Chinese entrepreneurs out-muscle local business
27 November 2013
An entry in The Crocodile Prize
PNG Chamber of Mines & Petroleum
Essay & Journalism Award
HUMAN BEINGS ARE ECONOMIC BEINGS. We engage in various economic activities to help us survive. Regardless of where we are, whether on the island of Malta or off the coast of East Africa, we engage in buying and selling to generate some form of income to sustain our livelihood.
Over the last two years, the town of Madang, like all other towns and cities around PNG, has witnessed an increase in the number of Asian entrepreneurs engaged in various economic activities. From kaibars (food bars) to merchandise stores to auto parts outlets, Asian businesses are mushrooming all over town.
In their bid to make ends meet, Asians have outmuscled the citizens of this country. They have acquired land and buildings with ease, causing concerned citizens to wonder how on earth they did it.
In an interview with a paralegal specialising in landowner cases and who facilitates backdoor acquisition of land, I was able to get inside information about acquiring land. He said K50 is like poison. One can use this poison to get anything.
Most of the Asian entrepreneurs are of Chinese origin and the paralegal talked about the presence of the old and the new Chinese: the old being those who came before independence; the new being those who migrated after.
In the new wave of immigration there are two different groups: one made up of ethnic Chinese from Singapore, Malaysia and Indonesia; the other comprised of Chinese from the People’s Republic of China, also known as the Mainland Chinese.
Both the new and the old Chinese have played a fundamental role in the development of PNG. Their investments and taxes continue to contribute to government revenue. This fact cannot be disputed.
However, many misinformed Papua New Guineans say the money Chinese entrepreneurs make is smuggled back to China in brief cases and under their clothes. Others say they dig up the soil and bury all the money, that is why they do not go to the bank. There are numerous other urban myths about Chinese entrepreneurs.
So what makes Chinese entrepreneurs more successful? It’s a common question that bugs all Papua New Guineans who are concerned about the rapid rate at which Chinese businesses are spreading in towns and cities around PNG.
To answer this key question, I went out and did my own observation of Chinese entrepreneurs and how they operate in Madang. I was able to learn some very interesting details about Chinese entrepreneurs which I think contribute to their success in PNG.
I began by observing an auto parts shop owned by a group of Singaporean Chinese. The gentlemen who served clients were very fluent in Tok Pisin, he even used Tok Pisin swear words to connect with his customers.
Customers are drawn to the fact that these guys can swear in Tok Pisin. Thus, they like to go to the shop to buy spare parts and in the process tokpilai with the Singaporean Chinese gentlemen.
The first time when I went with my mechanic, I felt a bit awkward because they called the mechanic kuap hariap, which literally means fast sex or, in bedroom lingo, a quickie. On our way home the mechanic told me he is a regular and they know each other very well. He said this is how they connect, making it easy to ask them for a discount.
The second time I asked the mechanic to get a quotation for a clutch disc, cover and bearing. He came back with a funny looking quotation, funny in the sense that the quotation was addressed to ‘Mr Kuap Hariap’.
The Singaporean Chinese gentlemen learned the Tok Pisin swear words from their co-workers. They have a different Tok Pisin swear word for each of their regular customers. I was amazed at this relationship and how the regular male customers were attracted to the Singaporean Chinese gentlemen.
Moreover, Chinese from the Mainland have initiated an intricate mobile vending network. Youths of different age groups are paid to sell or buy goods from the Mainland Chinese to vend on the streets.
This is a smart strategy to quickly reduce the stocks in the shops. Sun glasses, mobile phones, pirated DVDs, ear rings, necklaces and other items are sold using the mobile vending network. Hence customers do not need to go into the hot and stuffy shops to see the goods.
Most of the goods are either B or C grade from Guangdong, Honk Kong or Fujian. According to my own categorisation, A grade goods are designer goods or high quality goods which are exported to the European market and markets in other developed countries like Australia.
Papua New Guineans nit-pick about the quality of goods sold in Chinese shops but do not understand that Chinese entrepreneurs are not stupid. They know not all consumers can afford A grade goods or some B grade goods. They have to sell goods that match the customer’s ability to pay.
In PNG’s case, if 90% of the population is living in rural areas, it means they cannot afford quality goods. Based on this logic, one cannot flood the market with high end designer goods because there are simply not enough customers.
Other shops, like Brian Bell, sell quality goods. Most of these goods are also made in China. So not all goods made in China are of poor quality.
With the opening of Vision City Mall, which is an indication of economic growth, there has been an increase in the number of high quality goods. The new Jeans West shop in the Mall is an example. Most of the jeans in the shop are made in China for markets in the developed world.
A villager from the north coast of Madang or from the jungles of Karamui will have problems buying jeans costing K160 in comparison to someone from a posh back ground.
A low income consumer will not be too keen on buying Gucci sun glass or a LA Lakers cap from a shop in the Vision City mall for K200 if they can buy a K5 sun glass or cap from a street vendor.
I met a young kid of about 13 or 14 selling low quality sun glasses outside Madang market. I asked where he was from and he told me that he was from Simbu. He was one of the squatters from the notorious Sisiak settlement who has never been to Simbu. He told me he got the sun glasses from a Chinese shop.
The young kid is part of a group of those who get paid by the Chinese entrepreneurs to push their goods on the streets. Most of these vendors are underage kids who get paid a meagre commission to act as another outlet for Chinese made goods.
Another vendor I interviewed was more mature; in his late 20s or early 30s. He was selling pirated DVDs outside the large Papindo shopping complex in town. He told me he bought the DVDs from the Chinese traders at a wholesale price and resold on the streets for a profit.
Another interesting observation is the way Chinese entrepreneurs watch the cash register. Most Papua New Guineans say, Ol kongkong ol moni pes (Chinese people idolise money) because they watch every cash transaction with x-ray vision.
Chinese entrepreneurs and the Chinese people in general have a very different culture in how they use and save money. This has evolved over time and they have developed different practices which make them who they are.
Chinese entrepreneurs are also risk takers. I was fascinated to see a Chinese mini mart in Madang’s Four Mile market, which is a notorious place for betel nut traders and sellers. The Chinese have ventured into this area with the aim sucking up money from cashed up betel nut entrepreneurs who are kings of the informal economy.
Quite recently Chinese entrepreneurs succeeded in building another mini mart next to Balasiko market, another hub for betel nut entrepreneurs. The Balasiko market services mainly the betel nut trade in town, while the Four Mile market services other provinces connect by the Highlands Highway.
The mobile vending network is very risky businesses. The street vendors are equipped with bags or have different ways of hiding their goods from the police. One particular seller demonstrated to me shoving the pirated DVDs down the front of his pants.
He told me that if the police catch him red handed they will let him go but confiscate the pirated DVDs for their own viewing pleasure. To date, the number of people arrested for breach of copyright laws and for facilitating the sale of pirated goods is a joke.
The peculiar way in which some Chinese entrepreneurs communicate with their customers, their fluency in Tok Pisin, the mobile vending networks for low income earning Papua New Guineans, their distinct culture of using and saving money and their ability to take risks makes them very successful.
In the years to come as the Chinese entrepreneurs continue to operate in PNG they will develop new and fascinating practices to enable them to thrive. Papua New Guineans wishing to operate small to medium size enterprises should study the Chinese entrepreneurs by learning what they are doing. Only then will they be able to mirror their success.
A possible practice as China do away with its one-child policy will be strategically arranged marriages between Chinese and Papua New Guineans with the aim of acquiring land or property. This practice will no doubt contribute to the success of Chinese entrepreneurs.
Another possible practice will be the use of mafia style protection. Chinese entrepreneurs will identify a certain powerful family, individual or group of individuals who have strong connections with the underworld and possess firearms. To avoid armed robbery the Chinese entrepreneurs will offer women and money on a regular basis as protection payments.
According to word on the street, this practice is already happening in Madang but I am yet to verify the credibility of the source. Also I need to do more research to confirm what I am hearing. But if that is the case, all Chinese entrepreneurs who enter into this arrangement will be untouchable.
Not only Papua New Guineans but Australians and other foreign nationals who wish to invest in PNG’s retail sector should make an attempt to fully understand this ever changing business environment.
Very interesting piece Bernard.
Posted by: Cameron Mamadeni | 17 September 2020 at 06:18 AM
Barbara it is an interesting change that is happening all over the world. Thanks for sharing your experience
Francis this is one way of educating citizens so they can be competitive.
Posted by: Bernard Yegiora | 27 November 2013 at 11:12 AM
Excellent research, Bernard. You would have made a great detective.
How about also using your skills to study the PNG politicians who are involved in corrupt practices and making themselves very rich?
I live between Epping and Eastwood in Sydney and the whole area is gradually being taken over by Asians, especially Chinese and Koreans. Eastwood is full of Chinese restaurants and Chinese people from all over Sydney come here in the evenings to eat their traditional foods. The restaurants are full and they line up outside.
But I mainly shop at Coles supermarket at Epping and over the last year the Coles management has started to stock what the Chinese people want and you now see a lot of Chinese people shopping at Coles.
We are all trying to get the best deal for our dollar. The Chinese $2 shops which sell the lower quality goods are popular with the European Australians, like myself, but we realize that their goods may not last as long as the goods we used to manufacture ourselves in Australia. Sadly, Australian manufacturing has been hit hard by the high value of our dollar during the mining boom.
But I'm getting onto Australia's problems which are probably different from PNG's. I guess if these Chinese people are so gifted at commerce then leave them to it and let the educated PNG people get involved with the service industries - health and education etc. They used to say that the Chinese had become experts in commerce throughout SE Asia as where-ever they went they found it very hard to own land and become involved with farming. That may be about to change in Australia where I hear that Chinese people are starting to buy some of our large farms.
Posted by: Mrs Barbara Short | 27 November 2013 at 08:49 AM
Bro, this is an interesting finding of chinese entrepreneurial culture which can help in shaping SMEs in PNG and also provide new insight into orthodox misperception of chinese in general.
Posted by: Francis Hualupmomi | 27 November 2013 at 08:24 AM