ITS high growth potential makes the small and medium sized enterprises (SME) sector of the Papua New Guinean economy of particular interest to the national government.
Last year, the government adopted a new SME policy and published a bold master plan to drive the development and growth of SMEs.
But before this objective can be realised, there are a number of constraining obstacles to SME business operations and expansion that need to be addressed.
The three main ones are the remote location of many businesses, the difficulty of leasing or buying land, and problems dealing with banks.
These obstacles are addressed in the latest report by PNG National Research Institute which has been released this week and is available here for download.
The discussion paper is based on a survey of formal SMEs and identifies obstacles to SME business operations, expansion and performance.
It finds that the biggest obstacle to business operations is the remote location of businesses. This is significant because 83% of SMEs in remote locations are owned by indigenous Papua New Guineans.
Remoteness makes it difficult for indigenous entrepreneurs to transport goods. It affects their customer base, workforce size and sales.
Other obstacles highlighted in the report that are also significant constraints include difficulties in leasing or buying land, which hinder SME businesses from increasing their workforce, and difficulty dealing with banks, which could be preventing access to finance necessary for increasing business asset base.
On top of these main obstacles, SMEs also face a myriad of other problems such as unreliable electricity, law and order issues, and the challenge of retaining skilled workers.
To improve conditions of the country’s SMEs, the report recommends that the network of physical and business infrastructure in remote parts of the country be improved, that land be made more accessible (including reducing improving the system of obtaining lease or land title ownership) and that ways be found to make it easier for SMEs to access finance with financial institutions.