Bad governance & lots of tok gris
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PNG manufacturers face tough year

Chey Scovell
Chey Scovell - "A number of manufacturers have had to put their expansion plans on hold"

| Business Advantage PNG

PORT MORESBY - It is shaping up to be a difficult and frustrating year. Manufacturers, like anyone else, require people to be spending money to buy our goods and there is just not much money going around.

If you go to the supermarkets there is nobody in line and everyone has a small basket because they can’t afford to fill up a trolley. In the rental market there is a 40 to 50 per cent vacancy rate.

One of most pressing things at the moment is the liquidity of the government. Their cash-flow problem is terrible and that has flow-on effects.

When the landlords of government have not been paid for up to five years their business, and all of its employees, will be under significant duress.

When the government is nine to 12 months behind in paying their utilities provider that means the utilities provider can’t even look at reducing the cost of its services.

So this government cash-flow problem is having a huge inflationary impact on the rest of the market.

Most of the manufacturers, when they sit there and look at strategy over the year, are not seeing anything to get excited about. The situation now is that a number of manufacturers have had to put their expansion plans on hold.

Another big challenge is the issue of standards. I myself have gone out and done audits and inspections on places that clearly don’t meet the PNG code but the provincial authorities are giving out licenses and permits.

I inspected a beverage and ice-cream manufacturer and they didn’t have any sanitation.

Then you have the fishing industry, an example where PNG is world class. Because of our trade with the European Union, the level of compliance and monitoring is second-to-none.

Our smallgoods manufacturing exceeds the highest standards of places in Australia because our regulatory bar is so high, although a lot of these new guys are not meeting it.

That is the real challenge for manufacturers, you are not looking at any new consumers, you are not looking at consumers with any more money to spend and you are seeing an erosion of your market share by parties that are not actually operating on the same playing field as you.

As a manufacturer you use a lot of power. We need to see some big energy projects that will allow PNG Power, in the medium to short term, to halve their costs – and the same goes for water.

We need to address why it is so expensive to do business in PNG. It is not expensive because people are chalking up large profits. It is expensive because security is a nightmare, law and order is terrible, and our ports and road infrastructure is falling apart.

In PNG, you are paying 10 to 20 times more for your monthly operating costs, so how can you be competitive?

My take on Australia is they don’t want heavy industry anymore; I think they just want to be an importer for bricks and roofing tiles. They have made it so hard for someone to even get the raw materials out of the ground and that is good for PNG.

We’ve got lime, we’ve got cement, we’ve got clay and we’ve had discussions with some of those big manufacturers about relocating here – but it all hinges on energy.

Chey Scovell is CEO of the Manufacturers Council of Papua New Guinea


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