Covid-19 & PNG international trade
29 May 2020
| PNG National Research Institute | Edited
PORT MORESBY - A pandemic has broad implications on the world economy and has differing impacts on the economies of countries around the world.
Evidence suggests that a pandemic or an epidemic may impact trade and affect international supply chains.
The impact of a pandemic on international trade can either be via a direct link in terms of reductions in the volume of goods and services traded, or indirectly through an impact felt in the sectors of an economy which support trade such as transport and logistics.
Although the most crucial impact of a pandemic is, and will always remain, human suffering and the loss of human lives, a pandemic also has profound economic impacts including disruptions to the agriculture sector, trade, tourism and travel.
The United Nations Conference on Trade and Development notes that supply chain disruptions in China due to Covid-19 can affect the productive capacity and exports of any given country depending on how reliant its industries are on Chinese suppliers.
A statement on an economic stimulus package responding to Covid-19, delivered to the national parliament by Minister for Treasury Ian Ling-Stuckey on 2 April, acknowledged that the spread of Covid-19 would have adverse impacts on the PNG economy.
Ling-Stuckey said that, despite economic modelling efforts, the true value and scale of the impact would be unknown due to many uncertainties.
The Covid-19 pandemic has affected the movement of goods, services and people domestically in PNG and across international borders due to the 14-day lockdown period which commenced on 24 March 2020.
Restrictions on the movement of non-essential goods, services and people in and out of PNG has been gradual in tandem with the appropriate coping response mechanisms related to the spread of the virus.
The restrictions in movement have been advocated and enforced by the team of international and local health experts and other professionals including national security forces leading the response against the virus.
Ling-Stuckey’s statement highlighted that from economic modelling by a team of local and international experts, the best estimate is that the value of PNG exports will fall by at least 13%, equivalent to over K5 billion.
This is a clear representation of the demand-side impacts on PNG’s exports of goods and services whereby demand for goods and services originating from PNG dwindle due to health concerns by consumers in destination countries (weaker external demand).
Restrictions on transport services, logistics and other sectors that support trade also translate into impacts on the export sector.
The fall in the value of exports in PNG could also be attributed to falling commodity prices. Suppliers of commodities such as agricultural products and services such as tourism could respond by producing less for the export market.
The fall in commodity prices can be considered as an indirect impact of the Covid-19 pandemic channeled through weaker global demand for goods and services.
Further, restrictions on the movement of goods and services out of PNG including to China, an increasingly important trade partner, affects the volume of exports and serves as a supply-side impact of the pandemic on the export sector.
Restrictions on sectors that support trade also translate into export sector impacts both on the demand and supply side.
Following the release of its first economic update of the PNG economy, the World Bank has suggested that the impact of Covid-19 on PNG’s import sector will be felt indirectly via a slowdown in China’s manufacturing industry, whereby businesses in the retail space in PNG experience delays in the delivery of their products.
The Minister for Treasury in his statement to parliament also highlighted that global supply chains were being affected including the supply of goods and services out of China. These are an indication of the supply-side impacts of Covid-19 on the import sector in PNG.
Restrictions imposed on the movement of non-essential goods and services into PNG as a measure under the PNG state of emergency to contain the spread of the virus could also be affecting retailers’ access to goods. Impact on the import of goods and services could also be caused by weakening domestic demand.
These are the demand-side impacts of the Covid-19 pandemic on the import sector in PNG. However, the true value of the overall impact of Covid-19 on the import sector in PNG is not clear at this stage.
To mitigate the impacts of Covid-19 on the PNG economy, particularly in the trade sector, the Government of PNG will directly support the rural sector as well as micro, small and medium enterprises through the domestic budget, and joint efforts with commercial banks and other financial institutions in providing support for loan repayment holidays for businesses and households.
However, there are lessons that can be drawn from elsewhere to counter the negative impact of the Covid-19 pandemic on trade.
Informed by measures in other countries and what could be viable given domestic conditions, the Government of PNG could consider:
- cooperation and coordination between the national government and provincial governments in terms of information sharing and targeted funding for local producers such as farmers;
- where appropriate, import-substitution should be encouraged with value-addition being the focus;
- developing a strategy in consultation with industries concerned to lift restrictions on the movement of goods and services, in phases and in a coordinated manner;
- targeted and precautionary expansionary fiscal policy to support the trade sector; and,
- expansionary monetary policy such as providing MSMEs access to credit with regulatory oversight and not introducing any new restrictive or protectionist trade measures.
The impact of a pandemic, and certainly Covid-19, is not distributed equally throughout an economy, including the PNG economy.
While sectors such as health, in particular, health supply and procurement subsectors have benefited, other sectors such as trade, tourism and domestic retail have suffered and may continue to do so for a while.
Although the value of the impact of Covid-19 on the trade sector in PNG has been estimated through economic modelling, the true value and scale of the impact is difficult to determine due to many uncertainties.
It is therefore important that further studies are conducted to determine the full and true impact of Covid-19 on the value of goods and services exported and imported as well as the impact on the overall PNG economy
China is a trading giant, every item found on the shelves of our stores is labelled as made in China, from match boxes to big machines, clothes and other goods.
During the coronavirus shut down, when all Chinese shops were closed, people who are rice eaters went hungry. After much pressure the government allowed the stores to open for a day.
There were hundreds of people rushing in to buy rice but the supply never ran short.
Rice and wheat may be just small grains, but they feed the world every day.
Posted by: Philip Kai Morre | 29 May 2020 at 11:40 PM
Bernard, there are two main types of questions answered by Ministers: a question (with or without notice) posed by the opposition and a "Dorothy Dixer" (pre-planned question) asked by Government MPs.
The former answers are supposed to be minimalist in every respect while the latter are intended to be verbose in the extreme.
The objects of the Dorothy Dixer are to allow the Minister to wax lyrical about the achievements of the government, whilst simultaneously running down the clock on Question Time.
As many episodes of Yes Minister demonstrated all too clearly, the art of government includes avoiding answering any inconvenient question and the tactics I have mentioned are part of the government armoury for achieving this end.
I always had a compendium of both types of questions readily to hand. They were updated regularly so that the Minister was, figuratively speaking, always armed to the teeth upon entering the parliamentary bear pit.
The pile of files frequently seen in front of a Minister, especially a new one, always include answers for anticipated questions on topical issues, plus the bureaucracy is on stand by to frantically research and write an answer for any question that comes "out of the blue".
Once a Minister genuinely masters his or her portfolio, they usually become very adept at ad libbing answers. Such political masters are a pleasure to serve unless they go so totally off piste that they risk "misleading the house".
Parliamentary tactics are truly a dark art and the most skilful practitioners are always figures of significance in any political party.
Posted by: Chris Overland | 29 May 2020 at 05:37 PM
I had the same thought as Chris but gave up halfway through reading it. I hate having to read and decipher jargon at the same time.
All credit to him for deciphering the thing so that is readable and makes sense.
His rendition is about what I figured it was all about after paragraph one or two. Which is why I gave up on it.
Posted by: Philip Fitzpatrick | 29 May 2020 at 04:25 PM
...……"The object is to allow the Minister to give a short, sharp and shiny response to a question, not waffle on for hours in mind numbing detail (unless, of course, parliamentary tactics require that he or she do so)."
Simon Birmingham, the Australian federal minister for trade, tourism and investment immediately springs to mind.
Posted by: Bernard Corden | 29 May 2020 at 03:03 PM
I mean no disrespect to the author of this article, but it reads very much like a press release drafted by lifting large slabs of text from a briefing note to the Treasurer from his bureaucrats.
Indeed, I would not be too surprised if this was, in fact, its origin.
This is not necessarily a bad thing. It is really good that the PNG government is willing to release the advice it receives from the experts who support them.
This helps create confidence that the government is being open and candid, which has certainly not been the case in the recent past.
That said, I have to say that the article is not an easy read because it uses a lot of economic jargon and is written in what I know as "bureaucratese", not plain English.
I can say this with confidence because, as a senior bureaucrat in the public health system, I long ago mastered this style of writing.
One of the joys of writing for PNG Attitude has been to discover what seems to be my authentic "voice" and, simultaneously, learn to express sometimes complex ideas in plain language.
In the latter task, I have been greatly assisted by our redoubtable editor.
In the interests of clarity, I have tried to translate the article into a form I would have used to write what are called Parliamentary or Ministerial Briefing Notes.
These are written to serve as a memory jogger for Ministers when they are answering Parliamentary Questions and are deliberately kept as simple as possible.
The object is to allow the Minister to give a short, sharp and shiny response to a question, not waffle on for hours in mind numbing detail (unless, of course, parliamentary tactics require that he or she do so).
So, here is my version of the article.
"The outbreak of the COVID 19 (C19) disease has had a severe impact upon the world’s economy.
It has forced the closure of many factories and so reduced the supply of many manufactured goods.
It also has drastically reduced the availability of air freight and shipping services used to move manufactured goods around the world.
Other effects include a collapse in demand for things like oil, natural gas, cotton, wool, timber and various other commodities.
This hurts countries like PNG that rely upon exporting commodities to earn money to pay for government services.
Many businesses are suffering severely due to their inability to earn enough money to remain viable and, as a consequence, many people have lost their jobs and incomes as well.
In PNG, the government has been told that the country will suffer a reduction in its export earnings of around K5.0 Billion. This will severely reduce its ability to fund important services unless it can find another source of revenue.
It may be forced to reduce some government services although it does not wish to do this.
Right now, no-one knows how long these problems will last.
Governments are doing their best to both support businesses to survive and to continue to provide important public services like education and health care.
One way they are doing this by borrowing more money when they can and using it to help businesses continue to operate. This helps keep people employed as well.
It will be very important for PNG that the national and provincial governments all work together to help businesses and people get through the crisis.
While it is going to be a very tough period for many people, the government believes that the country will be able to keep functioning until C19 is overcome and the world’s economy recovers."
I think that an article written in these terms is more likely to be understood by more people, especially in a country where schooling beyond primary level is still relatively uncommon.
My recollection is that journalists are taught to pitch their writing at the level of a Year 10 high school student and this is what I have tried to do.
So, with due humility because I am no expert, may I suggest that, in future, the author might consider rewriting Treasury handouts in terms that even only moderately literate people might understand.
This would be a great service to the readership and, I think, to the PNG government itself.
Thanks Chris for your wonderful rendition, ating mi gat bikpela les long klinim sitori ia. Sometime editors get weary - KJ
Posted by: Chris Overland | 29 May 2020 at 10:32 AM