Infrastructure investments balance changing trade deals in PNG

Bold plans to transform Papua New Guinea’s (PNG’s) fishing industry into the largest tuna processing and canning hub in the region ahead of Thailand and the Philippines are beginning to gain momentum. Considered a key economic segment, tuna exports have long been a significant provider of foreign exchange income to PNG’s economy. In recent years the fisheries industry has shown robust growth while overcoming structural shortfalls that threatened to derail its impressive progress, none more so than the “Yellow Card” issued by the EU in mid-2014 after it was deemed that PNG was not meeting the necessary requirements to combat unregistered fishing activity. Since then the authorities have worked tirelessly to ensure that the fisheries segment adheres to international law.

Throughout 2015 exports of marine products grew by 31%, totalling PGK466.1m ($147.8m) by year end. As a result of growing global demand for seafood, with tuna as a leading product, export revenue for marine produce more than doubled from 2015 to 2016, with the PNG Fisheries Industry Association reporting that more than PGK1bn ($317m) in export revenue was generated through fisheries in 2016.

While the fisheries segment has been a sturdy pillar of the economy in recent years, it is currently faced with a unique set of obstacles that need to be addressed if the government is to successfully increase its marine exports. On one hand, the country benefits from the largest fishing zone in the South Pacific. On the other hand, it is threatened by a lack of foreign exchange, the rising cost of doing business limiting market access, the struggle to prevent unregulated fishing and the prospect of the trade benefits that PNG enjoyed with the EU being expanded to other countries which have a substantially lower cost of doing business. Despite these challenges, PNG’s rich fishing waters hold immense potential for growth. As such, plans to establish new trade agreements and a large marine industrial zone are set to take the nation’s fishing industry to a new stage of growth, resulting in an improved value chain and a more robust downstream industry.

Tuna

From a trade perspective tuna is by far PNG’s biggest earner in the marine department and its fishing permits are also an important source of income. According to the National Fisheries Authority (NFA), PNG accounts for around 11-14% of the global tuna catch with an average of 500,000 tonnes per year. While the vast majority of PNG’s tuna is sent to Europe on preferential trade agreements, some industry insiders are concerned that the country could lose its market share if the EU was to grant the same reduced tariffs to other nations that have lower production costs. With millions of dollars at stake, the NFA and the PNG government are taking proactive measures to negotiate ongoing deals with the EU, while also opening greater trade corridors with the US and Asian markets. Specifications of these negotiations were not made public as of the second quarter of 2017, however the government has made it publicly known that it aims to generate $1.5bn in marine-based export revenues per year.

Industrial Zone

The establishment of the Pacific Marine Industrial Zone (PMIZ) project in Madang Province is expected to greatly improve the local fishing industry. According to local reports, sections of the PMIZ are set to open in 2017 after a decade of delays. Upon completion the PMIZ will have up to 10 tuna canneries and a host of integrated port facilities located on the Madang Lagoon, comprising a 100-ha industrial zone and 115 ha for residential and commercial use. Its primary funding comes from the Export-Import Bank of China, which has a 78% share. The project budget reportedly increased $61m over the original $95m.

According to Rodney Kirarock, trade and investment officer at the NFA, “The core idea of the PMIZ is to reduce the cost of doing business and raise the segment’s competitiveness.” Kirarock told OBG, “Its establishment will support economies of scale, improve job prospects and encourage foreign investments.”