How local agriculture products will help Papua New Guinea

Towards the beginning of the Covid-19 pandemic, many people chose to stockpile groceries, raising questions about food security in the event of prolonged disruption to supply chains. As of June 2020 restrictions included suspension of domestic and incoming international flights; a ban on movement between provinces except for approved cargo, medical supplies and security forces; and home quarantine for everyone other than essential workers. The government’s swift actions were calculated to prevent health care infrastructure being overwhelmed by cases of community transmission. As of late July 2020, however, there were 63 reported cases, and the sudden increase may pose risks for the health care system and economy.

Growth Agenda

Agriculture has proven to be an increasingly crucial sector during the global pandemic. Since May 2019 Prime Minister James Marape has advanced an inclusive growth agenda, focusing on using PNG’s resource wealth to diversify the economy, and developing other sources of job creation and foreign exchange (forex) earnings, such as value-added agri-business and tourism. PNG’s economy remains largely dependent on revenues from extractive industries, which leaves it vulnerable to downturns in commodity cycles. Prime Minister Marape has highlighted the potential of agriculture to offset this and become a new growth engine for the country, telling OBG that the country has the potential to emerge as a “food bowl” for Asia, if it can develop a viable commercial agriculture structure. Although PNG has developed some successful agri-businesses, most agriculture takes place on smallholder farms at the subsistence or semi-subsistence level. Around 85% of the population relies on subsistence farming to meet daily nutritional needs. According to state estimates, up to 30% of land in PNG has moderate to high agricultural potential; however, only 4% is used for commercial agriculture. Establishing the right incentives to unlock land for mass production will remain a key priority in the coming years.

Subsistence

Notwithstanding long-term challenges, the subsistence focus of most agriculture may prove beneficial as PNG faces potential supply chain disruptions due to the pandemic. With international flights and cargo movements constrained, the country may have rely to on local produce if transportation of goods into and within the country becomes difficult. Most of the population will likely be unaffected by supply chain issues, as they are accustomed to consuming local produce. “The challenge is in larger cities like Port Moresby and Lae, which rely on imports as well as food coming down from the Highlands,” James Rice, group CEO of local food and beverage manufacturer Paradise Foods, told OBG in early April 2020. “We are seeing a shortage of fresh fruit and vegetables from the Highlands in the cities, but not yet a shortage of imported food. Other non-food items are still arriving with only a slight delay.” One positive factor is that local food manufacturers have long maintained large inventories of raw materials, to hedge against shipping disruptions or forex shortages. While Covid-19 measures will impact economic activity, there are signs that local food brands may experience an upturn, at least in the short term. For example, Paradise Foods reported that sales during the last two weeks of March 2020 were 20% higher than expected as urban residents stocked up on provisions.

Self-Sufficiency

Prior to the arrival Covid-19 PNG was already pursuing a policy of food self-sufficiency, strengthening local production capacity for items such as bottled water, canned fish, poultry and hard biscuits.

Consecutive governments have viewed food import substitution as key to boosting forex reserves. To this end, in August 2019 the government announced that it would allocate PGK200m ($58.9m) annually for an agriculture incubation programme to achieve food self-sufficiency by 2025. Although GDP will be impacted in the short term by falling global demand for oil, gas and minerals, continued efforts to boost local food production should provide long-term fiscal benefits.