Rich and diverse resources drive economic development in Papua New Guinea's Morobe region

Located on the Gulf of Huon, due north of Port Moresby, Morobe province is widely regarded as Papua New Guinea’s industrial heartland. The region is the gateway to the highlands and islands as well, providing the main transport link between the most populous provinces of the country. The Highlands Highway ends here, making the region’s capital, Lae, the centre for a wide variety of economic activities including industry, agriculture, fisheries and mining. Lae is also the country’s main manufacturing hub, producing soap, industrial chemicals and cleaners, steel, gas, and timber. The manufacturing and industrial sectors employ approximately 25% of the formal workforce and contribute an estimated 10% of GDP.

The Port of Lae is one of the nation’s busiest, contributing more than 60% of PNG’s movement in the import and export of cargo in any given year. At the same time, the Gulf of Huon is home to abundant fish stocks supplied by the many feeder rivers emptying into the gulf’s deep waters, Meanwhile on land, the Markham Valley’s vast expanse of fertile plains crisscross the province from east to west, making it widely known as the food bowl of PNG.

Morobe Province is PNG’s most populous region, with a 2011 population count of 646,876. Moreover, it is also home to more than 170 distinct languages. However, in urban areas English and Tok Pisin (Pidgin English) are the most commonly spoken tongues.

Investing In Infrastructure

Despite current economic challenges, the national government is maintaining a PGK30bn ($10.2bn) public investment programme, under way since 2013. In Morobe, the projects include the PGK40m ($13.7M) Angau Hospital in Lae, the Lae port development project and Lae city roads. Since 2013, the national government has allocated PGK250m ($85.3m) for roadways, rehabilitating most of the major city highways. Construction of a four-lane road from Lae to Nadzab has begun, with the first section from Lae to the Wau turn-off to be completed by the end of 2016, according to the Lae Chamber of Commerce (LCCI). When the highway reconstruction is complete, the travel time to and from Lae Nadzab Airport will be substantially reduced. In addition, the airport itself is being redeveloped to handle international flights. Work is expected to begin in 2018 on an upgraded runway, a new terminal and other facilities, carried out under an agreement with the Japanese government.

In utilities, power for the manufacturing and industry sector in the region is supplied by the Ramu hydro scheme, of which the newest project, Ramu 2, will serve the load centre for Lae and mining developments in Morobe. Once completed, Ramu 2 will triple the amount of electricity supplied from the Yonki Dam from 93 MW to more than 270 MW.

Fish Exports Rising

With a focus on fisheries, catching and processing tuna is quickly becoming one of Lae’s main economic activities. Every year, the local fleet catches around 750,000 tonnes of tuna in PNG’s 2.5m-sq-km Exclusive Economic Zone (EEZ), equalling about 18% of the total global tuna catch. PNG exports more than 580,000 tonnes of tuna annually.

Augmenting the processing facilities in the region, an international shipping hub is in its second phase of construction at the Lae Tidal Basin. In Malahang, new fish processing plants are planned, supplementing those currently in operation in Lae. Three are planned for the near future, according to the LCCI. In addition, the PNG Fisheries Department has plans to build a dedicated fisheries wharf east of Lae to expedite the export of the anticipated increase in canned tuna products, as well as to handle any surge in fishing fleets visiting the port. Support from the provincial government and local landowners has been essential for the area to become a major regional processing destination, as has the prospect of legislation requiring all fish catches to be processed on PNG’s shores.

Under its economic partnership agreement with the EU, PNG may export processed fish to the EU from any vessel fishing outside its territorial waters, provided the catch is processed in PNG. “Lae could easily become the main fishing hub in the Pacific, if the government continues to invest in infrastructure, as we have seen in recent years,” James Johnston, PNG general manager of the Philippines-based fish processing company Frabelle Fishing, told OBG.

Meanwhile, in April 2016 Mao Zeming, minister for fisheries and marine resources, told Parliament that in order to cater for the increasing fisheries market, an urgent review of laws under the National Fisheries Authority should be carried out.

Coffee & Cocoa

Coffee is the main source of income for an estimated 2.5m people in PNG, with Morobe Province serving as one of several key coffee-producing regions. Together with the Western and Eastern Highlands and Simbu, these provinces account for more than 80% of coffee production in PNG. Coffee exports were worth PGK927m ($316.5m) in 2011, but production has declined since then, a victim of aging trees and an El Niño-induced drought and frost during the crucial production period of April to November, according to Charles Dambui, acting CEO, Coffee Industry Corporation (CIC). Between 2013 and 2015, exports declined by 24% compared with the 2010-12 period, according to CIC. In 2015, the total value of coffee exports was down to PGK393.6m ($134.4m), with a total production of 44,030 tonnes – 7% lower in volume than the 2014 production level.

International Aid

However, the price of coffee has been rising sharply in recent months, and if yields increase Morobe’s growers could profit from this price rise. For this to succeed, the province’s growers need access to funds to invest in new trees with stress-resistant bean varieties that can thrive in PNG’s climate. To support this effort, the World Bank, the EU and the International Fund for Agricultural Development are currently financing a large-scale programme known as the Productive Partnerships in Agriculture Project (PPAP). Valued at $46m, the initiative seeks to develop links between growers and key players in the country’s coffee industry to help replant and revive their plantings. Work is also in progress to develop the PNG coffee brand with the CIC.

Morobe has also seen a similar scheme being rolled out to increase cocoa production. Indeed, starting from nearly zero, Morobe’s output of this commodity has risen to become one of the highest in PNG, behind industry leaders East New Britain and East Sepik, with help from PPAP, New Zealand Aid, and the Morobe Mining Joint Venture (MMJV).

Under the PPAP, cocoa industry representatives and farming groups work together to help revive production. One result has been an enormous increase in disease-free hybrid plantings, the proceeds of which have become a major contributor to local incomes. One testimony to the success of the aid project was the awarding of a Cocoa of Excellence Award in 2015 to Wals Cocoa Cooperative, in the Lower Watut area of the province. The Wampar people earned PGK2m ($682,742) from cocoa exports in 2015, according to Morobe Provincial Governor Kelly Naru.

The Morobe Provincial Government is supportive of the cooperative and its enterprises, but a lack of funds has hampered local efforts. Looking for outside assistance, the provincial administration has stated that it is willing to work with multinational cocoa exporters who commit to investing in developing downstream processing, within the province in the future. “Once roads, bridges, electricity, water supply and other infrastructure is improved, we are looking towards downstream processing and international exporters are welcomed to help,” Governor Naru told local press in July 2016, adding that the provincial administration also welcomes the participation of cocoa exporters already operating in the country.

Mining For Ore

Based at the Hidden Valley mine in the Wau/Bulolo district, the MMJV is a gold and silver mine established by South African mining firm Harmony Gold, in a 50:50 joint venture with Australian firm Newcrest Mining. The MMJV also operates all of the exploration work on the MMJV tenements, which includes the large Wafi-Golpu copper and gold deposit located in the Mumeng district, approximately 65 km south-west of Lae.

Exploratory drilling conducted at the Wafi-Golpu mine has identified large deposits of porphyry suited to bulk underground mining techniques, as well as gold, copper and silver ore deposits. As this project continues to progress, its findings are expected to further contribute to Morobe Province’s economic development and prospects for growth.

Looking Forward

The province’s potential for expanded employment and economic growth is high, with increased private foreign participation and aid also widely welcome and encouraged, although recent national moves to restrict the level of foreign ownership are a potential obstacle. However, the central task of making the region more attractive to investors will help to structure the numerous developments currently under way. Yet even as it stands today, the province is in a strong position to flourish both economically and socially, with a wide variety of industrial subsectors – from fishing to agriculture and mining – primed to grow, and a very promising agricultural sector driven by cocoa and coffee.