Clarence Hoot, Acting Managing Director, Investment Promotion Authority (IPA): Interview

Interview: Clarence Hoot

How can small and medium-sized enterprises (SMEs) play a greater role in developing key sectors within the wider PNG economy?

CLARENCE HOOT: From a global perspective, evidence clearly shows the importance of SMEs in any economy. In PNG there is a lot of space for these enterprises to play a greater role in economic development, simultaneously improving the livelihood of the population.

We are dealing with a number of small landowner groups in rural areas, and have identified as the largest challenge accessibility. Access to markets, roads and airports is the missing link that is stopping an abundance of products from reaching customers. If products do come from the rural areas to the market, they come by extravagant, costly means, usually by helicopter or plane. Partners and the government have a great task ahead to address this issue of accessibility. In terms of agricultural production, the challenge is to change the mindset of Papua New Guineans from subsistence to a more commercial approach.

There is also a need to identify the potential opportunities for SMEs to play a greater role. For example, in the non-renewable resources segment there are unexplored opportunities between foreign investment and local companies. We need to be able to identify the spin-off opportunities in construction and services, for example, and provide a system whereby local companies can participate easily. There are certain standards that need to be achieved in order for SMEs to contribute to these large projects in the country, so this is another area we must place our focus on to ensure that Papua New Guineans are upskilled and operate at a level in line with international standards.

PNG was taken by surprise by the requirements and the level of service demanded by the PNG LNG construction phase. There is more that we could have done to participate in that particular project, but looking forward, a main pillar of our strategy is to ensure that the capacity of SMEs in the country is up to standard, and that they have all the resources available to participate in any future projects and developments.

What is the IPA doing to improve company registration and incorporation practices to better align with international standards?

HOOT: The prime minister has taken a personal interest in improving the ease of doing business in the country. We understand that the World Bank’s doing business index does not measure everything that PNG specifically needs to do to improve, but it does give us a benchmark in comparison to the world’s best practices. The positive news is that there is strong political commitment to the proposed changes, both on the regulatory side and in terms of incentives.

The improvement in the 2017 ranking to 119th out of 190 countries, compared to 145th in 2016, was largely due to our online registration system. The average time to register a company dropped from 30 days to less than 10, and in some cases, if all the paperwork is in order, the IPA can issue a certificate within a matter of minutes. This represents a drastic improvement.

There are a number of different parameters in the “Doing Business” report, and in PNG these parameters span a variety of government agencies. Our focus has been to try and show these agencies that it is not solely the IPA’s responsibility to improve the ranking; everyone needs to improve their processes and systems to eliminate bottlenecks. There are ongoing efforts to establish better single-window registration and cut down on bureaucratic processes.

The Companies Act and the Business Names Act were also revised. The Companies Act amendments serve to increase protection to shareholders, clarify guidelines on directors’ duties, increase protection of creditors and streamline filing procedures. Also in the pipeline are amendments to other pieces of legislation, with the changes aimed at streamlining business procedures and making investment in PNG much easier in the future.