James Lau, Managing Director, Rimbunan Hijau (PNG) Group: Interview

Interview: James Lau

What are the main challenges facing a foreign company operating in Papua New Guinea?

JAMES LAU: Capacity building is one the biggest challenges that we face on a daily basis and one that definitely has an impact on investors when they consider a given market. A reliable workforce should be viewed as capital when planning long-term investments and large development expenditures. As far as we have seen, the government of Prime Minister Peter O’Neill has been emphasising education and health care since its inception, and we support this initiative, as stronger fundamentals will enable the country to compete in the future. We saw this in Malaysia not long ago, and I do not see why the same should not happen in PNG. The private sector has a role to play through the transfer of skills and knowledge to the country’s workforce, but it cannot do it alone. Another aspect that needs rethinking is the sense of belonging and discipline among the local populations. Too frequently we have seen infrastructure built with the help of investors’ money, who are often asked by contract to build hospitals and schools that quickly fade due to a lack of maintenance.

To what extent could the decline in oil prices jeopardise PNG’s recently high-paced GDP growth?

LAU: There is real optimism about PNG’s future among the local business community, and counting on double-digit GDP growth is a good place to start. However, there is a certain risk associated with the domestic economy, as the government has spent a significant amount of money on infrastructure projects, banking on the sales of liquefied natural gas. How these will be affected by the fall in oil prices is anyone’s guess, but people are raising questions about the 2015 budget and the capacity of the administration to deliver on its commitments. Dynamics change quickly in global markets, and large conglomerates like Rimbunan Hijau are aware of trends that can define our investment portfolio, though large capital projects are not generally affected by short-term drops in a single commodity.

To what extent does the perception that foreign firms are exploiting PNG’s natural resources persist?

LAU: A certain amount of negative perception still exists, especially in relation to the timber industry, mainly because of campaigns mounted by activists’ groups not only in PNG, but throughout the region. According to them there is no room in PNG for the development of the forestry or palm oil industries, but the argument seems anachronistic, as far as we are concerned.

Sustainable approaches to these industries have proven successful in countries including PNG. Palm oil has delivered enormous socioeconomic benefits in West New Britain, for instance, and this is proven by the fact that the great majority of landowners are in favour of new developments. Let us not forget that rural areas of PNG, especially coastal regions, have seen little of the gains derived from hydrocarbons, while oil palm plantations provide business opportunities for local small and medium-sized enterprises. Furthermore, environmental laws in PNG are very strict and any operator seeking a licence will have to follow them. If PNG wants to keep growing and improve the living standards of its people, it has to bring developments to its provinces and palm oil is just one industry that can deliver much needed employment opportunities.

For our project in Pomio, East New Britain, for example, we plan to plant 10,000 ha of oil palm in 2015 and we are employing as many as 3000 people in the process. From an investor’s point of view, this is a real commitment that requires a significant amount of capital. Not many companies out there are willing to take the risk, especially for greenfield projects. While in countries like Indonesia several players are keen to enter the market, in PNG the industry has attracted very few investors and has remained embryonic, despite its significant overall potential. Perhaps the negative campaigns of activists have affected the general perception of the industry, but it will not take away the fact that oil palm continues to be one of the most profitable crops in PNG, with a growing demand on the international market.