OBG talks to Michael Kingston, General Manager, K. K. Kingston

Interview: Michael Kingston

In what ways has the PNG Made campaign affected the local consumer market?

MICHAEL KINGSTON: Historically, purchase decisions were made purely on price, but the emergence of a middle class has resulted in more disposable income and spending power. Now the emphasis is more on quality instead of cost. Since local companies are now becoming competitive in terms of quality, we have even begun to notice PNG Made brand loyalty among consumers. The PNG Made campaign has helped shift people’s perception of products made in PNG. Not so long ago consumers thought that PNG-made products were inferior and had a preference for imported products, but now more consumers are appreciating locally made goods. Over the years, PNG Made products have achieved great advances in quality and local consumers view domestic goods on par with Australian products.

How could the manufacturing sector benefit from the economic growth that is expected in PNG?

KINGSTON: The previous administration was not very keen on the manufacturing sector. Instead, politicians focused on the energy sector through mining and oil and gas development. However, those resources are finite and will eventually run out. Right now, heavy manufacturing and engineering industries suffer from a lack of economies of scale and volume, because mass production is key to remaining competitive and profitable. Right now, PNG is a small market, but as the economy grows, there will be more opportunities implement large-scale production.

Is PNG in danger of suffering from Dutch disease?

KINGSTON: I believe that PNG is already suffering from Dutch disease, especially thanks to the previous administration’s economic policies. We need to start investing in basic services, especially in education, health care and transportation infrastructure that are the foundations of a healthy economy. Unless we do so, I fear the economy will become more stratified going forward.

Are there challenges in the labour market currently affecting the manufacturing sector?

KINGSTON: Until recently, companies did not focus on efficiency because labour costs were very low. Now, however, we have a “scissors effect”. On the one hand, PNG has a more liberalised trade environment in which tariffs are decreasing, therefore lowering the cost of imported products. On the other hand, labour costs are growing substantially. As a result, local production is suffering in this competitive environment, so if local manufacturing is to survive, we must adapt and become more efficient. As the market demands higher quality products and labour costs increase, we find that manual processes can no longer deliver an adequate volume or quality of production, so we are looking for ways to automate our production operations.

What type of investments in infrastructure is needed to boost PNG’s manufacturing sector?

KINGSTON: The manufacturing council has specified three key areas that are in need of urgent attention and modernisation: ports, transportation and power.

Transportation is probably the most significant challenge for the industry. All of PNG’s ports are heavily congested. We believe that investing in expanding and maintaining the ports is long overdue. Delays from the current congestion add significant costs to the manufacturing sector and the shipping companies.

What is the likely impact of the inevitable rise of the kina on the production and manufacturing sectors?

KINGSTON: Currency values are always a double-edged sword. While currency appreciation will make imports more competitive, it will also make raw materials cheaper. Some people in the manufacturing industry have raised concern about the impacts of the kina’s appreciation, but we believe that the currency’s rise will self-equalize over time, only causing some short-term discomfort. A gradual, steady rise of the kina, as we have seen, is better than major fluctuations in currency.