OBG talks to Zoë Harrison, Country Manager PNG, DHL

Interview: Zoë Harrison

Taking trade flows as an economic indicator, how would you assess the local market’s performance?

ZOE HARRISON: Over the last five years we have seen disposable income grow considerably in Papua New Guinea. This has driven larger imports of luxury items, especially mobile phones, which are highly desired by average Papua New Guineans. Handsets were practically unaffordable 10 years ago due to lack of competition in the local market. Now, they have bypassed the use of computers, especially in remote areas, and had a huge effect on people’s capacity to trade. In the last half-decade we have seen a surge in coastal trading, and have been moving more cargo than ever between Lae and Port Moresby. In general, the telecoms industry has been buoyant in recent years, and we have imported a large number of shipments for the BeMobile and Ericsson roll-outs. Spare parts for the automotive and mining sector have also seen exceptional growth via air and ocean freights, as vehicle maintenance is keeping the segment dynamic following the completion of the PNG Liquid Natural Gas (LNG) project’s construction phase.

How will the completion of the PNG LNG project affect the industry’s performance in the short run?

HARRISON: It depends on the amount of exposure that individual logistics companies have. Those that were heavily involved in the construction phase will inevitably feel the pinch, as everything will be scaled back during production. The question is how to read market trends in advance and not be carried away by temporary developments, even ones as significant to the local economy as the PNG LNG project. The problem with construction is that it has a start, but also a finish. If a supplier does not plan its activities accordingly, it will face difficulties down the line. This project has made transport in PNG more expensive, since salaries are above the national standard. What used to cost logistics companies PGK5 ($2.03) an hour for transport has now escalated to PGK25 ($10.16), which naturally affects the final costs charged to consumers.

To what extent is the cost of doing business in PNG a hurdle to its logistics industry?

HARRISON: That is an issue for everybody, not only for our industry. True, it costs twice as much to clear a container in PNG than in Singapore, but to build a house here also costs double what it would in New Zealand. Looking at our industry specifically, I can say that having only one stevedoring company at Port Moresby is certainly not conducive to business. In general, the port needs to be upgraded: it is likely one of the last places in the world where gantry cranes have just become operational. Keeping them functional 24/7 continues to be a challenge. Another logistics nightmare is having a wharf near the centre of town, as it creates traffic congestion. Most of those involved in the industry are in favour of its relocation to Motukea Island, which we have already been using to clear most of our cargo. Prices at Motukea continue to be high, but although you are paying a premium on paper, a quicker turnaround repays the higher costs. Also, delivery is easier: you don’t have to go through traffic in town.

How much is security an issue for a logistics company in PNG, and how can companies mitigate this?

HARRISON: I would say that an average of 10% of spending is destined for security, from GPS tracking to all sorts of measures to mitigate possible problems along the way – and that includes curbing corruption. Compare this figure with mature markets like Australia or New Zealand, where operators spend hardly more than 2%, and you get a sense how much this is an issue in PNG, or in any developing country. Although it is a distant prospect, we are looking at the option of robotic aerial couriers like drones, which can provide niche commercial services in remote areas. Given the country’s topography and the poor state of its roads network, this could certainly be a positive development. PNG has leapfrogged other technologies before, such as landlines in telecommunications. Perhaps transport will be another area for breakthrough technologies.