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

Interview: James Lau

Which sectors continue to propel Papua New Guinea’s economy forward despite the overall slowdown in the region?

JAMES LAU: Timber exports remained strong in 2014. The retail sector also performed well in 2014 but experienced a subsequent slowdown in 2015 due to half a year of falling commodity prices. For some companies oriented towards the Chinese market, there have been challenges this year as the country is rethinking the way it does business and is currently implementing reforms in the financial sector. The picture looked a little bit brighter in the past, but now everything is slowing down; raw material markets and consuming economies in this part of the world are struggling.

That said, I believe that companies which have a strong client base are able to weather the storm. In relative terms, PNG is still in a favourable position; it is just a matter of adjusting our expectations. This new state of affairs has to be assessed and our vision must reach beyond the medium term. We must also use innovation as a tool for diversifying our activities. There is great potential in the PNG agriculture sector, particularly in the oil palm industry. Stable policies are creating a strong base for this sector, and there is hope for a continued increase in oil palm demand. This is a country of high-quality soil and great yields, and there are opportunities within our reach for sustainable agriculture, which should be a priority.

What are the main challenges to sourcing foreign investment in the palm oil industry and other land-oriented sectors?

LAU: Palm oil is a growing business in PNG, with very large capital investments reaching hundreds of millions of kina and targets of tens of thousands of hectares per project. New infrastructure plans are in the pipeline, including an estimated 1300 km of provincial and plantation roads. With 4000 jobs currently being provided per project and a predicted increase to 6500 jobs per project, this industry has a lot more to offer the country. The main challenge is that PNG is a country of greenfield projects as it is hard to find existing infrastructure. Detractors are voicing their fears over the environmental consequences of the palm oil industry and stand against the land lease system, arguing that the companies are just logging and not replanting. Yet the real picture in PNG is different; there is a low percentage of selective logging, and levies are paid by the companies. The industry is replanting and keeping the soil rich.

Furthermore, palm oil industry projects in PNG make a broad economic contribution. The palm oil industry has the potential to generate significant economic growth in the country. Palm oil is PNG’s most successful agricultural crop, accounting for around 39% of agricultural export earnings over the last decade while directly providing income for over 160,000 people living in rural households.

Which areas offer the greatest potential within the construction sector?

LAU: Actors in the market are aiming to finish projects in time for the 2018 APEC summit. The typical customer profile of the hotel industry comprises mostly business travellers, so there is an opportunity to attract other kinds of tourists. Lower prices and greater capacity will bring more competitiveness to the sector and allow new players to offer value for money in hospitality and housing.

Shaping the landscape of Port Moresby with landmark projects in hospitality, housing and retail is the key to upgrading the city’s areas and improving standards. Malaysia and the Philippines provide good examples of these types of projects, and the challenge is to bring this kind of dynamic to Port Moresby and capitalise on the emergence of the middle class to create comprehensive urban areas that give the city an identity and reflect growth.