Efforts to promote agricultural self-sufficiency in Papua New Guinea saw a setback in 2015, with droughts and supply chain disruptions impeding sector growth.
To allow for lower prices and greater market competition, Tommy Tomscoll, minister for agriculture and livestock, announced plans in mid-January to lift restrictions on a range of agricultural imports, including fresh produce and poultry, for three months, sparking resistance from many businesses and retail operators.
Announced by Tomscoll in August, the import ban had covered roughly a dozen types of produce – including potatoes, onions, capsicum and lettuce – in a bid to protect small-scale producers in PNG. This followed a similar prohibition of Australian poultry imports, put in place in April.
The ban received criticism when first imposed on fears of supply shortages and price increases. Food inflation rose to 4.1% in the third quarter of 2015, up from 3.8% in the second quarter, as per data from the Bank of PNG, driving overall inflation to 5.8%.
According to Peter O’Neill, prime minister of PNG, the government also plans to introduce a new system of import permits to allow foreign exporters longer-term access to PNG’s market, while also encouraging local producers to help meet domestic consumption and compete more effectively against importers.
“We are levelling the playing field and creating new opportunities for our [small and medium-sized enterprises] involved in food production,” he told local media. “In the coming months preparations will be made for the new system to come into full effect. We will do this in a structured way, so that foreign producers will be able to familiarise themselves with the new system, and new import permits will be awarded.”
Despite promises of a more level playing field, PNG’s agriculture sector could still face impediments to growth. While the sector accounts for approximately 25% of GDP and is both a significant employer and source of income for the majority of the population, it has lagged behind other sectors of the economy in recent years.
Expansion of both primary production and value-added goods was outpaced by other non-resource growth over the past decade. From 2003 to 2015, real growth in the agriculture sector averaged 1.1% per annum, roughly one-third the rate of expansion of other non-resource sectors, according to a recent report by Paul Flanagan, an economist at the Australian National University and former chief advisor of the foreign investment and trade policy division of the Australian Treasury.
Modest sector growth has been compounded by severe drought conditions triggered by the El Niño weather pattern.
Since mid-2015, when the current El Niño cycle hit the Pacific region, large swaths of the country have experienced droughts and frost, leading to a substantial decline in agricultural production and forcing some communities to begin shipping in food.
Limited stocks and shortages have driven up prices, with remote areas, particularly those in Western Province, most affected. According to the UN’s Food and Agriculture Organisation, up to one-third of the population is currently struggling as a result of the drought.
While many of the most affected regions saw rain in early 2016, concerns remain that the impact of El Niño will be felt for some time, with food shortages and high prices expected to continue.
The drought is also likely to impact PNG’s agri-business sector, disrupting supplies of produce for processing and hitting the country’s key agricultural export – coffee. According to World Bank estimates, PNG accounts for 1% of global coffee production.
Floods in early 2015 damaged some coffee plantations in the Highland region, while the subsequent drought is expected to take its toll on the upcoming harvest.
Supply chains have borne the brunt of the drought, as water levels in many of the country’s larger rivers are now too low to transport produce or other goods.
The OK Tedi open-pit copper, gold and silver mine, for example, was forced to halt operations in August after low water levels on the Fly River made river transport impossible.
The government is currently looking at ways to diversify shipping methods to ensure agricultural output reaches targeted destinations.
In late January the prime minister announced plans to hold consultations with farmers, wholesalers and retailers on improving supply chains. According to O’Neill, airfreight is being considered to ship produce from remote regions, such as the fertile Highlands.
“This will include discussion with airlines so as to more efficiently transport produce within the country,” O’Neill told local media. “The Highlands have the potential to grow some of the best and most nutritious fruit and vegetable produce in the world. We have to improve our supply chains to get this to market in other centres.”
While relying on airfreight would likely increase costs, such a move could also help encourage more substantial production in remote areas, which remains a key goal of the government’s agriculture policy of self-sufficiency.
Oxford Business Group is now on Instagram. Follow us here for news and stunning imagery from the more than 30 markets we cover.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×From lockdowns to remote work and widespread job losses, the Covid-19 pandemic has dramatically changed the way people work. These interruptions are likely to have a significant impact on the...
Food security became a central priority for many emerging markets in 2022, against the post-Covid-19 pandemic backdrop of supply chain shocks, natural disasters and high commodity prices.
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
