Ivan Pomaleu, Managing Director, Investment Promotion Authority (IPA): Interview

Interview: Ivan Pomaleu

To what extent will the 2015 budget revision affect allocations to government services, and what effect will this have on attracting foreign investment?

IVAN POMALEU: During this time of tight fiscal and monetary policy, the government’s priorities remain the education and health sectors. Inevitably, some government agencies – like the IPA – are not currently experiencing increases in budgetary allocation. Practically, what this means is that we will have to look to our own legislative powers for ways to raise the required operational funds and boost revenue-earning capacity.

This is what most government agencies have been doing since 2014 and, although I believe it will help to build efficiency in the long run, we have to ensure that services relevant to the business community remain intact. In the case of the IPA, our role is not only to provide a registry system but also to promote Papua New Guinea as an investment destination. This includes supporting initiatives that may attract foreign investment, as well as listening to the private sector’s policy concerns in order to feed them back to the government and improve the overall standard of the system.

Should small and medium-sized enterprises (SMEs) have more incentives and lower financial barriers to register as a company in PNG?

POMALEU: I believe that private firms are always willing to pay a higher price for better services, provided those services are significantly improved. According to a study on the development of SMEs carried out by the Asian Development Bank and the World Bank, the biggest concerns among SMEs are access to finance, lack of infrastructure, cost of energy, availability of telecommunications services and real estate charges.

These seem to be the real issues at stake and unfortunately some of them have yet to be addressed, although the situation has improved immensely in recent years. The government plans to have a total of 500,000 SMEs registered by 2030, and a lot remains to be done to facilitate investments and foster a genuine SME culture, which to a certain extent is still lacking in PNG. I am glad to see much wider consultations taking place nowadays among all government bodies to produce a coherent SME policy that is consistent with the principles of a modern economy and takes larger global issues and trends into consideration.

Overall, we should create an environment where it is cheaper and easier to conduct business, which means lowering the cost of power, water and property while improving access to loans. These are factors that will improve the investment landscape for both domestic and foreign institutions. As things stand, when compared with other countries in the region and beyond, the cost of doing business in PNG remains fairly high.

Would you say that PNG needs to change its culture if it wants to be more competitive globally?

POMALEU: PNG culture is communal in nature and is based on sharing. In keeping with the traditional PNG way of life, the “what’s mine is yours” philosophy is still very much alive. These are the sorts of entrenched cultural elements that need to begin to change if we are to become more competitive internationally, and we have to carefully consider this during our negotiations with APEC and the World Trade Organisation. In light of our recent history, is PNG really ready to make this fundamental shift? Are we ready to have a free and open playing field at this point in our development? These are questions that we need to seriously consider, and soon: according to the APEC agreement, 2018 will mark the year of no tariffs. I believe that the principles of liberalisation should not stop a country from directly intervening in or supporting its own business community to achieve better integration on the global stage. The principles of liberalisation are not always thought of in this way, but as far as I am concerned we should be allowed to do what it takes to build capacity. This does not necessarily mean introducing subsidies, but it does mean taking careful consideration of the country’s socio-economic situation at this moment in time.