OBG talks to Robert Howden, Managing Director, Express Freight Management: Interview

Interview: Robert Howden

How far has the commodities slump hindered economic growth both in Lae and nationwide?

ROBERT HOWDEN: There has obviously been a slowdown in Lae as much as in the rest of the country, mainly because the resource boom experienced in previous years went into a negative spiral. Inevitably, this is affecting consumers’ choices and prerogatives – favouring food for their families for instance, rather than buying TVs or new cars. There has also been an increase in the minimum wage and a parallel increase in labour costs, as well as the end of large projects, with no new ones ahead. In addition, the collapse of global tree crop prices and commodities, droughts in the country bringing down yields and the shutting down of the Ok Tedi Mine leads us to conclude that Papua New Guinea has been through a perfect storm.

In terms of transport sector performance in 2015, we have seen international competition driving freight rates down, and some nature-related circumstances are changing the balance and forcing some companies to turn towards new sources for foodstuffs. The drought in Australia, for example, caused rice millers to start importing from Thailand. There is a tough semester ahead of us, with hand-to-mouth companies bound to concentrate on paying their creditors. Tangible improvements and revenues from tree crops or extractive industry projects will only be apparent at the beginning of 2017. In the current climate, we might expect some mergers and acquisitions as small companies will not survive.

What changes can PNG make to ensure greater resilience against future economic headwinds ?

HOWDEN: It is time to chase after every piece of business available. Morobe Province is a good example, as it can be compared to Singapore and is currently focusing on optimising its position as a sea-shipping hub in order to decrease the level of dependency on the extractive industry and soft commodities.

The setting up of new fish factories will soak up thousands of unskilled labour positions and generate disposable income. Cargo flow will increase in Lae thanks to the construction of additional wharfs, and the sector is expected to become more competitive, especially after the scaling-down of land transport that previously catered to the needs of construction related to liquefied natural gas.

There are sectors of the PNG economy in great need of a better approach to business. Government policies for agriculture and related imports is an area that deserves attention in the times ahead; there is a need for more consistency. The industry should organise itself better because the department of agriculture doesn’t organise the farmers. There should be a rotation of what they grow and when, so as to get a 12-month supply. I believe in the relevance of the poultry ban, as biosecurity is a serious issue for PNG, and we do not wish to see the market flooded with suspect goods. The poultry industry is very large, although informal, and provides a certain amount of income for the citizens of PNG.

What upcoming developments in 2016 will have the greatest impact on the economy?

HOWDEN: There is hope in the prospect of an international bond. It should be used to solve the currency issue, given the current slide and inflationary trends. Even though soft-commodity activities and extractive industry projects have slowed down, they can still generate revenue in the long term. Above all, I believe that the success of the gas projects will underpin the success of the sovereign wealth bond.

Alongside the national elections in 2017 we can expect to see considerable capital inflows in the economy. The 2018 APEC summit will provide a benchmark for how well the new government is addressing pending issues. There is reason to believe we can expect many improvements in the foreseeable future.