Robert Howden, Managing Director, Express Freight Management: Interview

Interview: Robert Howden

How can infrastructure be improved across the country to ensure equal development?

ROBERT HOWDEN: Currently there is a lack of dialogue between private enterprise and the government, particularly with regard to the regional chambers of commerce and the manufacturers’ council. Each region is unique, and thus has its own development needs. For example, Lae is the industrial heart of the country and ships out many goods, but it lacks the reliable utilities and transport networks that such a city requires. All of the country’s major factories are in Lae, especially those in the fast-moving consumer goods segment that require products to be manufactured or repackaged and then distributed throughout Papua New Guinea. The situation is similar in Rabaul, where the economy relies on tourism and agri-business. Port Moresby is the political and commercial centre, and is therefore the best equipped in terms of critical infrastructure.

Much of the infrastructure that was built years ago is deteriorating and must be adequately replaced or maintained. In the Highlands Region, for example, feeder roads and bridges are collapsing, which impacts coffee production. As a consequence, farmers are cut off from the essential supply chains that enable them to sell their crops and collect an income. The issue is systemic, but if it can be solved we would see reinvestment in local economies, which will prove self-sustaining.

Why have tax-credit schemes not gained more traction as a means to develop infrastructure through foreign direct investment?

HOWDEN: Tax-credit schemes only seem successful when there is a mine or other extractive interests. Businesses need to be able to identify some tangible benefit to invest in infrastructure. The mandates for commerce and government are different, and while the end goal may be the same, the roles must be delineated.

The idea of providing tax credits has merits in theory, but falls short on delivery. It is also a cumbersome process. Scale is required in order to capitalise on the credits, so only those businesses with scale can make it work. Most businesses in the country are small or medium-sized enterprises. We are seeing some amount of help from institutional development banks such as the Asian Development Bank, which is investing $1bn in the Highlands Highway. The development and maintenance of feeder roads, conversely, are the responsibility of local councils. Ultimately, the lack of development comes from a lack of funds.

What are the obstacles to creating an intermodal transport network in the country?

HOWDEN: Land tenure is another major impediment to development, so even if there were available funds and willpower to build the requisite infrastructure to service the country, the next hurdle would be to resolve land disputes. This is likely to deter investors, because there are not enough answers to too many questions. This is also the primary cause of high real estate prices in PNG’s cities – once the gazette boundary is crossed, there is no longer a government title.

Where in the logistics value chain does PNG have the most potential to emerge as a support centre for regional transport activities?

HOWDEN: Air freight is the most likely means of transport for which PNG has the potential to emerge as a regional leader. The national airline, Air Niugini, has a regional network connecting the Solomon Islands, Vanuatu and Fiji. Not only is this network a natural fit as a passenger route from Asia to Oceania, it also has the capacity to carry freight between markets. Currently Air Niugini does this via Port Moresby. The potential for ancillary services to spill over if PNG becomes an air freight hub is somewhat limited due to the lack of a competitive manufacturing sector in Fiji. Ports in PNG would not be able to compete with the scale or connections of other regional ports like Singapore.