Building and construction boom in Papua New Guinea

By GEORGE TIPPING
Commercial Director of K G Contractors Ltd and
Past President of the PNG Institute of Builders

The question on everyone’s lips must be “will the Global Economic Crisis (GEC) affect the PNG construction boom”?
The simple answer is YES, but the real question that should be asked, is “how much will it affect the PNG building and property industry”?
There have been a number of articles written by eminent persons and institutions on the subject of the GEC and its affect on PNG economic activities.
The article that follows concentrates solely on the building and property industry but my reasons for my conclusions relate to the economic forces in play affecting PNG.
Whilst there is a financial crisis in most countries around the World, PNG is certainly the exception.
The main reason is that PNG banks and financial institutions (with minor exceptions) have not participated in overseas lending and share purchases.
The banks have been flush with funds and have been able to lower then maintain interest rates at historically-low levels.
That situation changed recently.
Almost every central bank around the world has been lowering interest rates because of the GEC, but PNG has recently been increasing them.
Deposit and lending rates are up by as much as 2% and the banks are now lending with more caution and requiring greater equity in the project from borrowers.
This will have an effect on new building and property activities being financed within PNG, particularly on the smaller and more marginal projects.
We can visually see the projects underway forming the current building boom.
The boom has come about because of past shortages in all types of accommodation projects including hotel rooms, housing, apartments, commercial office space (both private and government), factories, and shopping centres.
All new building projects require vacant land and this shortage has been particularly severe on residential land for housing.

National residential housing

This sector has been a major disappointment due to the severe shortage of serviced land and the extraordinary high prices now being obtained in the current property market.
I have been warning in the PNG Year Book for the last three years that there was an urgent need to get this sector actively working due to the fact that the “limited window of opportunity” was starting to close.
The sad fact now is that with interest rate increases and market prices in excess of K300,000 for a standard three-bedroom new house / land package, house prices have gone way beyond the capacity of even senior national employees.
Whilst building cost increases have taken place in the vicinity of K20,000, the real increase is being charged by those owning the serviced land.
The window of opportunity has definitely now closed on national residential housing and all the newly-developed policies, reports and public announcements by the National Housing Corporation and others will not revive the situation.
What is needed is a very radical increase in serviced land being made available at affordable and realistic prices but I cannot see that happening in the next few years.
To provide an example of what is happening, a standard residential block of vacant land at 9-Mile was recently advertised for K150,000.
Many of you would all be aware that this same land could have been purchased at 10% of that price only a few years ago.

Hotels

The first-tier major hotels in the NCD have had a very good income during the past few years because the demand has far outstripped supply.
They have been able to increase their tariffs and still the demand has been there, so they have increased the tariffs again and again to the point where they have suddenly met stiff tariff resistance and room occupancies have dropped.
This is whilst everybody else around the world is reducing tariffs.
This overseas tariff reduction will continue because of the GEC but PNG is not immune to those economic forces and we can expect to see less business visitors than in the past. However, on the other hand, the middle-tier of accommodation have improved their occupancy levels because of more-affordable tariffs.
Despite this, there is still a shortage of short and long-term hotel accommodation in the NCD and it is my belief that development of new hotels will continue but with more emphasis on the 3 to 3.5 star level.
Within the last year The Airways (67 rooms), Gateway Hotel and Ela Beach Hotel (44 rooms) have commenced expanding their room numbers and improving their premises. We have not yet seen any physical building activities at the Crowne Plaza and Holiday Inn.
However, the Holiday Inn is expected to have a major new building programme commencing in 2009.
It is interesting to note that the foreign-based new hotel developers such as the Korean CMSS Casino Hotel and Vision City Hotels upon their completion will compete directly with the established hotels in the NCD.

The current building boom

We can now see four-tower cranes on the NCD skyline, something that could never have been imagined in 2004.
In Hunter Street is Nambawan Super’s nine-storey mixed commercial and residential building (Fletcher Morobe) .
On the rear of the old Papuan Hotel site we can see the major high rise project for Steamships Properties (Fletcher Morobe) and we have seen the activities on the former Hornibrook site also for Steamships (HG Constructions).
We can all see the activity in Harbour City being developed by Curtain Brothers for Nasfund.
The first building is nearing completion (Fletcher Morobe) with the ANZ Bank as tenant, the second building being built by Curtain Bros themselves with a third Nasfund commercial building still to come.
These are the higher-profile projects and as usual it is in the NCD and Lae that we see the larger projects in the PNG building boom.
Lae has a six-storey 18 luxury apartment complex under construction (Lae Builders & Contractors) and a Nambawan Super mixed commercial / residential 8 storey building expected to commence soon.
But there are also a very large number of smaller projects in these cities as well as Madang, Alotau and Mt Hagen all continuing the boom in most urban centres around the whole of PNG.

The Exxon Mobil LNG project

Early visual works are expected to commence in 2010 and part of these comprise the building of two training colleges at Idubada (within the grounds of Port Moresby Technical College) and at Hides.
These are temporary construction colleges which are intended to run for five years then be handed over to PNG.
A permanent training college will be built later for LNG operations at the main plant 20km outside Port Moresby in the Boera district.
The main construction activities are subject to the final decision on proceeding with the world size project which everyone is working positively towards achieving.
A positive decision to proceed will bring another construction and property boom to Port Moresby and many other areas of PNG.


Investors from overseas

Where in the world can you now receive a good interest rate or invest / develop property and still receive an attractive return on investment?
Investors need a country with a relatively stable political and economic environment, a currency that will not devalue and where commercial business law can be understood? The obvious answer must be PNG.
With the GEC severely affecting their home based operations, I believe that the overseas investors who are still cashed up will consider PNG for their new projects.
One of these type of investors already here is Vision City which is being built at a remarkable pace and which now has a recently-erected heavy duty tower crane for all to see.
I expect that we will see more of this type of major investor visiting PNG in the near future to assess the prospects for their property investments.

In summary

What does the future hold for the building and property industry in PNG?
The following prediction excludes the impact of both Exxon Mobil and Interoil LNG plants and is based on supply and demand and other influences that are occurring now as well as known planned projects.
Despite the internal impediments of higher interest rates, inflation, hesitation by some PNG investors due to the GEC, slow NCDC and utility service providers approvals, it is my prediction that the current building and property boom will continue at a high level of activity, particularly for large projects.
How long will this boom last? That is the hard question to answer.
My crystal ball suggests we have another three to four years before the boom slows to more-manageable levels.
However, if the Exxon Mobil LNG project is confirmed, then we will have a scenario of a much larger building and property boom making the current boom seem small by comparison.

A word of caution

Despite the boom, building companies and property developers can still experience financial problems due to many factors and “go broke”.
This boom has shown that there are some inexperienced people in the industry and some medium-sized companies who are taking on projects of significantly greater complexity and size than their experience and working capital will allow.
Late project completions are occurring and these can be devastating on both the builders and property investors’ cash flow.
Errors in tender calculations do occur, increased numbers of tenders and pressures on staff to perform tasks for which they may not be sufficiently experienced is occurring. We have seen a great deal of new and costly equipment coming into the industry.
This is a good sign providing the contractor has a continuing income producing role for that equipment.
The GEC has shown that banks and commercial companies must follow sound commercial practice and not discard the basic rules of business.
Greed has certainly been a factor in the GEC.
The profit factor and human nature being what it is, advantage has been taken of the unsatisfied demand in accommodation in the NCD to dramatically increase rentals and sales prices.
There is always a limit.

Papua New Guinea’s Western province has a lot to offer

A fun-loving girl swings into a river, Western province

Sunset along a river, Western province

Looking at Awaba, Western province

Another look at Awaba, Western province

Along a river in the Western province

A canoe taking part in the annual Gogodala Canoe Festival, Western province

By ZARA KANU

WESTERN Province has a lot to offer in terms of tourism and it would no doubt be a potential tourist destination because of its unique cultures which it can expose to the rest of the world.
The Middle Fly District is made up of three local level governments comprising of Suki, Lake Murray and Balimo.
There are more than 27 villages along the river leading out from Balimo towards the Suki and Lake Murray area and this is where you get to find the real fun -loving character of the local people.
The view along the Aramure River going towards Awaba is about five hours by dinghy and is spectacularly beautiful for those who intend to go bird watching or going fishing.
The bird life will never stop to amaze tourists as you travel along this most-captivating river and find that there is more bird life than one could imagine.
Night hunting is a norm for the locals but can be a good experience for those who love excitement and adventure.
Balimo is renowned for its beauty in the abundance of wildlife and rich culture and the staging of the sixth Gogodala Canoe festival in May was no exception.
“We must look at development from a different perspective because it will bring development and other major benefits,” said Western Province Governor Dr Bob Danaya.
“The Middle Fly is far expanding and there is great potential in promoting tourism here in the province.”
The town is currently under construction to upgrade most of the facilities for the locals and as well as those intending to go for holiday or sightseeing.
Tourists or visitors can check into the Biyama family house where 10 rooms are available for rent if going in a group or as an individual.
The town area is very peaceful and there is a health centre, a few shops and a main market housed in the centre of the town.
Transportation on dinghy along the river can be arranged upon consultation with the district administration and the town committee, or otherwise, a walk around the town can take only half a day.
The Gogodala Canoe Festival is an enriching way to truly appreciate what these people have to offer in terms of natural wildlife and the culture.
This festival is held annually in April and those who are interested can collect more detailed information from the National Cultural Commission website.

Mother's Day 2009

Today is ANZAC Day, however, lest we forget, Mother’s Day is just around the corner…

 

Mother’s Day falls on Sunday, May 10, 2009.

Mother's Day is celebrated to honor all mothers and express gratitude for the hardships they bear in bringing up a child.

 Most countries including Papua New Guinea celebrate Mother’s Day on the second Sunday of May.

People take the day as an opportunity to pay tribute to their mothers and thank them for all their love and support.

The day has become hugely popular and in Papua New Guinea, as is the case in several countries around the world, phone lines operated by Telikom and Digicel witness maximum traffic.

There is also a tradition of gifting flowers, cards and others gift to mothers on the Mothers Day.

The festival has become commercialised to a great extent.

Florists, card manufacturers and gift sellers see huge business potential in the day and make good money through a rigorous advertising campaign.

Think of your Mothers on the day!

 

Wallabies

Captions: 1. Mum and Bub 2. Wallaby doe 3. Young wallaby

 

By PAUL OATES in Queensland, Australia

 

Our back lawn has become a Wallaby haven.

Every mooring a small mob descends on the newly-mown grass.

If only they would only leave our passionfruit vines alone I wouldn’t mind so much.

Gogodala Canoe Festival on again

Scene from a previous Gogodala Canoe Festival. Picture courtesy of National Cultural Commission

Gogodala masks. Picture courtesy of National Cultural Commission

Gogodala headdress. Picture courtesy of National Cultural Commission

Gogodala child. Picture courtesy of National Cultural Commission

One of the spectacular war canoes of the Gogodala people. Picture courtesy of National Cultural Commission

By TRAVERTZ MABONE

THE annual Gogodala canoe festival in Balimo, Western province, scheduled for next week, will prove to be bigger and better than previous fetes, The National reports.
At least, this is the hope for organisers of the festival on April 30 and May 1.
The festival came about as part of Balimo district’s agriculture and cultural show five years ago, which is now a major event in the Middle Fly district with annual support from the National Cultural Commission (NCC) and the Rimbunan Hijau PNG Group.
The festival will showcase Gogodala war canoes, the 40m craft renowned for their decorations and artworks depicting animal figures representing various clans.
The war canoes of Gogodala play important roles for the many communities located near the sea and waterways, according to the organisers.
To the NCC, the loss of canoes from the lifestyles of Papua New Guineans will be a loss of an important cultural identity.
The Middle Fly administration thanked the RH Group for this year’s sponsorship.
It also thanked the NCC for the continuous support.

WHERE HAVE ALL THE FLOWERS GONE?

And as we mark ANZAC Day today, I leave you with the words of Pete Seeger's 1961 classic, 'Where Have all the flowers gone?', which was song so beautifully and poignantly by children of Ela Murray International School at the Bomana War Cemetery outside Port Moresby this morning.Thank you so much, particularly to the people of Australia and New Zealand, for your faithful readership of the ANZAC Day articles I have posted this week. God's Blessings from Papua New Guinea...Malum

Where have all the flowers gone?
Long time passing
Where have all the flowers gone?
Long time ago
Where have all the flowers gone?
Girls have picked them every one
When will they ever learn?
When will they ever learn?

Where have all the young girls gone?
Long time passing
Where have all the young girls gone?
Long time ago
Where have all the young girls gone?
Taken husbands every one
When will they ever learn?
When will they ever learn?

Where have all the young men gone?
Long time passing
Where have all the young men gone?
Long time ago
Where have all the young men gone?
Gone for soldiers every one
When will they ever learn?
When will they ever learn?

Where have all the soldiers gone?
Long time passing
Where have all the soldiers gone?
Long time ago
Where have all the soldiers gone?
Gone to graveyards every one
When will they ever learn?
When will they ever learn?

Where have all the graveyards gone?
Long time passing
Where have all the graveyards gone?
Long time ago
Where have all the graveyards gone?
Covered with flowers every one
When will we ever learn?
When will we ever learn?

 

Hundreds attend ANZAC Day Dawn Service in Port Moresby

Hundreds of people attended the traditional ANZAC Day Dawn Service at Bomana War Cemtery outside Port Moresby today.

The ceremony started at 5am with the Mounting of the Guard by the First Royal Pacific Islands Regiment of the Papua New Guinea Defence Force.

This was followed by the Cafalque Party moving into position, welcome by Master of Ceremonies Mick Pye, singing of hym Abide With Me, Requiem by Australian High Commissioner to Papua New Guinea Chris Moraitis, Prayer by Major Kelvin Alley of the Salvation Army, First Reading by Papua New Guinea Governor General Sir Paulias Matane, Second Reading by Australian Defence Adviser Colonel Luke Foster, saying of the Lord’s Prayer, Address by New Zealand High Commissioner Neils Holm, Wreath Laying, Reading by Papua New Guinea Defence Force Commander Commodore Peter Ilau, The Ode by Ms Christine Coulthard of the Gungahlin RSL Sub-Branch and Mr Joe Filippi of the Port Moresby RSL, The Last Post, Two Minutes Silence, Lament, Reveille, National Anthem of Papua New Guinea, National Anthem of Australia and National Anthem of New Zealand.

Those who attended included members of the diplomatic corps and hundreds of trekkers who had walked the Kokoda Trail.