CPL: Hard to attract international retailers to PNG

By MALUM NALU

Attracting international retailers into PNG will get harder if the country’s outlook doesn’t make it easier for them, according to City Pharmacy Ltd chairman Mahesh Patel.

Patel, who runs PNG’s largest supermarket chain, told the Papua New Guinea Advantage 2012 investment conference in Port Moresby yesterday that global players were also reluctant to enter PNG due to perceived and real security issues.

 Patel (right) with Esso Highlands managing director Peter Graham (left),  Newcrest Mining chief executive Greg Robinson, and Deloitte PNG managing partner Lutz Heim at the conference yesterday.-Nationalpic by MALUM NALU

“And they are also reluctant if their own assessments indicate unrealistic volume expectations and superficial sales targets,” he said.

“No significant international retailer wants to spend its shareholders’ cash on more than 5% of their operating costs just on security and insurance just to penetrate the market.

“I reiterate, the supply chain from garden, to manufacturing, to retail and household is a problem that has to be addressed from a national perspective.

“For a developing nation, it is the most-critical issue hampering business growth and local prosperity.

“For most people, the means of making an honest living is selling raw products to an accessible market or retailers – for a better price.

“This is not happening, because of high costs to everyone in the chain.”

Patel told of CPL’s buying fresh vegetables in the Highlands and air freighting them to Port Moresby.

“We charter an aircraft five times a week to bring fresh vegetables to sell in Moresby,” he said.

“It’s the fastest and most-reliable mode of transportation, so the perishable items are as fresh as we can deliver.

“Our customers and clients expect this and we strive to deliver on our promise.

“I have now assumed a key role in the supply chain as a charter management specialist.

“Thankfully, I am not a pilot, or the temptation would be for me to fly and pick up the vegetables myself.

“The problem is not restricted to the Highlands…it’s across the country!”

Patel said high import duties and in some specific categories, government restrictions on new entrants as a policy to protect local manufacturers, was another problem.

“It’s an issue that the ICCC (Independent Consumer and Competition Commission) has recognised and is addressing, as we see in public reports and debate on rice, sugar, and chicken,” he said.

“The list goes on.”

Central Bank: IPBC should review portfolio

By MALUM NALU

The Bank of PNG believes the Independent Public Business Corporation (IPBC) should review its portfolio, according to Governor Loi Bakani.

In a speech delivered on his behalf by assistant governor Gae Kauzi at the Papua New Guinea Advantage 2012 investment conference, Bakani said the government – through IPBC – should decide which industries to privatise and which to be sourced out.

Ironically, this was just Minister for Public Enterprises and State Investments, Ben Micah, admitted that public enterprises were a liability to PNG.

“The IPBC should review its portfolio and decide which of the industries it controls should be fully or partially privatised and which of their operations should be sourced out,” Bakani said.

“Such a decision on its own will attract large amounts of investment funds into the country.

“It can become a catalyst for major investor interest in channeling investments into the country, and the development of new investment institutions and instruments.”

Bakani said in infrastructure development and implementation, the systems were in place and the private sector was fully involved as a partner.

“In this case too, there were too many claims and accusations of misuse of public funds, lack of detailed planning, and non-delivery of projects to their specifications,” he said.

“It is the role and duty of government to ensure that public funds are used only for approved projects productively and efficiently.

“There is much more to it: the government should decide in which areas it should source out to the private sector, the activities.

“One good example is the power generation industry.”

Bakani said the government and public sector should concentrate on improving and maintaining service delivery of public goods such as health, education and infrastructure.

“This will encourage investment in economic activities and financial services by both the public and private sectors in the rural areas for inclusive growth,” he said.

“The government has to plan in great detail, and professionally, the pace of implementation.

“The decisions it takes are very wide-ranging, complex, and very costly.

“It has to ensure that the very large amounts of resources that will have to be allocated to each and every one of the above sectors are used efficiently, and under close scrutiny and control.”

Esso Highlands concerned about resource ownership

By MALUM NALU

Esso Highlands managing director Peter Graham has expressed concern about the issue of resource ownership which appeared in The National yesterday.

He told the Papua New Guinea Advantage 2012 investment conference in Port Moresby yesterday that such things made investors “nervous”.

Lawyer Hubert Namani told a mining industry gathering organised by the Mineral Resource Authority last Friday that it was only a matter of time before “resource nationalism” – a growing global trend – came to PNG.

The proposed amendment to the Mining Act was endorsed by three key figures – North Fly MP Boka Kondra, Central Bougainville MP James Miringtoro and former Western Governor Bob Danaya – and seeks that resources belong to the people and not the state.

Lawyer Peter Donigi, the architect of this bill, argues that resources belong to the people and, therefore, investors are required to enter into contracts with the owner of the resource to extract the resource.

He said PNG had the lowest return at 22.5% for oil and gas and 30% for minerals.

“From an investment perspective, one of the things that strikes me is stability,” Graham told the conference.

“Removal of uncertainty around investments.

“Reading this morning’s paper, the issue of resource ownership has popped up: transfer of ownership of resources from state to landowners.

“The uncertainty of that is not going to do any constructive to current investments in this country.

“It’s an issue that we’ve been given assurance by the new government that it’s not going to get legs and move on.

“I think investors around the country are wondering about the fiscal regime, the regulatory regime, the ownership regime.

“That’s the sort of thing that makes people nervous.”

PNG Made Expo begins in Port Moresby

By MALUM NALU

A two-day PNG Made Expo, being run in conjunction with the Papua New Guinea Advantage 2012 investment conference, began at the Gateway Hotel in Port Moresby yesterday.

It is organised by the Manufacturers’ Council and conference organisers and features leading PNG manufacturers such as SP Brewery, KK Kingston, Paradise Spices, RD Tuna Canners and Hugo Canning.

Stephanie Bawo (left) of Air Niugini at the RD Tuna Canners stall with Roger Galow (centre) and Ken Namasu.-Nationalpic by MALUM NALU

Council chairman Murray Woo, when opening the expo yesterday, said manufacturing in PNG was an integral part of the economy and would always be so.

“Now is the time we should take advantage of the opportunity of this period of exceptional growth to support and assist the growing manufacturing sector, including downstream processing and other value-adding industries, as they have and will continue to contribute to the fabric of PNG,” he said.

“Local manufacturers supply and distribute nationwide and some successfully export to international markets.

“Despite adverse operating conditions and lack of political support, our members have continued to increase their growth and investment.

“PNG must now take strong steps towards improving the infrastructure and grow our manufacturing and value-adding industries.”

Woo said the manufacturing sector employed more than 25% of the formal workforce in PNG in agriculture, timber and fisheries, among others.

“For too long, we have exported timber, fisheries and agriculture products with little or no added value,” he said.

“The council will soon roll out another PNG Made media campaign with support from our members to continue to promote this brand and what it stands for.

“Standard of goods manufactured here in PNG surpasses many cheap, imported goods.

“The recognition of the PNG Made brand hopes to bring pride and loyalty to our loyal consumers to choose products made by firms who invested in PNG, that are creating jobs and livelihoods for our people.”

Micah: Public enterprises a liability

By MALUM NALU

Public enterprises are in no better shape than they were 10 years ago, according to Minister for Public Enterprises and State Investments Ben Micah.
He told the Papua New Guinea Advantage 2012 investment conference in Port Moresby yesterday (Monday) that “the unpalatable fact is that we (government) have injected many hundreds of millions of kina into them (public enterprises) since 2002 for no net benefit”.

Micah speaking at the conference yesterday.-Nationalpic by MALUM NALU

These include Independent Public Business Corporation (IPBC), Air Niugini, Eda Ranu, Motor Vehicle Insurance Ltd (MVIL), National Development Bank (NDB), PNG Ports, PNG Power, Post PNG, Telikom and Water PNG.
“In fact, service delivery standards have declined and the extension of services into rural areas has proceeded at an unacceptably slow pace – if at all,” he said.
“Our critical infrastructure – roads and bridges, ports and airports, power stations, the national telecommunications system, water supplies and sewerage systems are crumbling around us because of poor maintenance.
“As an example of the lack of progress within public enterprises, at the start of 2002, Post PNG had only just been rescued from insolvency.
“Today it is still reliant on IPBC for life support.
“bemobile is also being kept alive by cash injections from its shareholders, including the government.
“MVIL and Ports PNG have lost millions of kina in illegal or foolish investments.
“Some public enterprises have been using debt to finance their daily operations instead of creating revenue-generating assets.
“Others, such as Telikom, have borrowed millions of kina illegally.”
Micah said there was a lack of transparency and accountability within public enterprises, and many were in breach of their statutory obligations.
“They suffer from poor management systems and processes and lack commercial discipline, resulting in high costs and poor delivery to their customers,” he said.
“Each and every public enterprise requires capital injections once again.
“But when we prop up non-performing public enterprises, we do it with money that should be going to where it is needed most – to hospitals, aid posts and clinics, to schools and universities, to law and order, to national security, to advice and assistance to farmers and fishermen, to community development, and so on.
“Our public enterprises are a drag on economic growth in that money spent elsewhere – for example on health and education – brings a higher return.
“It has been estimated by the Asian Development Bank that every kina invested in public enterprises produces seven times less output than the same kina invested in the rest of the economy.”

Parker: OTML is proudly PNG-owned

By MALUM NALU

Ok Tedi Mining Ltd (OTML) managing director and chief executive officer Nigel Parker has reminded the people of Western province and Papua New Guinea that they now own the company 100%.
He highlighted this again during a meeting with a provincial delegation led by Western province Governor Ati Wobiro at the Tabubil Golf Club on Saturday.

Parker (right) welcomes Wobiro to the Tabubil Golf Club on Saturday.-Picture by MALUM NALU

“OTML is now a PNG national asset, arguably worth US$3 billion on a commercial basis, and up optioned up for exploration programmes, worth many more billions,” Parker said,
“However, if valued from the perspective of total return potential to the state, the value is far more substantial.’
Parker said the people of PNG owned OTML through the PNG Sustainable Development Program (63.4%) and PNG government (36.6%) and the ownership of the exploitation of Mt Fubilan mineral wealth was now to the account of all Papua New Guineans.
“The traditional landowners still retain traditional ownership of the land and benefit directly from the exploitation of the mineral wealth through direct payment of royalties, land lease fees, spin-off businesses and the like,” he said.
“The broader Papua New Guineans benefit indirectly through taxes and dividends paid by OTML to the national treasury and from the commercial spend that OTML spends within PNG for goods and services.
“The eventual closure of the mine is being progressively covered by a financial assurance fund – currently US$228 million actual cash.
“The people of the Western province and the Sandaun (West Sepik) province are benefitting from the Ok Tedi Development Foundation Ltd and PNGSDP programmes.”

PNGSDP: Western province's future is secure

By MALUM NALU

PNG Sustainable Development Program (PNGSDP) has reminded the people of Western province that their long-term future is secure.
Chief executive officer, David Sode, told a Fly River provincial government delegation led by Governor Ati Wobiro at Tabubil Golf Club on Saturday that PNGSDP’s long-term fund (LTD) stood at US$1.2 billion (K2.5 billion) at December 2011.

Western Governor Ati Wobiro (centre) is flanked by his deputy Borok Pitalok (left) and South Fly MP Aide Ganasi during last Saturday's meeting in Tabubil.-Picture by MALUM NALU

This LTF can be drawn down only after closure of the Ok Tedi mine to support the Western province for a minimum of 40 years.
Sode explained that PNGSDP currently owned 63.4% of Ok Tedi Mining Ltd (OTML), with the balance of 36.6% owned by the PNG government.
He said two-thirds of its annual dividend was invested in the LTF, while one-third was used by the development fund.
The development fund is further split with one-third being spent in Western province while two-thirds goes to PNGSDP’s national programme.
The balance of the development fund as of July 2012 was US$203.4 million (K420 million), of which US$115.2 million (K238 million) was spent in Western province; and US$88 million (K182.2 million) was spent on the national programme.
“PNGSDP promotes development that meets the needs of the present generation and establishes the foundation for future generations of Papua New Guineans,” Sode said,
“To do this, we partner with credible organisations to deliver development.
“We work with government, multilateral donors, private sector companies, NGOs, community groups.
“Where no partner exists, we have created new subsidiary organisations to deliver our objectives.”
Sode said major projects embarked on in Western province included:

• Commencing survey of the northern and southern ends of a Fly River road corridor (K9 million);

• Daru Deep Water Port which is scheduled to commence in January 2013 and take 24 months to build;

• Completion of Kiunga-Kokonda Road and Gre-Drimgas Road (K51 million);

• Completion of survey and design of the proposed 70km West Bank Road (K5.5 million);

• Upgrading of Bak, Oksapmin, Golgobip, Eliptamin and Telifomin rural airstrips in the mine preferred areas (K5.5 million);

• Upgrading of Daru Airport (K40 million)

• Rehabilitation of Daru water system and construction of sewerage system (K52 million);

• Rural electrification mini-grid power systems (K32 million);

• Establishment of 57 communication towers ( K77.8 million);

• Rubber development (K55 million);

• Daru barramundi hatchery (K27.4 million);

• Microfinance support at K5 million annually; and

• Various others.