COUNTRY FEATURE ON PAPUA NEW GUINEA

*Article prepared by MATRADE Melbourne

Papua New Guinea map

MALAYSIA-PAPUA NEW GUINEA TRADE PERFORMANCE 

Source: Department of Statistics, Malaysia (DOSM)

 INDUSTRY PROFILE – PAPUA NEW GUINEA

In 2017, Malaysia’s trade with Papua New Guinea (PNG) registered a trade surplus, amounted to RM2.39 billion, an increase of 13.6% from 2016. Exports amounted to RM1.45 billion, an increase of 3.7% from the year before while imports grew by 33.1% to reach RM945.2 million. Major products exported to PNG are:

-Machinery, equipment & parts (RM286.7 mil or 19.8% of total exports);

-Petroleum products (RM216.4 mil or 15.0%);

-Beverages & tobacco (RM179.9 mil or 12.5%)

-Chemicals & chemical products (RM142.0 mil or 9.8%); and

-Processed food (RM82.6 mil or 5.7%).

Executive Summary

1. Papua New Guinea (PNG) is classified as a developing country and is one of the most culturally diverse countries in the world with over 800 languages and over 1,000 distinct ethnic groups. Most of the country’s population live in rural communities and are faced with significant challenges in health, education and economic opportunity.

2. The indigenous population of Papua New Guinea (PNG) is one of the most heterogeneous in the world. PNG has several thousand separate communities, mostly with only a few hundred people – divided by language, customs and tradition.

3. The minerals, timber, and fish sectors are dominated by foreign investors. Manufacturing is limited and the formal labour sector consequently is also limited.   The economy of PNG is dominated by labour-intensive agriculture and capital-intensive extraction of oil and gas, gold, copper, and silver. Mining and petrochemicals now account for over 25% of PNG’s GDP and over 80% of its exports. The country continues to face significant challenges in making economic growth more inclusive and sustainable. Many areas of service delivery – such as health, education, transport, energy and water – remain weak, especially in rural areas. Agriculture provides a subsistence livelihood for 85% of the people.

4. Following construction of a $19 billion LNG project, PNG LNG, a consortium led by Exxon Mobil began exporting LNG to Asian markets in May 2014. The success of the project has encouraged other companies to look at similar LNG projects. As such, more opportunities for Malaysian companies to provide products, services and expertise in the oil & gas sector as well as exploration work through Joint Venture.

5. With 2.5 million square kilometres of fisheries area known as the Exclusive Economic Zone, PNG accommodates an extensive and valuable marine resource. Fishing operations range from small-scale coastal commercial operations to large-scale deep water tuna fishing operations. The tuna industry in the country has evolved from licensed harvesting by international fishing vessels to now include in-country production and canning operations. PNG delivers 14% of the world’s tuna catch and has an existing agreement with the EU to allow duty free exportation of tuna to the region.

6. In general, the PNG economy is highly dependent on imports for manufactured goods. Its industrial sector – exclusive of mining – accounts for only 9% of GDP and contributes little to exports. Small scale industries produce beer, soap, concrete products, clothing, paper products, matches, ice cream, canned meat, fruit juices, furniture, plywood, and paint. The small domestic market, relatively high wages, and high transport costs are constraints to industrial development.

7. Numerous challenges still face the government of PNG, including providing physical security for foreign investors, regaining investor confidence, restoring integrity to state institutions and maintaining economic growth. Although PNG economy grew moderately to 3% in 2017, a more challenging environment is expected in 2018 due to economic slowdown in China.

Major Industries

1. Mining and Petroleum

• The mining industry is capitalising on the wealth of natural resources within the country, with the Exxon-led liquefied natural gas project serving as a case in point. This project alone has the potential to double GDP in the near term and significantly boost PNG’s export revenue.

• The current unfavourable economic climate may result in some mining investment projects being put on hold, but investments in new capacity are expected to develop the Elk-Antelope, P’nyang and Stanley gas, owing to the size and relatively low development cost of PNG’s gas fields and the predicted growth in demand for LNG from Asia. The resulting investment spending will support acceleration in economic growth from 2019.

• Obtaining more revenue from the mineral and petroleum sector by discontinuing the practice of providing significant tax concessions to companies operating in this sector will improve both the fiscal balance and the foreign exchange position in PNG. Further, translating revenues into strong, tangible improvements in living standards for all Papua New Guineans remains the key challenge for the Government of PNG.

2. Manufacturing

• The manufacturing industry has traditionally played a fairly small role in Papua New Guinea. This is attributed to a small domestic market, high labour costs and high transport costs.

• Traditional industrial products from Papua New Guinea include fish, timber, coffee, cocoa, copra and palm oil. Traditionally most manufactured products were produced for domestic consumption.

• While manufacturing still plays a small role in the economy, the country’s manufactured products have begun to enter global market places. These products include food and beverages, building materials, handicrafts, household items and furniture, packaging, and paints and coatings.

• One of the most widely known food production companies in PNG is Paradise Foods Limited, which is the oldest established food manufacturing company in the country. Paradise Foods produce food products for the international and regional markets, including biscuits, corn chips and potato chips.

3. Agriculture

• Agriculture dominates the rural economy of PNG. More than 5 million rural dwellers earn a living from subsistence agriculture and selling crops in domestic and international markets.

• PNG has fertile soils and favourable climate, which permits the cultivation of a wide variety of cash crops particularly in the highlands, coastal and island regions. Production of cash crops is usually centered on plantations but significant smallholder productions among rural communities also exist.

• Small scale farmers either sell their product to the plantations, or to the numerous community boards acting as centralised buyer and seller, set up to stabilise prices and improve bargaining power.

• The main agricultural exports of the country include cocoa, coffee, copra, palm oil, rubber and tea.

• Palm oil is a growing business in PNG, with very large capital investments reaching hundreds of millions of kina and targets tens of thousands of hectares per project. New infrastructure plans are in the pipeline, including an estimated 1300 km of provincial and plantation roads.

• Palm oil is PNG’s most successful agricultural crop, accounting for around 40% of agricultural export earnings over the last decade while directly providing income for over 160,000 people living in rural households.

4. Building & Construction:

• PNG’s construction industry experienced a marked expansion in 2010 thanks to the start of construction on the ExxonMobil-led PNG LNG project. The industry recorded five consecutive years of double digit growth, growing at an average rate of 20.8%.

• The PNG LNG project began commercial operations ahead of schedule in April 2014, with the country delivering its first LNG cargo the following month. While this had a positive impact on state revenues, the construction industry slowed in the wake of the project’s completion.

• The worst of the shocks were cushioned by state investment in infrastructure projects, while long term plans to upgrade the national power grid and planned development of the Konebada Petroleum Park and Elk-Antelope LNG Project could see the country return to growth in the medium term.

• PNG’s partnership with the Asian Development Bank (ADB) is the most significant for the country’s construction portfolio. PNG joined the ADB in 1971, and today stands as the bank’s largest Pacific region borrower for private and public sector development, while the bank represents the nation’s second-largest development partner after AusAID.

• Through its partnership with the ADB, PNG has made significant progress in updating major infrastructure, most notable the Lae Port tidal basin, in addition to improvements under way at its airports. The ADB’s second flagship project, the $640 million Civil Aviation Development Investment Programme, will upgrade safety and security at seven airports, including Jackson’s International Airport in Port Moresby.

• Industry players are aiming to finish projects in time for the 2018 APEC Summit. The typical customer profile of the hotel industry comprises mostly business travellers, so there is an opportunity to attract other kinds of tourists.

• Home building is forecasted to accelerate as the market moves to meet demand. The obstacle to this growth is the lack of freehold land as over 90 percent of land in PNG is customary title. Most of the commercial activity involves deals directly with landholders.

5. Forestry

• In PNG, the forest industry makes an important contribution to the country’s economy. The vast majority of timber is produced as raw logs for export – this account for 97% of the value of all exports of forest products, with woodchips covering almost all of the remainder.

• According to the FAO (2015), Papua New Guinea (PNG) has around 33.6 million hectares of forested land, which constitutes to 72.5% of the total land area. Almost the full extent of the forested area is defined as primary or otherwise naturally regenerated forest, and PNG has about 62,000 hectares of forest plantations.

• It is estimated that only 3% of the country’s land area is publicly owned, most of which are towns and cities, and the remaining 97% is owned by local communities or indigenous groups. The customary rights include rights to almost all natural resources, including forests, and landowner groups are consequently legally entitled to be involved in decisions concerning the management of their forest land.

• The country’s forest industry is predominantly based on the export of logs from natural forests. There are many species harvested from PNG’s forests. The top-10 of most important species for export from Papua New Guinea include Taun (Pometia pinnata), Merbau, locally known as Kwila (Intsia spp.), Malas (Homalium foetidum), Calophyllum (Calophyllum spp.), Terminalia (Terminalia spp.), Kamarere (Eucalyptus deglupta) from plantations, Dillenea (Dillenea spp., mainly D. papuana), Red Canarium (Canarium spp.), Pencil Cedar (Palaquium spp), and PNG Mersawa, also known as Palosapis (Anisoptera thurifera).

Trade Opportunities

1. Building Materials, Hardware & Household Products

Opportunities:

-Machinery & Equipment

-Building Materials

-Mechanical & Electrical Appliances and parts

-Household products

-Energy and Renewable Energy products

-Security and automated access systems

-Sanitation and eco-friendly management systems

 
2. Food and Beverage

Opportunities:

-General Food Stuff (e.g. biscuits, tinned / canned and dried food, snacks, etc.)

-Beverages – energy drinks, aerated beverages and natural waters

-Accessories such as equipment and packaging for the F&B industry including packaging

-Tobacco

3. Pharmaceutical (non-drugs)

Opportunities:

-Medical gloves, syringes, sutures and disinfectants

-Plastic medical disposables

4. ICT

Opportunities:

-Mobile application and value add service providers

-International cables for connectivity

Investment Opportunities

The following profiles have been identified by the Investment Promotion Authority PNG for overseas inbound investment:

1. Agriculture:
a) Coffee, cocoa, coconut (copra), palm oil, spices, tea and rubber.

2. Communications
a) Digitization of telephone exchanges;
b) Upgrading of transmission technology; and
c) Mobile communication providers.

3. Fisheries:
a) Aquaculture – Lobster, Sea Cucumber, Beche-de-mer, Trout, Carp; and
b) Offshore fishery – Tuna species – Big-eyed, Yellow fin, Albacore, Skipjack.

4. Forestry:
a) Tropical Hardwoods; and
b) Palm Oil

5. Financial Services
a) Banking services; and
b) Insurance services

6. Manufacturing:
a) Downstream processing;
b) Processed Food; and
c) Household consumer products

7. Mining and Energy:
a) Rural Electrification;
b) Renewable Energy;
c) Transport; and
d) Energy Efficiency

8. Health:
a) Medical professionals;
b) Clinics; and
c) Hospitals

9. Tourism:
a) Adventure Tourism; and
b) Nature Tourism;

Prepared by:
MATRADE Melbourne

 Country Feature on Republic of Fiji Islands 

*Article prepared by MATRADE Melbourne

Republic of Fiji Islands map

MALAYSIA – FIJI TRADE PERFORMANCE

Source: Department of Statistics, Malaysia (DOSM)

INDUSTRY PROFILE-REPUBLIC OF FIJI ISLANDS

In 2017, Malaysia’s trade with Fiji recorded a trade surplus, amounted to RM325.1 million, an increase of 28.6% from 2016. Exports amounted to RM305.6 million, an increase of 29.9% from the year before while imports grew by 11.1% to reach RM19.5 million. Major products exported to Fiji are:

-Other vegetable oil (RM54.1 mil or 17.7% of total exports);
–Electrical & electronic products (RM45.0 mil or 14.7%);
–Petroleum products (RM43.8 mil or 14.3%)
–Processed food (RM26.7 mil or 8.7%); and 
–Chemicals & chemical products (RM21.4 mil or 7.0%).

Executive Summary

1. Fiji is described as middle-income country and one of the more developed of the Pacific island economies, although it remains a developing country with a large subsistence agriculture sector.

2. For many years, sugar and textile exports drove Fiji’s economy. However, decline in preferential market access and the phasing out of a preferential price agreement with the European Union [to sugar price reductions of 36%] undermined earnings and the potential of these two sectors in becoming competitive in globalized markets.

3. Fiji has extensive mahogany timber reserves, which are being exploited. Fishing is an important export and local food source. From 2011, fish became one of the leading domestic export commodities. Gold from Fiji’s only gold mine is also an important export industry and is expected to continue its positive performance with rising gold prices.

4. From 2000 the export of still mineral water, mainly to the United States, had expanded rapidly. Water exports in 2016 were estimated at $129.2 million.

5. In recent years, growth in Fiji has been largely driven by a strong tourism industry. Tourism has expanded since the early 1980s and is the leading economic activity in the islands. About 40% of Fiji’s visitors come from Australia, with large contingents also coming from New Zealand, the United States, the United Kingdom, and the Pacific Islands. Tourist arrivals grew by 6.4% in 2017 and reached the 842,884 (2016: 792,320). Fiji’s gross earnings from tourism in 2017 was estimated at $1.70 billion, more than the combined revenues of the country’s top five exports (fish, water, garments, timber, and gold), with arrivals expected to increase by approximately 5% in 2018.

6. Sector contribution to GDP (2013):

a) Service – 48.6 per cent
b) Hotels & restaurants – 13.6 per cent
c) Manufacturing – 13.0 per cent
d) Agriculture – 10.9 per cent
e) Government Services – 5.8 per cent
f) Construction – 3.1 per cent
g) Sugar (including sugar manufacturing) – 1.4 per cent
h) Electricity and water – 1.4 per cent
i) Garments – 1.1 per cent
j) Mining and quarrying – 0.9 per cent

7. In 2017, the Fijian government passed a suite of changes that look to assist in the continued modernisation of the Fijian economy. Chief among these is Fiji’s accession to the UN Convention on the Use of Electronic Communications in International Contracts, and changes to the Electronic Transactions and Financial Transactions Act. The changes bring Fiji in line with international best practice guidelines with the intent of promoting ease of transactions and transparency.

8. This is in line with its key policy objective – to be a hub of e-commerce in the Pacific. The aim of the Fijian Government’s trade and economic policy is for Fiji to be a vibrant, dynamic and internationally competitive economy serving as the hub of the Pacific.

Major Industries

1. Tourism

• The Tourism industry has become Fiji’s largest source of foreign exchange in comparison to other industries such as sugar, fisheries, garments, forestry and even remittance receipts. The sector is mainly private sector driven and has grown substantially over the past few decades. Tourism contributes approximately 17.0 percent to GDP and provides direct and indirect employment to around 40,000 people.

• Tourism is therefore a critical pillar of the economy. In 2017, it is estimated that gross earnings from the tourism industry was $1.7bn, which is about 34.0 percent of GDP. Visitor arrivals have continued to increase over the past 20 years. In 1993, visitor arrivals stood at 318,874, which increased to 842,884 by 2017, an average increase of around 4.5 percent annually.

2. Manufacturing:

• One of the most thriving sectors within Fiji’s growing economy is manufacturing. This includes the manufacture of textiles, garments, footwear, sugar, tobacco, food processing, beverages (including mineral water) and wood based industries. The sector employs approximately 26,000 workers and is one of the nation’s top growing sectors. Fijian-made products have made substantial progress in the international trading arena such as Pure Fiji, Fiji Water, Pacific Green Furniture and FMF Foods Ltd, to name a few.

• Fiji has a highly trained and skilled labour force that is both cost effective and productive. Fiji’s natural advantage in the manufacturing sector mainly lies in the raw natural proximity in terms of sourcing:

-Timber/Wood for furniture;
–Agri-processing (sugarcane, pawpaw, taro, cassava, coconut, ginger, tobacco, herbals);
–Marine;
–Mining;
–Mineral and Water; and
–Dairy, meat and poultry processing.

3. Agriculture

• Agriculture being the mainstay of Fiji’s economy, contributes around 28% to total employment in the formal sector and indirectly employing many more. This sector which was once a major stronghold of Fiji’s economy is the third largest now, contributing $535 million (10.6%) annually to the nations GDP. Sugarcane which used to dominate the sector now only contributes (0.9%) and has been surpassed by other crops, horticulture, and livestock production and subsistence sector.

4. Building & Construction:

• The building and construction industry in Fiji has seen a renewed level of confidence after the general elections in September 2014. Local and overseas investors have announced a few multi-million dollar projects. The government has committed to investing in capital works in roads, water and sewerage and airports.

• The Fiji tourism sector drives building and construction projects for resorts, hotels, airports, marinas and accommodation. Asset maintenance is an essential area of need for hotels, resorts and commercial buildings.

• With increased investments in infrastructure projects and rehabilitation after tropical cyclone Winston, the building and construction industry in Fiji is operating at capacity. Being the biggest storm ever recorded in the Southern Hemisphere, parts of Fiji have been left utterly destroyed, with urgent access to medical care, food, water and shelter being a priority.

5. Forestry

• Export earnings from forest products have been moderately pegged around one percent of GDP in the last three years. However, this contribution can change should the focus is to maximize harvested logs targeting veneer and value addition products. Over 50 percent of Fiji’s land cover is made up of native forests. There is about another 5% to 6% land in pine and hardwood plantations.

• Softwood plantations, mainly of pine (Pinus Caribaea), representing 2.5 percent (46,379 hectares) of the land area, have been established on the leeward and grasslands areas and there is great potential for further plantation expansion. Hardwood plantations of mainly mahogany (Swietania Macrophylla), representing 2.9 percent of the land area, have been established on logged over rainforests, mainly on the eastern and central parts of the larger islands.

• The estimate is based on the anticipated increase in production of indigenous and pine logs as well as harvesting of mahogany plantations. At present wood products ranks as Fiji’s fifth most important domestic export commodity after sugar, fish, mineral water and garments. Earnings from forestry products are greatly influenced by the price of exports and weather patterns.

• Fiji has been self-sufficient in most timber products through utilisation of its natural forests and plantation resources for more than ten years. The outlook however continues to be heavily reliant on the commencement of large-scale utilization of Fiji’s mahogany plantation resource.

Trade Opportunities & Challenges

1. ICT:

a) Opportunities:
 -Network integrators and managed service providers
 -E-commerce that will enhance customer service and experience
 –E-gov and e-tax
 -Online learning for corporate and education providers
 -Mobile application and value add service providers
 -Professional services and billing systems
 -Software products particularly in HRM, distribution and logistics, library, medical, manufacturing, agriculture, hospitality, retail and POS systems data integration and backup and document management systems.

b) Challenges:

 -Other overseas businesses (in particular Australian and New Zealand) have already invested in and are operating call centres, data/voucher processing, tele-hosting/warehousing, software development and disaster recovery management.
 -Understanding and complying with investment procedures without seeking professional advice
 -Limited infrastructure in regional areas with readily accessible utilities
 -Relatively high costs of utilities, especially power and communication

2. Building Materials, Hardware & Household Products

a) Opportunities:
 -Building Materials – tiles, drainage, plumbing, paint, adhesives, glass, etc)
 -Mechanical & Electrical Appliances and parts – electrical socket & cables, locks, edging, bolts & nuts, etc)
 -Machinery & Equipment – telephony and wireless equipment
 -Household products – plastic containers, mat, toilet tidy, water filter, etc)
 -Resorts furnishings – furniture and fittings
 -Energy and Renewable Energy products – solar, wind, hydro
 -Security and automated access systems
 -Sanitation and eco-friendly management systems
 -Wood and Cork – for re-export of woodchips

b) Challenges:
 -Price sensitive market
 -Fijian companies prefer to deal with products and services that can be sourced locally which allows for easy access and guidance on maintenance and repairs
 -For extensive distribution in the market, collaboration with the 3 major hardware retail and wholesale outlets (Vinod Patel & Co Ltd, R.C. Manubhai& Co. Ltd & Carpenters Hardware) is crucial.

3. Food and Beverage

a) Opportunities:
 -General Food Stuff (e.g. spices, biscuits, tinned / canned and dried food, snack, etc.)
 -Beverages – energy drinks, aerated beverages and natural waters
 -Accessories such as equipment and packaging for the F&B industry including packing
 -Tobacco

b) Challenges:
 -Due to the small market size, export orders are expected to be in small volumes at regular intervals.
 -Competition from existing distributors and suppliers in Australia and New Zealand
 -Tariffs ranges from 0 – 32 per cent and industry standards (packing and labelling requirements, quarantine regulations) are applicable.

4. Pharmaceutical (non-drugs)

a) Opportunities:
 -Medical gloves, syringes, sutures and disinfectants.
 -Plastic medical disposables

b) Challenges:
 -Price sensitive market and heavy competitive from products originating from low manufacturing cost countries.
 -Government procurement accounts for approximately 70 per cent of the overall market and suppliers must be preapproved to be eligible to participate in tenders.

Investment Opportunities

The following profiles have been identified by Investment Fiji for overseas in bound investment:

1. Agriculture:
a) Production and export of high value niche agricultural produce;
b) Animal Feed Supply, using local resources from existing industries;
c) Dairy Farming;
d) Production and supply of organic farm inputs.

2. Audio Visual:
a) Movie shootings

3. Fisheries:
a) Aquaculture – Prawns, Shrimp, Seaweed, Sea Cucumber, Tilapia, Milkfish, Pearl Oyster, Sea grapes, Asian Carp, Ornament fish, Giant clams and Trochus.
b) Offshore fishery – Deep water snapper; Tuna species – Big-eyed, Yellow fin, Albacore, Skipjack.

4. Forestry:
a) Softwood (Pine)
b) Hardwood (Mohogany)

5. Information Communication Technology (ICT):
a) Call Centres
b) Mail Management
c) Data/ Voucher Processing
d) Tele-hosting/ Warehousing
e) Software Development
f) Audio Visual
g) Disaster Recovery Management System.

6. Manufacturing:
a) Timber/Wood for furniture
b) Agri-processing (sugarcane, pawpaw, taro, cassava, coconut, ginger, tobacco, herbals)
c) Marine
d) Mining
e) Mineral and Water
f) Dairy, meat and poultry processing

7. Energy:
a) Grid Based Power Supply
b) Rural Electrification
c) Renewable Energy
d) Transport
e) Petroleum and Biofuels
f) Energy Efficiency

8. Health:
a) Medical professionals
b) Clinics
c) Hospitals
d) Diagnostic facilities

9. Mining & Groundwater:
a) Mineral water.
b) Gold, silver, manganese, base metals (copper, silver, zinc, etc.), industrial minerals (marble/limestone, aggregate etc.), phosphate, placer materials mineral sands (magnetite, hematite, ilmenite, rutile, zircon, topaz etc.), petroleum & gas, and deep sea minerals including nickel, cobalt, copper and manganese.

10. Tourism:
a) Agro Tourism;
b) Spa Tourism;
c) Health Tourism;
d) Sport Tourism;
e) Nautical Tourism;
f) Retirement Resort Village;
g) Integrated Resort; and
h) Resorts & Villas.

Prepared by:
MATRADE Melbourne