THE 2014 PNG 100 CEO SUR­VEY

Our sur­vey of PNG’S ma­jor com­pa­nies in­di­cates that the Pa­pua New Guinea econ­omy is un­der­go­ing a con­trac­tion, although there is still sig­nif­i­cant con­fi­dence in its fu­ture.

Business Advantage Papua New Guinea - - Contents -

Our an­nual sur­vey of PNG’S ma­jor com­pa­nies in­di­cates that the Pa­pua New Guinea econ­omy is un­der­go­ing a con­trac­tion, although there is still sig­nif­i­cant con­fi­dence in its fu­ture.

This is the third year in a row that Busi­ness Ad­van­tage In­ter­na­tional has run its ex­clu­sive sur­vey of ex­ec­u­tives in PNG’S largest com­pa­nies—the PNG 100 CEO Sur­vey. De­signed to gauge busi­ness con­fi­dence, the sur­vey seeks to un­cover profit, in­vest­ment and re­cruit­ment ex­pec­ta­tions for the com­ing year. It also en­cour­ages PNG’S lead­ing busi­nesses to iden­tify the key is­sues they are fac­ing.

Prof­its be­low ex­pec­ta­tions

The sur­vey clearly in­di­cates that PNG’S largest com­pa­nies ex­pe­ri­enced a down­turn dur­ing 2013, with al­most half—46.9%— re­port­ing prof­its be­low ex­pec­ta­tions (last year, only 15.2% re­ported such dis­ap­point­ment).

No­tably, too, last year no re­spon­dents re­ported a ‘sub­stan­tial’ drop in prof­its; in this year’s sur­vey, how­ever, 15.6% did.

The pic­ture was not un­remit­tingly gloomy: 12.5% re­ported prof­its had sub­stan­tially ex­ceeded ex­pec­ta­tions, and a fur­ther 25% said prof­its in 2013 had been slightly above ex­pec­ta­tions.

2013 was the year when PNG lived up to its rep­u­ta­tion as the land of the un­ex­pected—just 15.6% of our re­spon­dents re­ported prof­its at ex­pected lev­els, com­pared to 24.2% in our last sur­vey.

Lower con­fi­dence

In spite of the down­turn, a de­cent pro­por­tion of busi­ness lead­ers were still bullish about the prospects for prof­its for 2014, with 43.7% ex­pect­ing an im­prove­ment on those of 2013.

While this is around dou­ble the num­ber of those who were ex­pect­ing lower prof­its, sug­gest­ing an over­all pos­i­tive pic­ture, it is down no­tably on last year’s sur­vey, when just over half (53%) of re­spon­dents said they were ex­pect­ing bet­ter prof­its in the year ahead.

Mean­while, the num­ber of CEOS ex­pect­ing a drop in prof­its has dou­bled from last year’s sur­vey, up from 11.8% to 22.1%.

In­vest­ment and em­ploy­ment in­ten­tions

The PNG 100 CEO Sur­vey is de­signed to cap­ture in­vest­ment and em­ploy­ment in­ten­tions in PNG’S largest com­pa­nies over the com­ing year, and it is in th­ese two ar­eas where we see a marked dif­fer­ence be­tween this and pre­vi­ous sur­veys.

Last year, al­most 70% of re­spon­dents were plan­ning to in­crease their in­vest­ment in plant, equip­ment and other as­sets dur­ing 2013. One year later, that fig­ure has fallen to just over 40%, with 28.2% of re­spon­dents plan­ning to re­duce their in­vest­ment ex­pen­di­ture.

Nev­er­the­less, the pic­ture is not too harsh: al­most a third of re­spon­dents in­tend to in­vest a sim­i­lar amount in 2014 as they did in 2013.

Ex­pect lay-offs

In our last two sur­veys, the num­ber of em­ploy­ers plan­ning to re­duce their work­force has been neg­li­gi­ble—7.4% in 2012

and 5.8% in 2013. In ad­di­tion, in both sur­veys around 50% of re­spon­dents said they were plan­ning to in­crease their head­count over the com­ing year.

This year, ex­pect lay-offs: the num­ber of CEOS plan­ning to in­crease staffing lev­els has fallen to 31.3%, and al­most as many—28.2%—are plan­ning staff re­duc­tions in 2014, a five-fold in­crease in just one year.

Is­sues af­fect­ing busi­ness

The is­sues fac­ing PNG’S largest com­pa­nies have changed lit­tle over the three years of our sur­vey, although the top is­sue has changed each year. In 2012, at the peak of the LNG con­struc­tion boom, it was the skills short­age. In 2013, it was se­cu­rity and law and or­der—a peren­nial, mission-crit­i­cal con­cern for our re­spon­dents, and one that shows only mar­ginal signs of im­prove­ment.

In this year’s sur­vey, the top con­cern was the un­re­li­a­bil­ity of state-owned util­ity ser­vices, which place an im­mense cost bur­den on busi­ness. Our sur­vey in­di­cates PNG’S largest busi­nesses are still await­ing the benefits of the PNG Gov­ern­ment’s in­creased in­fra­struc­ture in­vest­ment.

There was one ma­jor new is­sue to ap­pear on this year’s list of con­cerns—cur­rency ex­change rates. PNG’S cur­rency, the kina, lost al­most 14% of its value against the US dollar in the four months lead­ing up to the com­mence­ment of our sur­vey in Novem­ber 2013. The high rat­ing for this is­sue among CEOS in­di­cates just what an im­pact that fall had on busi­ness.

The PNG 100 CEO Sur­vey 2014 was con­ducted by Busi­ness Ad­van­tage In­ter­na­tional be­tween late Novem­ber 2013 and early Fe­bru­ary 2014. The sur­vey in­cluded se­nior ex­ec­u­tives from a rep­re­sen­ta­tive sam­ple of Pa­pua New Guinea’s largest com­pa­nies across all sec­tors of the econ­omy.

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