Lae business guide
David James reports that there are positives in the Lae economy, despite some bumps in the highway.
Lae, in Morobe Province, is Papua New Guinea’s second-largest city. It has a history as the industrial centre of the country. It has PNG’s biggest port and is the terminus for PNG’s longest and most important arterial road, the Highlands Highway.
The Asian Development Bank has announced plans for a 10-year project to upgrade the highway, which will especially benefit the region’s many smallholder farmers.
The PNG National Government has committed funds to upgrade Lae’s Nadzab airport and work has also started on expanding the road between the airport and Lae city.
John Byrne, president of the Lae Chamber of Commerce and Industry, says there are positives in the economy, however it has been
“static” recently, partly because of foreign exchange shortages.
“Lae has been caught up in the foreign exchange issue like most businesses have. A lot of importers have been hit very hard,” he says. “You can see it in the supermarket shelves. They have to balance what they are bringing in and not bringing in. Products that you have seen previously are not there.”
Byrne points to the positives. “Agribusiness has grown in recent times. There has been more investment in the Markham Valley with Trukai doing the rice fields, cassava for SP Brewery and sorghum through Mainland Holdings. It is import replacement, as much as it is about the need to support the local economy and also the need to satisfy government requirements.
“We are a food bowl and if we can do it locally it makes sense. I don’t believe there has been a massive reduction in terms of the shipping coming in and out. The numbers are pretty static. As for the economy itself, most people are saying it has been consistent for the last 12 months or so.”
One of the most important developments for Lae is the $US9 billion (PGK30.5 billion) Wafi-Golpu copper-gold project. The government signed a memorandum of understanding with Newcrest Mining and Harmony Gold last December. There is an application for a judicial review of the agreement with the National Court, but exploration work under the project’s exploration licence is continuing.
Michael Kingston, managing director of KK Kingston in Lae, is optimistic about the impact of Wafi-Golpu going ahead.
One of the most important developments for Lae is the $US9 billion (PGK30.5 billion) Wafi- Golpu copper-gold project.
“There is a general air of improved sentiment around Lae, due to the expectation of activity from Wafi-Golpu and flow-on economic activity.”
He points to other positive developments. “There are a number of new major developments under construction, including a large new production facility being built by Goodman Fielder, and the ongoing rebuilding of Angau Hospital. Most players that I speak to in the construction and industrial sectors are positive and reporting improved business performance,” Kingston says.
He believes that the problems associated with foreign exchange liquidity have “eased”, making international trade easier.
“The fast-moving consumer goods (FMCG) market remains tight, with most wholesalers and retailers reporting reduced sales volumes versus 2018. And there is increased competition.
“Most players in this market segment would say that business conditions are very tough, but this is not surprising to me as traditionally there is some stickiness in flow-on effects from increased activity in the industrial and construction sectors through to the general consumer sectors.”
Lae is situated next to the Markham Valley, whose fertile soils give it the potential to be an agribusiness exporter. But the infrastructure needs to be developed for this to occur.
Byrne says the Lae—Bulolo— Wau Highway is an important conduit for business and mining, but is badly in need of upgrading.
He says it is vital to many smallscale coffee, cocoa and produce growers who are impeded from exporting their produce or coming down to market. All the offshoots off the Markham Highway also require work, he says.
“If we get those roads built I see more smallholders getting better business principals and planning, which benefits the economy as a whole.”
The International Finance Corporation, a sister organisation of the World Bank, is working on a plan to develop a business model that will suit local producers in the Markham Valley.
Lack of infrastructure can be turned into a business opportunity. That has been the approach taken by the Lae-based Papua New Guinea Forest Products, which, needing to develop its own power, has become both a forest products company and a power producer. (See our story, Page 114.) High crime rates have been a challenge in the past in Lae, but Kingston believes there have been improvements. “Law and order is probably the best it has been in years, which I think is a combination of improved employment and tougher policing. There is a very marked reduction in violent crime. Lae feels like a much safer place than it was a few years ago.”