Lo­cally made

PNG’s small but mighty man­u­fac­tur­ing in­dus­try

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Man­u­fac­tur­ing in Pa­pua New Guinea rep­re­sents a com­par­a­tively small part of the econ­omy. Ac­cord­ing to the World Bank, it con­sti­tuted just two per cent of GDP in 2017, although other es­ti­mates put it between six and 11.5 per cent.

On the ex­port side, the strong­est per­former is palm oil. Ac­cord­ing to the Bank of Pa­pua New Guinea, palm oil ex­ports rose by 180 per cent between 1998 and 2016.

Yet if the man­u­fac­tur­ing sec­tor is small, there is nev­er­the­less some spir­ited ac­tiv­ity.

One ex­am­ple is Pa­cific Foam, which claims to be the largest di­ver­si­fied pack­ag­ing sup­plier in PNG. “We can meet all the pack­ag­ing needs of the var­i­ous sec­tors of the grow­ing PNG econ­omy: re­tail, whole­sale, fast-mov­ing con­sumer goods man­u­fac­ture, food and bev­er­age man­u­fac­ture, agri­cul­ture, fish­eries, con­struc­tion, min­ing and re­sources, hos­pi­tal­ity and cater­ing,” says chair­man Ni­hal Shah.

“While eco­nomic conditions are def­i­nitely very tough in the coun­try to­day, Pa­cific Foam Group does see a bright long-term fu­ture and con­tin­ues to in­vest in its man­u­fac­tur­ing ca­pa­bil­i­ties to grow its busi­ness and help the na­tional goal to re­duce reliance on im­ports.

“To­day, we are a ver­ti­cally in­te­grated man­u­fac­turer with prod­ucts that are proudly PNG-made and proven in the mar­ket­place.”

An­other prom­i­nent player is SP Brew­ery. Gen­eral man­ager, Stan Joyce, says man­ag­ing eco­nomic volatil­ity is es­sen­tial in PNG.

“If you’re plan­ning a man­u­fac­tur­ing busi­ness in PNG, you have to ac­cept that the nice lit­tle 2–2.5 per cent growth that the economists and all those won­der­ful peo­ple in suits on the other side of the world want to have hap­pen, won’t al­ways be the case in PNG.

“Some­times I go to meet­ings and tell the bosses about a 10 per cent growth in sales and they’re won­der­ing how you did it. When you’ve got to ex­plain a 15 per cent drop they want to know what you’re not do­ing. But you need to have that long-term view.”

Many man­u­fac­tur­ers in PNG are over­seas com­pa­nies.

For ex­am­ple, KraftHeinz has two fac­to­ries in PNG pro­duc­ing corned beef. In 1988, the com­pany pur­chased the Hugo Can­ning Com­pany and it has dis­trib­uted from the Port Moresby ware­house since 2011. It also ex­ports to the Solomon Is­lands and Van­u­atu.

The Aus­tralian com­pany Rhodes has a man­u­fac­tur­ing and lo­gis­tics plant in Port Moresby. Man­ag­ing di­rec­tor, Emanuel Pa­pas, says the com­pany is ge­o­graph­i­cally spread, with pro­cure­ment and man­u­fac­tur­ing oper­a­tions in China, a back-end de­sign of­fice in the Philip­pines, a head of­fice in Aus­tralia and lo­cal oper­a­tions for each project.

Pa­pas says es­tab­lish­ing oper­a­tions in PNG takes time, but once es­tab­lished it is rel­a­tively se­cure be­cause of the high bar­ri­ers to en­try.

Some com­pa­nies find conditions dif­fi­cult, how­ever. The paint man­u­fac­turer Akzo No­bel has pulled out of lo­cal man­u­fac­tur­ing, cit­ing high over­heads. Although PNG labour is af­ford­able, the other costs can be high.

The for­eign ex­change short­age is pos­ing a chal­lenge for many PNG busi­nesses, in­clud­ing in­ter­na­tional man­u­fac­tur­ers. But it can ben­e­fit the lo­cal play­ers, ac­cord­ing to Chey Scov­ell, chief ex­ec­u­tive of the Man­u­fac­tur­ers Coun­cil of PNG.

He notes that it is open­ing up gaps in the mar­ket, es­pe­cially in the fast-mov­ing con­sumer goods space.

Frank McQuoid, chair­man of steel fab­ri­ca­tor, Steel In­dus­tries, says that many clients pre­fer to pay for their prod­uct in kina. He says, how­ever, that it will be dif­fi­cult for PNG man­u­fac­tur­ers to sur­vive without greater pro­tec­tion, ob­serv­ing that “the vast ma­jor­ity of im­ports into PNG are duty free”.

Many lo­cal PNG man­u­fac­tur­ers are build­ing on the ad­van­tage PNG has in agri­cul­tural pro­duce.

Ac­cord­ing to Cana­dian vanilla sup­plier Aust & Hach­mann, PNG is one of the premier pro­duc­ers of vanilla beans, and essence is lo­cally manufactured. An­other us­ing this strat­egy is Ernes­tine Max­tone-Graham, di­rec­tor of Max­toneHaus, who started a co­conut oil pro­cess­ing plant at Kanudi in Port Moresby in 2015, buy­ing co­pra from lo­cal farm­ers along the coastal vil­lages in the Abau Dis­trict of Cen­tral Province. Max­toneHaus says it ini­tially bought sun-dried co­conuts, but then be­gan pur­chas­ing whole co­conuts and air dry­ing them. The shell is used for fuel, the meat is pressed for oil and the re­main­ing meal is sold to pig­geries. “There is no wastage,” says Max­toneHaus. An­other op­tion is to man­u­fac­ture off­shore us­ing PNG raw ma­te­ri­als. Pa­pua New Guinean, Pana Wiya, prin­ci­pal of Vil­lage Cof­fee, is lo­cated in Syd­ney, Aus­tralia. He im­ports beans from Wau in Morobe Province, and the Eastern High­lands, then roasts them for the Aus­tralian mar­ket.

While eco­nomic conditions are tough in the coun­try to­day, Pa­cific Foam Group does see a bright fu­ture and con­tin­ues to in­vest in its man­u­fac­tur­ing ca­pa­bil­i­ties to grow its busi­ness and help the na­tional goal to re­duce reliance on im­ports.

Hard at work … (from top, clock­wise) mak­ing ice cream at Laga In­dus­tries; Chey Scov­ell, the chief ex­ec­u­tive of the Man­u­fac­tur­ers Coun­cil of PNG; beer from SP Brew­ery; PNG springs.

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