In 2017 the government of Papua New Guinea introduced a series of policies to promote domestic downstream processing in the fisheries and timber segments, and self-sufficiency in food production. However, these measures have been met with criticism from some sector players, who claim that not enough has been done to boost output and self-sufficiency may not work for every industry.
Fisheries
In January 2018 the government introduced a rebate scheme, under which PNG-based tuna-processing companies are eligible to receive $400 per tonne of fish. Within the first month the six leading domestic processors received $2.5m in rebates and processed 6652 tonnes of fish.
The government has also taken steps to protect the segment by raising duties on canned tuna and other fish products from 10% to 25% in January 2019. Speaking to local media in March 2019, Chey Scovell, CEO of the Manufacturers Council of PNG, said the rebate scheme had seen processing double in PNG, with canneries often operating 24-hour shifts. However, some stakeholders have voiced concerns that processing firms still lack basic infrastructure. Although the rebate scheme has boosted employment and export revenue, the government will need to improve wharves and ensure access to affordable utilities in order to attract further investment.
Rice
Two local companies – Trukai Industries and Innovative Agro Industry – are rallying the government to follow through with its target of making the country self-sufficient in rice production. Trukai Industries is in the process of expanding a domestic rice project in the Markham Valley, which is expected to produce 1000 tonnes of rice by the end of 2019.
According to a report published by the PNG National Research Institute in 2016, the country imports around 98% of its rice requirements, amounting to more than 300,000 tonnes in peak years. It remains unclear whether large-scale rice cultivation is viable in PNG given the vast swathes of land required in a country where securing land rights continues to be fraught.
Wood Products
In July 2018 then-Prime Minister Peter O’Neill announced a complete ban on round log exports by 2020, in a bid to encourage downstream processing and the export of finished timber products. The PNG Forestry Authority told local media in February 2019 that the government aims to reverse the current situation in which 90% of harvested logs are exported and the remaining 10% are sent for domestic processing. The authority also noted that in 2015 the export value of logs was PGK1.04bn ($315.5m), while timber products generated PGK1.05bn ($318.5m).
Prime Minister James Marape echoed his predecessor in advocating the log export ban, reaffirming the plan in his inaugural address in June 2019 as a way to drive out illegal logging companies. PNG has sought to promote its finished wood products industry since the country became independent in 1975, but progress has been hampered by a small domestic market, bureaucratic red tape, fiscal instability and high logistics costs. If enacted, the ban is unlikely to result in a complete cessation of exports. Instead, the government is opting to forego renewing timber export licences, which usually carry terms of between 10 and 15 years.
With around 400,000 cu metres of an annual log harvest of 4m cu metres sent for downstream processing, existing capacity is limited. The government has taken steps to shield the domestic industry by doubling duties on wood furniture to 30% at the start of 2019. However, industry stakeholders have argued that in order to increase revenue derived from finished wood products, the government must first rebuild trust in the timber industry, which has suffered from a lack of enforcement of grading and timber preservation standards over recent years.
Read More from OBG
