View Full Version : ina FORUM with Mike Manning

10-05-2003, 12:19 AM
Publicise export-led agenda :

The Somare-Marat government has identified the way forward for Papua New Guinea’s economic recovery.

At every turn it is urging the whole country to increase exports which it believes will in turn stimulate the economy and reduce pressure on the kina. The strategy is correct but is it working and what more can be done to encourage exports and import replacements (which have the same effect) ?

The first problem that PNG faces is that no-one knows about it, or if they do there is a strong misconception about lawlessness and chaos.

The INA has long urged successive governments to address this problem by a well prepared positive media campaign in key countries.

This has to be done by a reputable firm and carefully put together.
It should show firstly where PNG is and then the assets and resources that it has to offer the world. It should be shown on prime time television in Australia, the US, South East Asia, Japan and Europe.

As an example of what can be done both Fiji and Vanuatu have in the past targeted the period between Christmas and New Year in Australia when most Australians are full of Christmas cheer and sit in front of their TVs watching cricket.

Those two countries have advertised at an almost saturation level during that period because they believed that families tend to think about their next year’s holiday then. It must have some effect because despite three coups and the disruption that was caused, Fiji gets around 400,000 tourists a year compared with PNG’s 15,000. It earns about $US1000 per tourist or around K1.6 billion from tourism.

PNG’s campaign should first show where it is, it show the beautiful scenery that the country has and the cultural diversity of its 800 tribes.

It should show what PNG can offer the world in terms of exports of petroleum and minerals, agriculture, forestry, fisheries and tourism as well as manufactured goods. In other words, PNG has to go out and positively counter the negative criticism that is continually being encountered in overseas countries.

That is the first step. The second is to analyse and remove the constraints to exports and investment in export industry. The main areas that were identified by the INA last year were law and order, policy certainty, corruption and currency fluctuation.

Other important areas were interest rates, inflation, transport, electricity and telikom infrastructure. A private sector working group also identified regulations such as work permits, visas and price controls as important areas needing reform.

It is important that people are not too impatient. Governments cannot undo years of neglect in a few months and some of these disincentives will take several years to fix. Some would say that the government has made a start and should be given credit for that. Others are more impatient and point to the fact that the economy has declined over the last three years, that government deficits are too high, expenditure is going to the wrong places and debt levels continue to grow.

As usual there are merits to both arguments. Nevertheless, if PNG is to increase its exports significantly and produce more goods that are consumed within the country (which will reduce imports), it has to have a clear and consistent strategy to do so. It has to make the initial investment in the right places so that the desired result will be achieved.

Exports will not increase because leaders want them to or because they tell the private sector it is their responsibility to make them grow, which is the approach that some previous governments have taken.

Exports will only grow when the economic conditions for growth are provided.

The quickest export response that PNG can get is to ensure that all of its tree crops get to a market and reach overseas markets. The first constraint to this is transport infrastructure. Roads, bridges, sea and air transport are all in a state of great disrepair.

The Coffee Industry Corporation reports that there is a good coffee crop this year but that the same high proportion (as high as 30 per cent) will not reach the market because roads are too bad. This is being made worse because there has been heavy rain in the Highlands causing land slides and more damage to roads.

There is no easy or short term solution to this problem. It will cost billions of kina to fix and when it is fixed, there has to be regular and systematic maintenance to ensure that it is never allowed to disintegrate in the same way again.

Individual members of Parliament have an important part to play in this process. Through District Planning and Budget Priorities committees, they can ensure that infrastructure in their electorates is repaired, they can reduce the wastage that is occurring at LLG and make sure that real progress is made.

They can try to get their electorates to take the initiative and help themselves. Many feeder roads were originally made by communities themselves. They could be repaired by those same communities if they can be persuaded to make the effort again instead of waiting for the government to do it for them.

The process of growth is slow to start with but gathers pace as it goes along. If a community fixes a road, produce starts to go to market and trade goods come back to the village that will create wealth and soon the road will be busy enough to warrant a road grader to look after it and even upgrade it.

If there is not an initial push from the community the government may never have the resources to fix the roads and it will remain in isolation and services will continue to decline.

In order to be able to fix infrastructure, there has to be a major re-ordering of government expenditure. The money has to be found somewhere and it is neither possible nor sensible to continue to expect that donors and international banks will continue to provide funds for this into the future.

This is the test for the Somare-Marat government.

It has to identify the important areas that require more funds and to find those funds from within the existing budget. That will require ceasing expenditure on unnecessary or less important areas or activities so that funds can be reallocated to the important areas.

Such decisions are never popular because there are always many people clamouring for money to be spent on their own pet interest.
The success of any business is recognising the areas that can give the best return and using whatever resources that are available to invest in those areas. The same principles apply to government expenditure.

It will require members of Parliament and other politicians to recognise that there has to be “short term pain for long term gain” as all sports people hear every day. If the country is to start growing again, the whole community has a part to play and that is to stop demanding special and personal benefits from their MPs and allow the nation to invest in its future.

Another area that the government can address to improve vital infrastructure is the way in which these assets are looked after.

The Highlands,, Magi, Hiritano Highway and the Lae-Madang highways are all subject to closure whenever there is heavy rain.

Traditional government departments have not been able to solve this problem for a variety of reasons despite the fact that successive governments have tried to make money available for maintenance.

The solution to this problem is to set up an authority that will be responsible for the highways and if successful, for maintenance of all road infrastructure in the future. This National Road Authority, which would bring private sector input into management through the board, is presently before the Parliament.

At a meeting during the week, a working group heard of some of the problems associated with the wharves of PNG.

There are a number of government agencies responsible for various aspects of management of the wharves of PNG. They include PNG Harbours Board (wharves and ports), IRC (customs), NAQIA (quarantine), various stevedoring companies and transport companies.

The private sector finds some of these bodies cumbersome, applying charges that are too high for services that are unnecessary, not collecting all the charges they are supposed to etc. It would seem logical to create an authority, bringing all of these different bodies under one roof and to review all of their operations with a view to making the service at the wharves more efficient and cheaper.

These are the sorts of practical measures that can be taken to improve the conditions and reduce the costs for both exporters and importers.
It is important to reduce import costs because many export industries depend on imported inputs like steel, chemicals, fertilisers, bags etc.

In order to increase exports, PNG has to make conditions better for exporters. Transport is the most vital link and it has to be provided at the cheapest possible cost to exporters. Law and order has to be brought under control so that exporters can get their goods to market without it being stolen or the money to buy the crop stolen.

Small exporters need to be able to buy goods with the money they earn from their crops. Often, a small grower doesn’t receive enough from his crop to be able to go to town so he/she needs a trade store in the village at which to spend their money. This will be impossible if the store is robbed every week.

Most of all, PNG needs a strategy which starts to attack the basic reasons why exports are not expanding even when prices are high.
We need to show the world what PNG has to offer regularly and in the places where there are potential markets. Road shows are a start but they have to be backed up by constant media exposure to the good side of PNG.

This will cost some money and needs a competent public relations firm to continually push advertisements and press articles into every press outlet available.