Speech
Address by: David J. Twine, Regional Director and Executive General Manger South Asia, SE Asia, Pacific, Austrade
Event: 22nd Australia - Papua New Guinea Business Forum
Location: Cairns
Date: 15 May 2006
- The Hon. Sir Moi Avei KBE MP, PNG Deputy Prime Minister and Minister for Petroleum and Energy
- HE Michael Potts – Australia’s High Commissioner to PNG
- HE Charles Lepani – PNG High Commissioner to Australia
- Mr. Alan Walter – President, Australia-Papua New Guinea Business Council
- Mrs Winifred Kamit – President, Business Council of Papua New Guinea
Good morning and thank you for this opportunity to contribute to this briefing accompanying the 22nd Annual Australia-Papua New Guinea Business Forum.
Firstly, I would like to applaud the Australia-Papua New Guinea Business Council and the Business Council of Papua New Guinea for organising this forum event. Both organisations are putting in a great effort, a very worthwhile effort, to foster closer trade ties. Austrade certainly values our productive working relationship, in fact the strong partnership we hold, with both organisations.
The Australian Trade Commission (Austrade) which I represent is the Australian Government agency that helps Australian companies win international business.
Quite simply there are two key aspects to Austrade’s role, essentially opposite sides of the same coin:
- helping Australian companies to export to and invest in markets outside Australia, and;
- helping customers in markets around the world source goods and services from Australia for their businesses and markets (helping make Australia a valued part of their supply chain).
Both of these aspects of our role are directly relevant to our subject today, and, as Austrade’s Executive Director for the region spanning across South Asia, South East Asia and the Pacific - which of course includes PNG – that’s what I would like to talk today: how Australian business capability can assist and complement PNG’s continuing progress.
Overview of Australia’s trading relationship with PNG
Of course, it’s worth recognizing at the outset that bilateral trade ties between our two countries already run deep:
- Australia is PNG’s principal trading partner and remains PNG’s principal source of investment.
- In recent years, almost half of PNGs imports were sourced from Australia.
That’s an impressive platform for us both to build upon.
In terms of the number of Australian companies exporting to market, PNG is Australia’s 9th most important export destination and 22nd largest trading partner overall. In fact, Australia sells a wider range of goods to PNG than any other market in the world!
PNG is a major purchaser of Australian services in terms of higher education, business services, and as well as other consulting services as inputs related to projects by AusAID, multilateral aid agencies and development agencies such as the World Bank.
PNG is also a natural first market for many Australian companies, SMEs, new to exporting, which is not really a surprise when you consider the size and needs of the market as well as the fact that accounting, legal and industrial systems derived from Australian influence; so there’s a natural familiarity and comfort in doing business in PNG.
The theme of the conference this year is ‘PNG on the Move’. It is a very fitting choice considering the high levels of confidence amongst business people in relation to Australian-PNG trade.
There are a number of important factors underpinning this confidence.
The PNG economy has returned to growth over the past 3 years, reaching a rate of 2.8% in 2005, with forecasts predicting continued growth in 2006 and beyond.
Other macroeconomic indicators and fiscal discipline have also improved. For example, inflation has declined sharply since 2003 – from 14.7 per cent – to around 1 per cent in 2005.
With the Somare government looking to contest an election later this year for a record second term, PNG is also benefiting from a period of increased political stability …
… and the PNG resources sector, a key driver of growth, is benefiting from record commodity prices.
A number of commentator’s have also said that the PNG economy is in the best shape since Independence.
Australia’s long standing relationship with PNG places Australian companies in an excellent position to complement and assist PNG’s progress.
This means there is growing opportunity for Australian exporters in PNG – both in terms of expanding trade for those, like many here this morning, who are already active in the market, and also for many more Australian exporters who haven’t done business with PNG before – provided we are careful, realistic, selective, targeted, do our homework and remain focused. Of course such principles are fundamentals of doing business in every market – whether developed or developing.
Today I’d like to outline some of the areas of opportunity that Austrade is currently seeing in PNG, and how Australian business capability can play an ongoing role in PNG’s progress, especially in the spirit of genuine partnership which delivers sustainable value to all parties.
Mining
You may well have heard PNG described as an ‘Island of Gold floating in a Sea of Oil’ – I understand it is a favourite expression of Sir Moi.
The resources sector, which is a traditional driver of the PNG economy, is experiencing positive developments in oil and gas, as well as mining. The recently overhauled mining tax regime has seen a significant increase in mine exploration licences over recent years, which bodes well for future projects coming on stream.
The proposed Ramu Nickel Mine and existing mining projects such as Tolukuma, Porgera, Ok Tedi, Lihir and the newly commissioned Kainantu Mine present new supply opportunities for Australian goods and services.
The PNG Gas Project is also approaching an exciting stage of its development with financial sanction expected in the third quarter of 2006, again presenting significant supply opportunities in the construction phase and ongoing operations.
Australia currently supplies around 65 per cent of total requirements to PNG’s mining sector.
Austrade will lead a trade mission to Porgera, Ok Tedi and Lihir in June to introduce new Australian suppliers to these mine sites.
These three mines have a combined annual maintenance budget of approximately US$310 million and present significant commercial supply opportunities. Austrade's Mine Site Visit program will provide potential suppliers with one-on-one meetings with key decision makers.
Of course, the resources sector has also traditionally been a focus of Australian investment in PNG, particularly in gold mining, and oil and gas.
Opportunities exist for Australian investors in a range of resource related areas, with some worthwhile incentives to qualified investors – including duty-free entry of plant and equipment.
Education
Education is another area where Australian expertise is proving of benefit to the people and economy of PNG – with the potential to play an even greater role into the future.
Currents statistics show that only around two per cent of PNG students who commence primary education complete the final year of high school, so the latent potential opportunity and need for education services is significant, and with an historical affinity and close geographic proximity, Australian education providers represent a natural choice for many PNG citizens and businesses.
Australian Education provider companies however should be mindful that PNG is different in some important respects to our traditional education markets.
While for many citizens there remains a keen desire to obtain secondary and tertiary education in Australia, affluence levels can limit demand.
However, opportunities for Tertiary education in Australia can be facilitated through the Australian Development Scholarship Program funded by AusAID. Australia contributes approximately A$80 million per annum to education for Papua New Guinea.
Part of this funding is directed to vocational training, designed to help overcome the problem of skills shortages in specific areas of the PNG workforce.
Through AusAid, Australia is a major foreign provider of skills training, with around 100 Australian Development Scholarships awarded annually.
Because of cost advantages, on-shore training can be more attractive to employers and opportunities for Australian education and training providers exist in:
- Flexible distance education
- Vocational training
- Skills training
There are also significant training components through other donor agencies such as the World Bank, the United Nations and the Asian Development Bank.
Austrade is leading an Education and Training Roadshow to PNG in June, to help further extend the reach of Australian education in PNG.
This road show provides the opportunity for representatives from Australian tertiary institutions accredited under the ADS Program to promote their courses to prospective scholarship and full fee paying students.
This year the road show will visit Kokopo, Lae, Port Moresby and Goroko – a blend of urban and regional towns.
Building and Construction
Renewed growth in the resources sector has also provided a springboard for an upward trend in building and construction.
While final figures for 2005 are not yet available it is anticipated building approvals reached AUD$120 million, with forecast prospects for 2006 looking even more promising.
Mine site developments and a revitalisation of home ownership schemes nation-wide are playing a significant role, as well as industrial and commercial construction generally in Port Moresby.
Tropical climates can pose unique challenges for building and construction – the Cairns community is all too aware of the impact of cyclones and flooding. While North Queensland coped well with Cyclone Larry, there is also potential to share the lessons learned with PNG.
Building and construction in the tropics requires specialised solutions, and innovative techniques developed in Australia can be applied to the challenges facing communities in PNG.
One local company, Homefab, based near Cairns, has developed a unique building construction system designed especially for the high-wind conditions of the tropics. Its software package, developed with James Cook University, allows the user to custom-design, cyclone-proof steel framed houses and pre-determine the exact building materials and the final price of the housing.
With several sales, Homefab is an excellent example of how smart and affordable, market-relevant building expertise can succeed in PNG.
In order to maximise business opportunities to Australian building and construction exporters, Austrade Port Moresby will be hosting a building and hardware showcase towards the end of this year.
The showcase will provide Australian businesses the opportunity to meet key industry players and to present their products to prospective customers in the key commercial centres of Lae and Port Moresby.
One company who participated in the ‘Building with Australia’ showcase event in 2005 was Gryffin Pty Ltd, providers of high security fencing and barrier solutions. The company initially entered the PNG market in 2000 via AusAid. Since then, they have successfully won several high profile projects including the construction of 14.8km of high security perimeter fencing at Jacksons International Airport in Port Moresby worth $4million, as well as an ongoing project at Mt. Hagen airport.
One of PNG’s leading building and construction companies has accepted an invitation to attend this year’s ‘Design Build’ trade fair in Melbourne during May. Austrade is also coordinating a visit program that will put this key buyer in front of a number of targeted Australian suppliers later in the year. Top of Form
Food and Beverage
The value of Australia’s food and beverage exports to PNG were estimated at $100 million in 2004–05.
Most (85%) of PNG residents derive their livelihood through subsistence and small cash crop farming, and so are not typically strong consumers of value-added imported food and products.
However, the upper end of the market, supplying middle and upper class nationals and expatriates, represents opportunities for a range of food and beverage supplies:
- Fresh fruit and vegetables – stone fruit, deciduous fruits, exotic vegetables, salad greens
- Dairy products – fresh milk, cheese, butter, ice cream
- Meat – beef and lamb cuts
- Beverages – wines, fruit juice, flavoured milk, sports & health drinks
- Ethnic food – Asian, Indian, Italian and Mexican
- Grocery products – pasta, breakfast cereal, snacks, condiments
- Frozen foods – vegetables, pizza, pastry
- Gourmet foods – salamis, flavoured cheese, dips and pates
- Food ingredients for the manufacturing sector in Papua New Guinea
There has been an increase in food and beverage imports from Asia in recent years. This is partly due to the rise in the number of expatriates from Asia now living in Papua New Guinea, many of whom are developing businesses.
Marine Industry
There are 14 main public seaports that are administered by the PNG Harbours Board, and an estimated 300 government and private small ports.
Most pleasure craft marine fittings and motors are imported. There is also a large boating fraternity in Port Moresby and Lae, and both cities boast world class Marinas.
AusAID has funded an Infrastructure Sector Transport Study looking at future development strategies for Papua New Guinea’s marine sector. The study made a number of key recommendations where Australian marine expertise could be utilised – in the areas of port development, safety and waterways strategy.
Funding has also been provided to the PNG Government by the Asian Development Bank of US$69 million loan for marine infrastructure development. Work began in 2004 and includes:
- Community waterways improvements
- Improvement and expansion of navigational aids network
- Fisheries wharf construction
- Technical assistance
There are a number of large Australian brand name suppliers already represented in the PNG marine market, such as:
- Haines Hunter
- Nustar
- Zodiac
- Image Marine, and
- Auscraft International.
… and there is room for more.
Agriculture
One of the challenges for PNG is linking traditional methods of agriculture production in rural areas to the needs of modern urban and overseas markets. The population continues to grow rapidly, with a large number of people still living in poverty. These key challenges need to be addressed if PNG hopes to build on the gains of recent years.
Australia’s world-class capability in agriculture can assist PNG in its goal to modernise and commercialise agriculture, and direct production to better align with demand in international markets.
In that spirit, Austrade, in partnership with the Queensland Department of Primary Industries, is leading an Agribusiness mission to PNG In June, to help deliver more Australian expertise into the sector.
ICT
While PNG may not appear to be a first-choice destination for Australian ICT companies, there are a significant number of Australian companies winning ICT business.
Australian software is playing a key role in helping maximise productivity and safety in PNG mining.
Recent ICT successes include companies such as Victoria’s Pronto software, who sell inventory systems to clients in both the government and private sectors, and Morpheum, also from Victoria, who were successful in securing a web design and development deal late last year.
Encouragingly, Telikom PNG also recently signed a deal with Australia’s Telstra and Telecom New Zealand to acquire a retired undersea cable that will link PNG to the US via Guam. By 4th quarter 2006 PNG businesses will see a marked improvement in telephony and data services, including nationwide broadband – a great win for PNG and PNG’s business partners, including Australian ICT suppliers.
Security Industry
Security issues in PNG, while little different to many developing nations around the world, are well documented and will represent a continuing challenge for current and future governments.
There have been repeated calls from the private sector, industry leaders and prominent citizens to address security and law and order problems.
As a result of an under resourced police force, the provision of private security services in areas such as manpower and surveillance monitoring is increasing.
Austrade sees opportunities for Australian expertise in the PNG security industry for:
- Electronic security and surveillance systems
- Systems technicians
- Security uniforms and accessories
- Guard dogs and their associated care
- Physical barrier systems
Security issues for Australian business people
While Australian Government travel advice recommends Australian travellers to PNG exercise a level of caution, I would like to quickly draw your attention to an interesting fact.
The last time the Australian Bureau of Statistics collected significant comparative data about where Australian companies were doing business was in 2003-04. As I mentioned earlier, that data showed that in terms of companies to market, PNG was the 9th most popular destination for Australian exporters, with 3000 Australian companies active in the market.
To put this in context, there were more companies doing business in PNG than there were in Indonesia, Germany, Taiwan, Thailand, Korea, Canada, India, South Africa, or the United Arab Emirates!
So, these statistics prove that whatever security obstacles may exist, real or perceived, Australian companies are finding ways to trade into even the most remote regions of PNG.
Indeed Austrade finds that those Australian exporters that are prepared to service the market via regular visits generally find they win good business, and with a sensibly managed visit program, are at minimum risk.
For those who may be hesitant to travel to PNG, or for whom travel is an inconvenience or high cost, Austrade also has programs to bring buyers from PNG to Australia.
Increased international competition in PNG
As I’ve mentioned before, Australian exporters are facing increasing competition from cheaper goods from Asian countries and from more aggressive activity from New Zealand.
There has been significant growth in expatriates from Indian and Asia. This has also generated competitive pressure at the top end of the market in some sectors – such as consumer products.
Despite the challenges, Australia’s longstanding presence in the region and relationship with PNG - provided we never take it for granted and focus on business collaboration with a true spirit of partnership – will I am sure, continue to see Australian companies in a solid position to maintain a market leadership role and contribute to, and benefit from, PNG’s momentum and increasing prosperity.
Investment – Pacific Investment Commissioner
In March the Australian Government announced it would create the new position of Pacific Investment Commissioner, to encourage more investment in Pacific nations, including PNG.
This is a joint initiative between AusAID and Austrade, and is one that is close to my heart.
The Investment Commissioner will help Australian companies identify opportunities for Australian direct investment, joint ventures and commercial partnerships. The aim of the appointment is to help get aid and trade policy settings working most effectively for Pacific nations like PNG, to stimulate economic activity, employment, community wealth generation, and foster greater self-reliance – a longstanding goal for developing nations across the Pacific.
Austrade’s role in PNG and concluding remarks
Ladies and gentlemen …
After several years of growth and stability, there is increasing optimism in both Australia and PNG’s business communities that Australian-PNG trade can keep progressing strongly.
This is backed up by Austrade’s experience of working closely with Australian exporters in the region.
In 2004-05 Austrade helped another 43 Australian companies enter the PNG market. We are well on track to exceed 60 this year, which includes ten companies new to exporting.
Good business is being done, and we have reason for quiet confidence in Australia’s ability to widen and deepen our market penetration by building on our existing trade base, while remaining focused on capturing new opportunities for Australian exporters wherever they arise.
The important point, I believe, is that by being innovative, persistent, and playing to our strengths, Australian exporters can succeed in this market, simultaneously complementing and helping to realise the trade and development ambitions of PNG.
In closing I would like to thank the Australia Papua New Guinea Business Council and the Business Council of Papua New Guinea for hosting this forum, and for their hard work and commitment to strengthening what is a very important trading partnership.
Thank you. |