Opinion: Papua New Guinea economy to remain weak but Lae business hopeful of an upturn

The Papua New Guinea economy is not likely to improve greatly in the first half of the year, says Alan McLay, President of the Lae Chamber of Commerce. But he believes companies in Lae – PNG’s manufacturing and logistics hub – remain hopeful of an upturn and he expects some positive developments with power provision.

Alan McLay, Lae Chamber of Commerce Inc.

Alan McLay, Lae Chamber of Commerce Inc.

The following remarks are not intended to provide a crystal ball of what will happen in 2017. They are rather a general outlook based on experience; they are a guideline only.

We do not expect any real difference in the economic situation at least for the first half of the year. The pressure on foreign exchange is likely to continue even with a bit of relief that we have seen.

This situation is likely to continue in some form or other for the remainder of the year.

This is because the prices for PNG’s main export commodities are not likely to rise enough to relieve the situation. Gold, which showed a good improvement late last year, is now bouncing around and not likely to recover to a great extent.

Wholesale, retail and manufacturing

Lae’s wholesale and retail businesses continue to do it tough, although some businesses are doing better than others. This is also the situation with the manufacturers, where some of the long-established companies are laying off workers.

‘The Wafi-Golpu mine is most likely going to go ahead.’

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The established fish canneries are the shining light, especially the tuna canneries relying on stock from Morobe waters. A new cannery will be built soon, which shows the strength of this industry.

Mining

Mining in Morobe Province continues to have a positive spin off to companies in Lae:

1. Hidden Valley Mine was taken over from the Harmony/Newcrest JV by Harmony themselves and they have instituted a range of reforms that should have the mine in a very strong situation this year.

2. The Wafi-Golpu mine is most likely going to go ahead and, with Newcrest being the single developer, they are now entering a full feasibility stage for the mine’s development.

‘Most companies see the early part of 2017 as a continuation of the economic slowdown of 2016.’

The National Elections will be held mid-year and,  as has happened in previous elections, we expect that there will be a fair amount of cash floating around before and during the elections, which should stimulate a lot of the retail and wholesale operations.

Most companies see the early part of 2017 as a continuation of the economic slowdown of 2016. However, they remain hopeful that the situation will gradually improve.

Power

In 2016, we expected an improvement to the power problems in Lae. However, that did not happen and daily blackouts have now become the norm again. The new 26 MW General Electric Gas Turbine generator that was installed at the Lae Port in January 2016 ran for some seven months before it stopped working.

‘A second transmission line from the Ramu 1 power station to Lae, is nearing completion by Japanese companies.’

PNG Power brought in three maintenance companies to fix the problem and I believe it is up and running again. Mind you, this generator never reached its full capacity anyway, as it is fuelled by dieseline with an output of about 17 MW only.

PNG Power also commissioned the Korean company Daewoo to build a heavy oil plant at Munum, just outside Lae. This plant, when commissioned, will generate a further 30 MW of power into the Ramu grid.

A second transmission line from the Ramu 1 power station to Lae, is nearing completion by Japanese companies under JICA direction. This will bring with it more stability in the power being transmitted to Lae.

Negotiations

We did expect that negotiations by PPL to construct the Ramu 2 Power Station at the Yonki dam, would be completed by now, which is estimated to bring over 200 MW into the Ramu Grid.

‘The much-talked- about, Oil Search-supported Bio Mass power plant in the Markham Valley is going ahead as planned.’

JICA were very keen to construct this power station but somehow these discussions fell through and indications are that a Chinese company will be engaged to construct this much needed power station. We hope that the Government will renew dialogue with this Chinese company, so that work can commence soon on this power station.

Of course, the much-talked-about, Oil Search supported Bio Mass power plant in the Markham Valley is going ahead as planned, which will bring an initial 15 MW into the Ramu Grid, with plans for twice or triple this amount in the years to come.

Therefore, if all goes as expected, the power supply in Lae will be more regular and reliable. This will be a further attraction for further industries to relocate here.

Highlands Highway

The newspapers have run a series of articles on the Highlands Highway recently, pointing out the difficulties getting through the flooded sections (Markham) and the areas affected by landslides.

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To give you an idea of the difficulties faced by drivers, we provide recently taken photographs of the massive landslide at Wandi between Kundiawa and Mengendi in Simbu Province. A very rough alternative route has been opened, but it is near impossible to get through, with the sheer numbers of vehicles that are waiting, as well as the never ending opportunists demanding payment of one kind or other.

Alan McLay is President of the Lae Chamber of Commerce.

Comments

  1. Phillip Glanville says:

    What about the small holder in Papua New Guinea? All this article mentions is big projects, involving hugh overseas investment, but no mention of the many millions of Kina that can be made by small holders.
    I can remember the time when tons of dried ‘birds-eye’ chilli left Rabaul, for instance, bound for Singapore and London.
    Also dried Trochus shell, that was made into buttons. There is still a high demand for Trochus shell buttons today.
    I know there has been an embargo on Bêche-de-mer, but in the Solomons Bêche-de-mer are being farmed.
    Then there are Coconuts, and VCO, plus dried Coconut milk. Dried Coconut milk is a billion Kina industry!
    Longpela taim mi no lukim yu.

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