Papua New Guinea’s National Trade Policy has just been released. It calls for greater liberalisation of the domestic economy and enhanced efforts to improve market access for PNG’s exports. Business Advantage PNG looks into the detail.

PNG’s growing trade deficit in services. Source: UNCTAD

The National Trade Policy 2017–2032, released this week by the Department of Trade, Commerce and Industry, says the aim is to make PNG an ‘internationally competitive, export-driven economy.’ It points to the need to expand market access for PNG’s products and services in foreign markets ‘thereby sustaining trade surpluses on both the merchandise and services accounts.’

To do this, it says, a National Trade Office (NTO) will be established to act on behalf of the Government and improve policy negotiations.

‘The policy is wide ranging.’

‘In its pursuit of bilateral, sub-regional and regional trade negotiations, PNG will continue to identify markets where it can receive a cost advantage for products of strategic interest and create secure, predictable market access conditions by concluding World Trade Organisation-compatible trade agreements/arrangements wherever possible.’

Coverage

The policy is wide ranging. It calls for a transparent and predictable legal and regulatory framework, a stable macro-economic environment, an attractive investment environment and sound principles of good governance.

‘The policy calls for increased foreign direct investment (FDI) flows into the PNG economy.’

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There is to be a review of ‘existing initiatives for trade-related infrastructure and implementing a comprehensive master plan’, including ‘a detailed strategic plan for improving trade-infrastructure throughout PNG.’

Infrastructure services and trade services are also nominated as crucial areas requiring greater attention.

The policy calls for increased foreign direct investment (FDI) flows into the PNG economy to ‘assist domestic businesses to partner and integrate with foreign investors and grow from FDI investments’.

PNG’s trade structure. Source: National Trade Policy

Sectors

The Policy has some sector-specific recommendations, such as establishing Special Economic Zones to promote development of agri-manufacturing industries.

It says an objective is to create sustainable growth in the forest industry, including promoting downstream processing activities. It also calls for establishing marine industrial zones for the fishery industry.

‘Export taxes are to be kept to a minimum.’

‘The NTP’s objective is to double the manufacturing sector’s contribution to the GDP and to generate employment,’ the report says.

Other policy measures include reintroducing trade defence legislation to protect local manufacturing industry against unfair trade practices such as dumping and subsidisation and ‘developing a clear policy stance on parallel imports’.

Tariffs

The policy calls for the elimination of non-tariff measures to reduce costs and strong Rules of Origin strictures in trade agreements.

Export taxes are to be kept to a minimum. ‘The NTP’s objective is to pursue limited application of export taxes and other export restrictions as a measure to encourage downstream processing and value adding activities in PNG,’ the report says.

‘Since independence our economy had been driven primarily by the extractive sector.’

‘The NTP’s objective is to secure enhanced market access conditions and opportunities for PNG’s goods and services in overseas markets.’

Imbalance

The Prime Minister, Peter O’Neill comments that the trade policy needs to address imbalances in PNG’s trade. ‘Since Independence, our economy had been driven primarily by the extractive sector without adequate attention given to the non-extractive industries and services sector.

‘Our over-reliance on the extractive sector has left us exposed to commodity price fluctuations and global financial shocks, and has led us to a situation whereby we continue to face economic and scale imbalances.’

The former Trade Minister and new Minister for National Planning and Monitoring, Richard Maru, argues that the policy will lead to an increase in PNG’s exports. He estimates that, if implemented, exports of coffee should rise by 10 per cent, cocoa by 7 per cent, oil palm by 19 per cent, copra by 16 per cent and fish by 20 per cent.

He says it will ‘increase downstream processing; diversify our merchandise exports and partners, and increase our services exports.

‘We expect this to result in increased employment of about 50,000, with the creation of new small and medium enterprises.’