A profile of the manufacturing sector in Papua New Guinea, including an overview, key players, the Manufacturers Council and incentives.

Paradise Food plant. Credit: BAI

Industry snapshot

Manufacturing in PNG is a small but economically significant part of the economy. The sector only contributes about three per cent of Papua New Guinea’s GDP, but employs about half of the people in the formal sector. A strong manufacturing sector is thus crucial for developing the economy and stimulating broad-based economic growth. PNG’s manufacturing sector has developed on the back of the nation’s comparative advantage in agricultural and resource based industries.

The National Government has adopted a strategy of broadening PNG’s industry base in an effort to reduce the impact of volatility in the resources sector. The aim is to move the economy from its dependence on primary industries into higher value-added processing industries.

There have been moves to protect manufacturing in PNG better. In 2017, PNG’s Tariff Reduction Program was suspended and in accompanying legislation about 250 tariffs lines were increased, and over 600 decreases were abandoned. Tariffs were increased on clothing, household and consumer items, and some processed food, such as ice cream. It has resulted in significant investment, including re-capitalisation of existing manufacturers and the establishment of new manufacturing plants in Port Moresby and Lae. Most tariff lines (three-quarters) in PNG are zero, however, with no tariffs applied on imports of most goods for which there is no domestic production.

There have been changes to subsidies that have affected manufacturing. In 2017, the PNG Government announced that all fish caught in PNG waters would have to be processed in PNG, and that its existing policy of subsidised fishing in PNG waters in return for some processing, would be replaced by a rebate for fish processed in PNG. The government has also announced that it would ban round log exports in 2020, with the aim of getting timber companies to go into downstream processing.

The lack of availability of foreign exchange has led to some import substitution from PNG manufacturers, especially in fast-moving consumer goods (FMCGs) and smallgoods manufacturing, including manufacturers in the Highlands.

Goods manufactured in PNG include beverages, building products, food, handicrafts, furniture, industrial chemicals, plastics, packaging, textiles and personal care products. Lae is PNG’s major centre of manufacturing.

A boost to prospects in the manufacturing sector is the establishment of the Papua New Guinea Electrification Partnership (PEP) in the 2018 APEC meetings, which were hosted by PNG. This will in time change power provision in the country, which is a crucial input.

The PNG Government is keen to encourage value-adding and downstream processing in all its major primary industries, including:

• Oil and gas (e.g. petrochemicals )
• Fisheries (e.g. Canning and loining)
• Forestry (e.g. plywoods, furniture and prefabricated buildings)
• Agriculture (e.g. biofuels)

Goods manufactured in PNG include

• Alcoholic beverages
• Beverages
• Canned fish
• Cement and other building materials
• Chemicals
• Chocolate
• Cleaning products
• Coconut-based beauty products
• Clothing
• Fabricated steel
• Furniture
• Ice cream
• Packaging materials
• Paint
• Prefabricated buildings
• Refined petroleum
• Rice
• Snack foods
• Water tanks

Key players

Key manufacturers of consumer goods in PNG include Mainland Holdings (poultry products), Paradise Foods (snacks), SP Brewery (part of the Heineken Group, beer), Nestlé (noodles), R D Tuna (canned fish), K K Kingston (diversified) and Coca-Cola Amatil (beverages).

Manufacturers Council of PNG

The peak body for manufacturers in PNG is the Manufacturers Council of PNG.

As well as representing the interests of its members, it also runs a ‘PNG Made’ scheme and logo to promote PNG manufactured goods. To qualify for use of the ‘PNG Made’ logo, 50 per cent of a products cost of production must have been incurred in PNG.

Further information:

Manufacturers Council of PNG, P O Box 598 Port Moresby NCD

Tel: +675 321 7143. Email: pngmade@global.net.pg www.madeinpng.com

Incentives for manufacturers

Several incentives exist to encourage the development of PNG’s manufacturing sector including

Industrial plant depreciation

Industrial plants not previously used in PNG are eligible for increased depreciation of up 100 per cent of cost.

Initial year of accelerated depreciation

Industrial plant not previously used in PNG is eligible for accelerated depreciation of up to 100 per cent of cost. The claim for accelerated depreciation cannot take the company into a tax loss (but can be carried forward and claimed in a subsequent year). To qualify, the plant must have an effective life for tax purposes exceeding five years and must be used by the taxpayer or any other person in a manufacturing process. Expenditure on new buildings for the housing of industrial plant, or for the storing of raw materials or finished products also qualifies for the 100 per cent accelerated depreciation.

Double-deduction for export market development costs

Expenditure on export market development for goods manufactured in PNG qualifies for a double deduction. Qualifying expenditure includes overseas publicity and advertising, market research, tender preparation, samples, trade fair expenses, overseas sales office expenses and certain travel costs

Export sales exemption

Taxpayers who export certain qualifying goods manufactured by them in PNG are entitled to an income tax exemption of 100 per cent of export sales made prior to the last day of the third year following the date export sales were first made. For the following three years, the excess of export sales over average export sales of the previous three years is exempt.

Wages subsidy

Companies manufacturing new products may receive a taxable wages subsidy payment for up to five years. The subsidy is based on a percentage of the relevant minimum wage for each full time citizen employee.

What else would you like to know?

This sector file is a living document created as a service to our subscribers. It is updated from time to time, as new information comes to hand.

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