Fiji and Papua New Guinea should strengthen economic ties, says ANZ economist

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Papua New Guinea could be on the cusp of a sustained period of strong economic growth, and Fiji should be seeking closer economic ties, says Kishti Sen, International Economist for the ANZ Banking Group, in an exclusive interview with Business Advantage PNG.

Large resource and energy projects could help Papua New Guinea become the ‘powerhouse of the Pacific’.

With several large projects in the resource and energy sector lined up to expand capacity and boost the nation’s commodity exports, PNG could become the ‘powerhouse of the Pacific’, says economist Kishti Sen .

‘Government finances will be a lot stronger when these projects move to production which, in turn, will allow the state to build infrastructure and unlock the enormous potential in the agriculture, manufacturing and tourism sectors.’

If this is achieved, PNG will have a diversified economy and, according to Sen, ‘the boom/bust cycles associated with a narrow commodity-based economy that PNG has had since independence will largely be eliminated and the country can look forward to a long period of high single-digit growth rates.’

‘We are already seeing Fiji’s food manufacturer’s putting on extra capacity to meet anticipated high demand for its products. The Fiji manufactured Raun Raun and Sol Cracker biscuits are becoming very popular among PNG locals.’

Fiji can benefit from PNG’s success, he says.

There is a lot in common between the two countries – for example, both are members of the Melanesian Spearhead Group (MSG) and operate under the MSG 2038 Prosperity for All Plan framework.

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Sen believes PNG should and will share its economic success story with Fiji and other Melanesian trading partners.

PNG exports

ANZ’s Kishti Sen.

‘One key area that PNG can offer Fiji is in agriculture – organic fruit and vegetables. I say this, even though Fiji has abundant land, because PNG’s organic fruit and vegetables are special, among the best in the world,’ explains Sen.

Fiji doesn’t have the climate to grow certain types of fruit, such as strawberries, which PNG does successfully. Vanilla, sweet potatoes, nuts, kava and certain vegetables could also find a market in Fiji.

‘These exports can build on the success of PNG’s Ox and Palm corned beef exports, a product which has become a hit among consumers in Fiji.

PNG’s Prime Minister, James Marape, mentioned during his July 2019 visit to Australia that he wants to boost the agriculture sector, helping PNG become ‘the food basket of Asia’.

Sen believes ‘PNG can become the food basket for the Pacific as well.’

Major impediments for trading between the two countries are the high shipping and freight costs.

‘Low volumes make it uneconomical to run direct shipping routes between the two countries. Added to this are the very high inter-island shipping charges. For example, freight costs from Lae to Port Moresby can be more than the cost from Suva to Lae.’

What Fiji has to offer

He doesn’t see greater PNG–Fiji trade as just a one-way proposition.

Fiji’s exports to PNG are currently small, both in volume and range. Last year, Fiji exported insulated wire cables, electric accumulators, personal hygiene products, flour, and sweet biscuits to PNG – totalling just under F$20 million (K31 million).

But the economist says once the new resource sector projects are underway, PNG unemployment will fall and incomes will rise.

‘We are already seeing Fiji’s food manufacturers putting on extra capacity to meet anticipated high demand for its products. The Fiji manufactured Raun Raun and Sol Cracker biscuits are becoming very popular among PNG locals.’

Other potential goods which Fiji could export include fast moving consumer goods, electronics, wines and spirits, and top end retail and luxury goods, he says.

‘PNG’s organic fruit and vegetables are special, among the best in the world.’

‘Fiji businesses have decades of experience, through its tourism and duty-free sectors, in trading in these goods and could expand their horizons through either re-exporting to PNG’s rising middle-class, or through joint ventures, importing directly to PNG.’

‘But the real potential for Fiji is in the export of its labour services across different industry sectors including IT, accountancy, finance and hospitality.’

He warns Fiji businesses, however, must take a long-term view.

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