The Marape-Rosso Government have set the agenda of “Take Back PNG’ and as part of that agenda, International Security and Economic growth will be priority of the government.
To advance this Government’s overall policy objective, I as the Minister responsible for Trade and Investment have set my policy directions, centred around two pillars. These are Economic Security and International Trade.
Economic Security
The Government is committed to partnering with both the public and private sectors to improve public safety, border security and digital security. I will take it to a broader view to add economic security, which includes building a resilient and diversified economic base that will withstand external economic shocks.
For far too long our economy has been over reliant on the extractive sector. We have not been able to successfully restructure our economy. We continue to export raw materials and import finished manufactured products when we could be transforming some of our own natural resources into finished products for domestic consumption and for exports. Hence, we are very vulnerable to external economic shocks such as the current economic downturn we are facing. It is, therefore, very important for us to diversify our economy by investing in the non-renewable sector and diversify our exports so that our economy is resilient against external economic shocks.
International Trade
Why Trade?
The answer is very simple. “Trade is the heart-beat of any economy. The economy revolves around trade and investment’. The exchange of goods and services determines the economic fortunes of nations, corporations and individuals.
It is when we lose sight of the importance of trade that we become debt-ridden and dependent on AID and faced with Foreign Exchange issues. ‘Trade’, as part of the economy is likened to ‘blood’ in the body. Blood carries nutrients, oxygen and life to all parts of the body, keeping the body alive and active.
Trade facilitates movement of money in the economy, which is vital for growth and development. Trade is the heartbeat of the economy. Without it, there will be no movement of currency, thus, the economy will collapse into recession as trade generates the funds to fund the other sectors. This is why I am passionate about trade.
Let me say that PNG is a small trading nation, heavily dependent on exports for our income and imports for our consumables and industrial inputs.
Many of the richest nations in the world today are where they are because they have good traders supported by governments that create a competitive and enabling environment for trade to prosper. PNG needs to stimulate all its exports and create conditions that will encourage diversification of our export base. Therefore, we cannot afford to continue to ignore the barriers that make the costs of imports and exports higher.
To date, a new paradigm of international trade is being characterized by globalization of production, global distribution chains, high volatility of foreign direct investment flows, and increased liberalization of traditional border measures. Countries both developed and developing have established dedicated trade institutions with sufficient resources to secure the best deals for their exports and also attract lucrative investments into their countries.These are inevitable global development trends that challenges small economies like ours to start by putting in place responsive and appropriate policies and resources to foster economic efficiency and international competitiveness.
In this connection, I want to review trade relations with our other key trading partners to ensure that our trade relation going forward focuses on enhancing FDI and trade in the non-extractive sector. I want to see all our trading partners invest in key sectors such as agriculture, fisheries, forestry, tourism, manufacturing, etc… I want to see a shift away from extractive to non-extractive sector and focus on our bilateral trade relations which will be growing the non-extractive sector. If it means negotiating new trade agreements to achieve that for our people, we will do that.
This is how we will open up opportunities in the non-extractive sector and drive more investment into downstream processing and value-adding of our natural resources for domestic consumption as import substitute and for export.
In this connection, I as the Minister responsible for Trade have set my policy directions that I want to deliver during my term as Minister responsible for Trade and investment that will contribute to the economic development aspirations of the Marape-Rosso Government.
Policy Priorities
Priority 1
My first priority will be to launch a Free Trade Agreement negotiations with Indonesia, PNG’s very closest neighbour. As per the 2021 estimate, it is the world’s 16th largest economy by nominal GDP estimated to be around US$1.159 trillion and growing at the rate of 5 % annum. Indonesia is classified as a newly industrialised country with a population of over 275 million. Our downstream and value-added products can then be exported to Indonesia and rest of Asia to meet their increasing demand for food and other industrial needs. Indonesia is a huge market for us to tap into and is also the gate way to the lucrative markets in the Asia region.
Furthermore, Indonesia has the technical expertise in hydrocarbon, mining and petroleum, agriculture, textile and industrial technology and other sectors. We need their companies to come and invest in these sectors especially in the downstream process and value–adding of our natural resources. Indonesia can provide our local SME with relevant expertise and technologies necessary for our people to engage in developing agriculture, fisheries and forestry sectors.
PNG and Indonesia share the same Land Mass and our ancestors have been trading with the Indonesians long before colonization. Furthermore, goods and service trade amongst our people living along the border is already happening. It’s a matter of formalizing it, recognising this ongoing trade and making it simpler and friendlier through a formal trading arrangement so trade can flourish.
Therefore, one of my priorities is to conclude a Free Trade Agreement with Indonesia during my term as the Minister for International Trade and Investment.
I have already issued instructions for the National Trade Office to prepare a Terms of Reference for a full Feasibility Study for me to take it to NEC for endorsement which will commence immediately. The proposed Feasibility Study will not only look at the cost and benefits of the FTA, but will look at two very important issues:
Firstly, regarding the existing trade happening on the ground along the border, we need to establish the number of people involved, and the value and kinds of goods and service traded. This will ensure that any FTA concluded is inclusive of these small people that are already conducting trade along the border.
The second most important aspect is putting in place trade infrastructure (Free Trade Zones) in the provinces that share land border with Indonesia to take advantage of the Free Trade Agreement to target the Indonesian market. The development of the proposed Vanimo Free Trade Zone, the Sepik Plains Free Trade Zone and the Western Province Free Trade Zone will become priority as they will be seen as the trade hub not only targeting the Indonesian Market but the rest of Asian Market as well.
Priority 2
My second priority will be to deepen trade and investment relations with Australia, which is also PNG’s closest neighbour and trading partner.
Papua New Guinea (PNG) and Australia have trading arrangements going back to the 1970s under PNG Australia Trade and Commercial Agreement, as well as a regional arrangement under South Pacific Agreement on Regional Trade and Economic.
Despite the number of trading arrangements in place between PNG and Australia, they have not served to increase trade in favor of PNG. We boast of the trade balance being in PNG’s favor, but to me, personally the present trade relationship is heavily skewed in favor of Australia.
When you really look at the data, for example, in 2020, PNG’s total export to Australia was $2.39 billion; of which gold was $2.21 billion. So, gold export constituted 92.47% of these exports.
Other minerals and petroleum products exported were crude oil ($6.41million) and Silver ($62.6m). This left us with renewable products constituting $53.7million. This $53.7 million of renewables represents only 2.24% of the total PNG exports to Australia in 2020.
All other commodities from the renewable sector from PNG show a declining market share in Australia, even as Australia’s market share continues to increase for most of its imports which are imported from other countries, although PNG is producing and exporting them such as tuna. Moreover, Australia’s share in PNG’s imports were found to be increasing even when PNG’s overall world imports were decreasing.
A similar pattern is revealed for the services sector. Australia enjoys a significant services trade surplus in the PNG market whilst PNG experiences great difficulty to supply services connected to the temporary movement of natural persons.
Current statistics indicate that Australia’s service exports to PNG is valued at $400 million to $500 million whilst PNG’s exports is nil apart from those few going as fruit pickers.
So, you can see that the actual trade balance is in favor of Australia and not PNG. The reasons for the imbalance in trade between the two countries is twofold;
The biggest challenge takes the form of non-tariff measures (NTMs) that are applied by Australia in respect of these products entering the market. These NTMs are largely responsible for keeping PNG’s products out, even as Australia boasts of the free market access for PNG products.
The second challenge is supply-side capacity related in PNG which include the products that are in strong demand in Australia are not produced in sufficient volumes in PNG to have a viable presence in the Australian market, and logistics or transportation issues.
I therefore will be looking at a two-stage approach to deepening the Trade and Investment relations between PNG and Australia.
The first stage will be to conclude a Trade and Investment Framework Agreement (TIFA) with Australia, to be implemented over a period of time. The TIFA will focus on a strong program for technical cooperation between Australia and PNG that addresses the issues above. The program would include protocols for dealing with NTMs in Australia, developing the supply-side capacity for PNG products with Relative Comparative Advantage or niche products, and implementing a program for reducing the cost of shipping between PNG and Australia.
The second stage of the process is to conclude a WTO compatible Free Trade Agreement between PNG and Australia after successful implementation of the TIFA.
Priority 3
My third priority will be to accelerate work on a possible free trade agreement with China. China has become a global superpower and the trade and investment relations between PNG and China has grown from strength to strength and a formal trade relations between the two countries is inevitable.
I therefore will be looking at fast tracking the Joint Feasibility Study for a possible PNG-China Free Trade Agreement. PNG completed the National Feasibility Study last year and we are currently exchanging notes on the Terms of Reference for a Joint Feasibility Study.
On this note, let me thank the Chinese Government for proving a grant assistance of K1 million to assist PNG to meet the cost of the Feasibility Study.
We will also be looking at entering into discussion with Philippines, Malaysia and other countries of interest for a possible Free Trade Agreement that we think PNG has the potential to export its products.
Priority 4
Apart from looking at market access through the Free Trade Arrangements, I am looking at establishing Trade Missions in countries that PNG has specific market interest. In close collaboration with the Ministry for Foreign Affairs, we will be setting up Trade Missions mainly to advance PNG’s trade interest.
They will be on the ground providing market intelligence through market research, provide information to potential exporters on market requirements, promote PNG’s products through trade expositions and exhibitions, and provide other necessary market information.
Due to funding constraints, I am looking at establishing six Trade Missions immediately. They will be in Brisbane, Jakarta, Manila, Singapore, Brussels and Dubai.
Priority 5
My fifth priority will be to immediately look at developing the Pacific Marine Industrial Park, focusing on downstream processing of our fisheries into different products for external markets as well as for domestic consumption. This project along is capable of generating 40, 000 new jobs especially for our youths and women, and a lot of spin-off business activities for the local communities.
Currently, PNG processes 30% of its annual catch and export 70% for processing outside of PNG. This equates to 70% of potential job opportunities and income for our people being exported to other countries; this needs to be addressed immediately.
The implementation of this particular project has been delayed for too long and I as the Minister responsible will ensure that it is implemented during the Marape-Rosso Government’s term in office.
I will be establishing a technical team made up of National Fisheries Authority, the PNG Ports Corporation and other stakeholders to look at the funding options for the construction work to commence as soon as possible.
Priority 6
The sixth priority will be to look at the internal structure of the newly created International Trade and Investment Ministry. This will include creation of a department that will provide the policy oversight over the several functions that come under the Ministry which include the National Trade Office, The Free Trade Zone Authority, The PNG Securities Commission and the Konebada Petroleum Park Authority. The structure of the department will have a very linear structure for the purposes of policy coordination. This will be done in close consultation with the Prime Minister.
The other will include the abolition of the Konebada Petroleum Park Authority and bringing in the function and its assets under the Special Economic Zones Authority. This is to cut down on the duplication of function and to maximize the use of scarce resources.
Priority 7
Another priority will be to encourage private sector investment in the Agricultural sector including encouraging Super Funds and State Owned Enterprises such as Kumul Consolidated Holdings Limited (KCHL) to invest in the agriculture sector.
For far too long, our economy has been over reliant on the extractive sector. Some of our mines will cease operations, such as the OK Tedi Mine which has 10 more years left of its lifespan. The income gap left behind will be huge. Hence, there is a greater need now to restructure our economy. We need to invest in the agriculture sector. We need to transform some of our own natural resources into finished products for both domestic consumption and for exports. We must invest now in the non-renewable sector to fill in the income gap that will be left behind by the mine closures before it is too late.
The Marape-Rosso Government is well aware that our long-term sustainable economic development and growth lies in the agriculture sector, which saw the creation of separate Ministry each for Coffee, Palm Oil and Livestock.
During my term as Minister for International Trade and Investment, I will ensure to encourage more investment in the agriculture sector and downstream processing and import replacement.
One of the low hanging fruits I am looking at now is import substitution. PNG’s import bill on some of the goods that we can produce in the country is very huge, such as rice. PNG imports 400,000 tonnes of rice per annum which equates to around K600 million per annum.
My priority is to reduce the import of rice and substitute it with local garden food or locally produced rice. This will also apply to other products such as dairy products, coffee, cocoa and vanilla.
We can process and develop these products into finished goods and replace the imports. It does not make any economic sense when we produce the actual commodities, export them in raw form and import the final products. We process these products ourselves to either meet the domestic demand or export and earn high return for our products.
The Marape-Rosso Government has set the policy direction to build a sustainable, resilient and equitable economy for our country. We have set the target for PNG to become economically independent by 2032. This objective or target is too ambitious, but I believe we can achieve this if we invest in the agriculture and manufacturing sectors.
The Ministry of International Trade and Investment will advance this government agenda through the implementation of the priorities outlined.
My Ministry will be doing its part to contribute towards the overall objectives of the government. I call upon the support and cooperation from other government Ministries and agencies as we chart a way forward for the benefit of our people.