Chair's Annual Report 2015-2016

At the Annual General Meeting of the NZPNG Business Council the Chair, Stephen Eagle presented his annual report. This was the last report from Stephen as he has stepped down from the role of Chair after 7 years. His successor is Tamati Norman of Romack Industries.


The report commenced highlighting the economy of PNG in the last year.

To read the full report please see below

 NZPNGBC

Chairman’s Report to AGM 2016

 

1.   PNG over the last year

Economic growth and expansion of infrastructure have continued in PNG over the last year, but at a lower rate than in previous years. The last year has seen the completion of the 450 room Stanley hotel in Port Moresby, and continuation of a number of major infrastructure projects around the country. Prices of major commodities on which the dominant extractive industries depend have continued to fluctuate. The prices of oil and natural gas slid over the first two months of 2016 but have generally risen since and are currently at a similar level to prices twelve months ago. The for natural gas is around US$ 2.50 per gigajoule, while the average over the last three years is around US$ 3.50 per gigajoule). Following a drop over 2015, the price of gold has climbed through the year and is now at a level similar to 2013/2014 levels, but still well below the prices seen in the two or three years prior to that.

 

 

   

Crude (12 months)

www.nasdaq.com

Natural Gas (12 months)

www.infomine.com

 

 

In terms of indicators, PNG’s economy continued to grow in 2015, the first year of LNG production,  at around 10% but is currently declining to under 4% in 2016 and is predicted to remain at a similar level for 2017[1]. This growth is no longer head-and-shoulders above that of other Pacific nations, but is still growth.

 A significant factor that has had a major effect on many companies and individuals doing business in PNG is the effect of reduced royalties from extractive industries on government reserves. A very large number of companies and individuals are in difficulty because the Government simply cannot pay many of its bills. This includes some of our members, and some other New Zealand companies. It is particularly true of the infrastructure sector: with the heady revenues and handsome prospects of five years ago, the Government spent up big. It exceeded itself. Many of us are forced into intensive follow-up on unpaid bills, and some projects have stalled. Symbolically, construction on the Sir Hubert Murray Stadium near the Harbour City has now stalled.

 2.   Trade Missions.

The Business Council has not organized a trade mission this year. While there is interest, numbers are low and some of our members will travel to PNG later this month, on a trip organized mainly by Pacific Islands Trade and Invest. We appreciate the effort and willingness of PT&I and other participants to "fly the flag" of the Business Council this year.

 The mission will provide all-important networking opportunities but will not have a formal programme, although the ANZ bank will kindly provide support in the form of a briefing session and the business community and New Zealand High Commission will host networking functions. This will provide the environment for the all important business to business meetings to take place.

 

3.   Prospects for our members, and New Zealand businesses in general.

A number of New Zealand firms have secured valuable contracts over the past few years with private sector clients (associated mainly with oil & gas, or with mining) and others benefitted from opportunities associated with the development of infrastructure and facilities for the Pacific Games of last year. Relatively few have established a long term presence.

 The downturn in the PNG economy has been apparent for some three or so years now. While it means there are fewer and less substantial opportunities, the nature of the resource-based economy is such that this downturn is inevitable, and so is an upturn at the end of it.

 The lower level of activity presents a useful opportunity for businesses to familiarize themselves with the PNG market, key contacts, service providers, sources of advice and regulations. We learned in 2010 that when the economy picks up, it can pick up very quickly. Many firms who had established local companies at the start of the Exxon Mobil project benefited considerably. Comparable investments are very likely to occur again.

 On the other hand, another lesson that has been learned concerns contracts with Government organizations. The PNG Government needs good services for essential investment, particularly in infrastructure and NZ firms are well placed to provide these, but entering into a contract with the Government entails risks that need to be understood. The factual basis for this comment is well known, it is not judgemental.

 4.   MFAT and NZTE

Support to business from MFAT and NZTE continues. The Trade Commissioner to PNG, Peter Hobbs, has been in post for a year, strengthening the support to business that NZTE can provide. Peter has assisted the re-establishment of the PNG NZ business council, chaired in Port Moresby by Mr. Reg Monagi.

 5.   Events

A Road Show took place in May 2016. Graeme Solloway of NZTE accompanied David Conn, CEO of the Port Moresby Chamber of Commerce and Industry, to Hamilton, Tauranga, New Plymouth and Auckland. This gave the opportunity to provide an authoritative update on business in Papua New Guinea.

 As mentioned, the NZPNGBC will be represented by a small mission between 28th to 31st August 2016.

 An occasion is planned to mark Papua New Guinea's 41st Independence Day on 16 December.

 

6.   The Executive

Our executive meets monthly at the premises of the Auckland Chamber of Commerce who provide a broad and thoroughly reliable support service. We seek to build an executive with balanced representation of the industries that are featured among our membership. These include shipping, manufacturing, food and beverage supply, specialist engineering and materials supply, and design and consulting services as well as non governmental organizations.  

 Nominations to the executive are encouraged. I regret that I will stand down as Chairman with effect from this AGM, primarily for commercial reasons. My firm has encountered difficulty and will continue in PNG on a reduced resource basis.

 

7.   Support

The council continues to benefit considerably from the participation of both governments in our activities. These include the PNG High Commission in Wellington and Consul General in Auckland, for the PNG Government and MFAT, NZTE, the NZ High Commission in Port Moresby, and the Pacific Cooperation Foundation.  We enjoy working with these groups and individuals and would not be able to organize as many events, with as much success, without them.

 The Auckland Chamber of Commerce provides a highly efficient, reliable and cost effective service as secretariat to the council.

 

8.   Final Word

It has been a great privilege to serve as Chairman, and I thoroughly appreciate the support and friendship of the membership and the supporters of the Council.



[1] www.adb.org/countries/papua-new-guinea/economy