Report on MEXPA’s visit to Embassy of Papua New Guinea

The Malaysian Exporters Association’s calendar PNG events for year 2011, saw us visiting the PNG’s embassy in Jalan Ampang, Kuala Lumpur on 6 December 2011. The visit comprised of 6 Exco members and was led by Mr Kabur Ibrahim, we were welcomed by H.E. Ambassador Veali Vagi and were well briefed a press interview was conducted and mentioned below is the extract of our interview.

H.E. Ambassador Veali Vagi described PNG as a country with mountains of gold on lakes of soil surrounded by a vast sea of natural gas.Roughly the size of California and boasts one of the most diverse populations on Earth, with more than 850 indigenous languages, Papua New Guinea (PNG) is also one of, if not the most, heterogeneous nation in the world.

This island nation in Oceania is conveniently divided into 11 regions and considered to be one of the least explored countries in the world, both culturally and geographically. With more than 80 percent of its people living in rural areas, this beautiful country is just waiting to be tapped. Since 2003, PNG’s GDP has grown above population growth, reflecting an expansion in its key primary industries of Agriculture, Mining, Petroleum and Gas, Fisheries, Forestry and Manufacturing.

PNG is considered to have a dual economy comprising a formal, corporate-based sector and a large informal sector where subsistence farming accounts for the bulk of economic activity. In May 2011, PNG’s Treasurer Mr Peter O’Neil announced that the nation’s economy is expected to grow by a staggering 8 percent for the year with the main driving force identified as the multi-billion dollar PNG LNG Project (PNG LNG).

In our quest to understand the exciting transformational period of economic activity in its history, Malaysia Trade had a face-to-face session with His Excellency Veali Vagi, Ambassador of Papua New Guinea to Malaysia and learned so much about how PNG is well-placed to weather the current global financial storm and successfully develop a sustainable long term economy. Veali addressed the opportunities for Malaysian exporters and investors mainly in infrastructure development as well as opportunities for partnerships between government and business in a wide range of areas, human resource development, agriculture, climate change and exploration of new resources.

This is evident as Malaysia continues to solidify its position as a strong and trusted investor in PNG with the recent announcement of Takaso Resources Berhad, a Malaysian entity that would acquire Kayumas Plantation PNG Ltd, which holds the rights and license to a net loggable area of 40,000ha of timber, possibly worth up to RM500 million, in Inland Pomio, East New Britain Province. This length of extraction is reported to be up to nine years. “This strong sense of confidence by Malaysian investors is concrete proof on how the PNG government has aggressively worked together with the private sector to improve economic and social infrastructure and the delivery of government services”, said Veali.

It is beyond doubt that PNG is a rapidly growing economy with a stable government now with unlimited opportunities for Malaysian companies that surpass those in many other emerging and growing markets. “We are no longer mired in economic stagnation. We are no longer a dysfunctional business environment. We are now “trading-our-way” out of poverty. In fact, we are on the road towards economic superiority”, said Veali. PNG is now actively expanding and capitalize on revenues and business activity outside the resource extractive sector. The mining sector (and services to the mining sector) no longer remains the only area where significant activity takes place.

Veali beamed that PNG is noted to be one the world’s fastest-growing economies in the world. This is in addition to more liquefied natural gas projects being planned, major new gold and nickel mines opening and exploration activities in mining, petroleum and gas surging, PNG’s resources sector has definitely attracted deep-pockets investors.

“We are spurred on by the USD$15 billion ExxonMobil-led PNG LNG project, and I trust that it experienced a growth rate by over 9 percent in 2011. Just take a look at the number of Australian firms doing business in PNG. They are no doubt growing at a rapid pace and attracting more to our country. I do believe and I’m sure many will agree that there are still so many untapped opportunities in an economy that remains under-serviced in many areas”, Veali explained.

This is acknowledged by PNG’s National Government, which has made expansion of the country’s non-resources sectors, notably agriculture, manufacturing, fisheries, forestry and tourism—the priority of its two major national development documents, the Papua New Guinea Development Strategic Plan 2010–2030 and the more general Vision 50.In a nutshell, the ambitious Develop Strategic Plan aims to set out ‘how PNG can become a prosperous, middle income country by 2030’, in imitation of other resource-rich countries which have made similar development progress, such as Malaysia and Botswana. While some of its growth targets have raised one or two eyebrows in business circles, there’s no doubting the document as a statement of national intent.

Veali also added that PNG is seriously looking at expanding its tourism business and intend to capture a significant market share in the region. “We welcome Malaysian investors to work together with the locals to build hotels and other amenities there.”Our tourism industry is growing and has become one of the most contributing sectors to our nation. But the backbone of the country’s economy still lies in the agricultural industry,” he elaborated.

Veali was proud to say that Malaysia is one of the biggest investors in Papua New Guinea with more than RM3 billion invested since the country gained independence on September 16 1975. “I think Malaysia is ranked in the top five countries before Australia, US, Japan and China who had invested heavily in the nation”. The High Commissioner also pointed out that a Malaysian company, Rimbunan Hijau Group, invested close to RM1 billion into Papua New Guinea to build the country’s first shopping mall, which comes with an adjunct five star hotel.

He said there are close to 10,000 Malaysian who are working and doing business in Papua New Guinea. Vagi added that Malaysian investors can help build more hotels there to accommodate the growing tourism interest that Papua New Guinea has garnered recently. “Hotel rooms are very expensive in Papua as there is very limited number of hotels doing business there. If investors come in and address this market, it will be good,” Veali added. He went on to say that the PNG government has introduced taxation incentives in the last two years to encourage more marketing and promotional activities overseas by tour operators as well as other major steps to bring tourism to the forefront of national development.

“I assure you that our national tourism office is working tirelessly with the support of the industry partners to ensure we minimize impediments to tourism growth. I must say this also involves a lot of awareness and workshops on our part to educate ordinary Papua New Guineans about the importance of tourism and how it can benefit them,” says Veali.

On the agricultural sector, Veali said Papua New Guinea had vast pieces of land which are good to plant oil palm, rubber, coffee, cocoa and spices. “The Papua New Guinea government only owns 3 percent of the total land, while the rest are owned by the people themselves. If Malaysians are keen to developed these lands for plantation purposes, then they would have to partner with the natives there with via a 49 percent (foreigners) to 51 percent (locals) partnership. Nevertheless, in recent years this has been relaxed,” he said.

Veali stressed, “PNG’s agricultural sector has a number of competitive advantages, including high seasonal rainfall, good quality soil and low-intensity methods. The absence of pesticides and artificial fertilisers presents opportunities for PNG to position itself as a leading organic producer. According to Veali, PNG is also developing its Fairtrade potential, particularly in the coffee and cocoa sectors.

In conclusion, there is currently a palpable air of excitement among business leaders that the country is already on the economic bandwagon to realising its rich potential. What is the outlook like for this nation that is positioned strategically between the fast-growing economies of Asia to its north and west and Australia and the Pacific to its south? Well, as Vishnu Mohan, ANZ’s Chief Executive Officer for PNG & Pacific North West Region, pointed out strongly and optimistically, “By 2050, I honestly believe—subject to there being good governance and leadership—this could well be the richest country in the region after Australia in terms of per capita GDP. I think the potential is enormous, given the richness of the natural.

We encourage Malaysian business people to invest as many more opportunities exist. Builds more hotels for the tourism industry and build more roads, highways and become partners with the local people and also look into the organic production in the agricultural sectors. Provide your health education and promote your training skills. Provide many other areas needing Malaysian expertise.

We extend all wishes to Takasu Resources Ltd and Rimbun and Hijau group to be pioneer Malaysian companies to invest extensively in PNG (Papua New Guinea). We thank H.E. Veali for his kind hospitality.

Action Plan

MEXPA will look towards organizing a Trade Delegation of interested members/ business people to Fiji, Papua New Guinea and New Zealand (Auckland) where business people will have a firsthand opportunity to look at this year.