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Optimism after the lost decade: Sir Henry looks to the future

Sir Henry ChowSIR HENRY CHOW

Extracts of a speech to the Papua New Guinea Association of Australia, 7 December 2014

I am here as a friend to talk to you, about Papua New Guinea, to share some of my life experiences and to express some of my opinions about the development and progress made in Papua New Guinea during the last 10 to 15 years.

Nobody in his wildest dreams could have envisaged the progress made, the transformation that took place, and the changes in the lives of the people in 15 years.  The last eight years have seen an economic boom unparalleled in PNG’s history.

In terms of natural resources our people of Papua New Guinea are blessed: a sparsely populated country and huge natural resources in land, minerals, gas, timber, fisheries and agriculture.

Outside Africa we have some of the biggest gold, copper and nickel mines in the world.  The Ok Tedi, Mount Kare and Lihir mines, each one is producing more than half a million ounces of gold a year.

And we have another two world class mineral resources waiting for development, the Wafu-Gupa gold and copper deposit in Morobe and the Freida River copper deposit in East Sepik. The copper and gold industries provide direct employment for some 20,000 people.

The Ramu nickel mine started exporting its ore to China in 2013 and just 50 kilometres away is another huge nickel deposit, also in Madang Province.

Exxon Mobil’s seven million tonne per annum capacity LNG project exported its first gas shipment to Japan in June 2014.  Every three days a shipment of gas sails from Port Moresby to Japan, Korea, China and Taiwan. 

Eight specially built LNG carrier vessels are permanently engaged to ship the gas and each shipment has a value of $US52 million.

A second gas project in Gulf Province will be developed within the next two years and there is another huge deposit under exploration in Western Province.

PNG is the world’s number one producer of tuna fish with an average catch of 400,000 tonnes a year, 12% of world production.  Half of that is processed locally in five factories in Wewak, Madang and Lae with a sixth under construction at the Malahang industrial centre outside Lae.

The tuna fishing industry employs more than 16,000 people, which will soon rise to more than 20,000.

In 2014, PNG produced about one million tonnes of palm oil of which about 10% is processed locally and the balance is exported to England and Malaysia to be processed and sold on the world market.

PNG is the fourth largest global producer of palm oil behind Malaysia, Indonesia and Brazil and we are in the process of bringing many thousands of hectares of oil palm to production within the next few years.

Our soil is more fertile than the other palm oil producing countries and our trees mature earlier, and produce more fruit brunches per hectare.

Other commercial agriculture is not faring so well.  At the time of Independence nearly 40 years ago, we produced three million bags of coffee beans a year. Last year we produced 800,000 bags. 

Copra and cocoa have also declined in production but not to the same extent as coffee. Production has stabilised and is on the rise again.

So how did all these developments translate into the Papua New Guinea economy? Most of them were concentrated in Port Moresby, Lae and the highland provinces where the gas and mineral resources are located.

The demand for high standard accommodation for thousands of expatriate managers and high skilled technicians and mechanics created a building boom in Port Moresby. The skyline of Port Moresby city has been completely transformed. 

Every piece of vacant land was used to build multi-storey residential buildings and shopping malls. Rents for high covenant two bedroom apartments sky rocketed to K20,000 a week, higher than New York, London or Hong Kong.

Thousands of high covenant residential apartments were built to meet the demand.  With the completion of LNG project and the departure of thousands of expatriate managers the rents of high covenant residents have moderated and even fallen. 

Several years ago not many people in Papua New Guinea even dreamed about shopping in a shopping mall.

And in the land transport sector vehicle dealers were laughing. Every month for three years, more than 1,000 new vehicles were registered, often four wheel drive off-road land cruisers and huge haulage trucks.

At that time the Toyota car dealer in Port Moresby was the most profitable agency for Toyota in the world, selling more than 500 vehicles a month. Toyota headquarters in Japan was so impressed that they sent senior executives regularly to Port Moresby to monitor the operation.

At the time of Independence, major wholesale and retail outlets were dominated by the three major trading houses, Steamships, Burns Philip and WR Carpenters, and the small trade stores were owned and operated by long-term Australian families and PNG born Chinese families.

One year after Independence, the PNG government bought most of the trade stores from expatriate owners and handed them to indigenous families. For 20 years these stores operated profitably but in the past 20 years the scene reversed.

Just about every one of these stores reverted to foreign ownership – mainly the new immigrant Chinese, Indians and Bangladeshis.  The trading activities of the three giant trading houses ceased. Now 95% of wholesale and retail businesses have gone to those three ethnic Asian groups.

Over 40 years, domestic air travel increased from half a million passengers a year to three million passengers in 2014, a fivefold increase. 

The one weekly flight from Port Moresby to Singapore is now five flights with a proposed sixth in the near future.  From Port Moresby to the Philippines also increased from one flight to five flights each week.  From PNG to Australia flights have increased to 15 each week.

The manufacturing sector of PNG has also had a field day over the last eight years.

Every manufacturing facility has more than tripled its capacity and increased its employment fivefold.  The sole manufacturer of beer in PNG doubled its huge production capacity and sale volumes and so have Coca-Cola and other beverage manufacturers.

There has been a huge expansion of manufacturing facilities for chemicals, detergents, paper tissues and cardboard. Local food manufacturing also expanded, especially tuna canning, biscuits, smallgoods, bread and cakes.

At the time of Independence, our Chow family had less than 200 employees, today we have 1,600, one of the biggest family employers in the country, the biggest food manufacturer and the biggest exporter of tuna.

All this change and rapid development during the last 15 years has also had negative effects.

At present we have seven and half million people in Papua New Guinea, with about 40% of the population under the age of 20 and two million in the education system.

With increased funding from the government and the introduction of supposed free education in primary schools, enrolments tripled. But classrooms and the number of teachers only increased by half.  Students per classroom increased from 35 to 55 over the period. School buildings and supporting facilities left by Australia had not been maintained. 

Only one in four graduating primary students find a place in high school and less than half of the finishing high school students will secure a place in a tertiary institution. Meanwhile, the business community is concerned with the falling standard of students being turned out by our education system. 

Only about 10% of school leavers find employment in the formal sector. This means that 90% of school leavers need to return to their villages to farm their land for a subsistence way of life, or be left to roam the streets of urban centres.

We have created in these half-educated young people an expectation to have the better things in life, to wear better clothes, to eat better food and to live in a better house, but we have not been able to create the employment opportunities for them to earn an income to sustain that hope.

So we have law and order problems and many of our streets, markets and crowded urban shopping centres are no longer safe.

In these areas, shoppers are likely to be accosted and to have their pockets picked, their bilums and handbags snatched, and gold chains on the ladies’ necks snatched.

Drivers can no longer leave items on the seats of cars, even if the car is locked invariably the doors will be forced open and the items stolen by these so called raskols.

PNG’s health system is in a similar situation. The number of rural health clinics and aid posts has declined with a corresponding drop in the number of patients treated. Many clinic and aid post buildings are in a state of disrepair.  More than three-quarters of health clinics need major repairs or complete rebuilding.

Demand for electric power has increased to such an extent that the government-owned and managed electric generating plants and hydro-power station can no longer provide adequate supply, so companies and households must have their own generation equipment.

In Papua New Guinea, we call the period from 2002 to 2012 the “lost decade” of service delivery.  We do not know actually where all the public funds went.

However, now we seem to see light at the end of the tunnel all over the country. The delivery of services seems to have improved, although slowly, old roads have been repaired and many new roads and infrastructure are under construction.

More funds are being provided for the repair of schools and hospitals, and for their operations.  The majority of the people are more hopeful and optimistic.

With the unprecedented resource boom of the last few years, and much more to come, the people of Papua New Guinea are looking forward to the da, when they will have good government leaders who will manage their wealth wisely and deliver the services they so desperately need to improve the life for themselves and their children.

Comments

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Corney Korokan Alone

PNG's Trade Minister Richard Maru is focused and is viewing this whole SME agenda in the right light.

Some tough decisions needs to be made – and the ideal time to make those decisions is not in the next decade but now. There will never be another good time.

We are all mindful how sweet procrastination robs opportunities and consigns people into legislated subjugation and poverty.

The idea that “all shops and small businesses currently owned by foreigners bought, managed and operated by PNG citizens over the three years from 2016 is the right thinking.

The citizens have been writing to the daily papers on this issue for donkey years. Therefore, I don’t see anything dramatic in this approach.

There is no need for foreigners to be operating fuel/gas stations and little restaurants that can be easily handled by Papua New Guineans.

We need to adopt the Chinese model that 51% ownership needs to go to the citizens as of 2016 onwards. It is not not early. It is about time.

There has been a mountain-load of talk-fest on this issue already. It’s action time now.

Port Moresby Chamber of Commerce & Industry and others need to articulate and tell us what they have been doing for the past twenty years to develop local entrepreneurship before reacting and scaremongering.

We have seen a lot of shops ending up in the hands of our friends from the North as prominent businessman Sir Henry Chow clearly says here.

Recently, the Prime Minister in an Australian radio interview did not really dismiss his Minister’s views – but he did clarify the need for Papua New Guineans to enter into SME businesses.

I have heard the statement. He’s not distancing himself but clarifying the context by saying his Govt supports local SME.

http://www.radioaustralia.net.au/international/radio/program/pacific-beat/oneill-distances-png-government-from-ministers-idea/1431110

There’s no better time to do this, than now, when there is political will and the interests of the citizens are pricked.

Pandering to scaremongers and unfounded fears is not leadership. Bold and decisive action is what the citizens of Papua New Guinea have been crying out for decades.

Jimmy Awagl

Sir, your contribution to this column is very informative.

This article I wish shall be surfaced for other bureaucrats to read.

Leaders are voted in but they do not know the reality of how they should run the affairs of this nation's resources.

Like the blind is leading the blind.

Sir, you are genuine and bold enough to remind the people of this nation to know the progress of their country's resources, economy and development.

John Karani

Thank you, Sir Henry Chow. The 'Lost Decade' assessment is comprehensive.

As I was typing my comments, a 'black-out' snapped in again and again and again - its seems never ending. This greatly indicates that PNG Power cannot manage.

And I think this applies across all sectors. To effectively manage.

I can say that PNG as a country is abundantly blessed in all dimensions. But if we don't manage prudently then we are setting our country off-course.

The government has already a vision - Vision 2050. Now the onus is on the bureaucrats to implement it ethically.

Rodney Dawan

A pretty good assessment of PNG's progress and struggles since independence, Sir Henry. Apparently honest, genuine and patriotic leadership is the most important thing we need in PNG right now.

Enough greed and the selfish mentality common in many of us.

God Bless Papua New Guinea.

Jeff Febi

A great read indeed.

William Dunlop

Sir Henry - Salute. All same man b'long work.

Corney Korokan Alone

Insightful article. Thanks. I remember the lost decade vividly. The decade of "surplus budgets and so many trust accounts with holes that, no one explained what became of them.

The optimism now is real.Consequently, one would hope that the constant mutterings of maledictory antagonisms displayed towards this government by one-liner crusaders read a bit more and reassess history and be factual for once.

Phil Fitzpatrick

Governments driven by economic imperatives (often on behalf of their friends) without the slightest whiff of a social conscience are becoming the norm in the world.

One day this omission will raise up and bite them.

This is not to say, of course, that there is anything wrong with what the SP Brewery is doing.

Jaffie Amani

Sir Henry, Your comments are very much appreciated and thanks for your contributions to this country's economy.

It's about time our leaders are voted to the government house on merit and not through bribery come the 2017 election.

Michael Dom

Sometimes the fitting job is the job that needs doing.

After completing chemistry at UPNG and working in a lab, I found a niche doing a job I was never trained for: animal science.

In a country where pigs have high value, there wasn't exactly a long line of volunteers to do the dirty and apparently menial work. Still isn't.

Enough said.

But I can't complain. The pay is passable, the lifestyle liveable and the fringe benefits, well, I now have a very colourful passport, have had tea and chit chat with HRH and spend six months of the year in Adelaide.

And for the record I am a loyal contributor to SP Brewery's success.

Yes, PNG has all the physical ingredients for prosperity.

Finally, it seems, we are having input into improving education.

But there are some lessons we need that can't be taught by textbook.

And someone has to be prepared to do the dirty work, for the right-eous reward.

Perhaps we've been mining all the wrong resources and planting all the wrong crops.

Albert Schram

This is a fair assessment of PNG's lost decade of the mining boom. So little of the economic growth has been translated in better outcomes in the population's health and education. We must address the root causes of this failure.

At UNITECH, meanwhile, we are working hard to offer more opportunities to access higher education, and improve chances for our graduates to get a fitting job.

Mathias Kin

Sir Henry, you summed up the PNG economic scene since 1975 really well.

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