Ozpresso, Baglaga plantation and the PNG Broomheads
Tackling corruption at its root in Papua New Guinea

We must ensure that protecting small business delivers results

Another go at localisationBUSA JEREMIAH WENOGO

An entry in the Crocodile Prize
PNG Chamber of Mines & Petroleum
Award for Essays & Journalism

NOW that the government is planning to introduce legislation to reserve certain segments of the business activities in Papua New Guinea to indigenous Papua New Guineans, a number of people like the Port Moresby Chamber of Commerce are of the view that it will stifle the growth of economic activity instead of stimulating it.

Convinced by the notion that majority of Papua New Guineans lack the necessary skills and capital to thrive in a business environment, they fear that such a reform will regress the growth of business activities instead of growing them.

Yet the counter argument has always been that the reason most Papua New Guineans could not own a business is due to lack of government support, particularly the absence of credit facilities and inaction to clamp down the takeover by foreigners of simple business activities like trade stores.

Over the years, the takeover of the trade store sector has led to strong calls for government intervention.

In the informal economy such activities like meri blaus businesses and even betel nut selling have seen foreign encroachment. Protecting these activities no doubt provides participants with the shield they need to grow.

It is hoped that under this canopy they are incubated to a point where their competency to compete in an open market is improved.

Now the government, led by Richard Maru MP, seems to have heard these cries and has embarked on a small-to-medium sized enterprise stimulus package to revive the entrepreneurial spirit of Papua New Guineans.

The recent decision to introduce a law to reserve certain business activities to locals will encourage the localisation of the economy, something discussed for many years without real progress – despite the Business Reserve List in the IPA Act of 1992.

So such a list is not a new idea, but the reason it may sound new is because in the past the government has not properly enforced it.

Hence these cottage businesses have more foreigners than locals operating and owning them.

Other attempts were made to encourage local participation in the economy through the Stret Pasin Stoa scheme back in the 1970s which proved to be a popular success but perished after some years. Studies pointed to the wantok systemas one of the maincauses of the downfall.

It is experiences like this that have fuelled speculation about Papua New Guineans’ ability to make a mark in the business environment both locally and globally.

Now the government is passing a law to protect these businesses, it is incumbent upon every Papua New Guinean to use the opportunity to show to the rest of the world what Papua New Guineans are capable of doing.

Foreigners who have operated businesses within industries now to be reserved for locals have shown us the tenacity and finesse required to be successful. It all boils down to hard work, patient, discipline and commitment, traits that most of us Papua New Guineans seem to find difficult to develop.

Our short attention span and attitude problem have been our biggest enemy, although we complain of financial illiteracy and lack of capital as obstacles.

There is growing evidence that Papua New Guineans who lack financial literacy and start from scratch have gone on to become successful businessmen and women if they are committed and disciplined.

In addition, a culture where we are obliged to meet certain family responsibilities becomes a fatal injection that suffocates life out of businesses if we do not manage them effectively.

In fact there is a real danger that, under the reserve business environment, our wantok system may thrive and become a major obstacle to the success of such government policies.

It will be interesting to investigate how many cottage businesses in the country are operated by foreigners even though the businesses are owned by locals. The widespread practice of wantokism may force a lot of Papua New Guineans to rent out their business to eager foreigners who are willing to pay rent to operate.

Regardless, lessons from such schemes like Stret Pasin Stoa show that Papua New Guineans need to change their approach to running businesses. There needs to be a big shift in the way we view businesses otherwise there is no point in protecting them in the first place.

The government, by passing a law to protect certain industries for locals, is taking a big gamble.

Whether it is a vote of confidence in Papua New Guineas’ entrepreneurial skills (mostly abundantly raw) or mere political endeavor, the fact is that Papua New Guineans will now be expected to rise up and fill the gap left by the departure of foreigners.

Failure to do so may question the integrity of the policy itself and become an embarrassment for the government.

Protectionism has always been a controversial policy but the government has to be commended for tackling a very difficult issue head on.

It should now complement these initiatives by supporting legislation to protect the informal sector and to guide its growth.

To begin with, it should differentiate between SMEs and the informal sector and devise policy responses to aid the transition of informal sector activities into the SME sector.

Without this there is a high possibility that protectionism will create a comfort zone that will discourage the graduation of informal sector participants into the SME sector and thereby achieve little in terms of localisation.

The people have spoken and the government looks set to deliver the business reserve list this year. When the law comes into effect, it will be up to the people to make it work.

Comments

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Leonard Fong Roka

I think the small businesses in fact have now been taken over by Asians.

John Kaupa Kamasua

The restricted businesses in PNG to a large extent are still a myth. Foreign interests and encroachment are evident.

Blame has been put on cultural factors and the inherent conditions, but the bottom line has always been that we have never fully implemented such policies and vigorously provided support to Papua New Guineans.

Lets hope this will change with this shift in focus.

Corney Korokan Alone

Any thinking that is rooted in the idea that local Papua New Guineans are not capable yet and need extra training is an affront to the industriousness and potential of citizens.

One does not need an MBA to run a fuel service station. There are many businesses like this that are unfairly taken up by foreigners - robbing our people of opportunities.

I say bring on the SME policy and let's kick some illusions out of the psyche of these doubters.

It's time. And the time is now - not in another 3 years time.

Jaffie Amani

I believe if financial institutions like the NDB can relax their borrowing terms and conditions for ordinary citizens that could help a lot in stimulating the citizens of PNG to prosper in starting businesses.

Currently, the NDB is for the MPs and their cronies and not the ordinary Papua New Guineans to borrow.

NDB, or Noken Dinau Bikpela, is not serving its purpose.

Chris Overland

When I first enrolled at university, my employer urged me to study economics and commerce. These were deemed to be the "hard" social sciences.

Instead, I chose to study politics and history. I have never regretted doing so.

It seems to me that economics, which is rightly called the "dismal science", has two main schools of thought: the "we'll all be rooned" school and the "irrational exuberance" school.

Both schools are often good at explaining what has happened and why but, importantly, their prognostications about what will happen in the future are almost invariably wrong.

However, both schools are united in their belief that government interventions in the market always produce perverse results. Politicians, it seems, may be good at politics but generally are very bad at economics.

Over many years, politicians of every description have been subjected to the siren call of those who advocate protectionism as a way to foster home grown industries and commercial endeavours.

Sometimes they succumb, always in the hope that this time, somehow, the dreadful logic of the "dismal science" will be wrong.

Sadly, the "dismal science" teaches us that it is rare indeed that protection produces other than inefficiency, special pleading and "rent seeking" behaviour from the business community.

History strongly suggests that letting the market rule within a reasonably regulated environment is the best long term strategy for sustainable growth.

I fear that, like many before it, the PNG government is about to learn this lesson the hard way.

Albert Schram

As the author says, this is not a new idea, rather it is based on the IPA reserve list of 1992.

Other countries have tried this, usually similar protectionist policies have mostly negative outcomes.

Simple "enforcement" will most likely not produce the desired results unless accompanied by complementary measures.

Rolling out effective training programs, and integrating entrepreneurship into the curricula is the way to go, but of course requires "hard work, patience, discipline and commitment".

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