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Coca-Cola has massively benefited from new PNG tariffs

CokePAUL FLANAGAN

“Coca-Cola has mastered the business of getting its sweet, fizzy drinks into even the most isolated of Papua New Guinea’s far-flung tropical islands and mountain villages. But getting the proceeds out of the South Pacific nation is proving much more troublesome…. Australian-listed Coca-Cola Amatil, which distributes Coke in the region, recently disclosed it was holding more of PNG's kina currency than it wanted due to foreign exchange restraints, a complaint echoed by other big businesses” - Reuters

CANBERRA - The irony of the Coca-Cola Amatil complaint that it can’t move money out of Papua New Guinea is that the company has been massively benefiting from new tariff levels on consumers imposed in last year's supplementary budget.

Tariffs on imported canned drinks that compete with Coke increased from 12.5% with an additional charge of K2.75 per litre on 1 January this year. This was actually an illegal increase as it was larger than what PNG had committed to when it joined the World Trade Organisation.

So a previously imported one litre bottle of soft drink from Indonesia or the Philippines with a wholesale price of K4 had its tariff jump from around K0.50 (12.5%) to K3.25.

Of course, this has been a massive win for local manufacturers as it has eliminated competition from overseas and allowed them to lift local prices. The losers are Papua New Guinean consumers.

What makes this slightly different from the usual issue of balancing the interests of the local manufacturing industry and PNG families is that Coke is judged by some as a less than healthy item - so less consumption due to higher prices has an upside of lower levels of obesity and some diseases.

So the tariff is also acting as a rather blunt sugar tax - except that PNG-manufactured Coke is getting all the extra revenues rather than it going to the government to support health education programs in nutrition.

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