PNG's ambitious plan for indigenous business | Asia Pacific

PNG's ambitious plan for indigenous business

PNG's ambitious plan for indigenous business

Updated 9 July 2014, 10:58 AEST

The Papua New Guinea government is developing an ambitious plan to help locals go into business by reserving large areas of the economy exclusively for indigenous entrepreneurs.

In his latest comments, Trade and Commerce Minister Richard Maru says any business with an intial investment of less than 10 million Kina or government contracts worth under 10 million kina will be reserved for indigenous business people.

Mr Maru wants to hear from Papua New Guineans what they think should be on the new list of reserved businesses.

While there is widespread support for measures to help local entrepreneurs, there is also concern that such as sweeping policy could have unintended consequences, as Jemima Garrett reports.

Reporter: Jemima Garrett

Speakers: Thomas Abe, Chief Executive Officer of the PNG Chamber of Commerce and Industry; Douveri Henao, Executive Director, Business Council of PNG

GARRETT: Trade Minister Richard Maru is horrified that ninety per cent of businesses in Papua New Guinea are owned by foreigners who send their profits abroad.

He wants the jobs and the profits to stay in the country.

At a recent workshop for small and medium-sized enterprises in Port Moresby Mr Maru said the business sector, even in towns, villages and districts is being dominated by outsiders.

Thomas Abe, the new Chief Executive Officer of the PNG Chamber of Commerce and Industry says generally speaking the government's small to medium sized enterprise policy is a good one.

ABE: Papua New Guineans cannot compete with the influx of Asians who have the funds, the network and they are very, very skilful so it is a generally held view among Papua New Guineans that while we are going through the resource boom more Papua New Guineans should benefit in wealth and employment creation. Papua New Guineans should not be spectators in their own country so from a patriotic and a political point of view, government wants to create an environment for local Papua New Guineans to be equipped to compete with foreigners in the long run.

GARRETT: Mr Maru says he plans to do that by reserving all businesses with an initial investment of less than 10 million kina around 4 million Australian dollars for indigenous business people.

Mr Abe says while that looks like a great idea on the surface, the 10 million kina limit may be counterproductive.

ABE: How many small business have 1 million kina or 5 million kina in the operational account? I guess very minimal. Just an observation for instance, service industries, the legal and the accounting profession, do you limit that to indigenous firms? We could compromise getting independent quality service because of this policy.

GARRETT: Like the PNG Chamber of Commerce the PNG Business Council says decisions on what should go on the reserved list should be made sector by sector and be evidence-based.

Many industries rarely have an initial capital investment of over 10 million Kina.

In joint venture businesses, especially in rural industries such as agriculture and eco-tourism, foreigners bring capital and know-how, while the indigenous entrepreneurs bring land and labour.

The Business Council of PNG's Executive Director, Douveri Henao, says foreign investments of below 10 million kina can have a positive impact for locals.

HENAO: The most important thing that foreign enterprises do bring in is not the money, it is not the capital, it is the intellectual skills that they bring. And that is an acknowledgment that all of us across the sectors have.

GARRETT: There is a risk that if the investment bar is set too high businesses that could provide jobs and mentoring will be shut-out.

HENAO: We certainly don't want that to happen And our conversations with Minister Maru has also indicated he doesn't want that to happen as well. It comes back to the construction of that justification on why the reserve listing has to occur.

GARRETT: As well as evidence-based decision making the Business Council of PNG wants there to be no ministerial discretion over which businesses are on the reserved list.

The PNG government is aiming to create half a million new small and medium-sized enterprises by 2030.

Thomas Abe says the reserved list is helpful but there may be more important questions.

ABE: Are the basic infrastructure in place to allow these Papua New Guineans to compete; roads and electricity and water and so forth? These are the main needs affecting all walks of life, not only foreigners but also Papua New Guineans, linking rural roads to urban areas so people can take their produce to the markets. No roads, no business simple as that.

GARRETT: The Chamber of Commerce has welcomed the recent boost in infrastructure spending.

Growing the indigenous business sector is a complex process.

The Business Council's Douveri Henao wants to see as many people as possible get involved in the debate and he hopes the government will listen.

HENAO: The conversation should be alive, it should be frank, it should be practical, but it should be a conversation and not a promulgation. It shouldn't be something that should be forced, based on populist and nationalistic views. It needs to have that commercial and business appreciation.

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