Business confidence low, but Badili Hardware stays upbeat

THE building and housing industry has been flooded with fake below-standard products. Badili Hardware chairman ASHOK KUMAR explains to Business Editor PETER ESILA why business confidence is at a low right now and will take some time to recover, even though the company remains optimistic about the future.

Q: What is your outlook for this year?
KUMAR: The signals we are getting do not look good. It is not a secret that business confidence is low after the Jan 10 civil unrest which was unfortunate not only for the economy but also for business and the country. We mourn the loss of lives and property, employment and economic activity because of income generation, and loss of tax to the Government. It is something we all could have avoided. We have learnt from that event and should make sure not to repeat that mistake. This year will be tough for businesses. I think economic activity has shrunk, availability of money supply has shrunk, people’s purchasing power is reducing. So it will be a hard grind for businesses. But we are committed to doing our best to continue employing many Papua New Guineans.

Q: What are some of your investment plans?
KUMAR: We have a 10-year investment plan which we are halfway through. Our bankers have extended that support to us on our capital investments. We are proud of continuing the investments which have already been approved. Plans will definitely go ahead. But that could be delayed because of the availability of foreign currency and sourcing relevant building materials.
I prefer not to mention the figure because the investment is not only on land, buildings and physical infrastructure, but also in terms of stock-holding, new manpower, resources. Overall, it is a significant capital injection project. It goes into different pockets, and also this is a competitive industry. This investment is for Port Moresby, Lae and other centres.
We are having confidential discussions with other stakeholders in terms of the availability of suitable business plans.

Q: With the major resource projects coming up, what are they expected to bring to the economy?
KUMAR: The reopening of Porgera mine will definitely inject confidence into the economy and the much-needed foreign exchange and employment generation.
Plus the regeneration of business activity in Porgera valley and elsewhere in Lae. We appreciate the efforts put in by the Government, State Negotiating Team and investors Barrick, New Porgera Limited, in terms of achieving very admirable and satisfactory outcomes and commencing the production at a rapid phase. As far as Wafi-Golpu is concerned, indications are that the Government and the Morobe government are talking to landowners (LOs). We are not experts on LO aspirations.
I am sure, LO aspirations are taken care of so that the project starts at an earlier timeframe for the benefit of the landowners, the Morobe government and PNG. We are optimistic that the project will definitely happen. Our only hope and desire is that it happens as soon as possible.

Q: Availability of foreign currency remains a top issue. How is it affecting your business?
KUMAR: Forex issues has been like that for the last few years. The availability of FX is very critical for the smooth functioning of the economy, whether we like it or not, whether we accept it or not.
PNG is an import-driven economy. Most products including basic products are imported. I also commend International Trade and Investment Minister Richard Maru for bringing in downstream processing, and encouraging agricultural downstream processing. It is about food security for the country as well as improving the level of foreign exchange. But that will happen few years down the line.
For now, FX supply is not becoming easier, with the queues and waiting period getting longer. Added to that is the rebuilding cost to businesses which suffered losses due to fire on Jan 10.
It is one of the major issues that all businesses including us face. We thank the bankers who do their best to allocate available foreign currency allocations to competition businesses. I do not want to be a banker at this stage because it is going to be a hard job trying to allocate to the various customers. But they do the best they can and we thank them for that. We wait from between two to four weeks or even more depending on the currency and the amount involved. Of it is a small amount, then it takes only two or three weeks. For currencies such as the US dollar or Euro, it takes longer.

Q: What are some other issues you facing?
KUMAR: Definitely law and order and security problems. It is a fundamental requirement for a civil society to have a good law and order climate prevailing in the country so that businesses can focus on running their businesses, generate employment and pay taxes. If the law and order situation is bad, it will have a significant impact on business activity and employment generation, revenue generation and taxes. Everything is linked, you can’t look at law and order by itself. But it also has a societal impact in terms of what it does. It is important that the powers that be focus on law and order control. I see that the Government is working with its traditional partners like Australia. We welcome any and all efforts in that direction.

Q: There has been a lot of issues on sub-standard building products flooding the market, how do you see that?
KUMAR: There are a lot of fly-by-night operators starting businesses and flooding the market with non-standard, non-genuine products. Unfortunately, education is not widespread in terms of pitfalls and problems of using non-standards, non-genuine building products. Badili Hardware is proud to stand by every product we sell. They have applicable PNG, Australian, New Zealand standards. We will not sell anything which does not meet the required standards, whether it is a plumbing you put behind your wall or timber to construct your house. We do not want to play with that because housing is one of the biggest investments a Papua New Guinean makes. We do not want to cut corners resulting his their investment value reducing after three years. Our company always focuses on bringing in and supplying products that comply with suppliers particularly Australia, NZ and PNG standards. There are companies in the industry that do not follow that. This is one area, that needs a lot more education so that the homeowners not only look at the prices but also where the product is sourced from, how it is manufactured and whether it is in compliance with the standards before they spend their money.

Q: What is the rate of housing and construction phase in PNG?
KUMAR: Talking at a micro level, the country needs a lot of housing, especially appropriate housing for ordinary Papua New Guineans. I am not talking about high-rise apartments, which will take care of themselves. But for the average Papua New Guinean, a durable two or three bedroom house which stands on its own land, where the materials do not rot, the house does not develop leaks, where the timber does not have termites. All these are of paramount importance. I think there is a lot of demand for good quality affordable PNG housing. Unfortunately, the issue gets clouded with the availability of land, because there are a lot of customary land.
But in terms of willingness and ability for suppliers like us to work with genuine developers who are going to develop a significant number of houses and housing estates, we can work with them to make sure we keep the overall costs down in terms of materials.
They bring in the expectations in terms of building standards, and lowering the cost of building.
So the availability of land, a developer willing to sacrifice profits then do the best thing by building to a good standard, and suppliers like us who are will to help such developers and anyone by supplying quality building materials at affordable price.
All these things come together to develop, and increasing stock across the country.
The country’s population is rising so the demand for housing will increase.