Country’s industrial hub grows

LAE, the country’s industrial hub, is expanding as more investments are taking place. Business reporter MARK HAIHUIE spoke to Lae Chamber of Commerce and Industry president ALAN MCLAY about the business environment in the country’s second largest city.
HAIHUIE: What is the LCC and its main purpose?
McLAY: A chamber of commerce is the voice of the private sector in a particular region. It is established by companies who pay annual subscriptions to allow it to operate. The chamber is the voice of businesses championing the economy as a force for economic growth, job creation and prosperity. The chamber of commerce movement is headed by the International Chamber of Commerce based in Paris, France. In Papua New Guinea, there is the PNG Chamber of Commerce which is the umbrella organisation. There are 16 regional chambers including Lae. The PNGCCI in turn is affiliated to the Confederation of Asia Pacific CCI based in Taiwan, as well as the Pacific Island Private Sector Organisation based in Suva, Fiji.
HAIHUIE: There has been a big infrastructure development in the past four years by the Government. How has this affected the business community in Lae? Has the Lae chamber been involved in the developments with the Government?
McLAY: Infrastructure is a major priority for the LCCI. The city road network had fallen apart in the early 2000s up to 2010. The roads got so bad that it was difficult to move around the city. This had a major impact in the way businesses were conducted in Lae. Vehicle replacement and maintenance is a high cost to businesses. Punctuality of staff is affected, and their absenteeism due to respiratory illnesses. Crime increases as vehicles slow down at sections of the roads, dust affects products and there are delays in the delivery of goods. In 2010, the Government embarked on a programme to improve the city roads, which eventually became a transformation to cement roads. We are now blessed with most of the city roads in good condition, and the majority restructured in cement, which has helped the efficiency of businesses across the board in Lae. We are waiting for the last few roads on the programme to be done, with Milfordhaven Road the major road in the city being the most urgent. The new Lae Tidal Basin project, which added 250 meters of wharf to the Lae Port, was recently completed under funding by the Asian Development Bank and the Government. Once management of this new port has been sorted out, there will be enough wharf area to cope with the current congestion problems. We welcome plans for further development of the tidal basin port especially now that the Wafi-Golpu mine looking very much like it will go ahead.
The lack of reliable and regular power has been a major concern of the LCCI for a number of years. The aging generators at the Ramu hydro-power station, has meant that the power supply is irregular and unreliable. The fact that most businesses have standby generators and expensive power protection devices, is testament to the poor quality of the power. But as these are necessary, they are a further cost to business in Lae. PNG Power have plans to construct the Ramu 2 Power Station at Yonki Dam, and we urge the Government to speed up this project so that Lae city will have a sufficient power supply. Small sustainable and economic power projects that are in the pipeline and are most welcomed by the private sector.
HAUHUIE: The Government has prioritised the involvement of citizens in small-medium enterprises. What is your chamber’s view on SMEs in Lae and the Government’s policy on it?
McLAY: Assistance to SME development is a must and the LCCI has been working in this direction for several years, with mentoring programmes. The Government has legislated and given direction to advance the progress of SMEs and opened up avenues for finance. But there is still a long way to go. The Government is pushing a re-creation of the reserved activity list of businesses to give national businesses a better chance. But this system had failed before because of not enough will or inspectors. It will do so again. There must be an initial commitment by small business people to get into business, and then assistance must be provided so that these businesses do not fail by falling into the same traps again, where they become non-compliant. The Small and Medium Business Corporation has been reformed to assist the development of SMEs but there is no operation in Lae. The LCCI would like to see a branch of this corporation set up in Lae to cater for the needs of smaller business people.
HAIHUIE:  Law and order issues have been a concern in Lae as they greatly influence commerce. What has the LCCI done on this issue and what has been the Government’s input?
McLAY: The LCCI has given law and order a priority, realising that good business cannot operate successfully where crime is rife. While Lae is certainly not without crime. It is significantly better now than it was a few years ago. A lot of the improvement is due to more police and more effective policing. However the LCCI is always there to support the police in their work, realising that there is a shortage of equipment or resources for the police. The LCCI has been one of the main supporters of the recently formed “Lae Community Safety Network”, which consists of members from RPNGC and AFP and business houses. This group looks at criminal trends and how to be more effectively deal with these. A “Crime Stoppers” telephone has been installed in the police station and a reward fund has been started under the assistance of this committee. Once problems have been sorted out with the telephone, an awareness will be made public.
HAIHUIE: There have been multi-million kina road projects in Lae in past years. What impact will this have on businesses in Lae and what are your views on these road projects?
McLAY: Part of this is answered above. The Lae-Nadzab Highway is being built. This road will be completed from Lae (Bugandi Roundabout) to the Wau-Bulolo turn-off by the end of this year or shortly thereafter. The second contract from the Wau/Bulolo turn-off to Nadzab is yet to be negotiated. The first section of this road, even though in its semi-completed condition, has already made a significant impact on Lae. The trip to Nadzab does not take much more than 30 minutes and can be travelled relatively safely. As everyone in Lae has to fly out from Nadzab airport, the completion of this road will speed up the trip to Nadzab even more. As the traffic is able to speed up, criminals will have less chance to hold up vehicles, which is still a problem on the road. The Government has announced an agreement for the Japanese Government through its Aid agency JICA, to redevelop the Nadzab Airport, with a revamped runway, a new terminal and land development for airport-related businesses. With the new four-lane road link to Nadzab this airport will become one of the busiest in the country and will be able to cater for overseas aircraft to Australia and Asian destinations.
HAIHUIE:  The LCCI is a key supporter of the redevelopment of Angau Hospital. What is the reason behind its involvement? Are  there any similar interactions between the LCCI and public institutions?
McLAY: The LCCI is not a financial backer of the Angau hospital but it supports the planned improvements. Angau is a referral hospital and receives referrals from other base hospitals around the country for specialised treatment. In Lae City there are a number of health clinics. In reality, these should be where Lae residents receive primary health treatment. Patients who cannot be treated at the clinics should be referred to Angau. These clinics are mostly run-down and do not have the capacity or the medicines to provide even basic treatment. It is why Angau is so overloaded with work. For the five years up to last year, the LCCI upgraded two of the city health clinics at a cost of K60,000, supported by funding from the ADB.
HAIHUIE:  Sentiments have been expressed that infrastructure developments are more concentrated in Port Moresby than in other  centers. Considering that Lae is conveniently connected to other centers and is the industrial hub of the country, what are your views on this?
McLAY: It is very difficult to upgrade the infrastructure everywhere at once. Port Moresby is the capital and perhaps should have some priority. The trouble is that there is so much infrastructure needed and all of it cannot be done at once. There must be a plan for infrastructure maintenance, improvement and capital requirements, so that the most needed projects are attended to first. The rush to develop infrastructure for the Pacific Games in Port Moresby should never be allowed to happen again. Lae is still without approved projects that have not been done because the Games sucked all approved funding.
HAIHUIE: There has been a decrease in foreign currency reserves which has had a detrimental effect on businesses and their operations. How has the current economic climate impacted commerce in Lae? What are your views on the Government’s input on this?
McLAY: The shortage of foreign exchange has been a crucial issue in the past 15 months. Well over 50 per cent of the nation’s imports are made through the Lae port. A large proportion of these imports are destined for the Highlands provinces. Even the goods manufactured in Lae are made up of a large proportion of imported components. These goods all have to be paid for. And with the restricted forex available at the banks, this is difficult to do. Because most of the Lae companies have built up a lot of goodwill after many successful years of dealing with overseas suppliers, credit has been extended. But this is becoming more and more difficult to arrange. Fortunately a little more forex is available now with an increase in some commodity prices and a good coffee season. But if this does not last, then there is a real danger that some companies will cease operations, bringing with it increased unemployment.