Economy to improve slowly

The National Business

THE national economy is not likely to improve greatly in the first half of the year, says Alan McLay, the president of the Lae Chamber of Commerce.
But he believes companies in Lae – Papua New Guinea’s manufacturing and logistics hub – remain hopeful of an upturn and he expects some positive developments with power provision.
He says the following remarks are not intended to provide a crystal ball of what will happen in 2017.
“They are rather a general outlook based on experience; they are a guideline only. We do not expect any real difference in the economic situation at least for the first half of the year.
“The pressure on foreign exchange is likely to continue even with a bit of relief that we have seen. This situation is likely to continue in some form or other for the remainder of the year.
“This is because the prices for PNG’s main export commodities are not likely to rise enough to relieve the situation. Gold, which showed a good improvement late last year, is now bouncing around and not likely to recover to a great extent.”

Wholesale, retail and manufacturing
Lae’s wholesale and retail businesses continue to do it tough, although some businesses are doing better than others.
This is also the situation with the manufacturers, where some of the long-established companies are laying off workers.
The established fish canneries are the shining light, especially the tuna canneries relying on stock from Morobe waters. A new cannery will be built soon, which shows the strength of this industry.
Mining
Mining in Morobe province continues to have a positive spin off to companies in Lae:

  • Hidden Valley Mine was taken over from the Harmony/Newcrest JV by Harmony themselves and they have instituted a range of reforms that should have the mine in a very strong situation this year.
  • The Wafi-Golpu mine is most likely going to go ahead and, with Newcrest being the single developer, they are now entering a full feasibility stage for the mine’s development.
    The national election will be held mid-year an as has happened in previous elections, we expect that there will be a fair amount of cash floating around before and during the elections, which should stimulate a lot of the retail and wholesale operations.
    Most companies see the early part of 2017 as a continuation of the economic slowdown of 2016.
    However, they remain hopeful that the situation will gradually improve.

Power
In 2016, we expected an improvement to the power problems in Lae.
However, that did not happen and daily blackouts have now become the norm again.
The new 26 mw General Electric Gas Turbine generator that was installed at the Lae Port in January 2016 ran for some seven months before it stopped working.
PNG Power Limited brought in three maintenance companies to fix the problem and I believe it is up and running again.
Mind you, this generator never reached its full capacity anyway, as it is fuelled by dieseline with an output of about 17MW only.
PNG Power Kalso commissioned the Korean company Daewoo to build a heavy oil plant at Munum, just outside Lae.
This plant, when commissioned, will generate a further 30 MW of power into the Ramu grid.
A second transmission line from the Ramu One power station to Lae is nearing completion by Japanese companies under JICA direction.
This will bring with it more stability in the power being transmitted to Lae.

Negotiations
We did expect that negotiations by PPL to construct the Ramu Two power station at the Yonki dam, would be completed by now, which is estimated to bring over 200 MW into the Ramu Grid.
JICA were very keen to construct this power station but somehow these discussions fell through and indications are that a Chinese company will be engaged to construct this much needed power station.
We hope that the Government will renew dialogue with this Chinese company, so that work can commence soon on this power station.
Of course, the much-talked-about Oil Search-supported biomass power plant in the Markham Valley is going ahead as planned, which will bring an initial 15 mw into the Ramu Grid with plans for twice or triple this amount in the years to come.
Therefore, if all goes as expected, the power supply in Lae will be more regular and reliable.
This will be a further attraction for further industries to relocate here.

Highlands Highway
The newspapers have run a series of articles on the Highlands Highway recently, pointing out the difficulties getting through the flooded sections (Markham) and the areas affected by landslides.
This article was provided by www.businessadvantagepng.com.