Economy needs audit

ALLOW me space to echo the need to have a classified research data into the real and perceived cost structure of the economy.
To know the cost of doing business in PNG and the profit margins, one needs to understand the fixed and variable cost drivers in every of economic activities – covering both extractive and non-extractive industries and the services sectors.
Most sector based industry associations tend to secure their interest within the enclaveness of their operations but there has to be an independent fine line comparative cost structure audit done.
Only then the Government can intervene on internal cost drivers where it has influence while external cost drivers are left to the market forces.
The unit cost audit per business activity output will unfold many possible areas of government intervention to ensure greater efficiency by setting the value and pricing of a vital unit input.
For PNG, it’s the cost of electricity, water, ICT, fuel, security, land and air transport and shipping, interest rates and cost of capital, wages, food and many more that drives the cost of doing business.
Savings identification and cross subsidy by the government can be options to be looked at.
User pay policy and service fees tend to trigger inflationary pricing too.
To cut the cost of fuel it requires direct subsidy at the cost of crude oil to the refiner to share the benefit of cost savings at retail pricing.
It means the government can explore options to enter into an agreement with Puma Energy of selling State’s portion at a ratio of 22% in Kutubu crude per shipment sales at 25%, discounted below import parity pricing to be refined and priced 10% cheaper at retail outlets nationwide.
The chain reaction is that all businesses activities cost in relation to fuel input has to come down within the 10 percent range.

Observer
NCD