PNG FISHING INDUSTRY ASSOCIATION CALLS FOR NFA POLICY REFORM

by Paul Oeka - September 12, 2022

The president & chairman of Papua New Guinea's Fishing Industry Association (FIA), Sylvester Barth Pokajam is calling on the new Government to reform its National Fisheries Authority policy document. This policy document provides the legal framework and guides the regulatory regime of the fisheries sector.

The policy should focus more on key areas on building basic and appropriate infrastructure such as fishing ports, having affordable and readily accessible utilities such as water, electricity and communication is vital for the growth of the industry and to foster interest amongst many individual groupings and businesses both within and outside to look at fisheries investment opportunities in PNG.

Mr. Pokajam said, “Attracting Foreign Direct Investment (FDI) has stalled since 2013 due to inconsistent and sudden shift in Government policy after Grand Chief Sir Michael Somare’s regime”.

“In fact, between 1998 and 2013, six new tuna-processing plants were built in PNG, but investment has been stalled since then”.

The FIA also refutes the claim by so called external advisors and experts that attracting investors is not the main problem.

“It is not just investment but finding the right investment. Investors must be enticed or attracted to invest where there is a win-win situation for both parties”. Said Pokajam

Mr. Pokajam emphasized on two factors that determine potential fishing operators to invest, which are;

  • Fishing operators invest in processing to gain license concession. This is a conventional global practice that rewards frontrunners for investing substantially in developing the local industry and the sector.
  • We need processors to invest not fishing operators to invest. This is a situation where a processor is able to put in place additional shifts in its processing operation as a result of the expansionary government policy where the negative impacts are reduced.

 

The FIA strongly supports the Marape Government in taking back PNG as it strives to fully involve and support the participation and inclusion of PNG in the fishing and processing business.

Pokajam said "The FIA is happy that the Prime Minister continues to support the PNG aspiration to make PNG the tuna capital of the world, a feat that is not impossible under his leadership".

"This is a quest we planned for after we were able to negotiate a Tariff free access to the EU." added Mr. Pokajam.

During Pokajam's tenure as the former Managing Director of the National Fisheries Authority from 2004 to 2014 he had seen the rush of serious proposals for on-shore investments. A lot of major investors such as Frabelle PNG Ltd, International Food Corporation Ltd, Nambawan Seafood Corporation Ltd, and Majestic Seafood Ltd were established in Lae, in addition to RD in Madang and South Seas Tuna Corporation Ltd/FCF in Wewak.

Two other investors who had already acquired land in Lae, signed project agreement with the State in 2013, but did not continue due to sudden change in Government Policy.

One of the biggest investors was Majestic sea food Ltd which is partly owned by the two world players in the tuna processing industry, Thai Union Group of Thailand and Century Pacific Food Inc of Philippines, Thai being the biggest tuna processor in the world and Century the biggest in the Philippines. Majestic Sea Food Ltd and our current tuna industry players have played a huge role in helping to boost our export to EU markets.

Pokajam explained that the Cost to operate a processing facility in PNG that competes in the world continues to be a big challenge. An ideal set up should be an entity doing fishing and processing at the same time ensuring supply of tuna for processing and the flexibility to market its products so that it can reduce the impact of high cost.

FIA was also able to secure a reputable Marine Steward Council (MSC certification scheme) ECO label for PNG.

"There is a lot more work to do. We shall work closely with the Prime Minister and his Government by providing accurate industry market information to guide the Government to enable us to achieve our aspiration". Said Pokajam.

In relation, another issue with the current Government policy is the higher prices it charges for the country’s vessel-day scheme (VDS), which governs its tuna-fishing sector.

From hard facts, other Pacific nations are charging USD 6,000 to USD 7,000 (PGK21,700 – PGK25,300) for daily access for their domestic fleets, but in PNG, the cost is USD 10,500 (PGK38,000) daily.

Investors that would like to invest in PNG look for competitive cost of license and the VDS is a scheme PNG can use to attract both local investor and foreign direct investors.

In late February 2022, the number of tuna purse-seiners (Large fishing vessels) flagged to Papua New Guinea had dropped significantly as a result of the higher prices. More PNG flagged vessels are reflagging to other Pacific countries, especially Nauru and FSM (Federated States of Micronesia).

Since 2019, a total of 28 vessels have moved to reflag to Federated States of Micronesia and 9 reflagged to Nauru. These two countries offered discounted vessel day scheme fees and facilitated access for vessels to fish in the Eastern High Seas Pocket. Only a dozen purse-seiners remain flagged to PNG.

The National Fisheries Authority (NFA) is very much aware of this dilemma and have stated that the country needed “conducive policies in place to attract vessels to carry the PNG flag and fish in the country's fishing zones.”

In addition, the FIA also shares the same sentiments as expressed by “The Farmers and Settlers Association Inc.,” that the Government should not get involved directly in the industries whether it be fisheries, forestry and downstream processing of precious metals which is something that should be discouraged at the outset.

Past experiences have shown the many failed ventures that the Government had been involved in and therefore the Government should concentrate more in supporting domestic PNG private sector entities and foreign direct Investors through an expansionary fiscal policy.



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Commentary by Stephen Howes, Kingtau Mambon and Kelly Samof The urban minimum wage has been an important part of Papua New Guinea’s economic history. In the last few years before independence (in 1975), it was greatly increased. In the decade or so after independence, it was widely regarded as too high. In 1992, it was slashed, merged with the rural minimum, and hardly increased again for more than a decade. We can compare the minimum wage in PNG today with other Asia and Pacific developing countries using International Labour Organization (ILO) data. As Figure 1 shows, PNG’s minimum wage is 18% below the average of the 19 countries shown if the market exchange rate is used to compare minimum wages. It is 37% below the average if differences in cost of living are also taken into account (with conversions made on the basis not of market exchange rates but so-called purchasing power parities or PPPs). The greater difference in terms of PPPs reflects PNG’s relatively high cost of living. Of the countries shown, only Samoa and Kiribati have a lower minimum wage than PNG when a PPP comparison is made. This is very different to the past. Raymond Goodman, Charles Lepani and David Morawetz in their 1985 report The economy of Papua New Guinea compared minimum wages in PNG with a subset of the countries above back in 1978. Then, the PNG minimum wage was about twice as big or more than the other comparators. Today (using market exchange rates, and the earlier authors do), PNG comes in the middle of the pack, as Figure 2 shows. So far, we have shown that around the time of independence minimum wages were very high in PNG by international standards, and that they no longer are. Figure 3 shows how this change came about – also, for interest, comparing trends in PNG with those in Australia. Both the PNG and Australian weekly minimum wages are shown in Figure 3 measured in Australian dollars. The PNG minimum wage is converted into Australian dollars using the current exchange rate. Both wages are then adjusted for inflation and expressed in 2021 prices. The two series follow diametrically opposed paths. The Australian minimum wage fell with the high inflation of the 1970s and industrial relations reforms of the 1980s, and by the early 1990s was little more than half its value in the 1970s. It then increased in the late 1990s and 2000s during the resource boom, and has continued to increase. Adjusting for inflation, it is now almost back to where it was in the early 1970s. The PNG minimum wage does the opposite. It increased in the 1970s and was then held stable due to indexation, until the big bang reforms of 1992. Adjusted for inflation, PNG’s minimum wage continued to fall until 2004. There have since been some significant increases, but today PNG’s minimum wage is only about one-third of its value at independence, and below its value even in 1972, which is when the steep minimum wage increases began. The Australian minimum wage has always been significantly higher than the PNG one, but the ratio has changed a lot over time. The lowest that ratio has ever been is 2.2 in 1986, the highest 45 in 2004. The gap between the two wages is much higher now than at independence: the ratio of the Australian to the PNG minimum wage was 14.5 in 2021, compared to only 3.2 at independence (1975). This reflects PNG’s 1992 deregulation, and the faster growth in the Australian economy, which has enabled an increase in the Australian minimum wage. The solution to low wages in PNG is not necessarily to increase the minimum. In some sectors, where there is a lot of international competition, a higher minimum wage might lead to job losses. For example, in tuna processing, one of PNG’s main competitors is the Philippines. From Figure 1, we can see that PNG’s minimum wage is lower than the Philippines' on the basis of PPPs, but actually higher on the basis of market exchange rates. While the former is what matters for the welfare of workers, the latter is what matters for international competitiveness. Whether PNG’s minimum wage should be increased will require a lot more analysis. The point of this blog is simply that PNG’s minimum wage does not look high any more by international comparisons, as it has fallen a lot since independence. PNG is often described as a high-cost economy, and this is a fair description. However, with regards to unskilled labour, it is no longer a high-wage economy.   Data note: The PNG Economic Database provides the weekly minimum wage of PNG going back to 1972, and the PGK-AUD exchange rate. Wikipedia provides the Australian weekly minimum wage data (hourly and weekly, on the assumption of a 38-hour week) starting from 1966. The Australian CPI is from the Australian aid tracker. There are some years where Australian minimum wage rates change more than once in a year. For such cases, we took the average as annual minimum wage rate. The data for Asia-Pacific comparisons are from the International Labour Organization and the World Bank. The different frequencies of minimum wages for each country in 2019 in the ILO’s report are adjusted to convert to weekly rates. World Bank data is used to obtain market exchange rates and PPP conversion factors. For the Goodman, et al., data go to Table 3.6 on p.61 in their report.\ Disclosure: This research was undertaken with the support of the ANU-UPNG Partnership, an initiative of the PNG-Australia Partnership, funded by the Department of Foreign Affairs and Trade. The views are those of the authors only. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is Director of the Development Policy Centre and Professor of Economics at the Crawford School of Public Policy, at The Australian National University. Kingtau Mambon is currently undertaking a Master of International and Development Economics at the ANU Crawford School of Public Policy, for which he was awarded a scholarship through the ANU-UPNG Partnership. Kelly Samof is a lecturer in economics at the School of Business and Public Policy, University of Papua New Guinea.

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