Minister for International Trade and Investment Richard Maru says the proposed acquisition of State equity in Ramu Agri Industries (RAI) will be the most significant agriculture deal in Papua New Guinea’s 51-year history.
“This is transformational — this investment will go beyond this generation,” Maru said.
The minister made the remarks during a dinner meeting on 28 January with the board and management of New Britain Palm Oil Ltd. and the group managing director of its parent company, SD Guthrie, in Port Moresby. The meeting followed discussions held during Maru’s recent visit to Kuala Lumpur, Malaysia, where key aspects of the proposed partnership were discussed.
Maru said the Marape-Rosso government is serious about its proposed partnership with SD Guthrie to drive agricultural development in PNG.
“The State’s interest to buy into RAI is for us to use the company as a vehicle to expand to other parts of the country,” he said. “We (the Government) admit that we are not good at running businesses. We have learnt from the past.”
Maru cited the example of PNG Banking Corporation, saying, “The PNGBC was a loss-making bank corporation when the Government ran it. When the bank was partially privatized (with the Government still remaining a shareholder), the services improved, it is recording profits in millions and getting dividends we never saw before, and it is now the leading bank in the entire South Pacific.”
“With this experience, we want to let the private sector, in this case SD Guthrie, to run the business,” he said. “The Government is only looking at a small stake in RAI to show our commitment so we can help the company mitigate the risks and expand the business.”
Maru said the government wants the business to grow beyond RAI and New Britain Palm Oil and expand into the Sepik Plains, Central Province and the Western Highlands, where there is significant undeveloped land.
The minister confirmed the State will use Kumul Agriculture Ltd., a wholly owned subsidiary of Kumul Consolidated Holdings Ltd., as its investment vehicle and is prepared to commit K100 million as equity in the proposed joint venture.
He said it was agreed that a non-disclosure agreement would be signed next month to allow for independent valuations, ahead of reaching a project development agreement by the end of April for the purchase of shares in RAI by the State and other PNG shareholders.
“In the Agreement, the Government will commit to providing essential enabling infrastructure and an environment that is conducive for business — this includes services like power, sealed roads and bridges, strong police and security provision, and providing State land and mobilising customary land for large scale agriculture development,” Maru said.
He said the agreement would also capture that all expansion projects under the partnership would operate as separate business entities so they could be developed in special economic zones, benefiting from incentives including tax holidays and duty-free treatment for construction materials and equipment.
SD Guthrie Group Managing Director Mohd Haris Mohd Arshad said the company was keen to partner with the State through Kumul Consolidated Holdings Ltd., Kumul Agriculture Ltd. and the Livestock Development Corporation to develop the 20,000-hectare Urimo cattle project.
“PNG should be growing and exporting cattle. K240 million annual beef imports (mainly from Australia) is crazy,” Arshad said. “The quality of beef produced in PNG is amazing.”
He said SD Guthrie could work with the government to develop the cattle industry, drawing on its experience operating Numundo Beef in West New Britain and Ramu Beef in Madang.
“SD Guthrie has been in business for over 200 years and what we need now is growth,” Arshad said. “We don’t see growth in Malaysia and there is no potential growth for us in Indonesia. We see a pathway to grow in PNG in partnership with the Government, starting with the State’s acquisition of shares in RAI and we can build from there.”
Arshad said that if the government was serious about partnering with RAI to develop the Sepik Plains, it should immediately construct an international wharf in Wewak and upgrade and seal the roads from Kusaun to Urimo to enable work to begin on the cattle project.
Also present at the meeting were the secretary for the Department of International Trade and Investment, the managing director of Kumul Consolidated Holdings Ltd., the chairman and acting CEO of the Special Economic Zone Authority, the managing director of the Livestock Development Corporation, and the acting CEO of the Securities Commission of Papua New Guinea. They pledged their support for the proposed development as part of the Marape-Rosso government’s reset agenda.
