DEVELOPMENT PRIORITIES FOR 2017-2022 Year 1 Report Card September 2018

Broadening the Industry Base

Productivity & Employment

Provision of Infrastructure & Basic Services

Government & Regulation

Improve dialogue between Business and Government to address business priorities for

future growth and development

Background

Four priority areas identified

Release of ‘Development Priorities for 2017-2022’

Our Working Groups

PNG Business Coalition4SDGs

Broadening the Industry Base -

Agriculture

Broadening the Industry Base -

Innovation

Provision of Infrastructure & Basic Services -

Energy

Productivity & Employment

Government & Regulation

Provision of Infrastructure & Basic Services -

Broadband

PNG BusinessCoalition4SDGs Year 1 Report Card

PNG BusinessCoalition4SDGs

Year 1 Report Card

TO ENCOURAGE BUSINESSES TO SUPPORT ACHIEVEMENT OF SDGS

•  Dashboard redesign to be more user-friendly

•  A total of 50 businesses to be signed up during 2019

•  BCPNG working with GoPNG to link the PNG SDG platform to MTDP3

Year 2 Plans

•  Business Council partnered with UNDP to create a live SDG Dashboard to monitor business impacts on the SDGs in PNG

•  PNG BusinessCoalition4SDGs established

•  10 businesses participated in the pilot

Year 1 Progress

154/188 PNG ranking in Global

Human Development Index

37% Illiteracy rate

83% Without power supply

via electricity grid

60% Without access to clean

water and sanitation

36% Below the national

poverty line

Spotlight on… Digicel bringing solar energy to regional PNG, generating socio-economic benefits for households and small businesses

Digicel, in partnership with DFAT (Australia), provides access to affordable and reliable solar energy solutions to off-grid households and small businesses in PNG.

This partnership creates shared value as Digicel establishes its solar products market by leveraging its extensive logistics networks, distribution systems and organisational capabilities across PNG. This results in communities having more access to electricity and the ability to charge their mobile phones and have access to information and digital services via smart phone or computers.

The challenge: To encourage businesses in PNG to support achievement of SDGs • Many businesses in PNG already implement a range of

community projects through their corporate social responsibility activities, helping address diverse social-economic challenges in their areas of operation.

• Outcomes include improved health care, better access to training and education, tackling gender based violence, supporting environmental protection, constructing infrastructure, and responding to humanitarian disasters.

• BCPNG has partnered with UNDP to form a Business Coalition, to increase private sector support for SDGs.

• A live dashboard has been developed which maps business contribution to the SDGs, with information on numbers of people reached and support provided.

• Ten businesses have participated in the pilot, with a further 50 businesses targeted to join during 2019.

“The Sustainable Development Goals are the fundamental cornerstone to secure future economic and business

growth…It is not possible to have a strong, functioning business in a world of increasing inequality, poverty and

climate change.”

Benefits include a substantial decrease in recurring energy expenditure; increased productivity and household financial savings by having an energy source on the premises; health and safety benefits associated with the solar energy solution; reducing indoor air pollution and the risk of fires from candles and oil lamps; better access to, and connection with, the digital economy (mobile, smartphones, laptops, etc); and creation of new jobs in sales, marketing and after-sales service.

PNG BusinessCoalition4SDGs

BROADENING THE INDUSTRY BASE - AGRICULTURE Year 1 Report Card

Broadening the Industry Base - Agriculture

Year 1 Report Card

•  Suitable framework to be developed in consultation with industry and government stakeholders

Year 2 Plans

•  Consultations with members, framing the need for stable and predictable framework to encourage agricultural investments and protect growers

•  Utlising robust engagement models in the market to navigate complex land tenure and security issues

Year 1 Progress

TO DEVELOP AN AGRICULTURAL INVESTMENT FRAMEWORK

16% Agriculture exports

in PNG Economy

80% Agriculture - main

economic activity for rural population

1.6% Expansion to non-resource economy

(2012-2016)

20% Primary production

(agriculture, forestry, fisheries)

Growth in informal non-resource sector to boost shared prosperity and reduce poverty

Ilimo Dairy Farm selling milk products at half the price of Australian imports, enhancing dairy consumption for local communities

Until recently the Papua New Guinea dairy industry has been entirely dependent on imports which limits the local community’s access to basic dairy products. An increase in milk import tariffs and the US$50million investment in the establishment of Ilimo Dairy Farm now enables provision of a daily glass of milk to thousands of school children, which will have an immediate positive impact on their nutrition and healthy development.

One of the central embedded in projects of this nature is creating a sustainable support challenges system, starting from its preliminary stages of establishment, while simultaneously ensuring its long-term functionality. Extensive research was undertaken to determine the local needs and preferences, local climate, markets, possible health solutions and more, in order to warrant a sustainable, thriving enterprise for the local region. The farm is self sustaining, producing 80% of its own feed on a 260 hectare plot, using bore water and solar power for back-up.

The challenge: To develop an Agriculture Investment Framework for Papua New Guinea • A heavy reliance on the resource sector, a

recent decline in commodity prices and the resultant impact on Papua New Guinea’s economy has highlighted the need to broaden the country’s industry base.

• Given the rich natural assets PNG has to support agriculture investment, this sector has been selected as a priority focus area.

• Land tenure, land security and a lack of legislative and regulatory support have been recognised as barriers to investment and growth in the sector, hence the need to develop an Agriculture Investment Framework for Papua New Guinea.

Ilimo is establishing a community of local professionals and experts, who will continue to implement the acquired knowledge, assisting in job creation and building a unique and modern training system that will enable PNG to continue its ongoing path to food security and self-sufficiency.

Spotlight on… Broadening the Industry Base - Agriculture

Year 1 Report Card

BROADENING THE INDUSTRY BASE - INNOVATION

Broadening the Industry Base - Innovation

Year 1 Report Card

•  Suitable framework to be developed in consultation with industry and government stakeholders

Year 2 Plans

•  Consultations have taken place with members, framing the need for a stable and predictable framework so as to encourage innovation investments and protect start-ups

Year 1 Progress

TO DEVELOP AN INNOVATION INVESTMENT FRAMEWORK

80% Estimated increase in

revenue through digital technologies

8% Internet usage

between 2010-2016

2 million New jobs in the formal

economy by 2025 (GoPNG target)

High cost of internet and low levels of IT literacy obstacles to

innovation

Embedding digital skills a challenge with

only 5-6,000 jobs available annually

Spotlight on… SkyFi opening up rural internet accessibility, cashless trade and improved financial inclusion within Papua New Guinea

The challenge: To develop an Innovation Investment Framework for Papua New Guinea •  Innovators and local start-ups are challenged by a lack

of leadership and policy support, which is hampering effective growth in the information technology space.

• A variety of coaching and mentoring initiatives are emerging, such as the Kumul Game Changers Initiative, however the broader ecosystem for entrepreneurs and innovators is not conducive for start-up businesses. Common issues such as the high cost of internet, access to effective power, and other factors are required to succeed.

• An effective Innovation Investment Framework is required to create a conducive and sustainable environment for start-ups. This would include consideration of initiatives such as tax concessions and incentives which can open up entry into the sector and create an environment which allows time and funding for innovation, as well as business incubators to facilitate pitching opportunities to domestic and global investors.

• Digital technology innovation is a core focus of APEC 2018. The challenge for Papua New Guinea will be to ensure that the focus in this area does not diminish once APEC activities have concluded.

Broadening the Industry Base - Innovation

A new app called SkyFi is being launched in September this year designed to facilitate trade and internet connectivity in rural Papua New Guinea. The app allows users to trade SkyFi tokens instead of cash in rural areas, or in instances where it is risky to handle cash.

Tokens can be bought from a SkyFi agency or traded for produce such as fish or garden food, and allow the user to access internet or continue trading for produce with other SkyFi users. SkyFi can also be used offline, outside network coverage zones, with online accounts being updated when the user returns to a network connected area.

According to Chief Executive Officer, William Amai, SkyFi is being piloted in Esa’ala district in Milne Bay, prior to a formal launch in September. Basic connectivity is currently being achieved using satellite, however plans are in place to use custom designed drones for enhanced accessibility.

Collaboration is also being undertaken with the Bank of Papua New Guinea to connect bank accounts to SkyFi, for funds transfer to the secure electronic wallet within the app. The funds within the electronic wallet can then be made for trade and purchases, resulting in improved financial inclusion and the security benefits of cashless transactions.

Year 1 Report Card

PROVISION OF INFRASTRUCTURE & BASIC SERVICES - BROADBAND

Provision of Infrastructure & Basic Services - Broadband

Year 1 Report Card

•  Consultation with telecommunications companies and ISPs to develop strategy for government

•  Consultation with government on internet pricing to ensure affordability for businesses and the rest of the country

Year 2 Plans

•  Ministerial commitment to develop new policies in relation to Sim Portability and Tower Sharing

•  Construction of new optic fibre from Australia to PNG as per agreement by both governments

Year 1 Progress

TO DEVELOP STRATEGIES TO IMPROVE AND EXPAND TELECOMMUNICATIONS SYSTEMS AND SERVICES IN PNG

10% Internet use in PNG; in contrast with Hong

Kong (87%) and Singapore (81%)

450 (Gbps) estimated

bandwidth by 2040

5 billion (USD) estimated additional GDP by 2040 for improved

internet access and connectivity

163/169 PNG ranking in the 2013

International Telecommunication Union for internet affordability

0.15% Population

penetration for fixed broadband

Spotlight on… New high speed telecommunications cable from Australia to Papua New Guinea to provide ‘faster and more reliable internet connection’.

Work is in progress to build the undersea internet cable that is expected to provide significant improvements to internet accessibility and quality in PNG. The Coral Sea Cable System, worth up to A$137million and primarily funded by the Australian government, will connect Honiara (the capital of the Solomon Islands) with Port Moresby and Sydney via a 4000-plus kilometre fiber optic cable.

The challenge: To develop strategies for both government collaboration and business’ participation that will improve and expand the telecommunications systems and services in Papua New Guinea •  Presently, only 10 percent of the population in

PNG have access to internet. •  According to a World Bank Study, a 10 percent

increase in fixed broadband penetration would increase GDP growth by 1.21% in developed economies and 1.38% in developing ones

•  Low bandwidth and limited satellite/terrestrial fibre capacity in the nation’s capital, Port Moresby, must be addressed to accommodate expected growth from 1Gbps to 10Gbps over the next 15 years

•  An upgrade of the Madang-Port Moresby microwave connection to manage regular and lasting outages is vital to improve reliability and capacity for future bandwidth needs that are expected to approach 100Gbps in the next 15 years

•  PNG’s geographical situation of dispersed communities poses challenges to the accessibility of telecommunications services by large portions of the population, especially in rural communities

The cable will offer an ultimate capacity of at least 20 terabits/second for each of Papua New Guinea and the Solomon Islands to connect to Australia. Scheduled for completion in late 2019, the system will provide access to fast, reliable and affordable connectivity, relieving the countries’ dependence on either ageing cable connections or satellite technology.

Provision of Infrastructure & Basic Services - Broadband

Year 1 Report Card

PROVISION OF INFRASTRUCTURE & BASIC SERVICES - ENERGY

Provision of Infrastructure & Basic Services - Energy

Year 1 Report Card

•  Prioritise grids for large user reliability and consider affordability

•  Consultation to continue with IPPs, renewable energy groups and ICCC in proposing provisions in new Regulatory Contract

Year 2 Plans

•  Reliability and outage warnings - major concerns for large energy users

•  Cumbersome regulatory arrangements and operating restrictions impacting IPP and renewable energy investments and ventures

•  PPL to examine business model to deliver new 2019 Regulatory Contract targets

•  Pilot solar roof top underway

Year 1 Progress

TO DEVELOP STRATEGIES TO IMPROVE AND EXPAND ACCESS TO ENERGY IN PNG

83% Without access to

stable power supply via electricity grid

70% Electrification by

2030 (GoPNG target)

7.2% Estimated target supply increase per annum to

meet PNG’s development goals

100% Renewable energy by

2050 (GoPNG target)

13% PNG electrified

PNG Biomass’ renewable energy project is in the Markham Valley in Morobe. It will use wood chips from trees sustainably grown in its plantations to fuel a biomass power plant to provide 30 Megawatt (MW) into the Ramu grid.

Identified as a priority in the O’Neill Government’s 100-day plan, the PNG Biomass Project will create over 500 full-time local jobs on a permanent basis and will be able to power about 200,000 households, or about a million people.

The project is supported by a 25-year Power Purchasing Agreement (PPA) that was signed with PNG Power Ltd (PPL) in December 2015. This means PNG Biomass will be supplying power to PPL and then PPL retails it to users on the Ramu grid.

The challenge: PNG's development ambitions cannot be achieved without energy supply improvements in the following areas of the Energy Sector: • Pursuing rural electrification through renewable

sources. Renewable technologies will be critical in providing PNG's rural population with affordable, sustainable, safe, robust, and reliable electricity.

• Seeking PPP opportunities in generation and distribution. PPP opportunities are considered more likely in the generation and distribution/wholesale sub-sectors than in the supply/retail sub-sector.

•  Improving land management to realise small-scale opportunities. PNG's significant hydro resources would favour small-scale generation projects. However, land management will be a critical issue in ensuring their success, and where they are not stand-alone projects, negotiation of feed-in tariffs to PPL systems will also be important.

• Pursuing a regulatory approach to encourage more investment in distribution. Private sector participation in distribution and supply is currently minimal. Attracting private investment will require an enforceable regulatory regime that balances the consumer interest in reasonable tariffs with the need to ensure a sufficient and predictable commercial return to attract private.

Over the course of more than six years, from late 2011 to mid-2018, a process of ongoing close engagement from the project’s lands team created a space for landowners to gradually decide whether they would want to lease land to the project and come to an agreement.

Provision of Infrastructure & Basic Services - Energy

Spotlight on…

With land being the most crucial resource in PNG, PNG Biomass is proud to have taken as much time as required to ensure that landowners are comfortable with the project, understand its impacts, and have achieved agreement within their families and clans on the terms to lease their land to PNG Biomass to grow trees and generate renewable biomass energy.

Today, over 22,000 hectares have been committed in preliminary agreements to the project, pending final negotiations over the lease terms.

Year 1 Report Card

PRODUCTIVITY & EMPLOYMENT

Productivity & Employment

Year 1 Report Card

•  Consultations with NDOE, DHERST & DLIR to explore pre-employment skills priorities

•  Consultations with DLIR to explore workplace priorities

•  Draft information paper on post-employment priorities for DLIR to consider

•  Enhanced focus on productivity

Year 2 Plans

•  Pre-employment priorities – inadequate education standards for employing blue and white collar workers

•  Workplace priorities – identified barriers for productive employment

•  Post-employment priorities – lack of policy for outplacement programs causes challenges in adjustment for exiting staff

Year 1 Progress

TO IDENTIFY AND IMPLEMENT THE ENABLERS FOR A SKILLED AND PRODUCTIVE WORKFORCE IN PNG

Education sector not underfunded by

regional standards but need for targeted expenditure and

utilisation

67 Average life

expectancy age in PNG (2015)

16% Unemployment

rate in urban areas

40% population

under age 15 and 60%

under age of 25

Poor workforce quality and increased

business training costs as a result of

deterioration in education and facilities

The Business Coalition for Women (BCFW) is supported under the Pacific Partnership, through which Australia, New Zealand and the International Finance Corporation, are working together to stimulate private sector investment, promote sustainable economic growth and reduce poverty in the Pacific.

The challenge: To identify and implement the enablers required to ensure a skilled and productive workforce which can effectively transition into the community upon conclusion of a career • With more than 40% of the population under age 15

and 60% under 25, PNG is challenged by a growing youth bulge which is outstripping very limited formal sector employment opportunities.

• Employers are finding that graduates from secondary and higher education are not suitably equipped or prepared with the right skills and knowledge to allow them to actively commence their career.

• The health status of many employees and potential for burn-out is limiting the length of productive careers, requiring investment and resulting in limited return for employers.

• Cultural obligations and financial challenges require innovative and alternative salary packaging options to ensure employment and career progression remains an attractive option.

• Retirement, cyclic employment and transition from shift work presents mental and physical challenges for employees, leading to mental health deterioration and increased mortality. Support is required to ease and assist in this transition.

BCFW members are able to provide a structured and informed response to staff who experience gender based violence (GBV) by supporting survivors so they can keep their jobs and be safe, establishing practical steps for dealing with perpetrators, and creating a work culture in which violence is not tolerated.

The results included:

•  Reduced GBV: Focus groups with male staff reported that they were less likely to abuse their partners because they could lose their jobs, indicating a reduction in overall GBV.

The Business Coalition for Women is the first organisation of it’s kind, a registered membership organisation made up of companies who are committed to tackling inequality, stopping gender based violence and enabling companies to derive maximum value from their female workforce.

•  Reduced costs: Improved support structures for survivors, and reduced absenteeism, turnover, and time spent dealing with incidents of GBV—all reduced costs to BCFW members.

•  Improved reputation: Members who promoted the BCFW received a reputational premium. Anitua Group, for instance, received positive media coverage4 for its stance against GBV and successfully positioned itself as an employer of choice for women.

Productivity & Employment

Spotlight on…

Year 1 Report Card

GOVERNMENT & REGULATION

Government & Regulation

Year 1 Report Card

•  CACC and NEC briefings on consultation outcomes of Working Groups

•  Deeper engagement with Parliamentary Committees to focus on legislative considerations re: barriers identified

Year 2 Plans

•  Dialogue undertaken between business, SOEs and Regulators to identify and remove barriers to service

•  Consultation with Chief Secretary to Government re: barriers identified

Year 1 Progress

TO ENSURE THE LEGISLATIVE & REGULATORY ENVIRONMENT IS CONDUCIVE TO INVESTMENT AND GROWTH

Streamlining business registration reduced

time required to start a business at IPA

109/190 PNG ranking in 2017 Ease of

Doing Business Report (previously ranked 119 in 2016)

More jobs created in economies with better business regulation

2016 SME Policy to encourage growth

and diversity

135/180 PNG ranking on the

Corruption Perception Index

The potential for unintended consequences

There is an old saying in government circles: policy on the run is policy under-done. Policies which are ‘rushed’ through Parliament, or which lack meaningful and full bodied consultation, risk creating adverse consequences which run contrary to the original aim of the policy.

The challenge: To ensure legislative frameworks are reviewed and implemented to allow ongoing investment that will enable industry growth in Papua New Guinea

• SMEs play a significant role in the development of many economies. However, SME growth in PNG is hindered by policy and institutional issues as well as environmental and structural impediments that create an unfriendly investment environment

• Based on a 2012 INA survey of 130 firms, of which half were SMEs, identified that major obstacles confronting business in PNG were law and order, corruption, poor transport infrastructure, deficiencies in utilities infrastructure and skill shortages

• According to reliable business sources, it is possible for businesses to operate in PNG without succumbing to corrupt practices. Reputable businesses that refuse to pay bribes may lose some work, but sufficient opportunities remain for legitimate activity

• Underfunding and political pressure are contributing factors that restrict existing anti-corruption bodies such as the Ombudsman Commission and the Anti-Corruption Directorate (commonly referred to as the Fraud Squad) to fight corruption in the country

Government & Regulation

Spotlight on…

It is recognised that business and Government will not always be in complete agreement on all issues. One thing we can all agree on, however, is a commitment to our country’s future prosperity. The Business Council and its members look forward to working constructively with the Government to harness these opportunities.

In recent years Papua New Guinea has seen a number of these policies. Proposed amendments to the legislative frameworks surrounding SMEs, land usage and mining, for example, which aim to create a welcoming and enabling environment for small businesses throughout PNG, have the potential to undermine the original good intentions. In these instances, constructive and open consultation with industry during the policy development stage could have made things considerably easier going forward. Through the creation of working groups and open and constructive consultation between business and Government, legislative and regulatory reform can positively impact the future growth and development for Papua New Guinea, and realise the considerable opportunities this country has to offer.