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By Frank Senge Kolma

PORT MORESBY, Papua New Guinea (September 2, 2002 – The National)---The country's coffee industry is in a state of crisis, the Coffee Industry Corporation said Friday.

Chief Executive Officer Ricky Mitio pointed out that a number of factors had compounded to lay waste to one of the country's largest revenue earner from the agricultural sector.

The crisis has been brought about by:

§ Historically low international prices for the crop;

§ Declining or stagnant production;

§ Serious break down in infrastructure as well as law and order;

§ A managed sector which is overburdened by debt; and

§ A re-alignment and restructuring of world demand as a result of technological advances.

Adding to the industry's woes is the non-payment by the government of K 15 million (US$ 3,822,000) which was approved under the 2002 budget for price support to coffee.

The CIC has undertaken to bear the price support burden until the government comes up with its promised relief.

Mr. Mitio briefed new Agriculture and Livestock Minister Moses Maladina soon after his appointment to explain the industry's state of affairs as well as a reminder about the government's commitment.

Further, the June elections severely affected harvesting in most coffee producing regions.

In an effort to revive the stagnant industry, the CIC is being drastically overhauled and its operations and structure reviewed and restructured with a view to shrinking its size and making it more efficient.

Mr. Mitio said the CIC, in its current format, is becoming increasingly ineffective.

High cost structures make coffee production now an unprofitable enterprise, with prices well below the cost of production.

It cost an average K 3 (US$ 0.77) to produce a kilogram of coffee but coffee prices are now just below K 3 at about K 2.90.

A European Union sponsored workshop in Goroka in April identified a number of problems, chief among them being the lack of an overall coherent industry strategy.

Mr. Mitio said: "The major threat facing the CIC operations is from within. This impedes effective delivery of services to stakeholders, incurs high overheads, duplicates functions and is a waste of resources."

Mr. Mitio has already tendered for a professional management consultant to conduct an audit of CIC management system and procedures.

He aims to complete the retrenchment, restructuring and the downsizing of the organization; institute prudent financial management practices, and merge certain functions of CIC divisions of extension services with the Coffee Research Institute and downsize the corporate services division.

All of this is intended to prepare the regulatory body to lead the industry in responding to global market trends, which make it highly competitive for the PNG coffee.

As a price taker nation, PNG possess no clout at the global stakes.

"The best option for PNG is to cultivate a 'niche market' using its high quality naturally grown characteristics into the specialty markets of Europe and the USA," Mr. Mitio said.

"I have therefore set coffee quality improvement program as the 'namba wan' priority of the industry.

"We will get all sectors -- the producers, buyers and processors and the exporting sector -- to focus on quality improvement. Standards for green bean exports are in place, supported by the European Union liquoring facilities at Lae," Mr. Mitio said.

For additional reports from The National, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The National (Papua New Guinea).

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