PNG May Limit Small/Medium Enterprises To Indigenous Businesspeople

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Foreigners won’t be able to start business worth less than 10 million Kina

By Jemima Garrett

MELBOURNE, Australia (Radio Australia, July 7, 2014) – The Papua New Guinea government is developing an ambitious plan to help people go into business by reserving large areas of the economy exclusively for indigenous entrepreneurs.

Trade and Commerce Minister Richard Maru says any business with an initial investment of less than 10 million Kina (AUD$4.4m) [$US3,997,000] or government contracts worth under 10 million kina will be reserved for indigenous businesspeople.

Mr Maru says he's horrified that 90 per cent of businesses in PNG are owned by foreigners who send their profits abroad.

He wants the jobs and the profits to stay in the country.

Mr Maru wants to hear people's thoughts about what they think should be on the new list of reserved businesses.

While there is widespread support for measures to help local entrepreneurs, there is also concern that such as sweeping policy could be have unintended consequences.

At a recent workshop for small and medium-sized enterprises in Port Moresby, Mr Maru said the business sector, even in towns, villages and districts is being dominated by outsiders.

Thomas Abe, the new Chief Executive Officer of the PNG Chamber of Commerce and Industry says generally speaking the government's small to medium sized enterprise policy is a good one.

"Papua New Guineans cannot compete with the influx of Asians who have the funds, the network and they are very, very skilful," he said.

"So it is a generally held view among Papua New Guineans that while we are going through the resource boom more Papua New Guineans should benefit in wealth and employment creation.

"Papua New Guineans should not be spectators in their own country so from a patriotic and a political point of view, government wants to create an environment for local PNGers to be equipped to compete with foreigners in the long run."

Mr Abe says while that looks like a great idea on the surface, the 10 million kina limit may be counterproductive.

"How many small business have one million kina or five million kina in the operational account, I guess very minimal," he said.

"For instance, service industries, the legal and the accounting profession - do you limit that to indigenous firms?

"We could compromise getting independent quality service because of this policy."

The PNG Business Council agrees that decisions on what should go on the reserved list should be made sector by sector and be evidence-based.

Many industries rarely have an initial capital investment of over 10 million Kina.

In joint venture businesses, especially in rural industries such as agriculture and eco-tourism, foreigners bring capital and know-how, while the indigenous entrepreneurs bring bring land and labour.

Executive director of the Business Council of PNG, Douveri Henao, says foreign investment of below 10 million kina can have a positive impact for locals.

"The most important thing that foreign enterprises do bring it is not the money, it is not the capital, it is the intellectual skills that they bring," he said.

There is a risk that if the investment bar is set too high, businesses that could provide jobs and mentoring will be shut-out.

"We certainly don't want that to happen and our conversations with Minister Maru have also indicated he doesn't want that to happen as well," Mr Henao said.

"It comes back to the construction of that justification on why the reserve listing has to occur.

The Business Council also doesn't want there to be any ministerial discretion over which businesses are on the reserved list.

The PNG government is aiming to create half a million new, small and medium-sized enterprises by 2030.

Mr Abe says the reserved list is helpful but there may be more important questions.

"Are the basic infrastructure in place too allow these Papua New Guineans to compete - roads and electricity and water and so forth," he said.

"These are the main needs affecting all walks of life, not only foreigners but also Papua New Guineans, linking rural roads to urban areas so people can take their produce to the markets.

"No roads, no business simple as that."

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