2019 was meant to mark the end of the PNG government’s 20-year Tariff Reduction Program (TRP), introduced in 1999 and designed to reduce tariffs gradually to a uniform 10% across the different tariff categories. In fact, 2019 was the second year the government deviated from the TRP, with more tariff rate increases introduced in addition to those of 2018. In total, the PNG government has instituted 323 tariff line increases in the past two years. Tariffs are taxes that increase prices consumers and producers pay for imported goods and inputs. The reason for the tariffs, according to the Customs Tariff Amendment (2019) Act, is to “provide relief to local pioneer industry and existing local manufacturers from cheap imports”. In my recent discussion paper, “Predicting the Impact of PNG’s 2018 and 2019 Tariff Increases: A Review of PNG’s Trade Policy History”, I undertook an analysis of the likely impact of these tariff increases by reviewing PNG’s trade protection history.
A quick glance at products enjoying recent tariff rate increases gives some idea of the products and industries PNG intends to promote. These include frozen meat, packaged fruit and vegetables, sugar and confectionary, flour, cereals, women’s handbags, various wooden products, garments and fabric, beverages, smoked fish, soap and plywood furniture. The average (unweighted) tariff rate increase in 2018 was 7%, and this doubled to 14% in 2019. But there were some substantial increases. In particular, a 25% tariff introduced on various milk products – previously tariff free – clearly intended to benefit PNG’s first joint venture dairy enterprise, Ilimo Dairy Farm. While there were no further tariff increases in the 2020 budget, there were no tariff reductions either.
Have protections for the manufacturing sector in PNG historically encouraged the economy to grow? A Tariff Review Taskforce established in 2003 to evaluate the effects of reduced tariff rates on PNG’s different sectors found that for the manufacturing sector, the industries that expanded the slowest were those subjected to some of the highest tariff rates, such as tuna and mackerel canneries. High tariffs also had a negative effect on export industries, the taskforce argued, by causing the price of imported inputs to increase. Furthermore, large capital-intensive producers were more adversely affected due to higher input costs, compared to smaller, labour-intensive producers.
The argument in favour of tariffs imposed temporarily to allow a certain industry to become competitive is known as the infant industry argument. The goal of infant industry protection is to ensure that industrial capability is developed in its initial stages of operations. Once these industries can compete against rival companies, the tariffs are lifted.
In East Asia successful economies like Korea and Japan historically used trade protections, while in Latin America many poorly performing economies also used trade protections. The degree to which protections helped or harmed growth in both instances is contested. PNG, however, historically has a poor record in selecting ‘winning industries’, with the cement and sugar industries prominent examples of industries that failed to become competitive under high tariffs. A key test to tell whether the infant industry argument holds is to ask whether the industry is competitive after tariffs have been gradually reduced. The TRP was in many ways a test to see which industries were ‘winners’ and which were not.
For example, Ramu Agri-Industries (RAI) lodged a complaint in 2013 when tariff rates were reduced to 40%, arguing that its products were no longer competitive. This complaint came after RAI (formerly Ramu Sugar Limited) had been producing sugar for 31 years, having enjoyed import bans, tariffs as high as 85%, and pioneer industry status. The reasons why the sugar industry did not become competitive were inadequate climate conditions, sugar disease, and low world sugar prices. RAI has since reduced sugar production by converting 2,500 hectares of sugar cane into oil palm, which has been doing well in PNG. Perhaps without protection RAI would have converted more land to oil palm earlier.
Another example is PNG Halla Cement, a joint venture between a South Korean company and the PNG government. PNG Halla enjoyed an import ban and then high tariffs on cement imports in the 1980s. Lack of competitiveness caused the government to divest its stake in the company in 2000.
The intention of the 2018 and 2019 tariff increases to grow the manufacturing sector is good, and as a revenue source for a government that has run budget deficits for the past seven years, tariffs do appear attractive. However, as PNG trade history indicates, several industries singled out for high levels of trade protections in the past have failed to thrive.
Maholopa Laveil is a Lecturer in economics at the School of Business and Public Policy at the University of PNG.
This article appeared first on Devpolicy Blog, devpolicy.org, from the Development Policy Centre at The Australian National University
An outbreak of a new coronavirus has killed at least 106 people in China, and has spread to some of the Pacific’s close neighbours, including Australia (with five cases) and Malaysia (with four).
The United States, Macau, Taiwan, Japan, South Korea, Singapore, France, Vietnam, Canada, Cambodia, Nepal and Germany have also reported cases, but no coronavirus deaths.
Pacific Island nations, several of whom are still reeling from the impact of the recent measles epidemic, have taken action. Here is a regional wrap up:
Wallis and Futuna
WHO situation report
It’s not caused by eating bat soup
A video showing online travel host, Wang Mengyun, eating bat soup in Palau has gone viral, prompting racist attacks on the host, Asian communities and widely spread misinformation about how coronavirus spreads.
Symptoms of the virus include:
As we enter not only a new year but a new decade, there is much to anticipate in the Pacific islands region.
Elections and domestic politics
A number of countries in the region will have elections during 2020: Kiribati, Niue, Palau and Vanuatu. The lingering discontent in Kiribati surrounding last year's switch in diplomatic relations from Taiwan to China may have an adverse impact on the incumbent government. In Vanuatu, Prime Minister Charlot Salwai Tabismasmas can point to having served a full parliamentary term as Prime Minister as a reason why he should remain in the top job but that may not be enough. The current premier of Niue, Sir Toke Talagi, has been suffering from ill health recently casting doubt on whether he will contest this year. Meanwhile, there have been calls for more young people to stand for parliament in that country.
Elsewhere in the region, some of what happened on the political scene in 2019 will continue to play out. In Marshall Islands, the Niitjela (Parliament) met last week and elected David Kabua as the new President further to last year's elections. In the immediate aftermath of Solomon Islands' switch from Taiwan to China last year there were indications that Prime Minister Sogavare might face a motion of no confidence. Whilst that did not eventuate in 2019, it remains on the cards for this year. In Papua New Guinea, this year will be crunch time for the Marape/Stephens government. The grace period that protects them from a challenge by way of a motion of no confidence comes to an end in late 2020 and there are already whispers of this paving a comeback for Peter O'Neill who was ousted from the PM's seat in the middle of last year.
There will also be elections in New Zealand, which will be closely watched given that country's closeness to the Pacific islands region, and the centrality of the Pacific Reset to the Ardern/Peters government's policy platform. The incumbent, Jacinda Ardern, was named Islands Business' 'Pacific Person of the Year' for 2019.
There are also significant elections taking place at sub-national level. In Vanuatu, the SANMA provincial elections taking place this month will be closely watched to see if they cast any light on what we can expect in the general elections in March. In Bougainville, there will be elections for President and government of the autonomous region. These elections will be heavily influenced by the results of last year's referendum on independence. However, there is currently some debate as to whether constitutional arrangements should be modified to allow the current President, John Momis, to run for another term. If this is what is to happen, the elections may need to be delayed.
The last couple of years has seen a proliferation of policies, programs and photo opportunities as established and emerging Pacific partners seek to (re)establish their influence in the region. This is expected to continue through 2020, including by way of high- level visits to the region. For example, President Emmanuel Macron will visit French Polynesia in April. This is significant given France's displeasure at the territory having been reinscribed onto the UN's Decolonisation List.
The impacts of Solomon Islands and Kiribati switching their diplomatic allegiance from Taiwan to the People's Republic of China will continue to be felt during 2020. We have already seen some developments with the visit of President Maamau of Kiribati to Beijing where he met with President Xi Jinping and signed up to the Belt and Road Initiative. Whilst the Taiwanese government has expressed confidence of the continuing relationship with Marshall Islands, Taipei will be watching President Kabua's early movements closely and has already announced a high-level visit to Majuro to help keep this relationship on track. Taiwan now has four allies in the region (Marshall Islands, Nauru, Palau and Tuvalu) and will continue to expend diplomatic and political capital to avoid losing any of them during 2020.
Independence and self-determination
Work will begin on the negotiations between the Bougainville and Papua New Guinea governments further to the result of last year's referendum which saw 97.7% of those who voted opt for independence. This will have to be ratified by the Parliament of PNG, under the terms of the Bougainville Peace Agreement. Positions on the future of Bougainville vary among PNG parliamentarians, including PM Marape's suggestion of 'economic independence'. Moreover, that agreement does not provide a timeline for how long this process should take. There will need to be a lot of work done around managing community expectations and keeping the flow of information moving in order to avoid frustration.
In New Caledonia, the second of a possible three referendums on independence from France will be held on 6 September. In 2018, the result was much closer than many had predicted with 43.6% voting in favour of independence, exceeding the 30% that some had been predicting.
After some considerable delay, the people of Chuuk in the Federated States of Micronesia will hold an independence referendum in March.
The question of self-determination for West Papua and addressing issues of alleged human rights abuses by the Indonesian state will loom large during 2020, particularly during the meeting of the Pacific Islands Forum leaders in Vanuatu. At last year's meeting of Pacific Islands Forum leaders Vanuatu lobbied successfully for the issue of West Papua to be given more prominence in the final communiqué than had been the case in the preceding couple of years. This includes a strong signal from leaders that they expect the government of Indonesia to facilitate a visit to the region by Michelle Bachelet, the UN High Commissioner
for Human Rights, in order for her office to report to leaders when they meet this year in Port Vila.
Meanwhile, in a region dominated by relatively young countries, Fiji will mark its 50th anniversary of becoming independent this year and Vanuatu its 40th.
We have already seen a change of leadership at the oldest of the region's peak bodies, the Pacific Community (SPC). Dr Colin Tukuitonga was replaced as Director-General by Dr Stuart Minchin late last year. The meeting of the Pacific Islands Forum leaders to be held in Vanuatu in August will be Dame Meg Taylor's last as Secretary-General. By convention, it is Micronesia's turn to nominate the person to take on this position. The front runner is Gerald Zackios, the current ambassador of Marshall Islands to the United States.
There will be ongoing work to further develop and embed the 'Blue Pacific' as a unifying narrative that speaks to the needs and aspirations of all members. However, this will take place in a context where there are multiple pressures on national governments, in domestic as well as foreign policy spheres. Divergences of approach when it comes to climate policy will continue to be a significant fault line at the meeting of PIF leaders. Vanuatu, the 2020 host, has already made it clear that the primary focus for that meeting will be climate change.
This item was first published on the DevPolicy blog of the Development Policy Centre, Australian National University
By Netani Rika
THERE was always only going to be one outcome when the people of Bougainville were given their inalienable right to choose the political future of the island chain.
With an overwhelming 97.7 per cent of islanders voting for independence and a mere 2.3% choosing greater autonomy under Papua New Guinea, the result speaks to a people who yearn for freedom.
In 1988 the island descended into anarchy after Bougainville Copper Limited – operators of the multi-billion dollar Panguna Mine – failed to heed the concerns of the people.
Poor working conditions, uneven distribution of profits, heavy handed tactics by the PNG Defence Force provided multiple catalysts for a 10-year civil war which cost as many as 15,000 lives.
Panguna – valued today at USD85billion – was Australia’s piggy bank with which it kept PNG afloat. And PNG, in desperate need for money for politicians’ slush funds for constituency development ran rough-shod over the locals.
And that was the fatal mistake that brought PNG to its knees and forced Australia to remove its military advisers, helicopter gunships and weapons from what threatened to become its Vietnam.
For the people of Bougainville, Panguna was not a funding facility for the central government in Port Moresby or Canberra.
Panguna has always been a legacy, held in trust by the women of the island for the people of today and the generations who will follow.
It is the women of the individual landowning units around the mine who will decide on how to proceed with the mine.
Asian businesses have started to line up and offer infrastructure projects, tourism investment and straight cash incentives to secure a slice of the mine when it reopens.
Local politician, Fidelis Semoso, is wary of the moves being made by unscrupulous investors.
“We have a perfect opportunity here to create a development model that reflects our values as a people,’’ Semoso said.
“Our people have spoken at the referendum, now we must design our future, not dictated to by foreign models which look only to exploit the natural resources.
“We must take only what is needed. We must develop roads and schools within reason and at every stage we must care for and protect the environment.’’
John Momis, President of the Autonomous Bougainville Government, is also wary of foreign businesses.
“Yes, they have been making offers and we must be very, very, careful,’’ Momis said.
“Our people have been through so much. We need wise leaders who will keep Bougainville and its future close to their hearts.’’
For now, discussions around Bougainville’s future will hinge on discussions between the government in Buka and Prime Minister James Marape in Port Moresby.
For the people of Bougainville that means talks on when PNG will hand over sovereignty, what reparation will be made for the 15,000 deaths in the civil war, a planned phasing out of non-Bougainville administrators on the island.
Once a deal has been negotiated, it will be placed before the PNG parliament.
Momis has been clear on his view that PNG must rubber stamp the desires of the referendum.
“Only a mad parliament would fail to ratify the desires of the people when it is so clear,’’ Momis said.
Unfortunately, signals out of PNG are that there may be some objection in Parliament to a new sovereign nation.
Deputy Speaker of the Bougainville Parliament, Francesca Semoso, had this advice based on the 30-year conflict: “We are a peaceful, loving people. We care for all people but you must never disrespect us. That would be a grave mistake.’’
By NETANI RIKA in Port Moresby
AS Pacific fishing nations end their first week of discussions on tuna, the question of Target Reference Points loom large on the agenda.
What indicators establish the target fishery state that should be achieved and maintained on average?
It’s a point over which there have been hours of debate, argument and conflict at the Western and Central Pacific Fisheries Commission for years – often without an amicable solution.
There a four species of tuna in the Western and Central Pacific – Skipjack, Yellowfin, Bigeye and Albacore.
For each species there are Target Reference Points which are part of a larger Harvest Strategy – the actual management of tuna stocks, fishing methods, conservation measures, scientific research.
But it’s the Target Reference Points where members of the Western and Central Pacific Fisheries Commission which is currently in its 16th Regular Session are often trapped.
The larger fishing nations – China, Japan, Korea, Indonesia and the United States – attempt to wriggle free of scientific analysis indicating that stocks must be maintained at no less than 26 per cent of critical biomass.
Every year they challenge the science, push the boundaries and try to bully their way to a larger share of the Pacific tuna catch.
And every year the Pacific nations, guardians of 50 per cent of the world’s tuna stock must struggle to control the fishery, maintain a sustainable stock and make a little money.
If the 16th WCPFC Regular Session in Port Moresby can agree to Target Reference Points, it will then face the challenge of coming to an agreement on harvest strategies.
John Maifiti of the Pacific Island Tuna Industry Association is under no illusions about the enormity of the task at hand.
“We acknowledge the progress that has been made so far with the Target Reference Points for skipjack,” Maifiti said.
“Currently they don’t have any interim TRP for albacore and bigeye and this is what we want the commission to come up with and put it in place.’’
Fiji is one of the countries affected heavily by tuna migration and its Fisheries Minister, Commander Semi Koroilavesau, has spent the last three years pushing for specific reference points for albacore.
As chair of the WCPFC’s Albacore Roadmap Working Group, Koroilavesau indicated today that a TRP outcome would be his prime agenda in the next 12 months.
American Samoa, New Caledonia, New Zealand, Samoa and French Polynesia have indicated their support for Fiji’s approach to secure a Target Reference Point on albacore as soon as economically possible.
Maifiti said one of the issues of contention when attempting to agree on Target Reference Points was the difference between scientific advice and actual results shown by fishing fleets.
“At times the science says one thing, but the catch says something else – it doesn’t match up and that is one of our concerns as well,” Maifiti said.
“Even though all the science says that biologically the tuna species are in a healthy state, the next question to ask is, is there enough fish for the fishing vessels to catch and make enough money. I think that’s the issue we have currently.
“It’s very important that we push for this harvest strategy to manage the fisheries.’’
Maifiti has set those harvest strategies as the industry’s immediate priority.
But he warned that the WCPFC had worked very slowly in this area since an initial work plan was agreed in 2014.
“When they reviewed it in 2017, the progress was very low and they shifted it for another four years and there’s a high chance they won’t agree on compliance when the current measures end in two years,” Maifiti said.
“The important thing for the industry is to put in place the management measure for the four key resources – skipjack, bigeye, yellowfin and albacore.’’
Maifiti said the issue of harvest strategy was important for the sustainability and viability of the fisheries.
“It’s important for the fisheries for the commission to come up with a harvest strategy. They are the ones mandated to manage fisheries,” he said.
“Inside the Exclusive Economic Zones and at the national level the Pacific countries already have some strong management measures in place – control harvest measures.
“But on the high seas where the commission is responsible, that’s where we don’t have any management system. There’re no harvest strategies to have harvest control in place to measure fisheries.’’
Maifiti said the Forum Fisheries Agency had pushed for some time for concrete measures but Distant Water Fishing Nations – keep pushing back.
At the moment the industry doesn’t feel the impact of the current stock status because they are highly subsidised from the countries. Like now the cost for them is less than for Pacific fleets.
Early indications are that the European Union will be one of the WCPFC parties which will push back on the albacore measures and reference points.