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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

Reduced Import Tariffs May Cost Local PNG Sugar Jobs
Only PNG sugar producer faces decreasing revenues

By Oseah Philemon

PORT MORESBY, Papua New Guinea (The National, Nov. 26, 2012) – Ramu Sugar, Papua New Guinea’s only sugar producer - has lost 31.5 percent sales since the government slashed tariff on imported sugar. And general manager Jamie Graham said at the weekend job losses are likely to occur.

"There will, I am afraid, inevitably be job losses," Mr. Graham said.

Ramu Agri-Industries Limited (RAIL), Ramu Sugar’s parent company, employs over 4,000 people at its sugar plantations and processing factory at Gusap in the Ramu Valley.

Mr. Graham did not say how jobs will be lost as a result of the loss in sales of local sugar.

"I have a warehouse packed and full of sugar. I have no evidence of any increase in the import tariff for sugar despite the many promises made by various ministers. It would appear that the government is simply not interested in maintaining a domestic sugar supply," said Mr. Graham in response to questions from the Post - Courier.

Mr. Graham said last week at the beginning of 2011, sugar prices were at 33 cents a pound on the world market. Today the price is 19 cents a pound.

"The growing strength of the Kina against the American dollar during the same period by over 30% has effectively increased the buying power of importers. During the same period the tariff on imported sugar has been slashed in half. This has made it much more attractive to import sugar than in the past and many importers are taking advantage of this situation. This effectively means lost sales and revenues for RAIL," Mr. Graham said.

He added: "The cost of production for the agricultural sector which is heavily reliant on labor is increasing with the strength of the Kina. In order to combat this, the agriculture sector, RAIL, included, is forced to cut costs and job losses are inevitable. The domestic production of sugar and along with it food security is potentially at risk unless the government puts in some serious support. It is RAIL’s belief that a tariff set at 50% over the next 5 years will provide protection to maintain a viable sugar industry in Papua New Guinea," Mr. Graham said.

Soft drink manufacturer Coca Cola Amatil (CCA) revealed last week it is losing sales as a result of the import of soft drinks from Asia that retail for much cheaper prices.

The company has not ruled out job cuts if it decided to import coke from its plants in Indonesia or Fiji. CCA employs around 900 workers throughout PNG.

Sometime ago CCA announced a K300 million [US$144.2 million] plan to improve its manufacturing facilities in PNG over the next three years.

Its general manager Peter Carey told the Post-Courier the company remains committed to the plan but will continue to assess the current developments in the PNG soft drink market.

The poultry industry which directly employs around 4,000 people is also feeling the effects of the continuous import of Australian poultry products which are being retailed at much cheaper prices than the local product.

Even more significant than the commercial sector is the vast number of small holder farmers reliant on the industry.

Conservative estimates put between 40,000 and 60,000 small holder farmers reliant on the poultry industry.

PNG governments since 1995 have liberalized import tariffs allowing imports into the country and being retailed at much cheaper rates than the local industry which employs thousands of Papua new Guineans.

Whilst allowing imports to flood into the local market PNG governments have made no improvements to helping the established local industry.

This failure to help reduce the cost of doing business in PNG is already taking its toll on some leading PNG companies.

Stanley Leahy who is president of the Poltry Industry Association said the effect of dumped poultry products on PNG’s commercial poultry producers has been harsh.

He said all major producers are operating well below capacity.

The consequence has been job losses and the shelving of major investment projects, most notably Tablebirds recently laid off 200 out-growers and shelved an K80 million [US$38.5 million] investment project in Port Moresby.

Industry sources said the continued reduction in tariff for imported goods and the high cost of doing business in PNG as a result of the inadequate, failing and costly access to supporting infrastructure has created an imbalance in competitiveness placing the local industry at a serious disadvantage over foreign industry.

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