World Report

Production of many of PNG’s major agricultural export commodities such as oil palm, cocoa and copra increased last year

GRICULTURE remains the mainstay of Papua New Guinea’s economy, but its potential is far from being fully exploited. The sector currently accounts for 14 percent of the country’s foreign exchange earnings and 25 percent of gross domestic product, but with major investment could further improve the sector.

The government believes that agriculture could become the cornerstone of the country’s export drive, and has called for a “green revolution”. The aim is to encourage greater private sector participation and expand commercial and small-holder production. In the longer term, PNG needs to develop its agricultural resources to prepare for the time when it can no longer depend on its mineral resources as a major source of earnings.

On the Prime Minister’s initiative, a package of tax breaks has been introduced to attract investment into the sector. These include a 150 percent deduction for suppliers of primary production extension services, a 150 percent tax deduction for research and development expenses, and a special tax rate of 20 percent for primary agriculture projects started within the next three years.

The government has also ordered the agricultural commodity boards to spend less time and money on regulation and red tape, and more on promoting production and exports and encouraging private sector investment.
Last year, the agriculture sector saw increased production of all major export commodities, including oil palm, coffee, cocoa, copra and coconut oil. PNG also produces tea, rubber, vanilla, sweet potatoes, fruit, vegetables and livestock.

Coffee has long been regarded as PNG’s “green gold” and, until recently, was the most important cash crop in terms of foreign exchange. Ideal climatic conditions enable PNG to produce both Arabica and Robusta beans, and the naturally-grown, naturally-processed beans produced in PNG’s thousands of small village-based coffee gardens are tailor-made for the increasing market for an organically-grown product.

In recent years, levels of coffee production have declined, however, and in 2001, oil palm exports overtook coffee exports for the first time.

Oil palm is one of the country’s fastest-growing agricultural exports, currently accounting for around a third of the total value of the sector’s foreign sales and around 5 percent of all exports. The total value of oil palm exports has more than doubled to over K302 million (£50 million) since 1995, with the volume of oil palm exports up by almost 80 percent. The EU is PNG’s sole export market for oil palm, with the UK as the largest importer.

Some 100,000 hectares are cultivated for oil palm, almost half of which are managed by smallholders, with the rest being estate plantations. The government wants to extend the area under cultivation and increase production.
There are four major oil palm projects in PNG, situated in the provinces of West New Britain: Oro, Milne Bay and New Ireland respectively. The leading palm oil producer in PNG and the largest private sector employer is New Britain Palm Oil, which produces approximately 200,000 tonnes of crude palm oil per annum.

In 2002, the company built a refinery, designed to take around half of its annual capacity to produce a wide range of value added oil palm products, both for export and the domestic market.

The cane estate and sugar milling operation Ramu Sugar is also moving into oil palm production as part of its diversification strategy. The company, which supplies PNG’s domestic market and exports to the United States and Pacific islands, is planning for oil palm to eventually account for more than 50 percent of its revenues by 2007.

Ramu Sugar is also the largest single cattle operation in the country, owning 25 percent of the national herd. PNG’s beef cattle industry, which is based on large-scale ranching and more than 1,000 smallholder cattle farms, has been in existence for more than 40 years, and demand for exports of live cattle from the country is increasing.

The livestock sub-sector accounts for around 13 percent of the total agricultural production.

Vanilla, which has been grown in PNG for a number of years, is also experiencing a boom, stimulated by increasing demand from North America for the unique qualities of the PNG product. The spice industry reported a record K35 million (£6 million) in revenue earnings from vanilla exports for the first six months of last year, an increase of 54 percent on the year before.