BUSA JEREMIAH WENOGO
IMPORT substitution in its simplest formulation entails replacing imports with local substitutes. In PNG at the moment there is not much of this taking place.
PNG’s manufacturing sector is not advanced and does not have the technology to produce these imports domestically.
What is more baffling is the lack of attention given to agriculture by the government although it is clearly PNG’s biggest sector.
Over the years the government has established commodity boards yet it still gives scarce attention to agriculture.
While it tries to deal with issues relating to yield and quality management by exploring innovative agricultural techniques, it overlooks the importance of basic agriculture extension training which is just as important for farmers to improve their productivity.
One result of this is that Papua New Guinean entrepreneurs are relying more heavily on imports to satisfy a consumption pattern largely composed of imported food and other products.
At present the PNG market is flooded with cheap imports mainly from China that do not last long and pose risks to consumer welfare.
In addition, domestic products in which we have a comparative advantage such as artefacts and bilums from local craftsmen and weavers are already under threat from foreign competition
What is more frightening is that most of these small activities supports the needs of the majority of our population.
If foreign competition establishes its roots in the informal economy, import substitution will never get to see the light of day.
This is the reason why the informal economy needs to be protected.
The government should introduce licenses for foreigners who are exporting or marketing these products locally. It should also set-up a clearing house to facilitate the sale of these products to international markets at competitive prices.
Lack of government intervention has led to calls for the informal economy to focus more on value adding activities such as agriculture and horticulture.
It is a shallow argument that urban informal economy participants are lazy when their activities revolve around selling cheap imported products like batteries, clothes and other household items.
If the government is serious about converting the informal economy into a super mall that generates local value added products, it should address cheap imported goods.
The informal economy provides the training environment where budding entrepreneurs can trial ideas and products. Through this process they are able to fine tune products and skills and graduate into the SME sector.
The other aspect of import substitution should focus on foreign direct investment where the government encourages localisation of the economy with limited foreign direct investment.
Foreign investment is good but it should focus on areas that require large capital investment.
At the moment it seems clear that the extractive industry is appropriately dominated by foreign investment.
However, the government should ensure that, when it comes to negotiating the terms of large projects, it understands the supply of resources like gas is finite.
The government should be prepared to encourage downstream domestic processing with a focus on increasing the content of local suppliers.
At the informal economy level, the government should be focusing on protecting and nurturing the skills of the local micro-entrepreneurs while, at the SME level, it should equip nationally owned businesses with the tools required to compete in a competitive and open environment.
In essence, import substitution should not only focus on strengthening the SME sector but also protect and grow the informal economy.
IMPORT substitution in its simplest formulation entails replacing imports with local substitutes. In PNG at the moment there is not much of this taking place.
What is more baffling is the lack of attention given to agriculture by the government although it is clearly PNG’s biggest sector.
Over the years the government has established commodity boards yet it still gives scarce attention to agriculture.
While it tries to deal with issues relating to yield and quality management by exploring innovative agricultural techniques, it overlooks the importance of basic agriculture extension training which is just as important for farmers to improve their productivity.
One result of this is that Papua New Guinean entrepreneurs are relying more heavily on imports to satisfy a consumption pattern largely composed of imported food and other products.
At present the PNG market is flooded with cheap imports mainly from China that do not last long and pose risks to consumer welfare.
In addition, domestic products in which we have a comparative advantage such as artefacts and bilums from local craftsmen and weavers are already under threat from foreign competition
What is more frightening is that most of these small activities supports the needs of the majority of our population.
If foreign competition establishes its roots in the informal economy, import substitution will never get to see the light of day.
This is the reason why the informal economy needs to be protected.
The government should introduce licenses for foreigners who are exporting or marketing these products locally. It should also set-up a clearing house to facilitate the sale of these products to international markets at competitive prices.
Lack of government intervention has led to calls for the informal economy to focus more on value adding activities such as agriculture and horticulture.
It is a shallow argument that urban informal economy participants are lazy when their activities revolve around selling cheap imported products like batteries, clothes and other household items.
If the government is serious about converting the informal economy into a super mall that generates local value added products, it should address cheap imported goods.
The informal economy provides the training environment where budding entrepreneurs can trial ideas and products. Through this process they are able to fine tune products and skills and graduate into the SME sector.
The other aspect of import substitution should focus on foreign direct investment where the government encourages localisation of the economy with limited foreign direct investment.
Foreign investment is good but it should focus on areas that require large capital investment.
At the moment it seems clear that the extractive industry is appropriately dominated by foreign investment.
However, the government should ensure that, when it comes to negotiating the terms of large projects, it understands the supply of resources like gas is finite.
The government should be prepared to encourage downstream domestic processing with a focus on increasing the content of local suppliers.
At the informal economy level, the government should be focusing on protecting and nurturing the skills of the local micro-entrepreneurs while, at the SME level, it should equip nationally owned businesses with the tools required to compete in a competitive and open environment.
In essence, import substitution should not only focus on strengthening the SME sector but also protect and grow the informal economy.
One result of this is that Papua New Guinean entrepreneurs are relying more heavily on imports to satisfy a consumption pattern largely composed of imported food and other products.
At present the PNG market is flooded with cheap imports mainly from China that do not last long and pose risks to consumer welfare.
In addition, domestic products in which we have a comparative advantage such as artefacts and bilums from local craftsmen and weavers are already under threat from foreign competition
What is more frightening is that most of these small activities supports the needs of the majority of our population.
If foreign competition establishes its roots in the informal economy, import substitution will never get to see the light of day.
This is the reason why the informal economy needs to be protected.
The government should introduce licenses for foreigners who are exporting or marketing these products locally. It should also set-up a clearing house to facilitate the sale of these products to international markets at competitive prices.
Lack of government intervention has led to calls for the informal economy to focus more on value adding activities such as agriculture and horticulture.
It is a shallow argument that urban informal economy participants are lazy when their activities revolve around selling cheap imported products like batteries, clothes and other household items.
If the government is serious about converting the informal economy into a super mall that generates local value added products, it should address cheap imported goods.
The informal economy provides the training environment where budding entrepreneurs can trial ideas and products. Through this process they are able to fine tune products and skills and graduate into the SME sector.
The other aspect of import substitution should focus on foreign direct investment where the government encourages localisation of the economy with limited foreign direct investment.
Foreign investment is good but it should focus on areas that require large capital investment.
At the moment it seems clear that the extractive industry is appropriately dominated by foreign investment.
However, the government should ensure that, when it comes to negotiating the terms of large projects, it understands the supply of resources like gas is finite.
The government should be prepared to encourage downstream domestic processing with a focus on increasing the content of local suppliers.
At the informal economy level, the government should be focusing on protecting and nurturing the skills of the local micro-entrepreneurs while, at the SME level, it should equip nationally owned businesses with the tools required to compete in a competitive and open environment.
In essence, import substitution should not only focus on strengthening the SME sector but also protect and grow the informal economy.
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