But it will be a while before big benefits begin to flow both ways
By Dev Nadkarni
Australia and New Zealand’s relationships with Pacific Island nations historically seem to have been divvied along the two main sub regions of Melanesia and Polynesia. The possible exception is Fiji, where both the Anzac nations have had more or less the same level of involvement. Perhaps it has to do with Fiji’s acknowledged status as the gateway to the region – the doorway to both Melanesia and Polynesia.
Geographically, too, Australia is closer to the Melanesian nations of Papua New Guinea, the Solomon Islands and Vanuatu while New Zealand’s proximity is to such Polynesian countries as Tonga, Samoa, Niue, Tuvalu and the Cook Islands besides others. These old historical and geographical relationships along sub regional lines have carried on into the modern era with political, business and people to people relationships having developed along these very lines.
Small wonder, then, that Auckland is known as the world’s largest Polynesian city, which also hosts the world’s largest Polynesian festival every year in February. Australia, though, does not have as representative a population of Melanesian people as Auckland does Polynesians but Australian engagement in business and investment terms in Melanesia greatly outstrips similar engagement of New Zealand in Polynesia.
But the sheer force and pace of development in some Melanesian nations is beginning to change that. The entire region appears to have realised that you ignore the rapid developments happening in countries like Papua New Guinea at your own risk. Australia has long jumped on the bandwagon and over the past two years New Zealand has taken tentative steps with at least half a dozen trade mission to the region’s fastest growing economy.
This desire to get a piece of the action in PNG is not restricted to just Australia and New Zealand in the region. The Melanesian Spearhead Group (MSG) member nations have organised themselves to strengthen trade and investment ties and are meeting frequently with a view to grow into a common market in the not too distant future. (And it doesn’t end there: reports are doing the rounds that Polynesian countries like Samoa and Tonga have expressed desire to be a part of the newly conceived trade bloc in a suitable shape and form.)
Last month New Zealand businesses launched a substantial trade mission, reportedly the fifth in two years, to PNG. A team comprising some 30 delegates under the aegis of the New Zealand Papua New Guinea Business Council, New Zealand Trade and Enterprise and the New Zealand Government’s Ministry of Foreign Affairs and Trade toured the MSG flag bearer for a week.
New Zealand is rightly eyeing the big opportunities in the infrastructure sector that are becoming available around increased inward investment in core sector projects such as petrochemical and mineral prospecting. While Australia has concentrated within the core sector proper given its background and vast experience at home, New Zealand seems to be looking at infrastructural ancillaries – something which it has made a success of around the Pacific building ports, wharves, marinas, roads, bridges and other infrastructure.
Michael Greenslade, Pacific Trade Commissioner for NZTE, who also did a stint a few years ago in Fiji said, “The challenge that PNG has is that its infrastructure is poor. The opportunity for New Zealand companies is to not only assist in the exploitation of natural resources, but also to build the infrastructure that is necessary for that exploitation.”
Identifying opportunities for Kiwi infrastructure and retail companies, Mr Greenslade added, “The professional classes are growing in Port Moresby, as is the for housing; the need for first-class hotels is growing, as is the need for better and more up-to-date supermarkets. You’ve got the opportunities around supply of water, the processing of waste water, and you’ve also got opportunities around the development of an energy grid.”
PNG has become a magnet for regional and international events. In 2015 it will host both the Pacific Games and the APEC (Asia Pacific Economic Cooperation) Summit, bringing a host of opportunities for New Zealand companies to help with building infrastructure in what is widely acknowledged as being their forte.
The trade delegation engaged with several industries and businesses across the board to further opportunities for New Zealand businesses in the fast growing PNG economy.
But it will be while before there is any appreciable boost in exports from New Zealand into PNG. Though it is the Pacific island region’s biggest market both in terms of GDP and population, New Zealand does far more trade with Fiji than with PNG. As well as having been out of sight, out of mind for all these decades, political and business engagement between the two countries has not been anywhere at the level at which PNG’s relationship with Australia is. New Zealand’s annual assistance to PNG is NZ$35 million, relatively small beef in the bigger scheme of things that PNG is eyeing.
For instance, Australia already has a double tax avoidance treaty in place, which isn’t yet the case with New Zealand. Though such a treaty has been signed, it is yet to be implemented by Port Moresby at the PNG end of the deal. Diplomatic efforts are afoot to get on with matter as early as possible. The slow pace of implementation at the PNG end is perhaps symptomatic of the relatively low importance that PNG accords to New Zealand while being wooed relentlessly by global mining giants and its far closer and much bigger Asian neighbours. In the meantime, New Zealand companies find themselves at a disadvantage competing with Australian companies because of the double taxation.
Besides, New Zealand companies have a long way to go before getting acclimatised to PNG’s rather challenging realities such as seemingly ever widening wealth disparities, widespread bureaucratic graft, not to speak of the widely perceived issues of law and order that are ready grist for the mill in New Zealand’s domestic media.
But it is better late than never. Aligning itself more closely to countries of the emerging MSG trade bloc makes eminent sense for New Zealand in shoring up its diminishing footprint in the Pacific Islands region in recent years.