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Concerns growing over the future of Papua New Guinea’s sugar industry

21 January 2013

According to press reports, the only sugar producer in Papua New Guinea (PNG), Ramu Sugar, ‘has lost 31.5 percent sales since the government slashed [tariffs] on imported sugar’. The consequence of the reduction in import tariffs has been compounded by the combined effects of the declines in world sugar market prices (from 33 US cents/lb at the beginning of 2011 to 19c/lb in November 2012), the 30% appreciation of the PNG kina against the US dollar, and rising production costs (particularly labour costs). According to the General Manager of Ramu Sugar, Jamie Graham, ‘this has made it much more attractive to import sugar than in the past and many importers are taking advantage of this situation.’

According to Mr Graham, the decline in sales will inevitably lead to job losses. He states that the company believes that an import ‘tariff set at 50% over the next 5 years will provide protection to maintain a viable sugar industry in PNG’. 

Editorial comment

The government of PNG’s slashing of tariffs on imported sugar and reluctance to reimpose higher protective tariffs that would support the local sugar industry need to be seen in the context of the wider policy of trade opening pursued by the government of PNG.

The WTO’s trade policy review of PNG in 2010 highlighted the more open trade policies that the government had been pursuing since 2000. PNG’s market access offer under the interim EPA agreements signed with the EU has more than satisfied the EU’s interpretation of ‘substantially all trade’. This involved liberalising everything that was to be liberalised on Day 1 of entry into force of the interim EPA (see Agritrade Executive Brief Update, ‘ EPA negotiation issues between Pacific and the EU’, 31 March 2010).

More recently this policy of greater trade openness has been demonstrated under the Melanesian Spearhead Group Trade Agreement (MSGTA), whereby the country has removed more than 400 items from its ‘negative’ list, with the exception of three items (mackerel, salt and sugar). However, even for sugar (imported from Fiji), it can be envisaged that the current restriction will be relaxed in due course, in line with PNG’s general market opening policies.

This will then move away from the current sugar monopoly supply situation. This longer-term reality has implicitly been recognised by Ramu Sugar, which is undertaking a process of diversification out of sugar and into other agriculture-related activities. Indeed, Ramu Sugar Ltd has been renamed Ramu Agri-Industries Ltd (RAIL) to reflect its diversification into beef production, ethanol fuel and oil palm. The success being achieved by RAIL has been implicitly recognised by the competition that now exists between two major locally incorporated companies, New Britain Palm Oil Ltd and W.R. Carpenter to take over RAIL, which is currently 25% owned by the government of PNG.

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