The Proposal

Introduction 

Papua New Guinea (PNG) is endowed with natural resources, such as forestry, fisheries, oil, gas, mining, and energy. The focus of the current Government of PNG is to monetize these resources sustainably, so that it contributes to the country’s development aspirations. Agriculture is the mainstay of PNG’s economy, sustaining the livelihoods of more than eighty percent of the population in subsistence farming. The agriculture sector in PNG provides revenue, employment, Food and Social Security, raw primary products for downstream and upstream industries and most of all livelihoods of our people.  

Agriculture contributes about 26% to the country’s GDP which is valued at an estimated PGK18.4 billion (USD5-6 billion). The Agriculture Sector generates PGK2.4 billion (USD0.8 billion) revenue annually. It is estimated that smallholder farmers generate more than K440 million (USD147 million) annually mainly from the sale of primary produce, mainly in the informal sector. The Agriculture Sector is the single biggest employer of the people of PNG both in the formal and informal sectors. It employs 6 – 7 million of the population in rural PNG. The majority of these people are involved in semi-subsistence agricultural activities. These farmers also produce the 80-90 percent (%) of our export crop commodities apart from oil palm.  

Despite recent economic growth, approximately 40 percent of the population in Papua New Guinea lives below the national poverty line, predominantly in rural areas. Agriculture remains one of the priority sectors for the Government of Papua New Guinea under the Medium Term Development Plan IV 2022-2027 and the National Agriculture Sector Plan 2024-2033. The Government in further attracting investment opportunities identified 12 Special Economic Zones (SEZ) ideal for investments under the Special Economic Zone Authority Act 2019. The SEZ policy offers tenants a 5-20-year corporate income tax holiday depending on the size of the investment and exemptions from other levies including customs duties and withholding taxes. 

According to the World Bank PNG’s the country’s growth trajectory and abundant resource potential provide a strong platform for greater economic engagement with Asia and beyond. This year through the hand in hand Initiative Papua New Guinea is  present its agrifood investment  cases for the three prioritized commodities:   cocoa, vanilla, and coconut. 

Under the HIH initiative, the Government of Papua New Guinea along with FAO intends to enhance the competitiveness of priorities for investment in these commodities. The main objective of this initiative is to identify and propose interventions within selected investment areas to reduce poverty, improve food security, and enhance resilience to climate change. A summary of the three cases of investment plans is described below. 

Papua New Guinea Typologies

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Government of Papua New Guinea: investment cases in Papua New Guinea

Investment Cases and Interventions

Cocoa

Cocoa is one of the top agricultural crops with a production volume of 43,000 tons of dry beans valued at USD 84 million annually. The crop is cultivated in a total planting area of 150,000-200,000 ha with the potential of increasing the total production through specific investment inputs. Almost all cocoa produced in PNG is exported in the form of dry beans. There is none to very little downstream processing into subsequent secondary and tertiary products in the country, thus resulting in considerable export earning loss due to the absence of an upgraded value chain for the industry. There is a lack of modern processing facilities and challenges in meeting international quality and safety standards are the bottlenecks to achieving high-value-added cocoa products.

In recognition of the challenges and the economic and livelihood benefits that derive from cocoa production, this investment plan aims to enhance and increase the value of cocoa through targeted territorial based investments to create value addition for dry cocoa beans into cocoa powder and cocoa liquor in the country. This investment intervention will require a total value of USD 42.2 million which would result a Net Present Value (NPV) of 535.1 million and an internal rate of return of 32 percent translating into a potentially high return on investments. The total direct beneficiaries are 47,857 people and 191,430 indirect beneficiaries. The average expected income increase through these investments would be approximately USD 2,236 for each beneficiary which is significant to reduce poverty and improve food security and nutrition.

Vanilla

Vanilla is a high-value crop that sustains the livelihoods of tens of thousands of smallholder farmers and contributes to export earnings to the economy. Papua New Guinea produces 300 tons of vanilla annually from 1,918 ha growing area that are mostly semi-processed at household levels and sold to be exported as dried cured beans into Asia and other international markets. Vanilla as a high-value spice is in high demand for its aromatic properties in the food, beverage and cosmetic industries. PNG is rank the 3rd global producer of natural vanilla.

Currently, vanilla is produced and semi-processed at farmer's household level into cured beans. There is an absence of in-country processing facilities that can support farmers to improve quality and safety, promote the processing of the dried and cured vanilla to value added products that could shorten the supply chain create to established markets and generate higher return for the farmers, processors, traders and result in increased export earnings.

There is limited access to credit and financing for farmers and processors, post-harvest losses, a lack of modern processing/value addition facilities, and difficulties in meeting international quality and safety standards are major challenges that impede the development and expansion of the vanilla value chain in PNG. Using a territorial approach, the key investment opportunities are identified along the value chain from production to processing are create value addition for high grade cured vanilla bean as gourmet vanilla and vanillin extract; to invest in solar powered vanilla drying equipment for the 130,012 farming households to improve and achieve high quality cured beans and to setup one medium scale vanilla processing facility.

The total investment required is USD 24.3 million that would yield a NPV of USD 282.4 million and IRR of 33.7 percent. At the household level, the investment would have a direct and indirect benefit for 130,012 and 520,047 people respectively. The investment would further increase per capita income by USD 434.42.

Coconut 61.4 Million USD 254,364 Beneficiaries

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