PNG’s economic growth underpinned by SME’s

For all the headlines around Papua New Guinea's transformational LNG projects and large-scale agricultural exports, the reality is small to medium-sized enterprises (SMEs) are critical to economic growth in the emerging nation.

According to Richard Maru, PNG's minister of Trade, Commerce and Industry, the SME sector employs 200,000 people in PNG and contributes to 20 per cent of PNG's GDP – figures that are likely to be considerably higher if the informal job sector is included.

" A vibrant SME sector will underpin skill development, entrepreneurial business opportunities and deepen the economic base in cities and throughout rural regions."
Peter O'Neil, PNG Prime Minister

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SMEs create jobs and opportunity, they are the engine room of economies. The PNG government would like to see the sector increase its contribution to 60 per cent of jobs and 50 per cent of GDP and has set a growth target of 450,000 SMEs in the next 15 years.

PNG has the potential to grow its resource sector export revenues extensively over the coming decades with increasing demand for agriculture exports and the emergence of LNG projects. From those major projects, a vibrant and evolving SME sector should be another dividend.

ANZ's insight report 'Bold Thinking: Imagining PNG in the Asian Century' found PNG has the opportunity to grow resource sector export revenues to four to six times current levels, or US$23 billion to US$36 billion by 2030, if it can deliver its current projects then build upon them to maintain market share.

When any country - including PNG - experiences robust economic growth, it is important the right steps are taken to ensure growth is sustainable not only for the economy but for society as a whole.

This is where the SME sector comes in.

Community investment is equally as important as economic growth and in PNG we are balancing investments by ensuring we invest in the community and the various SMEs which underpin the economy.

In line with the PNG Government's focus on improving the environment for business - particularly SMEs - ANZ has this week launched an adult financial education program specifically for staff and owners of SMEs across the country.

We know, from our own research over a decade and other literature, the benefits of enhanced financial literacy accrue not just in individuals but in business.

The PNG National Financial Inclusion and Financial Literacy Strategy has identified financial inclusion education for individuals and SME's as a “key driver of economic growth, reduced economic vulnerability for individual household, poverty alleviation, promotion of gender equity and balance, and improved quality of life for people around the country".

PNG Prime Minister Peter O'Neil has committed the government to supporting the growth of the SME sector.

He emphasised the important role this will play at the national launch of ANZ's MoneyMinded Business Basics program when he said: “Development of successful and sustainable SME's in PNG is critical to generating new employment opportunities and to spreading the economic benefits that flow from the large scale resource developments back into the wider community.

“A vibrant SME sector will underpin skill development, entrepreneurial business opportunities and deepen the economic base in cities and throughout rural regions."

Investing in programs to support small businesses and the community more broadly is not just implicit in our social license to operate as a bank but good business.

Results from the 2013 Fiji MoneyMinded Impact Assessment Report show 81 per cent of participants now have money to cover sudden loss of income compared with only 21 per cent before they attended the program.

Moreover, 92 per cent of participants now pay their bills on time and all reported they have encouraged their family members to save and shared other aspects of the program with their family and friends.

We consistently see the benefits of financial literacy education extend from individual participants to their family, colleagues and friends, giving more people a better understanding of basic financial services and practices.

* Our business aims to continue delivering the MoneyMinded Business Basics program to SME customers, promoting healthier communities and supporting the overall economic development of PNG.

Mark Baker is CEO of ANZ Papua New Guinea.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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