"The achievement of the SDGs is strongly linked to MSMEs": Resident Coordinator’s Statement at SME Breakfast 2020

Hon Prime Minister James Marape, distinguished guests, representatives of the SMEs sector, ladies and Gentlemen,

It is a honour to be part of this important event. Thank you for inviting the UN.

I take this opportunity to congratulate Micro, Small and Medium Entrepreneurs in Papua New Guinea for showing resilience and strength in the face of the global crisis caused by COVID-19.  

I would also like to commend the Government for the measures taken to prevent and contain the spread of COVID-19 and to address the socioeconomic impact of this dreaded pandemic.

While these restrictions are necessary to limit the spread of the disease, they have, unavoidably and as in most countries around the world, affected production and sales revenue, and led to disruption of supply chains and trade of agricultural products, with impacts on the segments of population that depend on them for their livelihoods and their food security.

It is, without a doubt, a very trying time as businesses struggle with the socioeconomic impact of COVID-19, in PNG and all over the world.  During May 2020, the UN surveyed 3000 SMEs across all 89 districts of PNG’s 22 provinces.  The analysis of the survey results shows that 75% of SMEs were adversely affected by COVID-19. More than 82% of firms that sourced their production materials locally experienced a halt in production.  

The full UN socioeconomic impact assessment of COVID-19, including survey results from 6000 households, and recommendations for Government, development partners, and businesses, will be made available in July.

What COVID-19 has also shown, globally, is that the hallmark of a vibrant and healthy economy should be one that can sustain and take care of the wellbeing of its citizens during times of an emergency. It has become clear that families, communities, and relationships matter, they actually matter a lot! We are all in this together, and, we will come out of this together and stronger. The solidarity that Papua New Guineas have displayed to each other is once again a beautiful story to tell the world!

In Papua New Guinea where the social structure is very much built on larger family relationships and cultural ties, the achievement of the SDGs is strongly linked to MSMEs that are responsive to the needs and demand of the people and communities.

The private sector, especially MSMEs, is the vital driver of economic development and growth in Papua New Guinea, contributing to the employment and income of thousands of persons across this beautiful country. MSMEs provide essential goods and services and contribute to the productivity and economy-wide efficiency of Papua New Guinea with their innovations, ideas, and skills. 

A diversified economic base has a significant impact on economic output, productivity, and growth. Several countries have had a sustained transition in their economies due to their Government’s focus and support to the MSME sector. As a result, millions have been lifted out of poverty as economies have grown.   

I would like to acknowledge the Government’s vision on economic diversification in PNG and efforts to promote an enabling environment for MSMEs and a growth that is more inclusive and equitable.  In this regard, the UN supports the strategic direction taken by the Government through the 2016-2030 SME Policy and the SME Master Plan. I also trust the legislation being discussed in Parliament, and the institutions and capacities that are being considered to fight the scourge of corruption, as the ICAC, will go a long way in creating a better business environment. 

The Climate crisis we are already feeling in PNG highlights the importance of balancing development with sustainability.

PNG’s economic base diversification, through MSME development, can embrace the green economy and have a low carbon and circular economic path that minimises the output of greenhouse gases and has higher resource efficiency through re-use, re-manufacture, and less waste.   In this regard, the UN is working with Government s to revise its Nationally Determined Contributions under the 2015 Paris Agreement.

Furthermore, investing in developing  human capital is instrumental and critical to MSMEs growth. The latest Human Development Indicators shows that access to health, education and increased income is still an impediment to the wellbeing of Papua New Guineans. Government policies that improve access to health and education for all citizens, as well as a crucial capital investment in PNG's infrastructure, will lead to improved livelihoods and wellbeing for all citizens and enable growth and profitability for MSMEs.  An increase in profitability for predominantly family and community-based businesses will lead to better access to education and health and more options for wealth generation.  Literally, triggering a Virtuous circle. 

I also believe that businesses that respect and support human rights can help strengthen the social licence to operate and enable the businesses abilities to meet evolving customer expectations. Therefore, I encourage Government and businesses to integrate into their business operations, the UN Guiding Principles on Business and Human Rights. 

The United Nations has been supporting the Government and working with development partners to ensure that marginalised people are engaged in economic activities that will drive the development agenda to achieve genuine self-reliance as a nation.

For example, the Food and Agriculture Organization of the UN (FAO), is leading the implementation of a Kina340 million EU-funded grant programme focused on increasing sustainable and inclusive economic development through agricultural value chain development.  The Support to Rural Entrepreneurship, Investment and Trade programme – also known as STREIT - is a unique five-year programme targeted at increasing the level of participation and involvement of the informal sector in the formal sector and market.

Last month I visited cocoa and vanilla farmers and fishers in East and West Sepik Provinces who will directly benefit from this program. I saw the opportunity that STREIT will create for agri-prenuers, micro-to-small-to-medium-enterprises (MSMEs) and SMEs to be future drivers of economic growth. Beneficiaries will have the advantage of reduced transaction cost, improved access to finance, increased availability and use of digital tools and services, and access to improved road infrastructure and renewable energy.

The implementation of STREIT has already been disrupted by the impact of the COVID-19 global pandemic.  Cocoa exporters ceased the collection and purchase of Cocoa in the Greater Sepik since mid-March 2020. This action has had a significant adverse effect on the cocoa farm families, fermentaries owners and operators, traders and agri-preneurs depending on this income for their basic needs. Major vanilla producers live along the Sepik river and have not been able to travel to sell their vanilla beans, forcing them to store at home with poor storage conditions.

The COVID-19 movement restrictions have resulted in illegal movement of farmers across the borders of Sandaun and Western provinces looking for avenues to trade. Under STREIT, there is an opportunity for the UN and the Government of Papua New Guinea to work together with the Government of Indonesia to set-up a ‘market facility’ to be compliant with the COVID 19 control and mitigation measures.

Setting up a market facility at the border between PNG and Indonesia is a long-term intervention that is now an immediate need, based on the high demand for this market facility by cocoa and vanilla farmers especially in East and West Sepik. This intervention takes into consideration one of the policy measures of the Government to “Mainstream the various relevant provisions of the SME Policy and Master Plan into trade policy”, thereby, creating the enabling environment conducive for growth and development of the SMEs, especially during these challenging times of COVID 19.

Women and girls are too often left out of mainstream approaches to economic development, despite evidence about their significant contributions to national productivity. Apart from the contribution’s women make to the formal economy, a UN Women study found that the informal economy, where many women work, is equivalent to 20 per cent of PNGs macroeconomy. Women are also more likely to spend their income on social development for their families, thereby contributing to longer-term development outcomes.  

Since so many women in PNG work in the unprotected, informal economy, the UN has focused on improving their livelihoods and increasing their involvement in the making of decisions that affect them, along with the protections they have available to them. This improvement in livelihoods and protections enables women to respond to economic and health shocks.

The UN Women study of the informal economy also found that there is a myriad of discriminatory regulations against women entrepreneurs compounded with the societal barriers for women to do business. The UN is committed to promoting women entrepreneurs who are either working in markets or running small businesses. We are working through district markets to educate them on ways of doing business, how to improve their savings and help them connect to appropriate financial services to grow their businesses.

Having access to income through SMEs and markets gives women the voice and confidence to make their own decisions and to access the opportunities available to them. Women’s success as entrepreneurs will bring benefits to themselves, their families, and overall PNG social fabric and economy.

We recognise that access to financial services, linking and accessing markets, and sustainable management of natural resources is vital for active development of MSMEs.

The United Nations Capital Development Fund (UNCDF) and UNDP are assisting building the capacities of SMEs to help them scale up by creating opportunities through forward and backward linkages.

The UN has worked with partners to strengthen systems in the financial sector. On access to finance, there are pipeline plans to complement other development partners support through loans and guarantees in the range of US$ 100,000 to US$ 1 million as well as promote the use of blended finance. 

Recognising that technology plays a critical role in SMEs, the UN has in the pipeline, plans to work with SMEs to enable their effective and efficient use of technology. The UN will work closely with the Government in creating opportunities for the digital transformation of services and creating an environment conducive for the digital economy that will ensure digital inclusion.

Let me conclude by saying that the UN system  is fully committed to supporting PNG in building a viable and sustainable MSME sector, boosting economic growth and development that leaves no one behind, that is respectful of the environment and that ultimately contributes to the achievement of the SDGs.

Gianluca Rampolla

UN Resident Coordinator