Inqui re In form In f luence

Opportunities for Pacific Islanders in PNG’s construction industry

PAILS FORUM, PORT VILA, VANUATU

19-21 APRIL 2016

Dr Carmen Voigt-Graf, Senior Research Fellow, National Research Institute, Papua New Guinea, cvoigtgraf@nri.org.pg

Main aims of presentation

1. Providing an overview of PNG’s economy, labour market and the construction industry;

2. Providing an overview of PNG’s foreign workforce and Pacific Islanders among PNG’s foreign workforce;

3. Exploring the scope for increased intra-Pacific migration, focusing on PNG’s construction sector.

The economic context in PNG

Dual economy with a large informal and subsistence sector and a

small formal sector;

Formal economy dominated by large companies involved mainly

in the extractives industries and agri-business;

Sluggish economic growth in first 30 years since independence;

High growth rates since 2007, with peak in 2014 and slowing

down since 2015;

LNG construction phase (2007-2012) provided an enormous

stimulus to economic and employment growth.

Total GDP and non-mining GDP growth rates in PNG, 1995 to 2020

Source: Various BPNG QEB tables, various PNG National Budget Documents.

-10.0

-5.0

0.0

5.0

10.0

15.01

99

5

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

%

Total GDP rate of real growth Non-mining GDP rate of real growth

LNG construction phase

Formal private sector employment

Source: BPNG Quarterly Economic Bulletin, September 2015.

Snapshot of PNG’s labour force in 2014

Source: Based on data provided by Jones and McGavin, 2015: 115.

Number of Persons Employed by Industry, 2011

Source: Census 2011.

Industry Number employed % employed

Agriculture 1,205,628 71.1

Mining 19,842 1.2

Manufacturing 17,028 1.0

Construction 61,010 3.6

Whole sale & Retail Trade 171,167 10.1

Education 34,899 2.1

Other 185,200 10.9

Total 1,694,774 100

The formal private sector

Agriculture provides most formal employment opportunities;

Mining sector is capital intensive and employment numbers are not high;

Mining sector with huge impact on labour market due to high wages, skill drain and employment of foreign workers (e.g. LNG project).

Formal employment by occupation, 2011 Census

Occupation Total Male Female

360,732 261,682 99,050

Legislators and senior officials and managers 17,330 13,748 3,582

Professionals 76,512 45,866 30,646

Teaching and associates professionals 28,441 19,433 9,008

Office clerks 24,440 10,211 14,229

Service workers shop and market sales

workers35,942 22,574 13,368

Agricultural animal and fishery workers 14,184 9,862 4,322

Craft and building trade workers 57,937 54,333 3,604

Plant and machine operators and assemblers 29,956 28,436 1,520

Elementary occupations 72,267 54,588 17,679

Not stated 3,723 2,631 1,092

Current skill supply issues

Oversupply of unskilled workers;

Shortage of adequately skilled workers;

Low skill levels in workforce;

Skills shortages most pronounced in TVET areas;

Sufficient supply in some professional areas;

Training not aligned with labour market requirements;

Many TVET and university graduates unable to find work;

Employers turn overseas to recruit skilled workers.

The LNG project and skills demand

Huge demand for workers during construction phase (2007–2012);

Many required skills not available in PNG;

There was a long lead time which would have enabled advanced training of local workers;

Creation of labour market distortion due to high wages in LNG project;

Many companies recruited workers from Asia.

PNG’s work permit policy

Non-citizens need valid work permit to work in PNG’s private sector;

Traffic light system of occupations following three principles:

1. employers can recruit non-citizens for occupations which require a high skill level (green category);

2. semi-skilled jobs have to be advertised in PNG first (“labour market test”). If no suitable candidate can be found, the employer can recruit a non-citizen for the position (amber category);

3. unskilled and low skilled jobs are reserved for Papua New Guineans (red category);

There are also language and training requirements;

While policy seems balanced on paper, it is seen to disadvantage local workers and has been criticised for lack of enforcement.

Regional trade agreements with labour mobility provisions

The Melanesian Spearhead Group’s Skills Movement Scheme (SMS) is the only existing (sub-regional) agreement with labour mobility provisions but no movement yet;

PICTA Trade in Services: schedules are being developed;

PACER Plus: labour mobility provisions likely to deal with flows to Australia and New Zealand, rather than between PICs.

Number of work permits issued by major source countries, 2000 to 2014

Source: DLIR, annual work permit data

Work permits for PNG issued to Pacific islanders, 2000 to 2014

Nationalities of work permit holders, May 2015

Number of work permits held by Pacific Islanders, May 2015

List of ten industries with largest number of work permits, May 2015

IndustryNo. of total

work permits

No. of Pacific

Islanders

Forestry and Logging 2,376 0

Construction Services 1,720 8

Oil and Gas Extraction 1,601 1

Building Construction 1,190 12

Heavy and Civil Engineering Construction 1,027 10

Other Store-Based Retailing 948 15

Fishing, Hunting and Trapping 884 1

Administrative Services 775 8

Exploration and other mining support services 599 7

Professional, scientific and technical services 566 4

List of ten industries with largest number of Pacific Islander work permit holders, May 2015

IndustryNo. of Pacific

Islanders

Water Transport 26

Air and Space Transport 22

Personal and Other Services Including Religious Workers 20

Social Assistance Services 18

Other Store-Based Retailing 15

Accommodation 14

Telecommunications Services 12

Building Construction 12

Heavy and Civil Engineering Construction 10

Major occupational groups of work permit holders, May 2015

Source: DLIR, active work permit data, May 2015.

Major occupational group Total no. of

Work Permits

% No. of Pacific

Islanders

%

Managers 17,551 42.7 226 44.2

Professionals 8,100 19.7 212 41.5

Technicians and Trade Workers 13,440 32.7 64 12.5

Machinery operators and drivers 737 1.8 3 0.6

Labourers 857 2.1 1 0.2

Community and Personal Service

Workers 159 0.4 2 0.4

Clerical and Administrative Workers 69 0.2 3 0.6

Sales Workers 27 0.1 0 0

Three major occupations in construction sector among work permit holders, May 2015

Source: DLIR, active work permit data, May 2015.

Industry Three main occupations

No. of

Work

Permits

Construction services 1,720

Technicians and Trade Coordinators and Supervisors 440

Specialist Heavy Machinery Mechanic or Technician 138

Operations Manager 105

Building construction 1,190

Technicians and Trade Coordinators and Supervisors 389

Building and Construction Manager 118

Professional Builder 116

Heavy and Civil

Engineering Construction

1,027

Technicians and Trade Coordinators and Supervisors 270

Specialist Heavy Machinery Mechanic or Technician 79

Professional Builder 69

Ten most important occupations of Pacific islander workers in PNG, May 2015

Reasons for small number of Pacific Islander workers in PNG

Movement under general work permit policy and no movement (yet?) under the MSG SMS or the PICTA TiS;

Competition from workers from all other countries;

Filipinos in particular have gained an excellent reputation among employers in PNG as well qualified, hard-working and not complaining;

Foreign-owned companies sometimes recruit workers from country where headquarters are located;

Recruitment generally done through (local or foreign-based) recruitment agencies with links to selected countries overseas;

Pacific Islanders have not developed networks and reputation in PNG;

Lack of Pacific Qualifications Framework;

Cost of travel: Flights from POM to Manila are cheaper than to any Pacific destination.

Is there scope to increase the number of Pacific Islander workers?

YES

- There are ongoing opportunities and the second LNG project in particular will create considerable new opportunities.

BUT:

- The PNG government would like to see more Papua New Guineans taking advantage of opportunities in PNG;

-There is scope not only in construction but also in other industries (e.g. tourism and hospitality which are less male dominated).

Policy options

- Improve access under an existing or new regional scheme (MSG SMS for Melanesians, PICTA TiS);

- Preferential treatment for Pacific Islanders under PNG’s work permit policy (similar to New Zealand’s RSE);

- Create opportunities for Papua New Guineans in the region;

- Marketing campaign among PNG-based companies;

- Establish links with PNG-based recruitment agents.

THANK YOU