Help for Two Economies Dependent on Productivity Gains and Exposed to Disaster Losses: The Island Nations Maritime Partnership

I just downloaded two great McKinsey reports, one on Indonesia, one on Vietnam.  Both economies are dependent on productivity growth to prosper and maintain stability.  Both are also very exposed to loss from natural and man-made disasters.  The Pacific Maritime Partnership, which includes safer vessels, maritime training, and disaster resiliency, is an answer to at least part of that problem.  A briefing on the partnership, of which I am a principal, follows:

The Island Nations Maritime Partnership

Summary

The Sunrise Trade Network, Inc. is promoting development of a Public-Private Partnership (PPP) Project involving US, Australian, and Pacific Island interests to strengthen the maritime capability of Pacific Island nations. It would focus on three areas: safe marine infrastructure; disaster relief and economic recovery, and ferry and boat construction. The initial emphasis would be on Papua New Guinea. Later work might involve other Pacific nations such as Guam, Kiribati, Solomon Islands etc. Aid agencies, non-governmental organizations, and the private sector through economic development organizations would be asked to finance public/private interest elements.

Background

PacificIsland nations, especially PNG, depend heavily on ferries and smaller craft (e.g. launches, banana boats) for the transport of produce and equipment, tourists and local families around their coastlines. This infrastructure is in need of major upgrading. The reasons put forward by third parties are:

  • Vessels are either unseaworthy or unsuitable in heavy seas.
  • Overcrowding due to lack of capacity and poor ticketing systems.
  • Inadequate safety equipment, navigational aids and training.
  • Poor servicing of engines and equipment.
  • Weak regulation and monitoring of the industry’s performance.

The sinking of the Rabaul Queen in 2012 (around 300 dead) brought these issues into sharp relief. There are other precedents, and many smaller unreported events.   A considerable amount of local effort is going into addressing the above problems. However we believe this would be further enhanced by the facilitation of partnerships with world-class companies operating in places like Louisiana in the US and Cairns and Darwin in Australia.   The feasibility study would be undertaken by the Sunrise Trade Network, Inc. a Louisiana-based 501c3, and will be based around a visit to PNG by a small mission from companies, instructors on maritime safety snd standards, plus disaster resiliency expertise, all furnished by the regional economic development organizations South Louisiana Economic Council in the U.S.; and Cairns and Darwin regional economic development organizations.

Project has three parts

1. Safe Maritime Infrastructure:  This part would assess the nature of the problem and determine best options on possible roles for US and Australian companies working in partnership with PNG interests. Suggestions might also be offered on the scope for the development of PNG repair yards and ship chandlers, improved ticketing and management systems, inferred navigational tracking systems, early disaster detection and warning systems etc.

2. Disaster Relief & Economic Recovery:  Papua New Guinea is prone to natural-caused disasters including earthquakes, volcanic eruptions, tsunamis, cyclones, river flooding and coastal erosion and landslides. Indeed the considerable work underway in disaster relief is to be applauded. The particular relevance is that the Louisiana authorities have developed world standing in this field due to its Hurricane Katrina recovery effort. This followed on from longstanding work in the Gulf of Mexico servicing oil and gas facilities. As a result, Sunrise members have particular expertise in disaster relief, damage surveillance and assessment, and economic recovery programs involving technical assistance programs on finance and accounting, marketing and advertising, business development, small business incubators, micro-finance, etc.

3. Ferry & boat construction  The third part would focus on upgrading the marine fleets in the region via the development of a local marine construction industry.  PNG has a world-class timber resource, an artisan tradition in some areas, competitively-priced labor and a familiarity with boats. While wooden vessels may no longer be looked upon as ‘world class’ vessels in the eyes of the global market, the internal fittings are usually laced with wood product in order to soften the surroundings of long suffering seafarers. We would like to explore this as a potential niche market for PNG.  Recent investigations have sparked our interest in the potential for a new boat design that could be the basis for local manufacturing, based on local sea, climate and market needs. Our thinking is as follows:

  • Large-scale manufacture of half cabin launches could deliver a safe, robust and relatively low-cost product for the market (perhaps in the $US20,000 – $US30,000 range) and that aid funds could be very legitimately applied to subsidizing the cost to local villages.
  • The supply of US-manufactured outboard engines might be a further element, together with joint ventures in respect of repairs and servicing.
  • Marketing and distribution might be assisted by US companies, many of which have the channels and know-how in this field. However the local knowledge of PNG and possibly Australian firms will be vital.
  • In terms of governance, the main options appear to be (i) local ownership, (ii) foreign ownership, or (iii) joint ventures between existing companies. The study would assess these options, interview some of the potential players and relay their views and concerns on matters like IP arrangements, profit sharing, ownership and control, legal issues, export assistance.

Such an initiative could be the basis for a very interesting and beneficial PPP arrangement. The study could also evaluate the use of a PPP approach for the leasing of newer ferries from international fleets.

Timing

The aim would be to begin the feasibility study by mid 2012, enabling a progress report to be given at the Australia-PNG Ministerial Forum in late 2012, to which US representatives would be invited.  Should the project prove viable, further funding would be sought through partnerships between USAID/AusAID, Major NGOs in the region, and the private sector via the South Louisiana Economic Council and similar organizations in Australia.

Project partners

The Project would only involve companies of the highest standing; those with empathy with different cultures and commercial systems, a track record of fair dealings, and patient capital. A methodology would be developed to identify such companies.

Costs

The cost of the feasibility study is estimated at $US100,000.  The study would in turn identify the cost of the full feasibility study, together with some funding options. For example, assuming the study points to substantial net benefits for PNG, a mix of bilateral and multilateral aid may be possible.  The fundamental difference between this Project and many others is that the feasibility study is designed to prove out a concept that draws in private sector partners to develop commercially viable operations based around collaborative principles. Once proven in PNG, the project, and variations of it dependent on need, can be taken to island nations worldwide.

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