OVERVIEW

 Deeper definition of consumption.

 How consumption is like in PNG.
 States that affect consumption in PNG.
 Strategies to encourage consumption
 Factors and reasons for the pricing of goods and
services in PNG
 Definition of goods and services with examples.
 Statistics of popular goods and services consumed in
PNG.
What is consumption?
 Best defined in economics as the final purchase of
goods and services by individuals (household).
 Major concept in economics.
 Determines economic growth and success.
 Consumption includes durable and non-durable
goods, and services.
 Consumption in PNG
 The current population of PNG is 7,883,06.
 About 85% of the current population live in rural areas
and settlements around the city.
 There are different levels of consumption due to
different standard of living.
 About 3% of the population live the very high
standard, live an average of low standard of living.
 Consumption is still high concluded by our findings
on sample of most popular goods and services
consumed in PNG.
 States Affecting Consumption in
PNG
Price
Taxes
Savings
Consumer Confidence
 Strategies to Encourage
Consumption in PNG

 Tax Rebates to Individuals

- If people receive an amount of money that increases
their income, they will spend it and drive consumption
in the economy.
 Personal income Taxes
- Decreasing income tax is better long-term way to drive
consumption.
Factors affecting prices of goods
and services in PNG.

Availability of substitutes
Amount of Income
Time
 The Reasons for Pricing
INTERNAL FACTORS
 Cost
 Image of the firm
 Product or service lifecycle
 Promotional activities
EXTERNAL FACTORS
 Competition
 Consumers
 Government control
 Economic conditions
 Durable Goods
 Goods that do not quickly wear out.
 Are used more than once or over time rather than
completely consuming it in one use.
 Prices of durable goods are not the same even if two
goods have the same purpose.
 Most consumers prefer buying durable goods at
reasonable prices.
 In PNG during coffee, cocoa, vanilla etc. season the
cash flow increases and much of durable goods are
purchased.
PNG Motors importing used quality vehicles from
Japan is an example of the consumer’s durable goods.
 PNG Motors is a locally owned and operated
business that has been serving the motoring needs of
Papua New Guinea since 1971.
Proudly representing Mazda and Hyundai alongside
Suzuki and Suzuki Marine throughout the country for
vehicles, parts and service, together with a great range
of quality assured imported Used Vehicles that was
partnership with the overseas dears in Japan and was
then distributed into four retail dealers or agent in
PNG.
This map shows the four(4) of the PNG motor
agent or dealers in PNG

 Port Moresby, Mt Hagen, Lae and Kokopo.

 All the used vehicles are imported kept in Port
Moresby (PNG Motors) as a capital of PNG and then
distributed again to other three (3) sales agents.
Domestic Sales
Dec 2016 Jan- Dec 2016
Breakdown Units YoY Change Units YoY Change
% %
Passengers 9,152 -12.4 177,922 -19.8
Commercial 1,530 -2.5 23,448 -1.1
Vehicles
DOMESTIC Registration 8,449 -10.1 162,221 -19.2
SALES Total
Micro-mini 2,233 -14.6 39,149 -12.3
Total
Total 10,682 -11.1 201,370 -18.0
 Goods – Non Durables
 A category of consumer product.
 Needs to be purchased frequently
 Purposely produced to last for a short period of time.
 Usually lasts for a year or less.
CONSUMER PRICE INDEX
CONSUMER PRICE INDEX
 SERVICES
 A service is a type of economic activity that is intangible, is
not stored and does not result in ownership.
 To consume a service simply means to use up a service.
 An example of the most popular consumed service is the
PNG power electricity.
 PNG Power Ltd (PPL) is a fully integrated power authority
responsible for Generation, Transmission, Distribution and
Retailing of Electricity throughout Papua New Guinea and
servicing individual electricity consumers.
 It is a State Owned Entity (SOE) and is responsible for the
operation of 30 electricity systems at various centers
throughout Papua New Guinea. The three electricity systems
are, hydro, thermal and diesel generation.
 PNG Power’s main sauce of generation is hydro, which
accounts for 70% of the total electricity generation.
 Generation by light fuel oil is 14% and an Independent
Power Producer (IPP) with 16%. The current annual
generation is over 800Gwh.
 The demand for electricity has increased by an average of
2.2% over the past ten years and this trend is expected to
continue. Thus the consumption rate increases.
 Demand and Supply
 PPL recognizes to meet the community expectations for reliable power
supply and with the help of IFP (Improved Financial Performance) enables
PPL make investments to improve supply to existing customers and meet
demands as the PNG Economy grows.
 In 2012-Electricity production was 1, 104, 255MWh compared to 2022
production would increase to 1, 598, 632MWh. In 2012 the sales forecast
was 884, 681MWh and is predicted to be 1,279, 221MWh. In 2022. While
the sales growth in 2022 is predicted to be at 36, 857MWh compared to
2012 which was 83, 857MWh.
 Peak demand in production for 2012 was 210MW and predicts to rise in
2022 to 305MW. The generation capacity for PNG Power is expected to
increase as the company improves its service delivery to its customers.
 The Easy-pay system
 As part of the PNG Power’s plan it introduced the Easy-
pay System throughout the country so consumers pay for
the amount of electricity used. With this system, the
customer does not owe PNG Power any debt and it does
not disconnect the customer.
 PNG Power’s total number of customers is about 116, 220
using the three electricity systems (hydro, thermal and
diesel) including 85, 611 or more customers on Easy-pay
system.
The Manus Economy
Regional Processing Centre
RPC Impacts on Manus Economy in
terms of Service Consumption
Impacts on Manus Business
Community
 Employment increased by around 70-80. Average
wage K280 per week equivalent to K1.1 million per year.
 Sales increased between 60 and 200 per cent across
surveyed businesses
 100 Manus resident employed as security guards.
 15 car hire companies compared to 3 players 4 years
ago.
 Fuel suppliers increased from 1 to 5 suppliers and
number of smaller informal businesses. Fuel prices
remains high in Manus.
Shipping Service
 The sharp increased in shipping services has
benefitted local businesses in the management &
minimization of inventories.
 Community concern was the high fuel cost. E.g.
200litre drum of petrol from Lae cost some K62.30 (i.e.
K3.10 a litre)
 Lutheran shipping line was the only provider of
commercial cargo services previously.
 The increased shipping services benefitted the local
businesses.
Impact on Broader PNG
 Nevertheless, it is clear that the opening of the RPC
has benefitted Air Niugini and goods and suppliers out
of Lae. Previously Air Niugini operated 4 commercial
(passenger and freight) flights to Manus per week.
 Following the opening of RPC it now operates 8
commercial passenger flights per week plus two
schedule freight services (about 8 tonnes of freight)
per week and
 Two overnight charter services catering to shift
changes at RPC.
 Result has been more than 53% increase in revenues
from its Manus services in 2013 relative to 2012 which
has largely offset declines in other parts of its domestic
network following completion of the construction
phase of the PNG LNG Project.
 In addition, new carriers for the first time operate 2
flights a week to Manus.
 A further, small commercial air charter operates 1 or 2
freight services per month specifically supplying the
RPC
Conclusion
 Consumption consists 60% of the country’s GDP.
 Includes the purchase of final goods and services.
 Consumption rates in PNG vary from consumers,
goods and service.
 Pricing of goods and services are influenced by
internal and external factors.
 Consumption in PNG depends on the consumers
consuming the goods and services in PNG.