Major construction projects in PNG ahead of APEC 2018

While resources-related projects will always be the engine of the sector, the rising number of residential, hotel, retail, transportation and office developments are becoming increasingly important, as the country’s hosting of APEC events in 2018 and the expanding middle class continue to shift Papua New Guinea’s construction priorities. The skyline of Port Moresby is rising, while large housing developments, malls and shops are being built in the suburbs and countryside, connected by modern road networks.

At the same time, the broader challenges relating to foreign exchange issues and the persistent reliance on the energy and extractive sectors need to be tackled if the country is to secure sustainable, long-term growth in construction. Although large-scale infrastructure is being built as part of China’s Belt and Road Initiative (BRI), some local players are concerned about rising competition from Chinese construction companies, and public debt has slowed the PNG government’s spending in the sector.

Recent Uptick

Construction generated an estimated PGK6.4bn ($2bn) of GDP in 2018, according to government data, contributing 8% of the total. However, it is a less consistent contributor than other non-mineral sectors, as it tends to be largely dependent on oil and gas activities.

The sector’s prospects have been closely correlated to the extractive industries, rising with the development of the large-scale PNG LNG site and other projects that expanded during the commodities boom, and moderating during downturns.

The real rate of growth for construction hit a peak of 53.1% in 2010, and spiked again at 9.9% in 2012, before experiencing three years of decline. The growth rate recovered in 2016 and 2017, holding steady at 1.6%. Looking ahead, the government estimates that the sector’s growth will outpace national GDP for a number of years, forecasting annual expansion to remain at around 4% from 2018 to 2022.

Road Network

Despite the historical dependence on the energy and mining industries, a range of projects outside the extractive sector have materialised in recent years, particularly in roads and transport infrastructure. In the 2018 budget, the transport sector was allocated some PGK937.1m ($292.5m), up 2.1% on the 2017 supplementary budget. Furthermore, around 62% of the PGK18.7m ($5.8m) budget for the Department of Transport and Infrastructure (DTI) was reserved for road services.

Under the DTI’s National Transport Strategy for 2014 to 2018, approximately 120 road maintenance and repair projects have been prioritised, with funding coming from the World Bank, the Asian Development Bank (ADB), Australia’s Transport Sector Support Programme and the PNG government.

Notable projects include the PGK89m ($27.8m), 51-km East Cape Road in Milne Bay – which includes sealing the road, renovating six bridges, constructing shoulders and installing a drainage system – started in September 2016. The project, scheduled to be completed by 2021, was funded via a $126.5bn credit from World Bank, with additional co-financing from the Australian government. This was followed by the PGK80m ($25m) Koura Way Road, linking Tokarara and Hanuabada, which opened in late 2017. Meanwhile, a road from Southern Highlands to Hela is expected to be completed in 2018, and a section from Erave to Samberigi is in the works as well. China Harbour Engineering Company built a four-lane bridge at Laloki in 2018, which is one of 23 construction projects the company has undertaken in the country since 2011.

In late 2017 construction commenced on the first four-lane highway in the Highlands, spanning from Kagamuga Airport to Keltiga Junction in the Western Highlands. The project is funded by a PGK250m ($78m) loan secured from the ADB, with China Railway Construction Corporation (CRCC) serving as the contractor. There are plans to extend the road from Keltiga Junction to Togoba Junction, but this would require additional funding. To facilitate the project, an act of Parliament was passed that allows for the expropriation of land, with the exact amount paid to those displaced to be determined by the Valuer General. The road was originally scheduled for completion in 2019, but this is likely to be delayed due to issues in the design phase.

Plans for other major roadworks are also under way. In late 2017 PNG signed a deal with the Chinese government for 1600 km of PNG’s roads to be improved. The total value of the agreement, which includes the development of two industrial parks in the Highlands and a water supply facility in Goroka, was reported at $4bn. CCRC will similarly be the main contractor for these works. The agreement includes plans for the Ramu Highway from Watarais to Madang; the Gulf-to-Southern Highlands Highway; the Sepik Coastal Highway, running between Wau and Bulolo; the Magi Highway from Hoskins to Kimbe; and the Bougainville Road from Tari to Pori. The goal is to create the country’s first national ground transport network, whereby 10 roads will essentially connect all the regions of PNG. The projects included in the agreement form part of China’s BRI, an ambitious, transnational project for infrastructure development to improve connectivity between Asia, Africa, Europe and the Pacific (see Country Profile chapter).

Taking Off

In February 2017 the ADB signed a transaction advisory services agreement with the National Airports Corporation (NAC) for the upgrade of Jacksons International Airport under a public-private partnership (PPP) scheme. Planned works include a new passenger terminal and a runway extension. Under the PPP, the private sector will design, build, finance, operate and maintain the airport facilities at PNG’s main international gateway. In May 2018 Alfred Manase, minister of civil aviation, said there had been interest from international airport operators in the planned PPP, and feasibility studies had already been completed. In addition, a new fuel terminal at the airport is nearing completion in time for the APEC Leaders’ Summit, according to Simon Robilliard, CEO of Pacific Energy Aviation. “It will be the most modern site of its kind in the South Pacific, with advanced supervisory control and data acquisition systems, and will provide 30 days of stock cover, compared with the current one and a half days of cover,” he told OBG.

Coming improvements will help to further reduce congestion at the airport, building upon the Kookaburra Street Flyover and Roading project that was constructed for the 2015 South Pacific Games. This comprised a 600-metre flyover, a four-lane road, side roads, roundabouts and bus bays. The airport’s retail facilities were also renovated ahead of the games.

Considerable activity has been initiated outside Port Moresby as well. The redevelopment of Kagamuga Airport in Mount Hagen was started in 2013, and terminal renovations totalling PGK70m ($21.9m) were completed by 2015. The old building was demolished and replaced, parking spaces and drainage systems were added, and the runway was widened.

Hoskins Airport in West New Britain was also revamped 2015. The runway was extended by 1.9 km, the pavement was reinforced and a security perimeter fence was installed. The contract was awarded to China Overseas Engineering Group (COVEC) in 2013. COVEC also worked on the PGK110m ($34.3m) upgrade of Goroka Airport, which was completed in June 2018. Also in 2018, a new terminal was built and the runway was improved at Girua Airport in the Northern Province. The majority of this airport work has been supported by the 10-year Civil Aviation Development Investment Programme (CADIP) launched in 2009. The ADB provided PGK1.6bn ($499.5m) in funding for CADIP, while tax payments for land, goods and services were covered by the government. By the programme’s conclusion in 2019, some 21 national airports will have been improved. Work will continue after the CADIP as well, with the NAC signing two contracts worth a total of PGK41.1m ($12.8m) for airport upgrades in May 2018. The first, a PGK27.8m ($8.7m) contract, was awarded to China’s Sinohydro for another terminal and new pavement at Medi Airport in the Southern Highland Province. The second, a PGK13.3m ($4.2m) contract, was awarded to local G-Man Construction for security fencing at Tokua Airport in East New Britain.

In addition, the NAC is aiming to transform 15 of the 22 airports that it operates into smart airports by 2030. Reaching this goal will involve executing extensive construction works in order to expand their capacity and modernise facilities.


PNG’s 2018 APEC hosting duties, notably including the APEC Leaders’ Summit, scheduled to take place in November 2018, have resulted in considerable infrastructure activity: hotels and roads are being constructed, retail space is coming on-line and transport facilities are being upgraded. The list of major developments includes Star Mountain Plaza, which is scheduled for completion in September 2018. The PGK1.5bn ($468.2m) mixed-use development is being constructed in three phases. The first phase is building the 212-room Hilton Hotel Port Moresby, which has two restaurants and the 4000-sq-metre Kutubu Convention Centre. The second phase will build a 19-storey, mixed-use structure, with three floors of retail premises and 16 residential floors. The third phase will involve the construction of another hotel, as well as retail and office space.


The new road infrastructure being built as part of the National Capital District’s Road Rehabilitation Project – comprising five bridges, a ring road and a road to the central meeting area of APEC Haus – is pivotal to linking new APEC developments, including the PGK120m ($37.5m) APEC Haus, which will be the main venue for the 2018 APEC Leaders’ Summit. It is being built on reclaimed land at Ela Beach in the shape of PNG’s unique lakatoi sail. The interior design will reflect the country’s traditional style, utilising shell, clay, timber and metal. The structure is being funded by a special infrastructure tax credit scheme to local oil and gas company Oil Search, capped at PGK170m ($53.1m). Prime Minister Peter O’Neill has said the venue will be transformed into a national exhibition centre with restaurants, a museum and a gallery after it has held the summit.

Such tax credit schemes have been used for rehabilitation projects in the past. For example, the Central Government Office, which was a gift from Australia for PNG’s independence in 1975, was abandoned for being unfit for occupation in 1998. After sitting unused for 20 years, the building was refurbished by Oil Search, using a tax credit scheme, and was reopened as Sir Manasupe Haus in 2016. It now serves as the prime minister’s office.

Housing Boom

Housing is becoming a major segment for the country’s construction industry. In a 2017 survey from local property portal Hausples., more than half of respondents said that they were interested in making a property purchase over the following 12 months (see Real Estate overview). As such, a number of large housing developments are under way to meet this anticipated demand.

Paga Hill Estate, for example, will offer 800 apartments, waterfront commercial and retail space, and a cruise terminal. The PGK3bn ($936.6m) development was formally approved in early 2017, though construction did not begin until the first quarter of 2018. It is being developed under an agreement between the Shenzhen Special Economic Zone Construction and Development Group, China Harbour Engineering Company and COVEC. However, the project continues to face resistance from residents who have been displaced by the development. Completion of the second stage of the Old Parliament House Tower will add to Port Moresby’s real estate offering as well, having twin residential towers, town houses, a shopping mall, parking spaces and outdoor leisure areas. Construction on the first stage of the development was finished in 2016, and the second stage is set to be completed in late 2018.

State support has boosted construction for the housing market significantly. The First Home Ownership Scheme (FHOS) and new rules allowing Papua New Guineans to tap their superannuation funds for home purchases have helped make purchasing property much more attainable for many people. Under the FHOS, Bank South Pacific offers mortgages at a fixed interest rate of 4% over a 40-year period. The programme has been under way since 2014, with the government allocating PGK200m ($62.4m) annually for its implementation. As such, the private home market is projected to expand quickly; Hausples. forecasts 5000-6000 new homes will hit the market in Port Moresby by mid-2019, and as many as 50,000 through to 2020. Included on the list of developments are 44,000 homes at Duran Farm, as well as smaller developments such as Mediterranean Apartments, Community Housing, Rainbow Heights, Koki Bay City and Touaguba Hill Paradise. EDAI Town, located north-west of Port Moresby, is expected to eventually house some 10,000 people once complete.

Hotel Expansion

Port Moresby’s hotel space has similarly boomed in recent years, expanding from 700 rooms in 2011 to reach more than 2000 by 2017. This is partly due to a number of major multinational hotels entering the PNG market: the Holiday Inn Express opened in 2015; the five-star Stanley Hotel opened in 2016; and local Kumul Consolidated Holdings and Hong Kong’s Shin Kong Pacific Investment signed a memorandum of understanding to build a five-star, 500-room hotel in 2016. Loloata Island, located 20 km from Port Moresby, is being redeveloped into a luxury resort. The island was sold in 2016 and it is due to re-open after extensive renovations in 2018. The revamped resort will offer 50 hotel rooms, 16 suites and three villas. It is being developed by local firm Lamana Development with financial backing from superannuation provider NASFUND.

Retail Development

The country’s expansion of retail space has continued even through its most difficult economic periods. More projects are in the pipeline in 2018, with developers and retailers expecting PNG’s middle class to expand and broader macroeconomic conditions to improve.

There are plans to expand Vision City, which is already the largest mall in the South Pacific outside Australia and New Zealand. In addition, the Tininga Hagen Central, a new shopping mall developed by Steamships Trading Company and Tininga, was opened at the end of 2017. In the suburb of Gerehu, also in Port Moresby, the 20,000-sq-metre Mosin Plaza is expected to begin operating in the third quarter of 2018, while the Brian Bell Group, which has many retail outlets across PNG, is building its new warehouse facilities in the suburb. Port Moresby’s downtown area is also undergoing substantial changes. Significantly, the move of Port Moresby Port to Motukea was completed in February 2018, which has freed up large swathes of prime land, and there are already plans for the old port site to be redeveloped and transformed into a major recreational and commercial area.

Natural Disaster Risk

In a study conducted by the UN University in 2017, PNG was ranked the 10th-most disaster-prone country in the world. While storms and floods continue to be a concern, it is the volcanic and seismic activity that is most relevant to the construction sector. In February 2018 a-7.5 magnitude earthquake struck the Southern Highlands, resulting in more than 100 deaths. In light of these events and the country’s trend towards urbanisation, efforts are being made to update the building code in order to minimise the risks from seismic activity. PNG’s existing code was modelled on the New Zealand code dating from the 1980s, which did not include special requirements for areas at risk of earthquakes. In 2013 PNG began to re-evaluate the code in cooperation with Geoscience Australia, using new tools to assess hazards across the country. The findings will be used to devise a new code, which will require that architects and engineers use appropriate designs in different parts of the country.

Major Projects 

Besides real estate, the power sector is also seeing significant construction activity. A 57-MW, gas-fired plant near Port Moresby is being developed by Niupower, a joint venture between Kumul Petroleum and Oil Search, and is set to begin operating in 2019. Meanwhile, construction is under way on the Western Pacific University campus in the Ialibu-Pangia area of the Southern Highlands. The university has sought financial assistance from the Chinese government, with the hope of having its facilities ready to welcome its first students in 2019. When complete, the institution will have the capacity for 3000 students and 300 teachers. The development phase of the PNG LNG project, which came on-stream in 2014, provided a major boost to the sector, and there are indications that the $13bn Papua LNG project will reach a final investment decision in 2019, in which case construction work would begin in 2020 (see Energy chapter). Mining projects are also expected to boost the construction sector in the medium term. In particular, international mining companies are in advanced discussions with the PNG government for the development of the Wafi-Golpu gold mine in Morobe Province and the copper-gold Frieda River project in West Sepik Province.


Although the sector faces numerous challenges, such as foreign exchange issues and rising competition from Chinese companies, there are a variety of promising developments under way, which could help drive the next wave of sector growth. should sustain construction activity over the medium term. As the projects for APEC structures finish up, progress is being made on plans for the Papua LNG project, which should significantly boost the sector.

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The Report: Papua New Guinea 2018

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