The Report: Papua New Guinea 2016
A country of extraordinary diversity, spread across some of the world’s most spectacular, and often inhospitable, terrain, Papua New Guinea today is a country once again at a crossroads. A major eco¬nomic boom driven by a massive liquefied natural gas project has been swiftly followed by a sharp slowdown as global oil prices fell, and as a result the government has come under some pressure. Meanwhile this young country, a land shaped by its many ancient traditions, still faces great challenges in spreading more equitable development.
Culturally one of the world’s most diverse countries, Papua New Guinea is widely considered to be one the last frontiers for tourism and business opportunities – the island of New Guinea hosts 6-8% of the world’s species, one-sixth of known languages and rivals Borneo, the Amazon and the Congo in terms of biodiversity. The country is an important exporter of natural resources (gold, copper, oil and natural gas) as well as agricultural products, with its cash crops including coffee, oil palm, cocoa, coconut and to a lesser extent tea and rubber. PNG also became a major exporter of natural gas in 2014, significantly increasing the size and strength of its economy, and the $19bn PNG Liquefied Natural Gas project was completed ahead of schedule and within budget.
This chapter contains an interview with Prime Minister Peter O’Neill.Explore chapter
Trade & Investment
The trade and investment landscape in Papua New Guinea has undergone substantial changes in recent years, driven to a large extent by the country’s large liquefied natural gas (LNG) project, PNG LNG. The development comprises gas production and processing facilities, with its initial phase carrying an estimated cost of $19bn, an investment greater than the country’s GDP at constant prices in 2014, which stood at $15.8bn. Since the facility commenced production in April 2014, exports have reached record levels and the country has experienced its largest trade surplus ever. Even with fading hydrocarbons prices, key figures are holding up, putting PNG in an excellent trade position overall.
This chapter contains interviews with Manasseh Sogavare, Prime Minister, Solomon Islands; and Ivan Pomaleu, Investment Promotion Authority.Explore chapter
The economy of Papua New Guinea is decelerating, with the GDP growth rate expected to fall by half in 2016 to 4.3% and by nearly half again to 2.4% in 2017. A combination of the end of the construction phase of the PNG Liquefied Natural Gas (LNG) project and an unexpected drop in energy prices has resulted in a significant decline in business activity and state revenues. The PNG economy is in for a rough few years as it adjusts to the drop in LNG prices and awaits the start of the next major project. How¬ever, barring any further dramatic declines in energy prices, growth will remain positive and the government will be able to bring its spending closer in line with revenues.
This chapter contains interviews with Peter Lanslow, Managing Director, Steamships Trading; and James Lau, Managing Director, Rimbunan Hijau (PNG) group; and a viewpoint from Joseph Ernest Zveglich Jr, Director, Macroeconomic Research Division, Economic Research and Regional Cooperation Department, Asia Development BankExplore chapter
Situated at the eastern-most point of the New Guinea islands and in a different time zone from the rest of Papua New Guinea, the Autonomous Region of Bougainville is composed of two large islands, Buka and Bougainville, separated by a narrow tidal channel. Together with 168 smaller islands and countless atolls, it forms an archipelago that is geographically, geologically and culturally closer to the neighbouring Solomon Islands than to PNG, and its population of over 300,000 speak a dozen different languages. Bougainville’s development needs closely echo PNG’s own growth priorities, with infrastructure, improved services, health care and employment all featuring high on the list. Investors will watch with interest to see how the politics of the region develop in the run-up to the referendum, against a backdrop of untapped minerals and an agriculture sector that could prove to be highly lucrative drivers of growth.
This chapter contains interviews with Joe Lera, Minister of Bougainville Affairs; and Brenda Tohiana, Acting Secretary for Finance, Autonomous Bougainville Government.Explore chapter
Papua New Guinea’s banking sector is adjusting to the slowing of economic growth and to the foreign exchange shortage that is affecting local businesses. However, despite many challenges, the institutions remain well capitalised and highly profitable, and in some cases are maintaining positive profit growth. More than just holding its own, the sector is developing in significant ways that suggest structural shifts and new industry dynamics. Maybank’s local presence was acquired by the Kina Group, bringing a long-sought-after “fourth bank” to the market and promising increased competition, especially in the undeserved mid-market. Other players have been using this time to consolidate their positions, expand their offerings and enter new markets.
This chapter contains an interview with Robin Fleming, CEO, Bank South Pacific; a viewpoint from Garry Tunstall, CEO, Nambawan Superannuation Fund; and an interview with Geoff Toone, Former Managing Director, Westpac Bank Papua New Guinea.Explore chapter
After a number of challenging years, Papua New Guinea’s capital markets seem to be finding their footing and may be on the cusp of great and positive change. In 2015 the country had its first initial public offering in three years, and it was a significant listing: a major local financial services group with part ownership of the stock exchange. Also, in 2016 a key stock started trading again after having been suspended in 2014. Significant reforms are being discussed, with Prime Minister Peter O’Neill weighing in, and these could result in much-needed consolidation and modernization of capital markets regulation and oversight.
This chapter contains a viewpoint from Richard Borysiewicz, General Manager, BSP Capital.Explore chapter
In Papua New Guinea insurance makes up a small part of the economy by international standards, with the penetration rate at less than 2% of GDP compared to a global average of 7.5%, according to the UN Development Programme. Insurance in the country is also a sector of great opportunity. Access is straightforward given the regulations and low capital requirements, so international participation is high and newcomers are relatively free to enter. In addition, because penetration is low, the market is well placed to grow.
This chapter contains a round-table with Salamo Elema, Acting Insurance Commissioner; Wayne Dorgan, Managing Director, Pacific MMI Insurance; and Philip Tolley, Managing Director, Capital InsuranceExplore chapter
Much of Papua New Guinea’s economic success over the past decade, along with its prospects for future growth going forward, can be tied directly to the energy sector. The efficient construction and operational launch of the country’s first liquefied natural gas (LNG) programme the $19bn PNG LNG project not only secured unprecedented foreign direct investment (FDI) into the country and provided a stable revenue stream for years to come, but also delivered evidence that large, capital-intensive projects could be delivered effectively. With this proof of concept now established though the partnership of large international oil companies and the government of PNG, the door is open for further large-scale hydrocarbons recovery projects across the country.
This chapter contains interviews with Peter Botten, CEO, Oil Search; Raka Taviri, CEO, Water PNG; and Tony Honey, Managing Director, PNG Forest Products.Explore chapter
In line with the downward cyclical trend still buffeting the industry globally, the mining sector in Papua New Guinea remains in a cooling period in terms of exploration and production activity. To counter act tighter profit margins brought on by sluggish global demand for minerals and the corresponding drop in commodity prices, mining companies across PNG have responded by increasing efficiency and taking cost-cutting measures. Adding to the challenge of these market realities were other factors beyond the control of mining operators in 2015, such as a drought that lowered river levels enough to limit access to some mines and cut shipments, as well as temporary shutdowns due to health and safety concerns. These factors aside, the country’s historically strong copper and gold mines remain a crucial component of the economy.
This chapter contains an interview with Michael Johnston, President and CEO, Nautilus Minerals.Explore chapter
This chapter explores Papua New Guinea’s tax regime, focusing on issues slated for Treasury consideration, current corporate taxation guidelines, withholding rates and other key areas for investors. It also contains an interview with Jonathan Seeto, Territory Partner, PwC.Explore chapter
The Papua New Guinea telecoms market is set to enter a new phase. After nearly a decade of rapid expansion, largely the consequence of Jamaica-based Digicel’s market dominance on the mobile side, and given state-run Telikom’s virtual lock on essential infrastructure, credible and effective competition may soon be arriving. A restructuring has been proposed that promises to combine Bmobile, the number two player in the mobile space, and Citifon, the number three, and bolt them on to a new nationwide 4G network to create a powerful challenger to Digicel.
This chapter contains an interview with Michael Donnelly, CEO, Telikom.Explore chapter
Located on the eastern half of the island of New Guinea, Papua New Guinea is home to a rich supply of natural resources. However, with a geography characterised by tall peaks and deep ravines, miles of challenging coastline and a climate that encourages year-round vegetation, infrastructure can be difficult to place, install and maintain. While these topographical challenges sometimes make it problematic to move resources and people around PNG, issues around security and budgetary constraints up the ante further when it comes to creating a secure and efficient transport network for the country.
This chapter contains an interview with Robert Howden, Managing Director, Express Freight Management.Explore chapter
Industry & Retail
Often overshadowed by the extractive industries, Papua New Guinea’s industrial manufacturing, down¬stream processing and value-added sectors in fact serve as the largest formal employer in the country and continue to attract investment despite fiscal challenges presented by the current operating environment. Beyond employment, sustained long-term growth for PNG industry will be crucial for the country to steer clear of negative consequences associated with “Dutch disease”, which is incurred from relying too heavily on mining and energy. Developing local industry to offer more import replacement goods will also be essential to eventually lowering the cost of goods and services.
This chapter contains an interview with Stan Joyce, Managing Director, South Pacific Brewery.Explore chapter
Construction & Real Estate
Building on the momentum generated by the successful launch of the Papua New Guinea Liquefied Natural Gas project, the government continues to take the lead in stimulating construction activity in PNG, with various opportunities across the board from ports and road projects to a range of residential and commercial developments open to both domestic and foreign companies for participation and investment. With only 3% of land available to the government to build on and develop, the real estate sector in Papua New Guinea operates in a unique environment. Despite the majority of land being under customary ownership, with ownership rights held by extended family groups, there are still a number of opportunities for foreign investors and development in the sector, with more on the horizon if government-backed legislation, currently pending, opens up more of PNG’s land for development.
This chapter contains interviews with Dominic Avenell, Managing Director, Avenell Engineering Systems; Gudmundur Fridriksson, CEO, Paga Hill Estate; and Frank Kramer, CEO, Kramer Ausenco.Explore chapter
Agriculture & Fisheries
Home to a remarkable amount of biodiversity, rich volcanic soil, bountiful waterways and a moist tropical climate, Papua New Guinea possesses all the elements to fashion itself into a thriving agricultural exporter. These native assets have supplied the basic natural building blocks providing nourishment to country’s population throughout history, and more recently to the agribusiness industry for exporting cash crops such as coffee, tea, cocoa, spices, copra, rubber and palm oil. Given this abundance of naturally-occurring inputs along with a substantial labour pool already well versed in agriculture cultivation, the only stumbling blocks standing in the way of a robust agro-industry are the means to increase efficiencies throughout the value chain to make production and distribution more competitive.
This chapter contains interviews with John Kasu, Managing Director, National Fisheries Authority; and Robert Nilkare, Country Manager for Papua New Guinea, New Britain Palm Oil Limited; and a roundtable with Alan Bird, Agricultural Development Consultant; Ilan Weiss, Chairman and Executive Director, Innovative Agro Industry; and Sir Brown Bai, Chairman, Rural Industries Council.Explore chapter
While Papua New Guinea remains a relative newcomer to the global tourism stage, international arrivals to the country have risen steadily over the past decade, from just over 69,200 in 2005 to more than 198,600 in 2015, according to data compiled by the PNG Tourism Promotion Authority. Although notable, most of the increase has been driven by the influx of business travellers and workers that has accompanied PNG’s recent economic growth as opposed to a substantial boost in holidaymakers. This trend has reversed slightly as economic growth has cooled and as segments such as cruise and adventure tourism have taken hold.
This chapter contains an interview with Tobias Kulang, Minister of Tourism.Explore chapter
This chapter examines Papua New Guinea’s legal framework, focusing on regulations affecting foreign investors, restrictions and laws for companies, taxation and Customs duties, and other important areas.
It also contains a legal viewpoint from John Leahy, Partner, Leahy Lewin Lowing Sullivan, on proposed reforms to PNG’s land use regulations.Explore chapter
This chapter contains hotel listings for business and leisure travellers, useful contact details for embassies and ministries, and practical information for first-time visitors.Explore chapter
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