The Report: Papua New Guinea 2018
Although Papua New Guinea’s macroeconomic slowdown, challenging business climate and falling global commodity prices have weighed on trade and investment in recent years, the country continues to offer high-potential opportunities to investors.
Country Profile
Although external forces contributed to challenging economic conditions in recent times, PNG should benefit from the stability brought about by Prime Minister Peter O’Neill’s 2017 election victory, which solidifies the public agenda and provides more investor certainty. Hosting international events such as APEC 2018 should positively influence international perceptions and highlight opportunities available in the country, while planned investments in the extractive industries are positioned to boost the wider economy. This chapter contains an interview with Prime Minister Peter O’Neill.
Explore chapterTrade & Investment
With macroeconomic growth slumping and domestic demand weakening in the aftermath of a long construction boom, trade and investment in Papua New Guinea have faltered in recent years. However, ongoing geopolitical developments could see the situation change in 2018. China’s footprint in PNG has been growing, particularly in the lead up to the APEC Leaders’ Summit, which will be hosted in PNG for the first time in November 2018. Inter- national responses to rising Chinese competition should benefit PNG, with several of the country’s most important bilateral partners moving to shore up their presence in the country in recent times. Future trade ties are likely be steered by the government’s efforts to leverage the competing geopolitical interests to the country’s advantage. This chapter contains interviews with Clarence Hoot, Acting Managing Director, Investment Promotion Authority; Julie Bishop, Former Minister of Foreign Affairs of Australia; Stephen P Groff, Vice-President, Asian Development Bank; and Alan Bollard, Executive Director, APEC Secretariat.
Explore chapterEconomy
Although 2017 was another challenging year for Papua New Guinea, with subdued GDP growth against a backdrop of falling government revenues, cuts to public spending and rising fiscal challenges, economic recovery is gradually gathering steam in 2018. A steady uptick in commodity prices supported export growth and augmented the country’s trade surplus, while agriculture and mining recovered from severe drought that significantly impacted economic activity in 2016. Maintaining growth after a boom period – which was driven by construction of the country’s first major liquefied natural gas facility, PNG LNG – has proven challenging for policymakers. However, the economic slowdown has pushed the government to implement fiscal and policy reforms aimed at fostering domestic growth and the non-extractives economy. This chapter contains interviews with Charles Abel, Deputy Prime Minister and Treasurer; Hulala Tokome, Chairman, National Superannuation Fund; and David Toua, Chairman, APEC Business Advisory Council.
Explore chapterBanking
Papua New Guinea’s banking sector experienced a mixed year in 2017, with commercial bank assets declining after four consecutive years of growth. Total loans to the private sector also fell against a backdrop of subdued economic activity, even as Bank South Pacific, the country’s leading commercial bank, recorded a strong rise in lending and increased profits. Nevertheless, efforts are under way to overcome these challenges, with a focus on modernising existing infrastructure and improving financial inclusion. Under a far-reaching sectoral review, launched with support from the World Bank, the Bank of PNG – the country’s central bank – has made steady progress in upgrading the country’s interbank transfer network to support the development of a national payment system. This chapter contains interviews with Loi Bakani, Governor, Bank of PNG; and Robin Fleming, Group CEO, Bank South Pacific.
Explore chapterInsurance
The insurance industry of Papua New Guinea holds considerable potential for long-term growth, although insurers and brokers face notable challenges, including a lack of enforcement and compliance regarding financial reporting requirements, limited domestic reinsurance capacity, and the frequent offshoring of major accounts and business. Despite being a country that is susceptible to an array of natural disasters, there continues to be limited insurance awareness and penetration. There is, therefore, significant potential for future growth, particularly in the micro-insurance segment, which expanded rapidly between 2014 and 2018 to become a major industry growth driver. This chapter contains an interview with Keith Land, CEO, Capital Insurance Group.
Explore chapterCapital Markets
Although small by international standards, Papua New Guinea’s capital markets have performed well in recent years, despite facing notable macroeconomic challenges. Key indices on the Port Moresby Stock Exchange expanded steadily in 2017, supported by robust growth of two of its largest listed companies, Bank South Pacific and Oil Search, and an increase in domestic turnover. A series of regulatory reforms launched in 2015 – including the Capital Markets Act, Securities Commission Act and Central Depositories Act – have started to come into force, laying the foundation for stable growth and market modernisation. Efforts to upgrade the stock exchange were also supported by the launch of a new Nasdaq trading platform in late 2017, and the Bank of PNG, the central bank, is considering the adoption of an electronic bond auction system. This chapter contains an interview with Greg Pawson, CEO, Kina Group.
Explore chapterMining
Shaped by shifts in supply and demand, Papua New Guinea’s economy has relied heavily on mineral extraction for most of its modern history. On the back of increased gold, copper, nickel and cobalt production, mining revenue expanded by 18.8% in 2017. As prices rebound, growth in mining activity comes at an important juncture, boosting export and fiscal receipts, as the country grapples with ballooning public debt. While the economy is still highly vulnerable to commodity price shocks, major investments across a number of strategic mining projects are set to bolster economic output. Despite the positive outlook, inadequate infrastructure, landowner identification issues and delayed amendments to the existing mining act continue to hinder the progress of the sector, which by most measures has immense potential. This chapter contains an interview with Craig Lennon, Managing Director and CEO, Highlands Pacific.
Explore chapterEnergy
Although international oil and gas firms continue to face a challenging operating environment, economic expansion in Papua New Guinea has been driven by large-scale energy projects in recent years, with liquefied natural gas processing becoming an important catalyst for growth. Since the launch of the PNG LNG project in 2014, the country has witnessed a significant uptick in investment, with exploration, production, transportation and processing facilities receiving an injection of resources. However, there are a number of issues that need addressing, with power generation and domestic gas utilisation representing two key areas for further development. This chapter contains interviews with Wapu Sonk, Managing Director, Kumul Petroleum; and Carolyn Blacklock, Acting Managing Director, PNG Power.
Explore chapterTransport
Developing Papua New Guinea’s infrastructure has long been a challenge due to its diverse terrain and unevenly distributed population. However, increased public investment is expected to boost the transport sector. Long-term projects, such as the Sustainable Highlands Highway Investment Programme, being executed by the Asian Development Bank in partnership with the government, and the Civil Aviation Development Investment Programme should also bolster domestic and international connectivity, as well as the expansion of key industries. This chapter contains an interview with Paul Abbot, CEO, PNG Air.
Explore chapterConstruction & Real Estate
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 in 2018 and the expanding middle class continue to shift Papua New Guinea’s construction priorities. Although a downturn in the commodity cycle, the end of construction on the PNG LNG project and long-standing ambiguities over land rights have constrained development in the real estate sector, changes are afoot that could lead to significant improvements. About half a dozen major housing projects are now under way, and homes at reasonable prices are fast becoming available. A culture of home ownership is taking hold, driven by rising prosperity and aspiration. This chapter contains interviews with Matthew Lewis, Managing Director, Hornibrook NGI; and Graham Boddington, General Manager, Northbuild Construction.
Explore chapterIndustry & Retail
Industry has emerged as one of the bright spots in Papua New Guinea’s economy in recent years, providing a buffer against downturns in the commodity cycle. As natural gas prices fell and related businesses struggled, manufacturing held its own. The weak currency and the lack of foreign exchange that accompanied the downturn may have actually helped matters, as trouble sourcing dollars encouraged the consumption of domestic products. Efforts to reduce foreign currency outflows by encouraging self-sufficiency and curbing over-reliance on imports have also supported the sector. With a more relevant and consistently enforced legal framework, which includes the imposition of protective tariffs on products that are produced locally, PNG businesses have a better chance to compete. This chapter contains interviews with Chey Scovell, CEO, Manufacturers Council of PNG; and Ian Clough, Chairman, Brian Bell Group.
Explore chapterAgriculture & Fisheries
Papua New Guinea’s fertile soils are instrumental in the lives of the country’s residents, both as a source of income and nutrition. The agriculture sector has constituted between 25% and 40% of GDP over the last four decades, while supporting the livelihoods of around 85% of the population. Despite the sector’s importance, however, the evolution of farming has long been restricted by insufficient foreign investment, limited public spending of around 2% of GDP per annum, ambiguous land policies, major infrastructure gaps and a lack of access to credit at the smallholder level. This chapter contains interviews with Greg Worthington-Eyre, CEO, Trukai Industries; and Ritche Rivera, Vice-Chairman, RD Corporation.
Explore chapterICT
While still lagging behind many of its neighbours in the Asia-Pacific region, the ICT sector in Papua New Guinea has seen significant progress in recent years, which has helped ensure expansion of coverage and offerings. An increase in sector investment has helped both local and international companies expand into rural areas, while telecoms providers have also been able to bring more affordable and faster services to a greater share of the population. However, isolated parts of this large and sparsely populated country are still having difficulties in achieving connectivity. To address these challenges the government is looking to improve infrastructure in rural communities and upgrade the mobile data network from 3G to 4G in more parts of the country. This chapter contains an interview with Jacky Xu Qiang, CEO, Huawei Pacific.
Explore chapterTourism
While Papua New Guinea’s economy remains dominated by the agriculture, fisheries, forestry and extractives industries, tourism has been identified by government actors as an important source of economic diversification and sustainable development. With around 462,840 sq km of largely untouched land, a wide variety of indigenous flora and fauna, and immense cultural diversity as evidenced by its 852 known languages, PNG has promising tourism potential. Nevertheless, PNG’s tourism industry is seen by many as a key area of potential with significant development opportunities. This chapter contains an interview with Ann Sherry, Chairman, Carnival Australia.
Explore chapterTax
This chapter examines Papua New Guinea’s tax regime, focusing on corporate income tax, the introduction of capital gains tax as part of a five-year plan, double taxation agreements with other countries and other key subject areas. It also contains a viewpoint from Jonathan Seeto, Territory Senior Partner, PwC.
Explore chapterLegal Framework
This chapter examines Papua New Guinea’s legal framework, offering insight into the legislative powers of the government, laws that affect foreign companies, newly enacted securities legislation and other areas of interest to investors. It also contains a viewpoint from Peter Lowing, Partner, Leahy Lewin Lowing Sullivan Lawyers.
Explore chapterThe Guide
This chapter contains selected listings of some of the country’s top hotels, details for embassies, ministries and organisations, and helpful tips for business and leisure travellers.
Explore chapterTable of Contents
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