Papua New Guinea’s construction sector is closely tied to its extractive industries. This is in part due to the substantial contribution of extractives to the country’s economy, accounting for around 28% of GDP in 2019. The performance of extractives also dictates access to foreign exchange (forex), with the segment representing roughly 94% of exports that same year. PNG’s construction sector relies heavily on imported materials, thus access to forex is crucial to avoid project delays. Alongside vulnerability to forex shortages, other factors that have weighed on construction activity include limited availability of land for development and the slow process of opening this up; a historic lack of transparency accompanied by fraud allegations within the segment; and insufficient human capital.

Looking ahead, steps taken by the administration of Prime Minister James Marape – who was elected in 2019 on a promise to improve the lives of ordinary citizens – are expected to address some of these issues, namely through opening up more land for development; improving the transparency of public works projects and the land ownership process; and encouraging greater use of domestically sourced materials and local contractors. The sector will benefit from projects in the pipeline to improve the country’s transport infrastructure alongside a continued focus on increasing the affordable housing supply. A number of large-scale extractive projects – offering potential growth opportunities – have also been proposed.

Extraactivities-Driven Demand

At its peak, construction activity accounted for 0.9% of real GDP growth in 2012. This boom took place during the development of the country’s flagship liquefied natural gas (LNG) project, the $19bn PNG LNG project, which was completed in 2014 and led by US oil giant ExxonMobil. There is hope that the proposal for an integrated three-train expansion of PNG’s LNG capacity – involving the $13bn Total-led Papua LNG project and the development of ExxonMobil’s P’nyang gas field – could revive demand for extractives-driven construction (see Energy chapter). The Papua LNG project is expected to commence construction in 2021. However, the future of the project is somewhat uncertain, as talks temporarily broke down on the P’nyang development – which is integral to the plan – but resumed in April 2020. Although the P’nyang development would require less extensive construction work than the PNG LNG project, given that basic infrastructure is already installed, it would nonetheless provide considerable opportunity for the sector.

An extractives-driven boost in construction demand is also on the horizon for Morobe Province – the site of the proposed $5bn Wafi-Golpu mining project – with negotiations expected to continue once restrictions related to Covid-19 subside. As of June 2020 a number of real estate developers were reportedly already searching for sites in Lae, which is within driving distance of the mine, for residential development.

The 2020 national budget projected that the construction sector’s contribution to nominal GDP would increase from PGK5.4bn ($1.6bn) in 2019 to PGK5.9bn ($1.7bn) in 2020, PGK6.4bn ($1.9bn) in 2021 and approximately PGK8bn ($2.4bn) by 2024. Although business disruptions caused by the Covid-19 pandemic will undoubtedly lead to a revision of these estimates, they highlight the positive sentiment that surrounds PNG’s construction segment in general.

Road Network

Improving PNG’s transport infrastructure is another key driver of construction activity. In 2018 the government spent PGK356.6m ($105.2m), or about 27% of its total capital expenditure, on improvements to roads, airports and ports. This had been expected to increase to PGK995.6m ($293.6m) in 2019, before the administration took steps to rebalance the budget. Nevertheless, the sector was given a boost when the Asian Development Bank more than doubled its expected spending on PNG’s roads and airports for the year, from PGK287m ($84.7m) to PGK592m ($174.6m). In August 2019 the government launched PNG’s new National Road Network Strategy 2018-37, which seeks to improve the country’s historically underfunded roads. The initiative aims to develop a national road network based around five economic corridors and to repair pre-existing roads. The initial project launch outlined total expenditure of PGK21.1bn ($6.2bn) to be allocated in three phases: a PGK4.5bn ($1.3bn) disbursement from 2018 to 2022 to improve 2309 km of core national roads that would offer the greatest economic benefit; a PGK4.8bn ($1.4bn) tranche over a second five-year phase to develop a further 2502 km of priority national roads; and a final PGK11.8bn ($3.5bn) allowance from 2028 to 2037 to develop 4639 km of non-priority national roads. However, with the government’s disbursement of a PGK5.7bn ($1.7bn) stimulus package in response to the pandemic, it remains to be seen whether some of this infrastructure allocation will be adjusted – although, given the long-term nature of the strategy, it seems likely that improving the road network will remain a priority.

Improving roads is important to both support developers and connect local communities. Poor road access can hinder building projects and increase costs – particularly in areas beyond Port Moresby – as well as increase the challenge of installing utilities. Better access will therefore help the administration in its goal to build more affordable housing, which will provide ongoing stimulus for construction activity. It will also facilitate the installation of basic utilities to more communities, including water and power, which should help the government achieve a targeted 70% electrification rate by 2030 (see Energy chapter). Nonetheless, there remain a number of barriers to ensuring that public works projects in PNG continue to be completed on time and in a transparent manner.

National Procurement Act

Delays and a lack of transparency have historically hindered development projects in PNG, which the previous administration sought to address by centralising the public works procurement process and leveraging economies of scale to improve their affordability. The National Procurement Act (NPA) of 2018 replaced the Central Supply and Tenders Board and withdrew procurement rights from government departments, centralising responsibility under the National Procurement Commission (NPC), a new authority created through the NPA. State bodies can still seek certification to procure public works independently, but must first prove a sound track record in procurement activities and their ability to maintain good practices for the management of public finances.

The act also mandates that public procurement contracts with values exceeding PGK500,000 ($147,500) be undertaken by the NPC. Moreover, the new legislation grants citizens and state-owned companies the exclusive right to bid for government contracts valued under PGK10m ($2.9m), while contracts valued above this amount must be approved by the National Executive Council. The NPA, which came into effect in April 2019, also stipulates a 50% local contract requirement for contracts of PGK10m-30m ($2.9m-8.9m), with no local content requirement for contracts above this threshold. Once compliance to the new system becomes universal, the NPA should help to reduce the corruption and delays that have historically inflated costs and deterred investment into PNG’s infrastructure developments, and provide greater opportunity for local construction companies. It could also increase demand for domestically produced construction materials.

Local Materials

There is a limited amount of domestic alternatives for building materials for companies seeking to avoid import-related complications. PNG currently has one cement factory, operated by Japan’s PNG Taiheiyo Cement in Lae, which has an annual production capacity of 200,000 tonnes. Monier, meanwhile, is one of the largest local distributors of building materials. The firm produces ready-mix, reinforced and precast concrete; supplies aggregate, sand, rock, road base and fill; and has production capacity exceeding 1m tonnes annually from Nebiri Quarry near Port Moresby. A new cement player looks set to emerge in PNG. Australian mineral exploration company and resources developer, Mayur Resources, is working to establish its $350m Central Cement and Lime Project around 25 km north of Port Moresby. The facility is designed to develop large-scale, high-grade lime deposits and provide downstream opportunities for quicklime and clinker – two materials used in the production of cement – as well as cement itself. The project targets annual production of around 1.65m tonnes of cement and clinker combined, in addition to 200,000 tonnes of quicklime. This supply would be sufficient to not only reduce reliance on imports, but also to boost forex earnings via exports, with neighbouring Australia an appealing target destination given the country’s growing reliance on clinker and cement imports.

As part of efforts to narrow the affordable housing deficit, the previous administration aimed to boost the manufacturing of construction materials within PNG, but did not introduce any supporting policy. According to industry experts, companies can already source building materials of an international standard in PNG, but may be discouraged by difficulties in transporting goods across the country. While the road network continues to develop, government incentives could help to support local industry. One strategy is the introduction of tax credits for companies that use materials produced locally, which is viewed as a preferable alternative to raising import tariffs and further increasing the cost of overheads for construction activities.

Local Contractors

In some cases, domestic suppliers of construction materials and equipment have expanded their offering to provide contracting services. Those that have done so include Lorma Constructions, which offers crushing and materials testing services, as well as contracts for public road works funded by international development partners and the government; and Curtain Bros, whose facilities on Motukea Island, around 12 km from Port Moresby, comprise steel fabrication and a dockyard. The latter firm’s projects include Port Moresby’s first freeway, Poreporena Freeway; the capital’s port; and property developments in Harbour City, the Peninsula, Motukea Island and Motukea North. The upgrade of a 28-km stretch of the Boluminski Highway between Pinatgin and Soalaba Bridge, completed in December 2018 by Dekenai Constructions, is another notable transport infrastructure project awarded to PNG contractors in recent years. The local firm is also working on the maintenance of a 112-km stretch of road on the Hiritano Highway between Vanapa Bridge and Bereina.

Still, one factor that may discourage foreign participants from utilising local contractors is the skills gaps in the domestic industry. “There is a wide variety in the quality of construction work being delivered by domestic and international firms,” Graeme Paine, director of Corman Contractors, a local construction and civil engineering company, told OBG. “It is therefore very important that we have the requisite knowledge and technical transfers in the industry.”

Land Ownership

Another factor that impedes construction and poses a barrier to investment is the challenge of negotiating land rights. While much of PNG’s land remains physically available for development, this development is constrained by a number of bureaucratic hurdles. Approximately 97% of land remains under community ownership, and transferring it to investors is a complex and slow process.

The first challenge is the negotiation of formal agreements with customary landowners. Due to PNG’s history of common law, landowners traditionally pass land to the next generation verbally, and therefore often lack supporting legal documents for the sale or lease of land. This is exacerbated by claims of land grabbing – or the sale of land without consent of the landowner – and corruption, as well as a lack of coordination among government agencies surrounding the process. The second challenge is that new agreements must be finalised in the form of land titles by the Department of Lands and Physical Planning, which can be a lengthy process.

However, the administration has demonstrated enthusiasm to reform land ownership processes while maintaining landowner interests. In December 2019 the government made a commitment of PGK15m ($4.4m) annually for five years to the second phase of the National Land Development Programme, and in October 2019 announced that land title securities are to be digitalised (see Real Estate overview). These changes should streamline the process of ownership transferral and ensure the traceability of transactions.


A shortage of forex is also a long-standing barrier to doing business in PNG. This increases business administration costs, causes delays in paying foreign suppliers and undermines productivity. “The lack of forex weighs heavily on the construction sector,” Partha Sarathy, executive director of construction materials firm PICSA PNG Group, told OBG. “Without access to forex, we cannot import necessary raw materials required, most of which are not manufactured locally, such as steel. Invariably, there are project delays. Of late, many suppliers are unwilling to deal with PNG due to the unavailability of currency, which results in higher costs as we are forced to procure from the limited number of suppliers who are willing to export to PNG.”

In recent years measures have been taken to improve access to forex, including a maiden $500bn sovereign bond issuance in 2018; concessional loans from development banks and bilateral partners; improved performance in extractive exports; and targeted interventions by the central bank. However, the forex challenge looks set to remain: early 2020 was characterised by lower prices for copper, and resources revenue for the year is expected to fall by PGK1.1m ($324,400) due to the effects of the Covid-19 pandemic. However, local players are trying to mitigate the challenge. “Due to the lack of forex, local firms are looking to source as many things as they can locally – but there are downsides, such as inability to supply or long lead times,” Paine told OBG. Being able to easily source materials locally would speed up the building process, both by avoiding delays on the shipment of imported materials and reducing the need for extensive planning to factor in shipment times.

International Financing

Chinese companies have played a growing role in the development of PNG’s transport infrastructure as the country has made a diplomatic and economic push into the Pacific, with PNG signing onto China’s Belt and Road Initiative in 2018. Chinese-led projects to improve connectivity in PNG include the replacement of 12 bridges spanning 380 metres on the New Britain Highway, which was awarded to China Jiangsu Construction in June 2018, and ongoing work on the Highlands regional road network by the Chinese Overseas Engineering Group Company (COVEC) and China Harbour Engineering Company. COVEC is also building six bridges on the Ramu Highway, and three on the Sepik Coastal Highway.

Chinese companies have also spearheaded a number of building developments in PNG, such as the country’s tallest structure, the PGK250m ($73.7m) Noble Centre, built by the China Railway Construction Engineering Group PNG Real Estate Company. In April 2019 a consortium of private Chinese investors held the ground-breaking ceremony for a mixed-use development in the Port Moresby suburb of Five Mile. Dubbed Chinatown, the $414m, 270,000-sq-metre development will include retail outlets and entertainment venues, as well as a residential offering. The PGK50m ($14.7m) Overseas Chinese Cultural House Project is also under construction in Port Moresby.

While China’s influence is clear in PNG’s infrastructure development, a number of other countries have also strengthened their foothold in the country. These include neighbouring Australia, which helped to finance a PGK60m ($17.7m) cancer unit at Angau Hospital in Lae, and the Czech Republic, which supported the PGK300m ($88.5m) redevelopment of Boram General Hospital in Wewak. It remains to be seen how far the international financing of PNG’s construction projects might be reshaped as the global economy recovers from the Covid-19 pandemic – particularly in regard to Chinese involvement – and to what extent the sector may turn towards local companies in the future.


In the coming years the process of procuring public works in PNG looks likely to become more transparent and provide greater opportunities for local companies once regulations passed by the previous administration become well established. The government has also demonstrated notable early enthusiasm to increase the ease and transparency of land ownership processes, which could further stimulate construction activity. However, it will be important to ensure that the benefits are felt by all parties, including customary landowners on the fringes of major towns.

Meanwhile, ongoing efforts to improve road connectivity and affordable housing supply are poised to provide steady demand for construction around urban areas, before expanding outwards into rural communities – with added potential for proposed large-scale extractive projects to boost construction activity further down the line. These factors should provide an opportunity for local players to add value to the segment and contribute to PNG’s development.