Papua New Guinea: Investing
Papua New Guinea is the largest economy among the Pacific Islands and offers enormous trade and investment potential. According to UNCTAD's 2021 World Investment Report, FDI flows to Papua New Guinea amounted to USD -935 million in 2020 and showed a slight decline from USD -901 million in 2019, due to the economic and health crisis triggered by the Covid-19 pandemic and a massive government budget shortfall. The stock of FDI grew to USD 3.9 billion in 2020. Traditionally, the mining, agriculture, finance and trade and gas sectors attract most FDI (Bank of Papua New Guinea data), and the country is attempting to diversify it through a free and special economic zone reached with blockchain firm Ledger Atlas.
Under the current Prime Minister M. Marape, Papua New Guinea reaffirmed its openness to trade and investment, is stepping up reforms to recover from high debt levels and seeks to attract more foreign direct investment (FDI) to stimulate its economy. However, the Marape Administration’s inability to reach agreement with multinational companies on key energy and mining projects created a shadow over this strategy (US State Department, 2022). The country aims to increase Foreign Direct Investment (FDI) in mining and the petroleum/gas sector from USD 40.0 million in 2016 to USD 100.0 million by 2022. The mining, oil, and gas sectors attract most of the FDI. There is a target to increase stock to USD 10 billion by the end of 2022. The government also aims to increase FDI in the renewable sector. Last but not least, the world’s first public-private, Digital Foreign Direct Investment (FDI) working group has been recently created in PNG to encourage tech investment (World Economic Forum, 2022).
Papua New Guinea has six preferential trade agreements in force. The trade-weighted average tariff rate is 2.3 percent, but numerous nontariff barriers undercut trade flows. Foreign investors may not own land, and investment in several other sectors is restricted (Heritage Foundation, 2022).
Papua New Guinea (PNG) is the largest economy among the Pacific Islands and offers enormous trade and investment potential. Key investment prospects are in infrastructure development, a growing urban-based middle-class market, abundant natural resources in mining, oil and gas, forestry, and fisheries. FDI remain weak compared to the country’s potential due to lack of equipment, state monopolies, political instability and insecurity. Law does not allow direct foreign ownership of land and investment in several sectors is restricted. The judicial framework is inadequately resourced and underdeveloped. Pervasive corruption and nepotism are the biggest hindrances to development. Papua New Guinea ranks 120th out of 190 countries in the last 2020 Doing Business report, 12 spots down compared to the previous year. The government aims to provide security for foreign investors and regaining their confidence, promoting economic efficiency by privatising moribund state institutions and maintaining good relations with Australia, its former colonial ruler. A raft of foreign capital investments across new and existing mines are set to boost production and lead to a rebound in government revenues. However, there are concerns over proposed legislative changes that could hinder activity moving forward. The PNG Government remains focused on fostering an enabling environment for businesses to grow and attracting foreign direct investment. In 2021, the country faced a severe economic downturn, related to both a massive government budget shortfall and the COVID-19 pandemic. Foreign direct investment will play a significant role in PNG’s recovery and economic future, but at present has many barriers to overcome.
For additionnal information on FDI in Papua New Guinea access the IMF web page on this country.
| Papua New Guinea | East Asia & Pacific | United States | Germany | |
|---|---|---|---|---|
| Index of Transaction Transparency* | 5.0 | 5.9 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 5.0 | 5.2 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 9.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
| Foreign Direct Investment | 2019 | 2020 | 2021 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 335 | 112 | 87 |
| FDI Stock (million USD) | 4,843.4 | 3,800.0 | 3,886.8 |
| Number of Greenfield Investments* | 0.0 | 0.0 | 1.0 |
| Value of Greenfield Investments (million USD) | 0 | 0 | 52 |
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Personal income tax (residents) | Progressive rates from 0 to 42% |
| PGK 0 - 12,500 | 0% |
| PGK 12,501 - 20,000 | 22% |
| PGK 20,001 - 33,000 | 30% |
| PGK 33,000 - 70,000 | 35% |
| PGK 70,001 - 250,000 | 40% |
| Above PGK 250,000 | 42% |
| Personal income tax (non-residents) | |
| PGK 0 - 20,000 | 22% |
| PGK 20,001 - 33,000 | 30% |
| PGK 33,000 - 70,000 | 35% |
| PGK 70,001 - 250,000 | 40% |
| Above PGK 250,000 | 42% |
| Papua New Guinea | East Asia & Pacific | United States | Germany | |
|---|---|---|---|---|
| Number of Payments of Taxes per Year | 45.0 | 23.4 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 207.0 | 195.1 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 37.1 | 33.8 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
| Setting Up a Company | Papua New Guinea | East Asia & Pacific |
|---|---|---|
| Procedures (number) | 6.00 | 7.25 |
| Time (days) | 41.00 | 29.73 |
Source: Doing Business.
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Latest Update: June 2022
