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 World Investment Report 2023, FDI flows to Papua New Guinea amounted to USD 327 million in 2022 after being negative one year earlier (-USD 11 million). At the end of the same period, the stock of FDI grew to USD 4.77 billion, representing around 15% of GDP. Traditionally, the mining, agriculture, finance, 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. In 2022, investment from China experienced a significant surge. Much of this investment has been directed towards Chinese-owned energy and infrastructure projects, particularly in bolstering power generation to support Chinese-owned mining ventures. When analyzed by sector, the energy sector attracted the highest investments and investment proposals, followed by the retail and wholesale sector, manufacturing, mining and petroleum, and other sectors. Mining companies remain an appealing destination for investment. Papua LNG progresses into the next phase of liquid natural gas commercialization, fostering long-term collaboration among TotalEnergies, ExxonMobil, and Santos. Additionally, telecommunications companies are poised for growth and are regarded as favorable foreign investment opportunities in PNG and the broader Pacific region. Telstra Australia's acquisition of telecommunications giant Digicel Pacific, holding the largest market share in PNG, underscores this trend. Moreover, Vodafone PNG – Amalgamated Telecom Holdings Ltd commenced operations as the third mobile operator in PNG, with an expected investment exceeding USD 399 million.
FDI remains weak compared to the country’s potential due to lack of equipment, state monopolies, political instability, and insecurity. However, the government is directing its focus towards promoting large-scale investments and trade while aiming to enhance manufacturing and downstream processing to decrease reliance on imports and expand the country’s export opportunities. Prioritizing initiatives to develop and uphold infrastructure, bolster safety and security measures, promote robust regulatory practices, strengthen governance, and enhance access to health and education will contribute to fostering resilient livelihoods and businesses. Significant investment opportunities lie in infrastructure development, tapping into a burgeoning urban-based middle-class market, and harnessing abundant natural resources in mining, oil, and gas, forestry, and fisheries. The government has approved the establishment of twenty-two Special Economic Zones (SEZ). This decision underscores the government’s dedication to fostering FDIs in Papua New Guinea. These SEZs will function as designated areas offering tailored incentives and advantageous conditions for businesses, with the primary objective of attracting and facilitating investment from foreign companies. SEZs present a range of advantages to foreign investors, encompassing tax incentives, simplified regulatory procedures, access to infrastructure and utilities, and potentially advantageous labor regulations. The Investment Promotion Act oversees foreign investment in Papua New Guinea, ensuring regulation and oversight. Section 37 of the Act safeguards foreign investors' property from nationalization or expropriation except under lawful circumstances, for public purposes defined by law, and with due compensation as stipulated by law. Foreign ownership of land is prohibited in PNG, with many foreign businesses opting for long-term leases instead of direct acquisitions. While the government does not mandate a minimum investment threshold, the Investment Promotion Authority (IPA) reserves the right, under Section 28(7) of the Investment Promotion Act, to request a potential investor to deposit a specified sum before granting IPA approval. This screening process aims to evaluate the net economic impact and alignment with national interests. Overall, PNG ranks 133rd among the 180 economies on the 2023 Corruption Perception Index and 148th out of 184 countries on the latest Index of Economic Freedom.
| 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 | 2020 | 2021 | 2022 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 112 | -11 | 327 |
| FDI Stock (million USD) | 4,446.5 | 4,446.5 | 4,773.2 |
| Number of Greenfield Investments* | 0.0 | 1.0 | 1.0 |
| Value of Greenfield Investments (million USD) | 0 | 52 | 1,017 |
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: May 2024
