Papua New Guinea: Investing

FDI in Figures

Papua New Guinea is the largest economy among the Pacific Islands and offers enormous trade and investment potential. According to UNCTAD's 2022 World Investment Report, FDI flows to Papua New Guinea amounted to USD 112 million in 2020 and showed a decline from USD 335 million in 2019, due to the economic and health crisis triggered by the Covid-19 pandemic and a massive government budget shortfall. It only reached USD 87 million in 2021. The stock of FDI grew to USD 3.80 billion in 2020 and USD 3.88 billion in 2021 (UNCTAD, 2023). 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. 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.

The country has faced dwindling FDI compared to pre-COVID-19 years, however investments increased at the start of 2021. Business confidence increased in 2022 sparked by renewed interest in PNG and evidenced by several key mergers and acquisitions in late 2021. Mining companies continue to be an attractive investment destination. Growth in mining industry is estimated to be 5.4%, underpinned by the expected reopening of the Porgera mine and improvements in OK Tedi and Wafi Golpu production in 2022. Furthermore, telecommunication companies are also anticipating growth and seen as good foreign investment opportunities in PNG and the Pacific. Telstra Australia acquired telecommunication giant Digicel Pacific which has the largest market share in PNG. Vodafone PNG – Amalgamated Telecom Holdings Ltd which operates across Fiji, Western Samoa, American Samoa, Kiribati, Cook Island and Vanuatu started operations as the third mobile operator in PNG with an anticipated investment exceeding USD 399 million. Australia was the top investing country in 2021, followed by Malaysia, the USA, Hong Kong, and the PRC. By sector investments, the energy sector had the highest investments, and investment proposals, followed by the retail, and wholesale sector, then manufacturing, mining and petroleum, and other sectors; despite recording increase in investments (ITA, 2023).

The country needs FDIs in 2023 to consolidate its growth trajectory and achieve a sustainable recovery (BSP, 2023). For additionnal information on FDI in Papua New Guinea access the IMF web page on this country.

© eexpand, All Rights Reserved.
Latest Update: May 2023