Guidance

Overseas business risk: Papua New Guinea

Updated 23 June 2017

1. Political and economic

Papua New Guinea’s current stable political environment and uninterrupted economic growth in the petroleum and mining industries proves promising for potential investors and businesses ventures.

1.1 Political overview

Papua New Guinea is a Commonwealth Realm with His Majesty King Charles III acting as the Head of State, represented by a Governor-General. The Governor-General appoints the Prime Minister on the recommendation of the National Assembly. The National Executive Council (Cabinet) is appointed by the Governor-General on the recommendation of the Prime Minister. It currently comprises the Prime Minister plus 32 Ministers, all of whom are members of the 110 member National Assembly.

Multi-party parliamentary elections are held every 5 years for the 89 district constituency and 21 provincial (Governors) seats. Elections are characterised by large numbers of candidates, significant turnover of MPs and weak associations with political parties. During the 2012 elections over 40 parties competed but only half secured seats in the National Assembly. The resulting parliamentary coalition nominated the Hon Peter O’Neill as Prime Minister who has brought a degree of stability after a period of frequent no confidence votes and changes in prime ministership.

Papua New Guinea National Election will be held in this year with polling open from 24 June until 8 July 2017. The writs for the election will be issued on 20 April, while the close of nominations will be on 27 April. There is the potential for political activity and protests in the lead up to and during the election period.

The Autonomous Region of Bougainville has special constitutional status which provides for 3 members of the National Assembly, as well as its own President and autonomous government. Under the Bougainville Peace Agreement, which is enshrined in PNG’s Constitution, Bougainville will hold a referendum on its future status by 2020.

1.2 Economic overview

The economy of Papua New Guinea decelerated through 2016 due to the drop in energy prices and while further LNG and mining projects have progressed slowly. The GDP growth rate was 4.3% in 2016 and forecast to fall to 3% in 2017. This drop has reverberated across the economy through decreased state revenues and a foreign exchange squeeze, although agriculture exports (palm oil, cocoa and coffee) perked up in 2016. However, it is predicted that GDP growth will remain positive and could rise significantly as future projects move into development in 2018-2019. Total’s Papua LNG project and Exxon’s P’nyang LNG developments are expected to be the next projects as PNG cements its position as one of the world’s lowest cost LNG suppliers. Beyond LNG, new world class gold and gold/copper mines are likely to move into development on the same timing.

The government’s Vision 2050, Strategic Development Plan 2010 to 2030, and other, shorter-term plans prioritise transport infrastructure, renewable energy, private sector development, regional co-operation, and rural primary health. While the current Government made progress on universal free primary education, and also prioritised health, security and infrastructure.

PNG remains an attractive country for foreign investment, particularly its primary sector, thanks to its abundant supply of commodities and its proximity to Asian markets. But PNG can be challenging place for international participants. High-level, strategically important projects are likely to proceed comparatively smoothly, while smaller, more entrepreneurial ventures may face difficulty.

Papua New Guinea has Economic Partnership Agreement with EU on some goods and services, which guarantee free trade.

PNG presents great opportunities, yet there are a number of issues that you must be aware of when calculating the cost of doing business:

  • poor infrastructure. Whilst the government is committed to boosting public spending, a lack of quality infrastructure and services makes it sometimes difficult to conduct business and implement projects.

  • law and order. Security is an issue within the country and needs to be well planned for. Many companies doing business in PNG find that security is one of their biggest overheads. According to research by the World Bank, 81% of companies said that crime has an impact on expansion decisions, while more than two-thirds of businesses spend an average of 5% of their yearly outgoings on security.

  • finding good management staff. Locally, education systems remain challenged sometimes making it difficult to find a pool of suitably educated and skilled staff.

  • bribery and corruption see below

2. Human rights and business

Basic rights and freedoms are enshrined in PNG’s Constitution and laws. However, implementation of these protections is patchy due to weak institutions, the limited reach of the state and police abuses. Significant human rights concerns remain in several areas, including women’s rights, family violence, LGBT rights and disability rights. Concerns about human rights impacts from logging and mining are also regularly recorded, with the police and private security firms coming under specific criticism.

PNG has rejected international recommendations to abolish, or confirm the de facto moratorium on, the death penalty. In 2013 PNG expanded the scope of crimes eligible for the death penalty and signaled its intention to resume executions. However, in early 2015 Prime Minister O’Neill indicated a further shift in policy to maintain the status quo. As of February 2017, thirteen prisoners remained on death row.

Approximately 900 asylum seekers and refugees are currently detained on Manus Island. International human rights NGOs regularly raise concerns about arbitrary detention, restrictions on freedom of movement and the conditions of detention. The Australian and PNG government are under mounting pressure to close the detention facility down.

Seventy per cent of PNG’s population live in remote rural areas engage in subsistent agriculture, while just below 40% of urban residence engage in the informal economy. Women are still under represented in senior professional positions with recent petite progress with women being appointed as departmental heads.

3. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Papua New Guinea was ranked 136th in Transparency International’s Corruption Perceptions Index for 2016. It is unsurprising therefore that many incumbent and former high ranking officials are investigated, prosecuted and convicted for bribery, fraud and corruption each year. You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.

4. Intellectual property

For the information on the protection of Intellectual Property Rights please visit Intellectual Property Office. The IPOPNG administers the Trade Marks Act, Chapter 385, Copyright and Neighboring Rights Act (2000) and the Patents and Industrial Design Act (2000).