WT/TPR/S/239/Rev.1 Trade Policy Review 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) OVERVIEW  
1. PNG has experienced relative political stability since its last Review, having re-elected 
in 2007 the first government (and Prime Minister) to serve a full five-year parliamentary term.  This 
was facilitated by the Integrity Law, which helped lay the foundations for grea ter policy consistency.  
However, recent parliamentary developments, incl uding in response to the Supreme Court's decision 
to rule some aspects of this legislation unc onstitutional, may jeopardize these achievements.   
2. No significant changes have occurred in the tr ade policy framework, although trade-related 
and FDI policies are to be aligned with the G overnment's over-arching development plan, Vision 
2050.  The Prime Minister's Office and the NEC (Cabinet), through the Public Sector Reform 
Management Unit, will be heavily involved in implementation.  Desp ite these developments that may 
yield longer-term improvements, PNG's trade polic y remains weak institutio nally, with insufficient 
coherence and coordination as well as implementati on problems.  Thus, trade policy-making, being 
primarily ad hoc, is not adequately mainstreamed in practice into economic and development policies, 
although it is now incorporated into major developm ent plans.  PNG officials expressed hope that this 
Trade Policy Review will help formulate and implement a modern trade policy by facilitating greater 
focus and transparency on what needs to be done, including enhanced coordination and 
implementation.   
3. PNG adopted an Export Driven Economic Recovery and Growth strategy in 2002.  It provides 
at least MFN treatment to all its trading partners.  PNG pursues an open trade regime through multilateral, regional, and bilatera l approaches, although the benefits of preferential trade agreements 
may be questionable.  An interim EPA with th e EU, operative from 2008, triggered on-going PACER-
Plus negotiations, still in their preparatory stag es, with Australia and New Zealand.  PNG is 
concerned that the expected gains from improve d access to the EU fish market, under the EPA's 
global fish sourcing rules, may be undermined by  the EU's adoption of regulations on illegal, 
unreported, and unregulated (IUU) fishing.  It is also worried that Australia and New Zealand will 
offer inadequate access to their semi-skilled and unskilled la bour markets from the PACER-Plus 
negotiations.  
4. The largely unchanged FDI regime is generally open, but foreign investors must be certified 
and "screened".  Joint ventures are voluntary and fu ll foreign equity allowed (special rules apply in 
some sectors e.g. petroleum and mineral resources,  timber and fisheries).  Generous non-transparent 
investment incentives e.g. tariff concessions, apply selec tively on a national treatment basis, subject to 
significant political discretion and approval by the NEC.  On-going land tenure reforms are likely to mobilize substantial customary land (97% of land) for economic use.  Foreigners can only lease land 
(usually for 99 years). 
(2) G
ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK  
5. PNG is a democratic constitutional monarchy with a unicameral National Parliament.  Its 
Members are elected for five years from 19 provinces and the National Capital District of Port Moresby.
1  No-confidence votes against governments are common and changes of government have 
occurred frequently without elections.2  Until 2002-07, no government had served a full term.  All 
                                                      
1 Voters elect members of the 89 constituencies and the 20 Members of Parliament that act as 
governors of the provinces and the Port Moresby District. 
2 General elections are only required if the no-confidence motion occurs within the last year of an 
elected term.  Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 17 
 
 
governments have been (often fragile) coalitions, and turnover of parlia mentarians is high at 
elections.3   
6. A few major political and constitutional developm ents have occurred since 2000.  While the 
2001 Organic Law on Integrity of Political Partie s and Candidates (Integrity Law) strengthened 
political parties and the executive, the Supreme C ourt's recent decision to rule aspects of this 
legislation unconstitutional may put these achievem ents at risk.  While a constitutional amendment 
abolished provincial seats and created additional constituencies, implementation was deferred until 
the 2012 election.  Relative political stability since 2002 saw the Government and Prime Minister re-elected in mid 2007, in elections that replaced "fir st-past-the-post" with limited preferential voting.  
The Government's constitutional 18-month grace period from no-confidence motions expired in 
February 2009.  In July 2009, the Prime Mini ster adjourned Parliament until November 2009, 
reportedly to avoid no-confidence motions.
4  Parliament resumed in July 2010 for a few days, in 
which the Government avoided an expected no- confidence vote (following the Supreme Court's 
decision referred to earlier), and was agai n suspended until mid-November 2010.    
7. A Bougainville Constitution was prep ared in 2004 after the 2001 peace  agreement.  
Provincial elections for the new Autonomous Bougai nville Government (ABG) followed in 
May 2005.  Its citizens voted in the latest na tional elections, and a re ferendum on Bougainville's 
future political status will be  held between 2015 and 2020.  
8. Provincial and national governme nts have concurrent powers in many key areas, including 
agriculture, commercial and industrial development, forestry, fishing, transportation, labour, and 
mining.  However, since national laws take precedence, provincial governments cannot make 
trade-related laws inconsistent with  national legislation.  In July 2008, Parliament packaged reforms 
to the Organic Law on Provincial Governments and Local Level Governments, which changed 
intergovernmental funding from the 2009 Budget.5  These changes are designed to equalize provincial 
and local-level government funding, and to focus on service delivery.  
9. PNG's independent judiciary consists of the S upreme Court at the top, headed by the Chief 
Justice, and the National Court, which has unlimited jurisdiction in both civil and criminal matters.6  
There are district and village-level courts (no longer local courts) as well as specialized agencies 
handling customary land disputes and civil cases relating to mining;  the legal system has adopted traditional local values, including communal land right s.  Land courts also handle ownership disputes. 
(3) T
RADE POLICY FORMULATION , IMPLEMENTATION , AND EVALUATION  
10. Legislative proposals are presented to Parliament  as bills.  Multilateral agreements must be 
passed into domestic law, and all trade agreemen ts submitted to Parliament.  The 28 ministerial 
portfolios are headed by appointed Ministers, which collectively compri se the National Executive 
Council (Cabinet) headed by the Prime Minister.  
                                                      
3 The majority party of the current 13-party coa lition Government has 27 of the 109 parliamentary 
seats.   
4 This practice was held by the Supreme Court to be unconstitutional in June 1999.   
5 The Intergovernmental Relations (Functions and Funding) Act of March 2009 is with the First 
Legislation Council, and is expected to enter into force in the near future following approval by the Head of 
State and publication in the National Gazette . 
6 The judiciary is comparatively free from politi cal interference (Economist Intelligence Unit, 2008, 
p. 7). WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 18 
 
 
11. The Ministry of Foreign Affairs, Trade and Immigration (MFATI) and its Department of 
Foreign Affairs and Trade (DFAT) through the Trade Division (TD),  handles external trade policy 
formulation and implementation.  It negotiates a nd administers PNG's multilateral, bilateral, and 
regional trade agreements.  These functions were tr ansferred in September 2007 from the Department 
of Trade and Industry, which was re-named the De partment of Commerce and Industry (DCI).  Other 
ministries with important trade-related responsibiliti es include: Treasury and Finance, and its Internal 
Revenue Commission (IRC) and the Customs Service, which were split in June 2009, with effect from 
2010;  the Prime Minister's Office;  Agriculture and Livestock;  Forestry;  Lands, Physical Planning and Mining;  Petroleum and Energy;  Public Enterp rises;  and Tourism and Culture.  Several statutory 
authorities have trade-related roles e.g. the Na tional Forest Authority, the National Fisheries 
Authority, the Minerals Resources Authority, the Tourism Promotion Authorit y, and the Independent 
Competition and Consumer Commission, established in  2002.  Services trade involves line agencies 
like the Ministry of Works, Transport and Civil Aviation, and the Ministry of Communication and Information.  The DCI, under the Mini stry of Commerce and Industry (MCI)  handles internal trade, 
manufacturing, small and medium-size enterprises , investment, and promoting commercial and 
industrial development.  The MCI's Investment Promotion Authority (IPA) facilitates and certifies 
foreign investment.  
12. Trade-related and FDI policies are to be aligned with the Government's over-arching 
development plan, Vision 2050;  the Prime Minister's Office and the NEC through the Public Sector Reform Management Unit are heavily involved in  implementation.  However, despite on-going 
efforts, which may bring longer-term improvements, PNG's trade policy framework remains weak 
institutionally, with insufficient coherence and coordination.  Policy-making is largely ad hoc.
7  This 
weakens the mainstreaming of trade policy into ec onomic and development polic ies. However, efforts 
are under way to address this weakness by incor porating trade policy into development policy 
strategies and plans, but implementation problems persist due to financia l and other institutional 
capacity constraints.  An external Trade Advisory Bo ard is planned, as part of the EU's Trade Related 
Assistance Project, to help the TD as a platform fo r dialogue with all stakeholders.  Policy statements 
have also emphasized making international trade an engine of economic revival, growth, and 
industrial transformation, along with an export-dr iven economic recovery strategy incorporating 
market-driven trade and investment policies.  The Medium-Term Development Strategy 2005-10 
(MTDS) focused on private-sector-led growth and, among its ten guiding principles, highlighted interventions in areas of PNG's global competitive a dvantage.  Officials hope that this Trade Policy 
Review will help formulate and implement a mode rn trade policy by facilitating greater focus and 
transparency on what needs to be done, including enhanced coordination and implementation.   
13. The private sector is represented in government discussions and policy dialogue by the 
Chamber of Commerce and Industry, the Manufacturers Council, the Business Council, the Chamber 
of Mines and Petroleum, and the Rural Industri es Council.  The Consultative Implementation and 
Monitoring Council (CIMC) facilitates dialogue betw een government, private sector, civil society, 
and the general community, and advocates implemen tation of recommendations made to government. 
Dialogue is facilitated through sectoral comm ittee meetings, annual regional and national 
development forums, as well as numerous policy enga gements with stakeholders, including providing 
secretariat functions to the National Working Group on Impediments to Business and Investment.  
The CIMC Commerce Sectoral Committee and the Agriculture Sectoral Committee, discuss trade-
related issues. Almost all industry boards also have non-ex officio members representing the private sector, and the National Development Forum enables gove rnment officials to liaise with stakeholders 
publicly.  No independent body publicly evaluates or advises government on trade policies or sectoral 
assistance.  The Industry Assistance Board (IAB), which advised on industry assistance, suffered from 
                                                     
 
7 UNCTAD (2006), p. 27. Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 19 
 
 
weak institutional capacity and government commitmen t, and was abolished in 2000.  The privately 
funded Institute of National Affairs (INA) conducts  research and provides independent public policy 
advice to government. The Government's independe nt "think tank" on public  policy and development-
related issues, the National Research Institute, also plays a policy advisory role and holds biennial 
public summits.    
Main trade laws 
14. Reform of outdated trade-related laws has b een slow since 2000, occurring largely piece-meal 
and handicapped by limited institutional, resource  and technical capacities (Table II.1). However, 
several major laws or amendments have been enact ed since PNG's last Review, including on customs 
legislation and regulations.  Laws are published in the National Gazette, and most departments have 
websites, albeit of varying usefulness. 
Table II.1 
Main trade-related legislation, as at July 2010  
Area Legislation 
Agriculture Export (Desiccated Coconut) Act 1956, Coffee Indus try Corporation (Statutory Functions and 
Powers) Act 1991, Kokonas Indastri Kopor esen Act 2002 (coconut), Cocoa Act 1991 , Cocoa 
Regulation 1982, Copra Act 1953, Copra Inspection Regulation 1982    
Aviation  Civil Aviation Act 2000 
Banking and finance Central Banking Act 2000, Savings and Loan Socie ties (Amendment) Act 1995, Life Insurance Act 
2000 (as amended), Superannuation (General Pr ovisions) Act 2000 (as am ended), Banks and 
Financial Institutions Act 2000, Securities Act 1997,  National Development Bank Act, Savings and 
Life Insurance Act 2000,  Insurance (Miscellaneous  Provisions) Act 1975, Insurance Corporation Act 
1977, Insurance Act 1995, Marine Insurance Ac t (Chapter 258), Proceeds of Crime Act 2005 
Commerce Trading Act 1949, Trade Licensing Act 1969, Discri minatory Practices Act 1963, Free Trade Zones 
Act 2000, Independent Consumer and Competiti on Commission Act 2002, Price Regulation Act 
1949, Price Regulations 1949,  Commerce (Tra de Descriptions) Act 1952, Companies Act 1997,  
Takeovers Code 1998, Industrial Centres Deve lopment Act 1990, Small Business Development 
Corporation Act 1990, Cooperative Societies Ac t 1982, Goods Act 1951, Arbitration Act 1951, 
Investment Disputes Convention Act 1978, Industr y Assistance Board Act 1985, Consumer Affairs 
Councils Act 1993  
Customs  Customs Tariff Act 1990 (as amended), Export (Cont rol and Valuation) Act 1973, Export (Control 
and valuation) Regulation 1973,  Customs ( Ad valorem  Duties) Regulation 1987, Customs 
(Prohibited Imports) Regulation 1973, Customs (P rohibited Exports) Regulations 1963, Customs 
Duty (Rebate) Act 1982 
Energy  Independent Consumer and Competition Commissi on 2002, Electricity Industry Act (Chapter 78), 
Electricity Commission Regulation 1966, Electrici ty Supply (Government Po wer Station) Act 1970, 
Electricity Supply (Government Power Stati on) Regulation 1970, Electricity Commission 
(Privatization) Act 2002  
Environment  International Trade (Flora and Fauna) Act 1979, In ternational Trade (Flora and Fauna) Regulations 
1982, Crocodile Trade (Protection) Act 1974, Croc odile Trade (Protection) Regulations 1980, 
Environment Act 2000, Environmental Contamin ants Act 1978, Environmental Planning Act 1978, 
Environmental Planning Regulations 1992, Water Resources Regulations 1982 
Fisheries  Fisheries Management Act 1998, Fisheries Manageme nt Regulations 2000, Fisheries (Torres Strait 
Protected Zones) Act 1984, Fisheries (Torres Strait Protected Zones) Regulations 1987, Export (Fish) 
Regulations 1953 
Forestry  Forestry Act 1991 (as amended) , Forestry Regulations 1996 
Health and pharmaceuticals Public Health Act 1973, Tobacco Products (Hea lth Control) Act 1987, Drugs Act 1952, Drugs 
Regulation 1952,  Poisons and Da ngerous Substances Act 1952, Pois onous and Dangerous Substance 
Regulations 1953, Dangerous Drugs Act 1952, Da ngerous Drugs Regulati on 1955, Medicines and 
Cosmetics Act 1999, Medicines and Cosmetics Regulation 2002 
Intellectual property  Patents and Industrial Designs Act 2000, Patents and Industrial Designs Regulation 2002, Copyrights 
and Neighbouring Rights Act 2000, Trademarks Ac t 1978, Trademarks Regulation 1979, Customs 
(Prohibited Imports) Regulation 1973 
Investment Investment Promotion Act 1992, Inve stment Promotion Regulations 1992 
Land and land transport PNG Constitution, Land Act 1996, National Road Sa fety Council Act 1997, Motor Dealers Act 1976  
Mining Mining Act 1992, Mineral Resources Act 2005, Oil and Gas Act 1998, Oil a nd Gas Regulations 1998 
Table II.1 (cont'd) WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 20 
 
 
Area Legislation 
Professional business and 
other services nes Professional Conduct Rules 1989, Lawyers Act 1986, Lawyers Admission Rule 1990, Attorney 
Generals Act 1989, Attorney Generals Regula tions 1990, Accountants Act 1996, Architects 
Registration Act 1989, Professional Engineers (R egistration) Act 1986,  Professional Engineers 
(Registration) Regulation 1988, Education Act 1983, Education Regulation 1983, Security 
(Protection) Industry Act 2004   
Quarantine and SPS Food Sanitation Act 1991, Quarantine Act 1953, Na tional Agricultural Quarantine and Inspection 
Authority Act 1997, Animal Disease and Control Act 1952, Animal Disease and Control Regulation 
1952, Animal Act 1952, Animal Regulation 1952 
Shipping Shipping Act 1951, Merchant Shipping Act 1975, Independent Cons umer and Competition 
Commission Act 2002, Harbours Board Act 1963 
Standards National Institute of Standard s and Industrial Technology Act 1993, Trade Measurement Act 1973, 
Building Act 1971, Weights and Measurements Regulation 1974 
Taxation Income Tax Act and Regulations 1959 (as am ended), Goods and Serv ices Tax Act 2003 (as 
amended), Excise Tariff Act 1956 (a s amended), Goods and Services  Tax Revenue Distribution Act 
2003, Goods and Services Tax Regulation 2005, St amp Duties Act (Chapter 117), Customs Tariff 
(PNG LNG Project) (Amendment) Act 2008  
Telecommunications Independent Consumer and Competition Comm ission Act 2002, Post and Telecommunication 
Corporation (Home Ownership) Act 1990, Postal  Services Act 1996, National Information 
Communication Technology Act 2009, Televi sion (Prohibition and Control) Act 1986 
Source: PNG  authorities.  
(4) TRADE POLICY OBJECTIVES  
15. Trade reforms are integral to PNG's economic priority of developing an efficient, open 
economy to promote private-sector and export-led growth.  An Export Driven Economic Recovery 
and Growth strategy was adopted in 2002.  The economy has become more outward looking since the 
last Review of PNG;  import restrictions, especially tariffs, reduced, and there are relatively few formal non-tariff barriers overall.  Government a ccepts that PNG will benefit economically from 
improved productivity and consumer  welfare brought about by greater competition, including in key 
service sectors.  PNG's National Vision 2050 is the Government's strategic directional statement driving development until 2050, and focuses on expanding manufacturing, services, agriculture, forestry, and eco-tourism.  Developed by the N SP Taskforce as an overarching development plan 
cutting across sectors, it is based on seven pillars , including especially service delivery, wealth 
creation, and human capital deve lopment, and focuses on downstream activities, an export-oriented 
economy, and rural development.  All policies and prio rities, including those related to trade and FDI, 
are to be aligned with it, and the Prime Minister 's Office and the NEC through the Public Sector 
Reform Management Unit, are to be heavily i nvolved in formulation and implementation.  The 
Development Strategic Plan 201 0-30, developed by the Department of National Planning and 
Monitoring,   encompasses four successive five-year Medium Term Development Plans (the next, 
from 2011-15, is being finalized) that outline key obj ectives, strategies, indicators, and sectoral 
targets.  PNG's trade policy has aimed at "domesticat ion" of value added in agriculture, minerals, and 
manufacturing, including foodstuffs, to promote im port substitution and diversify the economy away 
from mineral and petroleum extraction.
8  T h e  D C I ' s  t a r g e t  i s  t o  r a ise manufacturing (excluding 
petroleum and minerals processing) from 10% to 30% of GDP by 2030. 
(5) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Multilateral 
16. PNG accords at least MF N treatment to all, including non-WTO, trading partners.  It is not a 
member or observer of the WTO Plurilateral Agreem ents on Government Procurement or on Trade in 
Civil Aircraft.  PNG does not participate in th e Working Group on Transparency in Government 
                                                      
8 UNCTAD (2006), p. 28. Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 21 
 
 
Procurement (currently inactive).  It is not a party to the Ministerial Declaration on Trade in 
Information Technology Products (the Information Technology Agreement). 
17. PNG has indicated its continued commitment to the multilateral trading system and to 
concluding the Doha Round, including achieving the key objective of a "fairer rules-based trading 
system" that meets the sp ecific needs of developing countries.  It believes the WTO should protect the 
country from other nations' unfair trade practices, including export subsidies.  PNG has requested the WTO to create a division to specifically impl ement the work programme on small vulnerable 
economies (SVEs), and establish a regional training ins titute on WTO Agreements.  It is a member of 
the SVE Group (on agriculture, NAMA, and rules).
9  PNG advocates the extension of special and 
differential to SVEs with regard to fisheries s ubsidies;  meaningful market access commitments on 
temporary movement of people;  and binding agreements on technical  assistance for trade facilitation, 
agriculture and non-agricultural market access ( NAMA).  PNG supports regional approaches for 
SVEs in forming SPS, TBT, and TRIPS enquiry points and in providing technical assistance and 
capacity building.  The services negotiations, includ ing on domestic regulation, should reflect SVE 
development levels.  PNG feels SV Es should not have to commit to  agricultural tariff reductions 
incompatible with their development needs, and th at appropriate treatment of special products is 
important.  Developed country li beralization would, according to PNG, eventually remove the 
important export benefits from pref erential schemes, and the negotiati ons should adequately address 
state-trading enterprises, export credits, and food  aid.  PNG believes that tariff escalation by 
developed countries hindered its effo rts to add value to production, and that having to meet their 
sanitary and phytosanitary standards reduced its ex ports.  PNG supports liberalization but the NAMA 
negotiations should reflect special SVE needs. 
18. As a non-resident WTO Member, the absence of a Geneva mission makes PNG's multilateral 
participation less effective.  Such matters are handl ed part-time by its EU mission in Brussels and the 
WTO Pacific Islands Forum Representative Office in Geneva, established in 2004. 
Notifications and dispute settlement 
19. PNG has not fully met its WTO notification requirements since 2000, creating a lack of 
transparency;  43 notifications relating to agriculture were outstanding as at June 2010 (Table II.2).10  
The authorities indicated that this reflected a l ack of coordination among relevant departments and 
agencies as well as capacity constraints, and that fu rther technical assistance was needed if PNG was 
to satisfactorily meet its notification commitments .  PNG has submitted annual tariff data to the WTO 
Integrated Data Base (IDB) from 2000 to 2008.  It has not been involved in any formal WTO 
disputes, including as a third party. 
                                                      
9 PNG also belongs to the WTO "W52" Group proposing "modalities" in negotiations on geographical 
indications and "disclosure" by patent applicants.   
10 WTO (2009).  The number was reduced (by one) to 43 follow ing receipt of a notification 
in July 2009. Outstanding notifications are those under the Agreement on Agriculture, Article 18:2 on domestic 
support (Tables DS:1 of G/AG/2 and appropriate Supporting Tables), as well as Articles 10 and 18:2 on export subsidies (Table ES:1 of G/AG/2 and appropriate Supporting Tables) for the years 1997 to 2008. WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 22 
 
 
Table II.2 
Latest notifications, by WTO Agreement, 2000 to July 2010 
Agreement Requirement/content Document symbol and date of 
notification 
Agreement on Implementation of GATT Article VI of the GATT 1994 (Anti-dumping)  
Article 16.4 Semi-annual reports of anti- dumping actions (taken within the 
preceding six months) G/ADP/N/16/Add.1/Rev.12, 27 April 2009 
Article 16.5 Competent authorities G/ADP/N/14/Add.28, 14 October 2009 
Article 18.5 Laws and regulations a nd changes G/ADP/N/1/PNG/1, 28 March 2001 
Agreement on Trade-Related Intellectual Property Rights  
Article 63.2 Laws and regulations and ma jor changes IP/N/1/PNG/2, 15 November 2005 
Agreement on Rules of Origin 
Article 5.1 and 5.2 Non-preferential rules of  origin and changes G/RO/N/32, 30 April 2001 
Paragraph 4 of Annex II Non-preferential rules of origin and changes G/RO/N/32, 30 April 2001 
Agreement on Preshipment Inspection 
Article 5 Laws and regulations and ma jor changes G/PSI/N/1/Add.10, 19 July 2004 
Agreement on Technical Barriers to Trade (TBT)  
Article 15.2 Implementation and administration of agreement G/TBT/2/Add.77/Rev.1, 27 October 2006  
Articles 10.1 and 10.3 National enquiry points G/TBT/ENQ/36, 5 February 2010 
Article 10.6 Laws and regulations and majo r changes G/TBT/N/PNG/1, 29 September 2006 
Paragraph C of Annex 3 Membership of Co de of Good Practice for the preparation, 
adoption and application of standards G/TBT/CS/N/170, 29 September 2006 
Agreement on Subsidies a nd Countervailing Measures 
Article 25.1 Subsidies  G/SCM/N/74/PNG, 18 June 2001 
Article 25.12 Competent authorities G/SCM/N/18/Add.28, 14 October 2009 
Regional Trade Agreements U nder the "Enabling Clause" 
Paragraph 4(a) Pacific Island Countries Trade Ag reement (PICTA) WT/COMTD/N/29, 17 September 2008 
Source:  WTO documents. 
(ii) Preferential 
20. PNG pursues its trade policy objectives at the mu ltilateral, regional, and bilateral levels, and 
has expanded its preferential arrangements (Table A II.1).  However, given the potential for trade 
diversion, agreements among Pacific states may not have enhanced regional welfare, and in the case 
of PICTA may even be a "stumbling block" to broa der liberalization.  Even if PNG has benefited, 
gains may have been at the expens e of smaller island economies.  Th ey are also likely to be small 
relative to a liberalizing PACER-Plus Agreement with Australia and New Zealand, and especially 
compared with its own non-discriminatory libe ralization, achieved either unilaterally or 
multilaterally.11  Further unilateral trade reforms coul d raise PNG welfare by improving resource 
allocation and introducing dynamic efficiency gains from greater competition and openness to 
investment, technology, skills, and ideas.  Accord ing to the ADB, the EU Economic Partnership 
Agreement (EPA) is likely to genera te few economic benefits for PNG.12  While the authorities 
indicated that the EPA is expected to provide subs tantial benefits, especially for the fish processing 
industry by maintaining preferential tariff access to the EU and the associated relaxation of the rules 
of origin requirements to allow greater global sour cing of fish, they expressed concern that the EU's 
                                                      
11 ADB (2007).  PACER-Plus refers to the negotiated PACER and not the existing framework 
agreement. 
12 ADB (2007). Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 23 
 
 
adoption of regulations on illegal,  unreported, and unregulated (IUU) fishing would undermine such 
gains.13 
21. PNG is not a member of the Global System of Trade Preferences (GSTP).  It provides no 
preferential tariffs for developi ng or least developed countries.   
(a) Regional agreements 
South-Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)  
22. PNG, a Forum Island country (FIC), is a member of SPARTECA, a longstanding 
non-reciprocal preferential agreement with Austra lia and New Zealand.  PNG exports enter these 
two markets duty free without restriction.  PNG would like SPARTECA's restrictive value-added 
rules of origin eased since it imports most raw materials and has difficulties meeting the rules, 
especially for "pack-off" products (e.g. instan t coffee) imported for packaging and re-sale 
(Chapter III).  Australia and/or New Zealand ma y vary or suspend preferential access under special 
safeguard provisions, and actions against dumpe d or subsidized exports from all SPARTECA 
members are handled under both countries' legislation. 
23. SPARTECA's importance has declined due mainly to the erosion of tariff preferences, with 
Australia and New Zealand reducing MFN rates unila terally, and the restrictive rules of origin. 
Melanesian Spearhead Group (MSG) Trade Agreement 
24. The revised MSG Trade Agreement, reviewed  in 2005 and in 2007 (MSGTA 2007), replaced 
the small positive tariff concessions list (which had been increased to cover some 530 six-digit tariff 
items) with a negative list, and opened membership to other FICs.14  PNG has a negative list covering 
a number of agricultural items (e.g. sugar, cer tain cereals, jams and fruits) and manufacturing 
products (especially clothing, but also canned macker el and salt) (Article 9).  Tariff schedules were 
also expanded from 4- to 6-digit HS headings to better identify preferential products.15   
25. The MSGTA 2007 calls for eventual elimination of tariffs, no quantitative import restrictions 
on eligible goods (except for balance-of-payment s reasons), and no new export prohibitions or 
restrictions.  Tariffs were to be phased out over a maximum of nine years;  rates below 30% were to 
be removed more quickly e.g. rates of up to 6% were to be abolished in the second year and of 
between 6-8% in the third year.  PNG has so  far implemented none of the tariff reduction 
commitments negotiated under the MSGTA 2007.16  Safeguard provisions cover tariffs and import 
quotas.  Members can suspend tariff concessions on pr oducts of new or existing industries for up to 
three years.  Loose drafting of key provisions (e.g. timing of tariff reductions) and little commitment 
to obligations have contribut ed to numerous trade disputes.17  Fiji banned imports of PNG corned beef 
(mainly Ox & Palm), on SPS grounds, even though it was made from imported Australian beef certified free of mad cow disease. The PNG authorities re jected the authenticity of this ban, which to 
their knowledge is still officially in place.  Fiji disagrees with PNG's refusal to grant preferential 
access to Fijian Pepsi exports but, since 2006 the P NG authorities believe these items are not entitled 
                                                     
 
13 Council Regulation (EC) No. 1005/2008, 29 September 2008. 
14 Other members are Vanuatu, the Solomon Islands, and Fiji.  New Caledonia is an observer.  It 
excludes mineral fuels, tobacco products, alcoholic beverages, vinegar, and cane sugar. 
15 Negative lists were to be phased in by October 2005.   
16 Chenyang and Scollay (2009), p. 57. 
17 Scollay (2006). WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 24 
 
 
to preferential access because carbonated soft drinks  are included in PNG's negative list, irrespective 
of brand. 18  
26. Intra-MSG trade is limited, and overall is of  least importance for PNG.  The MSGTA is 
largely political and, to the minor extent it has expa nded regional trade has been more diverting than 
creating, thus generating minimal gains to PNG.  PNG sees the MSGTA as largely irrelevant to its 
national economic development.19  Nevertheless, the authorities see it as important for exports of 
some goods, especially foodstuffs, and PNG is frust rated by some partners' failure to meet 
commitments.  The MSGTA excludes services, but a multilateral air services agreement is being 
considered.    
Pacific Agreement on Closer Economic Relations (PACER) 
27. The PACER, an "umbrella" agreement signed in August 2001, entered into force in 
August 2002 mainly as a defensive framework ai med at protecting Australian and New Zealand 
interests in FIC markets by developing a single regional market.20  Its "triggering" mechanism 
provides for WTO-consistent negotiations to establis h a reciprocal free-trade arrangement (either a 
single free-trade area or a customs union) to commen ce:  within eight years from PICTA's entry into 
force;  or as soon as practical, either jointly or individually, with Australia and New Zealand after 
commencement of FTA negotiations between any FIC and OECD country (Box II.1).  The PACER is 
open to any Pacific island country or territory. 
28. PNG's (and Fiji's) interim EPA with the EU ha s triggered PACER-Plus  negotiations, launched 
in August 2009.  Australia and New Zealand would seemingly like to include a wide range of "WTO-
plus" issues, and to start formal negotiations.  A maximum of three annual Forum Trade Officials 
meetings will be held on Pacer-Plus (extra meetin gs to be called when appropriate).  Preliminary 
discussions during 2010 are to focus on: consolid ating the Office of the Chief Trade Adviser 
(appointed in February 2010);  intensifying nationa l consultations and deepening understanding of 
common priority issues (e.g. rules of origin), regional labour mobility (beyond GATS mode 4), and 
development assistance (e.g. physical infrastructure for trade, trade development and promotion);  
trade facilitation, including SPS measures, TBT, sta ndards and conformance, and customs procedures;  
and other priority areas, e.g. services, including health, education, telecommunications, shipping and 
aviation, economic cooperation, and the environm ent, including renewable energy.  No draft 
consolidated legal text is to be tabled during the preliminary stage.21  Negotiations are scheduled to 
commence in 2011.  The authorities indicated that PNG along with other Pacific island countries was 
keen to adopt a "phased-based" instead of a "sta ge-based" approach to these negotiations, and that 
development aspects, including provision of both "soft"  and "hard" assistance, were a priority.  It also 
needed sufficient time and resources to conduct comprehensive independent sectoral studies of the 
impact of PACER-Plus, including of government re venue implications and wa ys of compensating for 
these.22  PNG has formed several working groups to consider an agreed lis t of issues, such as 
                                                      
18 PNG produces only Coca-Cola cordial. 
19 Pacific Institute of Public Policy (2008), p. 2.  
20 Australia, New Zealand, Fiji, Cook Islands, Ki ribati, Nauru, Niue, Papua New Guinea, Samoa, 
Solomon Islands, and Tonga have ratified PACER. 
21 Special Forum Trade Ministers Meeting, Outcomes Document , 23-24 October 2009. 
22 According to one study, PACER will reduce total government revenue by onl y 2% (compared with 
no losses under PICTA and the EPA) (Soni, Harries, and Zinner-Toa, 2007).  These low revenue losses reflect 
PNG's relatively successful diversification of commodity ta xes from tariffs to the GST and excise duties, thus 
making tariffs a comparatively sma ll source of government revenue. Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 25 
 
 
infrastructure.  It is also looking for acceptable access to the Australian a nd New Zealand semi-skilled 
and unskilled labour markets from the PACER-Plus negotiations. 
Box II.1:  PACER and PICTA  
PACER 
Individual or joint consultations with Australia and New Zealand would also be activated as soon as 
practicable should any FIC conclude free-trade arrangements with any developed non-FIC;  and Australia 
and New Zealand offered the opportunity of ne gotiating free-trade arrangements where the FIC 
arrangement involves a non-FIC with higher GDP per capita than that of the lowest developed FIC member.  If the PICTA parties jointly commence nego tiations for free-trade arra ngements with any non-
FIC, consultations would be offered as soon as practical to Australia and New Zealand, either individually 
or jointly, with a view to commencing negotiation of  free-trade arrangements.  Moreover, any FIC not 
involved in negotiations activating the PACER may par ticipate in any consultations or negotiations with 
Australia or New Zealand.  The PACER will not apply to the accession of any Paci fic island country to the 
PICTA provided that the PICTA rules of origin do not discriminate between Australia and New Zealand and other developed countries, or any bilateral/plurilateral free-trade arrangements between or among 
countries each of which is an FIC, a Pacific island country or territory, or a least developed country 
provided that the rules of origin do not discriminate between Australia, New Zealand, and other developed countries.  If Australia or New Zealand starts formal  negotiations for free-trade arrangements with any non-
FIC they must offer to undertake consultations as soon as practical with each FIC with a view to 
commencing negotiations for improved market access.   Any new trade arrangements between FICs, 
Australia, and New Zealand should be non-discriminator y, except for appropriate special and differential 
treatment of less developed countries.  Gradual volu ntary unilateral tariff liberalization by all FICs is 
encouraged and each party should review tariffs periodically with a view to reductions.  PNG has 
conducted no such review.  Members are also required to implement detailed trade facilitation 
programmes.  WTO Members should provide treatment no  less favourable than among themselves to non-
WTO members in areas of SPS, customs procedures, and standards and conformance. 
PICTA 
Members must extend MFN treatment to each other in tariffs (including  levying methods),  export taxes, 
internal taxes and sale of imports, and foreign exchange administration.  The PICTA provides for 
immediate elimination of all import and export prohibitions or restrictions, including quotas, licensing or 
other similar measures, as well as voluntary export restraints, orderly marketing arrangements or other similar trade measures.  Internal taxes and other char ges must not discriminate against imports.  Safeguard 
measures by way of tariffs and other contingency m easures apply.  The emergency safeguard provisions 
are less stringent than the corresponding WTO arrangements.  However, the latter provisions take precedent among WTO PICTA Members.  Members may raise tariffs for up to five years generally and 
ten years for small island states and least developed co untries (extendable to 10 and 15 years, respectively), 
where a causal link can be shown objectively between imports and the "domestic industry's development".  Tariffs may only be raised if the good concerned is produced domestically.  Th e PICTA also covers trade 
facilitation and dispute settlement.  Government procurement is to be liberalized as soon as possible;  a 
study was conducted on this during 2009.  A PICTA Trade in Services Agreemen t was due for conclusion 
by 2010;  three negotiation rounds have been held since being launched in March 2008 (latest in 
April 2009).  The authorities indicated that PNG's initia l offers were "WTO-plus".  A draft report on the 
proposed framework for a PICTA Temporary Movement of Natural Persons (TMNP) Scheme has been 
prepared, and a draft conceptual framework is being developed. 
Source:   WTO Secretariat. 
 
 WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 26 
 
 
Pacific Island Countries Trade Agreement (PICTA) 
29. The PICTA, also signed in August 2001, aims  to establish a free-tr ade area among FICs 
(Box II.1).23  While it entered into force in 2003 (2005 for Vanuatu) and was intended to be 
operational by 2007, the PICTA is working only partially:  only six FICs, excluding PNG, have 
passed the necessary legislation.  Trading under PICTA started in 2007 between the Cook Islands, 
Fiji, and Samoa, and recently included Niue, th e Solomon Islands, and Vanuatu.  The authorities 
indicated that while PNG's slowness in implemen ting PICTA reflected a lack of administrative 
capacity, such as coordination and technical capabilities, a draft Cabinet submission had been prepared for comment by stakeholders.  Schedul es to eliminate tariffs on intra-regional trade 
progressively by 2016 were extended to 2021 for all FICs.  Tariffs on "non-excepted" goods are to be 
removed by 2017 (originally 2010 for PNG and other FICs, except for small island states and least 
developed countries (2012).
24  PNG and other developed FICs were to reduce maximum tariffs on 
these goods immediately to 25% in 2009 and to phase  them out by 2017;  to lower rates from 15-20% 
to 15% in 2009 and to phase them out by 2015;  to  lower rates from 10-15% to 10% in 2009 and to 
phase them out by 2013;  and to reduce rates of 10%  and below to 5% in 2009 and to eliminate them 
by 2011.25  PNG and other developed FICs are to pha se out tariffs on negotiated "excepted imports" 
(i.e. negative list) by 2021.26  Pacific leaders had called for all signatories to start implementing 
PICTA by 2009.  Members of the MSGTA also belong to PICTA.  Intra-regional trade remains 
negligible and is mainly between PNG, Fiji, and Samoa. 
The Cotonou Agreement (CA) 
30. Until the interim EPA, the CA governed PNG-EU trade relations.  It provided PNG (and other 
ACP countries except South Africa) non-reciprocal tr ade preferences via duty-fr ee entry of industrial, 
and certain agricultural and fishery products, su bject to safeguards.  These preferences were 
significant for PNG canned tuna exports (duty-free access).27  PNG exports sugar mainly to the United 
States (at well above world prices) under a small access quota.28  Restrictive rules of origin specified 
maximum import content, processing criteria, and changes in tariff headings, including on a product 
basis.  While all PNG exports to the EU were covered by Cotonou preferences, around half of these 
were redundant since MFN tariffs were also zero. 29   
EU Economic Partnership Agreement (EPA) 
31. EPAs are replacing non-reciprocal with recipr ocal preferences between the EU and ACP 
states.  PNG and the other 13 affected Pacific states decided to negotiate a joint EPA, which 
                                                      
23 At end-February 2010, 11 FICs had ratified the PICTA:  Fiji (in October 2001), the Cook Islands, 
Kiribati, Nauru, Niue, Papua New Guinea (in August 2003), Samoa, Solomon Islands, Tonga, Vanuatu 
(in June 2005), and Tuvalu (in April 2008).  The Federa ted States of Micronesia is still to ratify it and the 
Marshall Islands and Palau have not yet signed.  PICTA does not cover trade in alcohol and tobacco products;  their permanent status is to be deci ded after two years.  Membership is  open to any Pacific island state or 
territory.   
24 Small island states are the Cook Islands, Kiribati, Nauru, Niue, Marshall Islands, and Tuvalu.  Least 
developed states are the Solomon Islands, Kiribati, Samoa (due to soon lose this status), Tuvalu, and Vanuatu. 
25 FICs are encouraged to convert specific tariffs to ad valorem  rates by the start of the scheduled 
reductions.  Any remaining non- ad valorem  duties are to be reduced by 80% by 2009 and to be phased out 
by 2017. 
26 They are to be reduced to at least half by 2012. 
27 Duty-free entry compared with a MFN tariff of 24%. 
28 "Commodity prot ocols" for bananas, beef, veal, and sugar whereby the EU restricted market access 
using tariff quotas, thus raising its prices well above international levels, were largely irrelevant to PNG 
29 Pacific Institute of Public Policy (2008). Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 27 
 
 
commenced in September 2004.  PNG (and Fiji) init ialled an interim regiona l EPA with individual 
market access schedules in November 2007 (Interim Partnership Agreement be tween the EC and the 
Pacific States), operative from 2008, with the EU  provisionally extending the arrangements to PNG 
(and Fiji), although the Agreement was not signed by PNG until 30 July 2009 (Fiji in 
December 2009).  Otherwise, PNG's market access to the EU would have reverted to less favourable 
GSP treatment.  The interim EPA covers goods and improves sectoral rules of origin, especially for 
fish products, agri-processing, and textiles (Chapter II I).  Negotiations with Pacific island states were 
initially due to conclude a comprehensive EPA by end 2009, but this was extended.  The authorities 
indicated their understanding that PNG would be ex pected to negotiate further concessions on goods 
to conclude the EPA.   They also expressed the need for more  focused technical assistance from the 
EU to conclude these negotiations. 
32. The interim EPA required the EU to liberalize all products (excluding arms and ammunition) 
immediately, with a transition period for rice and sugar (Box II.2).  PNG agreed to eliminate tariffs 
immediately on 82.1% of tariff lines (covering 88.1 % of imports from the EU), excluding sensitive 
products, e.g. meat, fish, vegetables, fu rniture, and luxury products like jewellery.30  
Association of South-East Asian Nations (ASEAN) 
33. PNG has special observer status in ASEAN, and has recently indicated its intention to become 
a member.31  This would imply joining the ASEAN Fr ee Trade Agreement (AFTA) and the various 
ASEAN FTAs.  
Asia-Pacific Trade Agreement (APTA) 
34. PNG has acceded to the APTA (called the Bangkok Agreement until November 2006), but 
has yet to ratify it.  APTA, which entered into for ce on 1 July 2006, is a preferential trade agreement 
designed to liberalize and expand tr ade in goods progressively in the ESCAP region by reducing tariff 
and non-tariff barriers and promoting trade-related economic cooperation.32  
(b) Bilateral agreements 
Australia PNG Trade and Commercial Relations Agreement (PATCRA) 
35. PATCRA provides non-reciprocal duty-free acce ss on most PNG exports to Australia.  
Substantial goods are excluded, including certain impor ts of sugar, beverages, tobacco, mineral fuels, 
textiles, clothing, and footwear.  PATCRA was largely superseded by SPARTECA. 
PNG/Fiji Agreement 
36. This 1996 reciprocal agreement is currently in active.  Trade between the two countries is 
mainly under the MSGTA.  
 
                                                      
30 EU online information, Economic Partnership Negotiations .  Viewed at:  http://ec.europa.eu/trade/ 
wider-agenda/development/economic-partnerships/negotiations/#pacific [24 March 2010]. 
31 Radio New Zealand International (2009). 
32 Members are Bangladesh, China, India, Lao PDR, Republic of Korea and Sri Lanka. WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 28 
 
 
Box II.2:  Interim EPA between EU and PNG (and Fiji) 
Transitional periods for the EU to eliminate tariffs on rice (excluding tariff heading 1006.1010) and sugar 
(tariff heading 1701) applied until 2010 and Octo ber 2009, respectively.  The EU may up until 
October 2015 impose MFN tariffs on sugar from ACP non-LDCs in any marketing year when imports from ACP states exceed a total of 3.5 million tonnes (white sugar equivalent) and where imports from ACP 
non-LDCs exceed certain levels.  These were fixed at 1.38 million tonnes in 2009/10, rising to 1.45 million 
tonnes in 2010/11 and to 1.6 million tonnes in each of the four followi ng years.  From October 2015, the 
EU may apply bilateral safeguards to sugar imports if  its white sugar price falls in two consecutive months 
below 80% of the previous year's price.  From 20 08 until October 2015, imports of sugar confectionery 
(tariff items 1704.9099, 1806.1030 and 1806.109 0) and food preparations (tariff items 2106.9059 and 
2106.9098) are covered by a "special surveillance mechanism" to avoid circumvention of these 
arrangements, by applying specific MFN tariffs if impor ted quantities from Pacific states rise by at least 
20% in any year.   
Rules of origin are to be reviewed within five years aimed at simplifying the concepts and methods used 
(Chapter III(2)(iii)).  A non-discrimination clause (Article 16) ex tends to each party any more favourable 
treatment subsequently granted to third parties.  For PNG (and Fiji) this covers FTAs with any "major trading economy", and extends to any "substantially more  favourable treatment in goods, including rules of 
origin", offered by a third party to PNG (or Fiji).  A major trading economy is any developed country, or 
any country accounting for above 1% of world merchand ise exports, or for any group of countries with 
above 1.5% of world merchandise exports.  Some WTO Members are disputing the legality of the non-
discrimination clause, and it is opposed by Pacific states. 
Multilateral rules apply on anti-dumping, countervailing, and safeguards.  Bilateral safeguards also exist to 
prevent serious injury;  disturbances, either social or economic, in an industry or sector, or difficulties that 
could bring about serious deterioration in the economic situation; or disturbance in agricultural markets or regulatory mechanisms.  These meas ures may suspend further tariff reductions, increase tariffs to the MFN 
rate, or apply tariff quotas, for generally up to two years by the EU (extendable by two years) and for four 
years by a Pacific State (extendabl e by four years under exceptional ci rcumstances).  Safeguards may not 
be re-introduced within one year.  For 20 years PNG and other Pacific states can take safeguards if, due to 
the reduced tariffs, import quantities increase to cause or threaten disturbances to an infant industry, 
initially for PNG and non-LDCs for up to seven year s  and for twelve years for Pacific LDCs (with 
possible extensions of three years fo r both). Tariff increases may not ex ceed 3% of tariff lines or 15% of 
the average value of imports from th e EU over the past three years.  Bilateral safeguard measures are not 
covered by WTO dispute settlement provisions.  Parties agree to facilitate trade by  identifying, preventing, 
and eliminating TBT and SPS obstacles to  trade, and a list of priority expo rts from Pacific states to the EU 
is specified (includes palm oil, coffee, tea, cocoa, co pra, fish and marine products, sugar, spices, soaps, 
nuts, pearls, textiles, jewellery, alcohol, jams, biscuits , timber products, pottery, crocodile meat and skins, 
rubber saps, ornamental fish, flowers, petroleum products, and gas).    
Quantitative restrictions as well as import and export licences are prohibited from the outset.  Internal 
quantitative regulations on the mixture, processing or use of domestically sourced products in specified 
amounts or proportions are banned.  The EU is to phase out agricultural export subsidies on products 
exported to Pacific states on which th ey are to eliminate tariffs.  National treatment applies on internal 
taxes and regulations.  There are no provisions on subsidies or government procurement. 
Source:   WTO Secretariat. 
PNG/Indonesia Agreement  
37. Signed in September 2000 and ratified in Oc tober 2001, the PNG/Indonesia Agreement is 
inactive.  It provides the basi s for preferential trading arrange ments between PNG and Indonesian 
border provinces.  Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 29 
 
 
(iii) Generalized System of Preferences (GSP) 
38. GSP schemes provide preferential tariffs to PNG exports.33  However, only a small share of 
exports depend on GSP benefits  since almost all enter major markets (Australia, New Zealand, and 
EU) under more generous preferential arrangements;   statistics on PNG exports under GSP provisions 
were not available.  
39. The authorities were concerned that improved market access provided by major developed 
economies to less developed countries may in future  adversely affect PNG's export opportunities, 
including limiting its capacity to divers ify both products and markets.    
(iv) Non-preferential 
Asia Pacific Economic Cooperation (APEC) 40. As a developing APEC member, PNG is comm itted to voluntary non-discriminatory (i.e. 
MFN) liberalization to achieve the Bogor Goals of "free and open trade and investment" by 2020.  
APEC members have formulated  an Investment Facilitation Action Plan (IFAP) for 2008-10 to 
enhance the investment climate and highlight capac ity building to narrow the economic gaps between 
them.  Each member submits an annual voluntary Individual Action Plan (IAP) on how it will meet 
the Bogor Goals.  PNG's latest IAP plan (for 2008), was peer reviewed in 2009.
34 
Pacific Islands Forum (PIF) 
41. To strengthen regionalism, PNG and other PIF members endorsed the Pacific Plan in 
October 2005 (revised in October 2006),  to be implemented over ten years.35  It envisages increasing 
regional trade (including in services) and investment by lowering trade barriers, including physical 
(e.g. border) measures and technical (e.g. quaran tine, import taxes, and passport requirements) 
measures.  Initiatives to be implemented immediatel y included:  expansion of markets in trade in 
goods under SPARTECA, PICTA, PACER, and with  non-FICs;  integration of services trade, 
including temporary movement of labour, into PICTA and the EPA;  timely and effective implementation of the Regional Trade Facilitation Programme (RTFP);  and investigation of the 
potential impact of PACER.  The Pacific Plan Ac tion Committee oversees the Plan's implementation.  
Achievements in 2009 included maintenance of th e whole-of-region position protecting the region's 
international fishing interests;  commitment to a fit-for-purpose shipping services for several smaller 
island states;  launch of the bulk procurement of  petroleum initiative;  and telecommunications 
deregulation. 
(6) F
OREIGN INVESTMENT REGIME  
(i) Overview 
42. The Government believes that foreign direct  investment (FDI) is important to PNG's 
economic development and growth.  Investment prom otion is integral to its  industrial development 
                                                      
33 Australia, Belarus, Canada, EU, Japan, New Zealand, Norway, the Russian Federation, Switzerland, 
Turkey, and the United States (UNCTAD, 20 08).  Not all GSP schemes are included. 
34 APEC online information.  "IAP update for PNG fo r 2008".  Viewed at:  http://www.apec-iap.org/ 
document/PNG_2008_IAP.htm;  and Chenyang and Scollay (2009). 
35 Australia, New Zealand and 14 Pacific islands (Fij i was suspended indefinite ly in May 2009 because 
of the military regime).  Observers New Caledonia a nd French Polynesia were gr anted Associate Membership 
in 2006.  Current observers are Tokelau (2005), Wallis and Futuna (2006), and Timor Leste (2002). WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 30 
 
 
and private-sector growth strategy.  However, exce pt for lumpy investment in mining (about to be 
boosted by several large foreign-funded projects e.g. the LNG development), PNG has attracted 
inadequate FDI, despite relying h eavily on foreign equity (especially  in resources).  The Government 
is trying to raise investment by developing a fac ilitating policy framework, including plans to enhance 
the manufacturing sector and boost exports.  The ma in thrust of its economic development and 
industrial policies is diversification to produce higher-value-added goods.  Policies encourage the 
development of non-mining sectors such as manufactu ring, renewable resources (e.g. agriculture and 
fisheries) and business services, to promote self-s ufficiency and sustainable economic growth. 
43. PNG's FDI regime is generally  open.  There have been no significant changes since it was 
simplified in 2004, when the Reserved Activities Li st, reserving certain activities for PNG citizens 
and national entities (50% or more owned by PNG citizens unless controlled by non-citizens), was 
replaced by the smaller Cottage Business Activities List, effective 2005.36  While in principle to be 
revised at least biennially, it remains unchanged (T able II.3).  The National Investment Policy (NIP) 
contains guidelines for the pursuit of economic development through domest ic and foreign-funded 
investment projects.  Volumes I and II were prep ared in 1998 and 1999, respectively.  The NIP is 
being reviewed to formulate Volume III.  It w ill define core policy objectives and strategies and 
attempt to further boost economic growth through st ructural reforms to remove investment barriers 
and support infrastructure development.37 
(a) Legislative arrangements 
44. The Investment Promotion Act 1992, which estab lished the Investment Promotion Authority 
(IPA), and supporting Investment Promotion Regulati ons provide a comprehensive legal framework.  
The Act provides the general guiding framework for a ll investment in PNG, while investment in some 
key sectors is handled by other bodies under specific sectoral legislation e.g. investment in fisheries is administered under the Fisheries Management Act 19 98;  in banking and financial services under the 
Banks and Financial Institutions Ac t 2000;  forestry under the Forestry Act 1991;  mining under the 
Mining Act 1992;  petroleum under the Oil & Ga s Act 1998;  and telecommunications under the 
National Information Communication Technology Aut hority Act 2009 (NICTA).  These sectoral laws 
must also take into account the provisions of the IPA Act. 
45. The IPA certifies foreign investors (50% or more ownership or control and management by 
non-PNG citizens) as bona fide investors to conduct business in PNG, and screens FDI proposals, mainly according to the authorities, designed to ensu re that investors are of "good standing".  Joint 
ventures are encouraged but not mandatory and no foreign equity caps exist, although different 
requirements apply in the resource sectors.
38  Before commencing operations, foreign and domestic 
investors must register under the Companies Act.  Foreign firms can either incorporate as a new PNG 
entity or register as an overseas company.  They must apply for certification within one month, and 
approval is decided within 35 days;  most app lications take about two weeks (down from three 
weeks).  If approved, the IPA issues a certificate of incorporation, showing the entity or firm's 
corporate status, and a certificate of registration, displaying the firm's business activity, its principal 
location, and other terms and conditions (Companies Act 1997).  The IPA must be notified of 
substantial foreign equity changes, and investors wi shing to expand, diversify or change location must 
                                                      
36 Prices of used cars dropped significantly due to  more firms and greater competition (Chenyang and 
Scollay, 2009, p. 78). 
37 Investment Promotion Authority online information, "National Investment Policy".   Viewed at:  
http://www.ipa.gov.pg/index.php?option=com_conten t&task=view&id=60&Itemid=57 [24 March 2010]. 
38 The Government can take equity of up to 30% in mining development projects (Mining Act 1992) 
and 22.5% in petroleum projects (Oil and Gas Act 1998).  If it elects not to and there is 100% foreign equity, 2% 
will be negotiated for the landowners' benef it (negotiated at 7% for the LNG project). Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 31 
 
 
obtain approval.  Firms must meet six-monthly reporting requirements, and the IPA conducts annual 
Provincial Database surveys.  Illegal firms can be prosecuted. IPA approvals rose substantially 
in 2008 (Table II.4). 
Table II.3 
Cottage business activities list, as at March 2010 
Sector Activity 
Agriculture - Vegetables & other market produce,  animals with annual sales of K 50,000 or less  
- Hunting, trapping & game propagation including related services activities 
Forestry, logging & 
related activities - Gathering of wild growing forest materials includi ng balata & other rubber like gums; cork; lac, resins 
& balsams; rattan; vegetable ha ir & eel grass; acorns & horse-c hestnuts; mosses, lichens & cut 
evergreen trees used for festive occasions; saps; ba rk; herbs; wild fruits; flowers & plants; leaves; 
needles; reeds; roots; or other wild growing materials  
- Wok about (mobile) sawmill 
Wildlife - Hunting or collecting of non-protected fauna, incl uding insects, shells, animal  teeth, tusks, feathers, 
declared sedentary organisms & sim ilar products & living or dead fauna 
Fishing - Commercially in coastal (within th ree miles off the shoreline) & inland waters 
- Taking of marine or fresh water crustaceans & molluscs 
- Hunting of aquatic animals e.g. turtles, sea squirt s & other tunicates, sea urchins or other echinoderms & 
other aquatic invertebrates 
- Gathering of marine materials e.g. natural pearls, sponges, coral & algae 
Mining - Alluvial mining according to the definitions of the Department of Mining 
Catering - Mobile food delivery service 
Wholesale & retail trade - Wholesale & reta il sale of wild growing materials e.g. balata & other rubber-like gums; cork; resins ; 
balsams; rattan; vegetable hair & eel grass; acorns & horse chestnuts;  mosses, lichens & cut evergreen 
trees used for festive occasions; saps; barks; herbs;  wild fruits; flowers and plants; leaves; needles; 
reeds; roots; or other wild growing materials 
- Retail sales through stalls, tucker shops, markets, or carried out from a car or motorcycle - Wholesale and retail sale of second-hand cl othing & footwear, handicrafts & artefacts 
- Footwear repairs when not done in combina tion with manufacture or wholesale or retail 
Weaving - Cane products, textiles, baskets,  nets, dishes, ropes & bags saleable at home, in street markets or retail 
outlets for a fee 
Bilum making - String bags from traditional bush ropes & cotton stacking using traditi onal & contemporary designs 
saleable at home, in street markets or retail outlets for a fee 
Knitting - Textiles, wearing apparel, cloth,  garment, designs, fabrics & decorations, etc.  saleable at home, in street 
markets or retail outlets for a fee 
Art & craft - Handicrafts, artistic designs saleable at home, in street markets or retail outlets for a fee 
Wood carving - Sculptures on contract or asso rted carvings saleable at home, in str eet markets or retail outlets for a fee 
Pottery making - Clay pots, cups, mugs, dishes, plates, sculptur es & other art forms saleable at home, street markets or 
retail outlet on a fee 
Painting - Portrait & oil paintings, etc. saleable at home, in street markets or retail outlets for a fee 
Screen printing - Designs including emblems, logos, traditi onal & contemporary art forms, commemorations & special 
events on apparel including shirts, T-shirts & other ga rments and textile materials, suited to the event, 
situation or purpose, saleable at home, in street markets or retail outlets for a fee 
Sewing - Garments, textiles, cloth & fabrics saleable at  home, in street markets or retail outlets for a fee 
Jewellery making - Simple jewellery produc ts e.g. necklaces, earrings, rings, arm bands, primarily from sea shells, tusks & 
beads saleable at home, in street markets or retail outlets for a fee 
Baking - Fresh bakery products e.g. bread loaves, cakes, pies, cookies & scones saleable at home, in street 
markets or retail outlets for a fee 
Coffee pulping - Using manual pulping machine with bean s saleable at buying points or at coffee depots 
Hunting crocodiles & 
processing skins - Hunting and processing of crocodile skins for sale at established market outlets 
Operation of small tyre 
repair service - Where not done as incidental to the co re business of maintenance and repairs 
Source: Investment Promotion Authority.  Viewed at:  http://www.ipa.gov.pg/imag es/stories/publicat ions/cottage%20 
business.pdf [24 March 2010]. WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 32 
 
 
Table II.4 
IPA approvals, by type, 2000-08 
Type 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 
Certification 163 164 146 220 269 185 216 204 339 2,499 
Re-certification 12 12 11 17 20 14 16 14 58 219 
Expansion 26 26 24 36 44 30 35 30 101 351 
Diversification 33 33 30 45 54 37 44 37 74 452 
Others 50 51 44 66 82 57 65 58 1 710 
Total 284 286 255 384 469 323 376 343 573 4,231 
Source: Investment Promotion Authority (2009), Investment Papua New Guinea , Vol. 10, Issue 17, January-June, p. 5.  
(b) Recent Administrative and regulatory reforms 
46. Recent reforms have been directed at deve loping a non-discriminatory and transparent 
investment regime reflecting international best pract ice.  Changes include simplification of the foreign 
certification process in 2004, and the IPA adoption of an Electronic Filing Facility in late 2008 for lodging documents.  Mandatory localization plan s for businesses were removed in 2009 (Employment 
of Non-Citizens Act 2007);  compulsory trading reports detailing actual training activities are still 
required for businesses to renew foreign work perm its.  A new entry permit (Resident (Long Term) 
Entry Permit) was also introduced in September 2005 to extend permanent residency to majority 
foreign owners of businesses that have operated in PNG for at least five years with net assets of at least K 1 million.
39  However, there is scope to furt her rationalize business registration and 
certification and to better focus promotion activities.40 
(c) Investment protection and disputes 
47. Legislation guarantees the security of foreign investors, including against expropriation, 
cancellation of contracts and discrimination, thro ugh MFN treatment, and PNG's membership of the 
Multilateral Investment Guarantee Agency (MIGA) .  Investment disputes can be settled through 
diplomatic channels, using local remedies such as compensation and award of damages by the 
National Judiciary, or adjudicated at the Intern ational Centre for the Settlement of Investment 
Disputes (ICSID). 
(d) Land ownership 
48. Non-PNG citizens may not own land (Land (Ownership of Freehold) Act).  Some 97% of 
land is customary owned, and the need to negotia te with traditional owners' to use rural land has 
discouraged FDI as it is expensive and creates uncerta inty.  The Government assists investors in large 
projects considered essential for economic growth in these negotiations.   Foreigners may lease 
government-owned land, usually for 99 years, for specified purposes e.g. residential, business or for 
"special purposes".  All leasehold and freehold land is "registered", and leasehold land is transferable.  
The Government has tried to reduce the land tenure problems by forming industrial and rural 
development centres as well as free-trade zones to grant leasehold land to exporters (Chapter III).  
Most importantly, a successful land reform progra mme initiated in 2005, which culminated in two 
laws being passed in March 2009, is expected to mobilize non-agricultural customary land for 
development (Box II.3). 
                                                      
39 Investment Promotion Agency (2009a), p. 7.  Certain occupations are reserved for PNG citizens 
(Department of Commerce & Industry, 2008, p. 5).  Skilled professionals requirin g tertiary qualifications 
working in their field in PNG for at least five years are also entitled to permanent residence.   
40 Chenyang and Scollay (2009), p. 35. Papua New Guinea WT/TPR/S/239/Rev.1 
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Box II.3:  Land reforms 
The Government's overall goal is to introduce non-agricultural land reforms to facilitate private land use to 
promote economic growth and job creation.  Laws governing alienated land were cumbersome and 
complex, requiring time-consuming administrative proced ures before land could be freed for development.  
With no provisions for general registration of customary land, two legal mechanisms were historically 
introduced to mobilize cust omary land for economic development.  These were land tenure conversions 
and lease-lease back arrangements.  However, reform ing customary land tenure proved a highly politically 
sensitive issue and early attempts failed. 
A successful land reform programme was initiated in 2005 when a National Land Summit developed a 
mandate to undertake such changes.  The National La nd Development Taskforce wa s created in 2006, with 
three expert committees formed  to implement the Summit's re commendations.  The Taskforce's 
recommendations were adopted in 2006 and the National Land Development Program launched in 
February 2007, to be implemented over five years, by the Prime Minister.  These focused on improving the land administration system;  enhancing the land dispute settlement system;  fostering a framework to 
mobilize customary land for development; and establis hing institutions for a viable land and properties 
market.  Land reform became part of the mainstream public policy debate in PNG, with several political parties and candidates in the 2007 national elections advocating land reforms.  However, implementation 
has been slow e.g. the first Concept Design Document for 2008-2012 to firm up the implementation 
framework, identify activities, and objectively cost the land programme, is still being finalized. 
In March 2009, two laws were passed aimed at mobilizing non-agricultural land held under customary 
tenure for development, in line with the Summit's guiding principles that the system of registration would not eliminate customary ownership and that any titling system would be as good as state title.  The Land 
Groups Incorporation (Amendment) Act 2009 ensures that land ownership remains in perpetuity within the 
social unit that claims rights to the land by customary law.  The Land Registration (Customary Land) (Amendment) Act 2009 ensures that the land titles issued from the portions released for development are 
bankable i.e. usable as loan collateral.  Progress to  date includes the proposed piloting of customary land 
registration at Taurama Valley, Fanaiufa, Minj and Tari, and the establishment of a single land court.  Lease 
arrangements have also been extended from 30 to 99 years.  
Source:   WTO Secretariat. 
 
(ii) Investment incentives 
49. Direct tax incentives operating mainly through th e Income Tax Act apply to large and small 
business investments based on national tr eatment, according to PNG authorities.41  These include: tax 
credits for investment in manufacturing and primary production42;  reduced company income tax rates 
for certain businesses  and new primary productio n development projects43;  lower tax rates for 
resident than non-resident companies;  tax holid ays under the Rural Development Incentive Program 
and for exports of "new manufactured" goods (E xport Sales Exemption Scheme);  and a double 
income tax deduction for export ma rket development costs in manufacturing (Chapter III(3)(iv)).  
Indirect tax incentives are also provided under th e Goods and Services Tax Act, Stamp Duties Act, 
Excise Act and the Customs Act (Chapter III(3)(ii)(f) a nd (4)(i)).  A wages subsidy is payable to firms 
producing "new manufactured" goods or import re placement goods (Chapter III(4(i)).  New tax 
incentives apply to oil and gas, including exploration (Chapter III(4)(i)).  In addition, specific taxation 
treatment is negotiated as part of state agreements  covering major resource projects (Chapter IV(3)).  
PNG has no investment performance requirements. 
                                                      
41 Investment Promotion Agency online information, Investment Incentives .  Viewed at:  
http://www.ipa.gov.pg/index.php?option=com_conten t&task=view&id=68&Itemid=57 [24 March 2010].  
In 2005, the NEC instructed the IPA to include on its website all available information on investment incentives. 
42 Taxpayers can spend up to 0.75% of yearly assessable income on tax credit public infrastructure 
projects (1.5% for agricultural projects from 2006). 
43 Primary production projects are taxed at 20% instead of 30% for ten years if started during 2004-06. WT/TPR/S/239/Rev.1 Trade Policy Review 
Page 34 
 
 
50. Since the last Review of PNG, the Governme nt has attempted to rationalize investment 
incentives and, more generally, tax concessions.  Fo r example, ten-year tax holidays for "pioneer" 
industries were repealed. Preferred tax policy is to  grant industry-wide or sectoral tax concessions so 
as to create a level playing field aimed at tax neutralit y and transparency rather than on a project basis 
or under specific sectoral legislation for large-scale manufacturing investments.44  However, tax 
incentives are still granted non-transparently and under considerable ministerial or political discretion, 
subject to final NEC approval.   Existing project agreements also c ontinue to provide tax concessions 
under relevant legislation, and investors may s till request tariff exemptions or concessions on 
imported inputs (Chapter III(3)(ii)(f) and (4)(i)). Relevant agencies are preparing Investment 
Incentive Guidelines. 
Priority investment areas 
51. Government policies target investment in the manufacturing sector, including downstream 
processing of industrial goods, notably clothing, textiles, leather goods, f oodstuffs, timber products, 
footwear, chemicals, plastic and paper products, an d motor-vehicle parts.  Village eco-tourism and 
large-scale resort developments are also targeted.  Favourable consideration is also given to 
development projects that: contribute to economic  growth;  create jobs;  use domestic, especially 
renewable, resources;  assist local workers to acqui re skills;  expand exports;  develop remote regional 
areas;  promote import replacement;  and facilitate increased equity by PNG citizens. 
(iii) International agreements 
52. While PNG is a member of MIGA and ICSID, it is not a party to  the Convention on the 
Recognition and Enforcement of Foreign Arbitral  Awards (the New York Convention) and has 
introduced no arbitration and conciliation rul es in line with the UNCITRAL Model Law on 
International Commercial Arbitration. 
53. PNG has double taxation treaties with Australia, Canada, China, Fiji, Germany, Malaysia, 
Singapore, South Korea, and the United Kingdom.  Ag reements with Indonesia, the Philippines, and 
Thailand have yet to be ratified and incorporat ed into domestic legislation (PNG Income Tax 
(International Agreements) Act 1997).  It is curre ntly considering arrangements with the Solomon 
Islands and Japan (negotia tions with Japan are expected to start shortly).  PNG has negotiated no 
bilateral investment treaties (BITs), but has invest ment promotion and protection agreements (IPPAs) 
with the United Kingdom, Australia, Malaysia, and China. 
(7) AID FOR TRADE  
54. PNG benefited from a range of trade-related technical assistance activities during the review 
period, but continues to face significant human resource and institutional capacity challenges that 
limit its multilateral responsiveness and handicap  implementation of WTO obligations, including 
notifications.  Implementing new DDA commitments is  likely to further challenge already stretched 
resources.  International support could help PNG to integrate into the multilateral trading system and 
face changing trading conditions, including transition from depende nce on preferences to an open 
competitive economy. 
55. According to the Joint WTO/OECD database, PNG received trade-related assistance from 
international donors totalling US$12.13 million during 2001-07.45  Assistance rose from 
                                                      
44 Government of PNG (2010b), p. 66. 
45 WTO, Doha Development Agenda Trade Capacity Building Database, jointly maintained with 
OECD.  Viewed at:  http://tcbdb.wto.org/entity_project.aspx?EntityID=258. Papua New Guinea WT/TPR/S/239/Rev.1 
 Page 35 
 
 
US$1.73 million in 2005 to US$3.03 million in 2006 but declined to US$2.75 million in 2007.  The 
increase in 2006 reflected a rise from US$0.28 million to US$1.81 million (US$1.82 million in 2007) in assistance on trade policy and regulations, predominantly from Australia, Japan, Korea, 
UNESCAP, and the WTO, which provided trade-re lated training education through the "Geneva 
week" and regional workshops, seminars, and trai ning courses.  Assistance to PNG on trade 
development, mainly from Australia, New Zealand,  and Japan declined from US$1.45 million in 2005 
to US$0.93 million in 2007.  The EU is also funding a Trade Related Assistance Program (TRAP) 
aimed at helping to develop a national trade policy,  enhance capacity of PNG's trade institutions, and 
increase public/private sector dialogue and coordination. 
56. The authorities see a need for further widespr ead trade-related technical assistance covering 
almost all areas of unilateral, multilateral, and b ilateral initiatives.  Some areas noted were the 
establishment and operation of free-trade zones, taxati on of resource rents, technical barriers to trade, 
intellectual property protection, including enforcem ent, government procurement, meeting the EC's 
regulations on illegal, unreporte d and unregulated fishing, and  competition policy.  In addition, PNG 
has recently submitted to the Pacific Islands Forum Secretariat (PIFS) project proposals for assistance 
covering the introduction of a Single Window fo r Trade Facilitation (US$3.5 million);  a Trade 
Development Programme (US$3.8 million); review ing SME policies (US$120,000);  supporting the 
long-line fishing fleet (US$15.4 million) and implementing the National Tourism Master Plan (US$590,000);  creating a food testing laboratory (U S$7.2 million);  and providing equipment to the 
Metrology Laboratory (NISIT) (US$3 million).
46  PNG also intends to participate in a regional project 
focusing on intellectual property rights, and has been  requested to support the Joint Proposal by South 
Pacific Trade and the University of South Pacific to enhance national capacity in linking trade with 
the tourism sector. 
                                                      
46 Scollay (2007a).