Papua New Guinea WT/TPR/S/239 
 Page 61 
 
 
IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. PNG is primarily an agrarian economy, heavily  dependent on primary production, much of 
which is subsistence.  Natural-resource-based indus tries, including processed commodities, logs, fish, 
minerals, and petroleum are the mainstay of the economy, generating most exports.  The economy is 
therefore vulnerable to the effects of internati onal commodity price fluctuations.  Several major 
foreign-owned gas-processing export operations in  the pipeline will substa ntially boost economic 
growth and government revenue.  Substantial stat e minority ownership exists in petroleum and 
mineral projects. 
2. The Government views agriculture as a key sector  in promoting export-driven growth, rural 
development, and poverty reduction.  Food security, in terpreted as self-sufficiency, including greater 
food processing, is a priority.  Due to high tariff protection, PNG is almost self-sufficient in sugar, pork, and chicken.  However, agriculture, ex cept for the recent boom in oil palm, has under-
performed due primarily to low productivity, largel y reflecting inadequate r esearch and development, 
poor application of technological improvements, and lack of scale economies inherent in smallholder 
farming.  Other major constraints include inade quate transport facilities, unreliable and expensive 
utilities, prevalent crime and lawlessn ess, and insecurity of land owne rship and tenure.  Major crops, 
except oil palm, are marketed by statutory marketi ng boards, including in the past stabilization funds 
(coffee, cocoa, and coconuts);  these may ha ve impeded agricultural development through 
inefficiency and over-regulation.  Logging non-sust ainability remains a major problem, largely due to 
past permit approvals in contravention of the morato rium on issuing permits.  Fisheries in particular 
are being "domesticated" as licensing arrangements are increasingly being tied to on-shore tuna 
processing, but concerns persist over fishing non-sustainability. 
3. Despite substantial tariff reforms, relatively hi gh MFN tariffs, generally of up to 40%, still 
provide substantial and disparate effective rates of  protection, especially to food processing and other 
inefficient areas of manufacturing.  High tariffs  penalize PNG consumers regressively and reduce 
economic efficiency.  For example, sugar growing and processing, which is inefficient, is protected by 
PNG's highest MFN tariff of 70% until 2011, when it is due to fall to 40%.  It also relies on duty-free 
quota exports to the United States at prices well a bove international levels .  Imports of refined 
petroleum products are prohibited under a 30-year g overnment agreement with the owner of the Napa 
Napa refinery, but import parity pricing is administ ered by the ICCC in conjunction with the refinery's 
owner. Cigarettes and beer, produced by domes tic multinational monopolies, are assisted by 
prohibitive specific tariffs that conceal high ad valorem  equivalents. 
4. Telecommunications reform, after some un certainty and delays, is moving towards 
competition and the end of the state-owned Telikom monopoly over fixed-line services (local, national, and international calls) from August 201 0.  The monopoly on mobile calls ended when 
Digicel started in 2007 and subsequently captured 65% of the market.  Mobile prices have since fallen 
by up to 60%, and coverage and quality impr oved.  The ICCC's economic regulation of 
telecommunications is being transferred to a ne w independent regulator, the National Information 
Communications Technology Authority (NICTA), which is to replace the PNG Radio Communications and Telecommunications Authority (PANGTEL). 
5. The inefficient state-owned power utility, PPL, regulated by the ICCC, continues to provide 
inadequate services.  In preparing the Electricity  Industry Policy, reforms focusing on private-sector 
participation and competition, especially in power generation, are being considered.  Competition on 
air routes from Australia has increased recently with th e entry of Pacific Blue as a code-share partner WT/TPR/S/239 Trade Policy Review 
Page 62 
 
 
for Airlines PNG to compete with Qantas, which code-shares with Air Niugini.  Foreign equity 
controls apply to air services.  Cabotage is prohibite d, including in coastal shipping.  The banking and 
finance sector is relatively open and private-sector based, except for the state monopoly in providing compulsory third-party motor vehicle insurance and in general reinsurance. 
(2) A
GRICULTURE , FORESTRY , AND FISHERIES  
6. The share of agriculture, forestry, and fish ing in (nominal) GDP increased from 31.0% 
in 2000 to 32.6% in 2009 (34.0% in 2005) (Table I.2).  Yet agriculture employs some three quarters of the workforce, revealing low labour productivity th at lags well behind over sectors.  It is the most 
important income source for the majority of people , since 85% live in rural areas, many relying on 
smallholder agriculture and subsistence farming.    
(i) Agriculture 
7. Agriculture accounted for around a quarter of GDP in 2008.  The sector consists mainly of 
subsistence or semi-subsistence fa rmers growing mostly sweet potato,  banana, yam, cassava, taro, 
coconuts, sugar cane, maize, and peanuts. Small holders produce almost all food consumed in PNG 
and over 80% of exported crops (e.g. coffee, cocoa, copra, and vanilla).  Labour-intensive plantation 
estates of some 50-150 hectares grow tree products for export, especially palm oil, coffee, cocoa, 
coconut, tea, and rubber (Table IV.1).  Despite the sector's overall low productivity, farm exports, 
especially palm oil, copra (including oil), coffee, and cocoa, accounted for 18.7% of total merchandise 
exports in 2009 (Table IV.2). 
8. The Government sees agriculture as a key to export-driven growth, rural development and 
poverty reduction.  One of its priorities is to ensure food security, interpreted as self-sufficiency, 
including increased food processing.  High tariff prot ection has helped PNG to become almost self-
sufficient in sugar, pork, and chicken.  Agri culture has under-performed, with export volumes 
generally falling and poor average yields cont ributing to low productivity, largely reflecting 
inadequate research and development, poor applica tion of technological improvements, and lack of 
scale economies inherent in smallholder farming.  Except for oil palm, plantings have generally not 
expanded, and crop production was no higher in 2007 than in 2001-03.
1  Any productivity growth was 
due to oil palm.2  Other major constraints include inade quate transport facilities, unreliable and 
expensive utilities, prevalent crime and lawlessn ess, and insecurity of land ownership and tenure.3   
9. The principal agricultural research and development (R&D) agency is the state-owned 
National Agricultural Research Institute (NARI),  which focuses on general activities and semi-
subsistence smallholders.  Crop-specific R&D and extension services are provided by non-profit 
statutory research institutions, i.e. the PNG Cocoa and Coconut Research Institute (CCI), the Coffee 
Research Institute (CRI), and the Oil Palm Res earch Association (OPRA), which are funded mainly 
by commodity levies.  Governance issues have a dversely affected R&D institutions (and commodity 
boards), largely due to political appointments of directors and politicization, making them almost 
dysfunctional.4 
10. The National Agricultural Development Plan  2007-16 involves annual government funding 
of K 100 million.  It aims to develop a well coordi nated planning and implemen tation strategy centred 
                                                      
1 Reddy (2007). 
2 Fleming (2007). 
3 Investment Promotion Authority (2009b), p. 12;  and Australian Centre for International Agricultural 
Research (2009), p. 2. 
4 Warner and Omuru (2008), p. 11. Papua New Guinea WT/TPR/S/239 
 Page 63 
 
 
on research and extension, training and information, industrial tree crops, food and horticulture, spices 
and minor crops, livestock, apiculture and aqua culture, and regulatory and technical services.  
In 2009, agricultural projects received K 80 million ( 70% in cocoa and coffee) and a credit facility for 
agriculture, run by the National Development Bank, received K 20 million.  Transport infrastructure, 
a major impediment to agriculture, is being impr oved.  The Large Plantation Rehabilitation Program 
is being funded in 2010 at an estimated cost of K 26 million. 
Table IV.1 
Production of major primary commodities, 2003-08 
(Quantity and US$ million) 
Commodity 2003 2004 2005 2006 2007 2008 
Agricultural       
Palm oil ('000 tonnes) 327 339 346 362 368 446 
US$ million 119 136 126 150 263 382 
Coffeea ('000 tonnes) 69 63 72 52 55 67 
US$ million 84 88 152 145 190 281 
Cocoa ('000 tonnes) 40 42 44 44 48 53 
US$ million 73 68 64 66 88 129 
Copra ('000 tonnes) 8 19 22 13 13 33 
US$ million 2 5 6 3 4 15 
Copra oil ('000 tonnes) 48 45 54 42 51 62 
US$ million 19 25 30 23 28 34 
Tea ('000 tonnes) 7 8 7 7 6 5 
US$ million 5 7 7 7 6 6 
Rubber ('000 tonnes) 4 4 5 4 4 5 
US$ million 3 4 6 8 8 11 
Mining       
Copper ('000 tonnes) 231 174 226 217 199 186 
US$ million 399 479 831 1,459 1,424 1,293 
Gold ('000 kg) 68 67 71 57 58 63 
US$ million 792 862 .. 1,102 1,254 1,774 
Silver ('000 kg)b 62 47 48 51 53 .. 
US$ million 9 10 12 .. .. .. 
Crude oil ('000 barrels) 15 13 13 15 14 12 
US$ million 460 513 710 933 982 1,182 
Logs (m3 million) 2 2 2 3 3 3 
US$ million  104 110 131 180 215 208 
.. Not available. 
a By coffee year, October to September. 
b Excludes small-scale mining. 
Source:  IMF, Papua New Guinea:  Selected Issu es Paper and Statistical Appendix , Country Report No. 10/163, June 2010.  WT/TPR/S/239 Trade Policy Review 
Page 64 
 
 
Table IV.2 
Main exports, 2001 and 2003-09 
('000 tonnes and K million unless otherwise specified) 
Commodity 2001 2003 2004 2005 2006 2007 2008 2009 
Agriculture (value) 803.8 1,390.8 1,688.0 1,949.9 1,653.3 2,295.4 2,969.0 2,223.5 
  % of total exports 13.2 17.8 20.1 19.0 12.9 16.3 19.0 18.7 
Palm oil         
  Volume 309.1 326.9 339.0 345.8 362.3 368.3 446.0 428.4 
  Value 244.8 421.3 438.7 391.4 430.1 672.2 1,011.9 714.3 
  % of total exports 4.0 5.4 5.2 3.8 3.4 4.8 6.5 6.0 
Coffeea         
  Volume 65.4 68.8 63.0 72.1 52.3 54.6 67.0 62.2 
  Value 246.6 298.5 283.8 471.0 337.0 408.4 520.2 460.3 
  % of total exports 4.0 3.8 3.4 4.6 2.6 2.9 3.3 3.9 
Cocoa         
  Volume 38.0 40.3 41.5 44.2 44.0 47.8 53.3 48.1 
  Value 120.5 257.7 218.0 198.7 204.4 276.5 345.6 336.1 
  % of total exports 2.0 3.3 2.6 1.9 1.6 2.0 2.2 2.8 
Copra         
  Volume 22.3 8.4 19.2 22.3 12.7 12.6 32.6 15.2 
  Valueb 24.1 73.9 98.2 111.0 68.7 132.2 247.8 100.3 
 % of total exports 0.4 0.9 1.2 1.1 0.5 0.9 1.6 0.8 
Tea         
  Volume 7.5 6.6 8.1 6.9 6.6 6.4 6.1 5.6 
  Value 21.0 19.3 22.9 20.2 21.2 20.0 18.9 18.4 
  % of total exports 0.3 0.2 0.3 0.2 0.2 0.1 0.1 0.2 
Rubber         
  Volume 3.8 4.2 3.8 4.8 4.4 4.1 4.9 5.4 
  Value 6.9 12.3 13.8 18.0 23.8 22.9 32.6 26.0 
  % of total exports 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 
Other agriculturec         
  Volume ..  .. .. .. .. .. .. .. 
  Value 139.9 307.8 612.6 739.6 568.1 763.2 792.0 568.1 
  % of total exports 2.3 3.9 7.3 7.2 4.4 5.4 5.1 4.8 
Forestry (value) 332.3 416.0 459.5 476.3 526.7 631.2 537.9 409.9 
  % of total exports 5.4 5.3 5.5 4.6 4.1 4.5 3.4 3.4 
L o g s          
  Volume (m3)  1,373.0 2,016.0 2,012.0 2,270.0 2,653.0 2,816.0 2,512.0 1,212.2 
  Value 255.7 369.6 355.7 404.9 491.0 567.6 468.0 383.1
  % of total exports 4.2 4.7 4.2 3.9 3.8 4.0 3.0 3.2 
Otherd         
  Volume ..  .. .. .. .. .. .. ..
  Value 76.6 46.4 103.8 71.4 35.7 63.6 69.9 26.8 
  % of total exports 1.3 0.6 1.2 0.7 0.3 0.5 0.4 0.2 
Table IV.2 (cont'd) Papua New Guinea WT/TPR/S/239 
 Page 65 
 
 
Commodity 2001 2003 2004 2005 2006 2007 2008 2009 
Fisheriese          
  Volume 17.7 17.8 43.0 54.5 45.5 49.3 55.8 53.6 
  Value 75.3 125.3 262.1 193.0 191.3 221.6 293.2 203.7 
  % of total exports 1.2 1.6 3.1 1.9 1.5 1.6 1.9 1.7 
Total agricultural, 
forestry, fishing (value) 1,211.5 1,932.1 2,409.6 2,619.7 2,371,3 3,148.2 3,800.1 2,837.1 
  % of total exports 19.8 24.7 28.6 25.5 18.5 22.4 24.3 23.8 
Mining (value) 4,895.6 5,890.0 6,007.5 7,651.9 10,459.3 10,910.6 11,855.5 9,057.0 
  % of total exports 80.1 75.3 71.4 74.5 81.5 77.6 75.7 76.2
Copper         
  Volume (tonnes)f 170.1 230.6 173.9 226.1 216.7 199.4 185.7 153.7 
  Value 859.1 1,415.0 1,544.2 2,497.7 4,329.5 4,172.7 3,616.7 2,035.9 
  % of total exports 14.1 18.1 18.3 24.3 33.7 29.7 23.1 17.1 
Gold         
  Volume (tonnes) 69.1 68.4 67.3 70.5 56.7 57.5 63.3 63.3 
  Value 2,115.1 2,811.2 2,779.5 2,834.1 3,090.9 3,674.4 4,669.3 5,366.7 
  % of total exports 34.6 35.9 33.0 27.6 24.1 26.1 29.8 45.1 
Silve rg         
  Volume ..  .. .. .. .. .. .. ..
  Value 32.0 31.9 31.6 37.0 50.4 79.9 63.4 ..
  % of total exports 0.5 0.4 0.4 0.4 0.4 0.6 0.4 ..
Crude oil          
  Volume (million barrels) 21.4 15.0 12.6 13.3 14. 5 13.8 12.2 10.0 
  Value 1,889.4 1,631.9 1,652.2 2,283.1 2,988.5 2,983.6 3,506.1 1,610.4 
  % of total exports 30.9 20.9 19.6 22.2 23.3 21.2 22.4 13.5 
Refined petroleum products         
  Volume 0 0 .. .. .. .. .. ..
  Value 0 0 202.8 496.8 263.9 503.5 510.7 221.5 
  % of total exports 0 0 2.4 4.8 2.1 3.6 3.3 1.9 
Total PNG 6,107.0 7,822.1 8,417.1 10,271.1 12,830.6 14,058.6 15,655.6 11,902.8 
  % of total exports 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 
.. Not  available. 
a By coffee year, October to September. 
b Includes oil. 
c Includes oil palm by-products, canne d tuna and vanilla and a small sh are of other manufactured products. 
d Includes timber, plywood and woodchip. e Includes tuna (but not canned or tuna ca ught by foreign purse seine operators payi ng access and sent for foreign processing, 
barramundi, beche-de-mer, lobsters and prawns. 
f As of March quarter 2003, volumes are gross amounts. g Excludes small-scale mining and alluvial gold. 
Note Figures may not add due to rounding. 
Source: Bank of PNG (2010), Quarterly Economic Bulletin , March Issue, 2 July. 
(a) Oil palm 
11. Oil palm production has grown quickly, from 32 thousand tonnes in 2003 to 446 thousand 
tonnes in 2008.  It is based on relatively large "nucleus estates", with smallholders growing around 
large company-run plantations that also buy from them and provide inputs and credit.  Plantations WT/TPR/S/239 Trade Policy Review 
Page 66 
 
 
produce almost three quarters of output.  Processing m ills and one refinery produce crude palm oil, 
palm kernel oil, and palm kernel expeller.  Exports grew from K 244.8 million in 2001 to some 
K 1 billion in 2008 (6.5% of total merchandise exports ) to become PNG's leading agricultural export.  
12. New Britain Palm Oil Ltd (NBPOL), which h as 50.68% Malaysian-owned equity and 8.28% 
owned by the West New Britain provincial governme nt, is PNG's largest oil palm plantation/milling 
company.  It has almost 40,000 hectares of planta tions in West New Britain, operates four mills, and 
commissioned its palm oil refinery in 2003.5  NBPOL sources 30% of its fruit from some 
7,000 independent smallholders.  Its research di vision deals primarily with seed production, plant 
breeding, and environmental issues related to planta tion and mill management.  It is the sole supplier 
of seeds.   
13. The statutory Oil Palm Industry Corporation (OPIC) provides extension services to 
smallholders, and is 50% funded by NBPOL.  The non-profit Oil Palm Research Association (OPRA) 
consists of the six oil palm grower s and approximately 18,000 oil palm fa rmers.  It is privately funded 
by NBPOL and other oil palm growing firms paying a per tonne production levy. 
14. Imported crude palm oil generally attracts an MFN tariff of 15%. 
(b) Coffee 
15. Coffee, mainly Arabica, is grown in the Ce ntral Highlands mainly by smallholders on 
customary land, as many traditional plantations are still to be rehabilitated.   Some 400,000 households 
cultivate coffee, which is the main income source for 2.5 million inhabitants.6  The estate sector, 
consisting of block-holders and plantations, produces some 15% of output.  Coffee production fell to a 
low of 52,000 tonnes in 2006, but rose to 67,000 tonnes in 2008.  While exports grew from 
K 246.6 million in 2001 to K 520.2 million in 2008, th ey fell as a share of total exports from 4% to 
3.3%.  Coffee remains PNG's second largest agricu ltural export, and contributes some 7% of GDP. 
16. A major challenge for the ailing sector is to re verse declining and inc onsistent quality, which 
has seen the world price of PNG coffee decline.  Sm allholders produce fair average quality (Y grade) 
parchment, which is consistently discounted by about US$0.15 per pound against New York "C" 
quality.  Grower incentives to improve quality are handicapped by insufficient price premiums for 
better quality coffee.  Other problems include poor production techniques, on-farm processing, and a 
weak marketing system whereby most smallholders sell parchment to roadside buyers.  The statutory 
marketing board, the Coffee Industry Corporation (CIC), implemented a plan to improve overall 
quality in 2002, and introduced a new grade for green coffee (Premium Smallholder Coffee or PSC) 
recognizing that many growers grew superior quality to the Y grade.  However, while this receives an 
average premium of K 0.47 per kg above Y1 grade, e xporters have realized this as the introduction of 
the new grade has not improved processor or mill prices.7  
17. The CIC has introduced several collaborative ma rketing programmes with the private sector.  
For example, Kongo Coffee Ltd implemented extension services in the Simbu Province to help 
growers improve quality, and pays higher prices for better quality parchment.  Also, the largest coffee 
exporter, PNG Coffee Exports Ltd, buys cherry  coffee from growers and processes parchment and 
                                                      
5 Some 10% of refined oil is sold in PNG, mainly as cooking oil but also as stearin as an input to 
making soap.    
6 Australian Centre for International Agricultural Research (2009), p. 4. 
7 Many mills do not discriminate in parchment qua lity and classify all green beans from smallholder 
parchment as Y1 grade.  Exporters sort and grade the coffe e at their expense to enable separate sales at different 
prices. Papua New Guinea WT/TPR/S/239 
 Page 67 
 
 
green bean for export to specialist markets (e.g. Starbucks).  The CIC provides extension services and 
research.  Supported by the Department of Agricu lture and Livestock, it adopted the Smallholder 
Support Services Pilot Project (SSSPP), based on the Participatory Rural Appraisal and Planning 
process, and has contracted-out some extension services.  The CIC also assists growers through the 
Coffee Credit Guarantee Scheme (provides concession al credit until the crop is sold) and the Freight 
Surety Scheme (pays air freight for remote and disadvantaged growers accessible only by air, for reimbursement when coffee is sold). 
18. PNG growers receive over 70% of the f.o.b. coffee price on Y grade coffee.  Parchment sells 
at a sizable discount to cherry, reflecting poor qua lity of processed parchment by smallholders.  They 
not only receive a higher price for cherry from wet mills but incur less work and costs.
8  In 2006, in an 
effort to safeguard growers from perceived low pr ices for good quality cherry (red and ripe), the CIC 
introduced a requirement that cherry must be sold only to licensed traders.  Since 2007, regulations 
regarding who growers could sell their cherry to has prevented them from obtaining price premiums 
over parchment coffee.9  These controls were aimed at  reducing widespread cherry theft from 
growers, especially in the Eastern Highlands. 
19. The CIC licenses coffee dealers (exporters, processors, and manufacturers) and inspects all 
premises, including roadside coffee buyers.  Natio nally owned firms, especially with broad-based 
grower shareholdings, receive preference in issuing manufacturing and processor licences.10  Licensed 
processors (currently some 60) must sell to licensed  exporters and meet the PNG Standards for Green 
Coffee and the Minimum Quality Standards for Unpr ocessed Coffee.  Many processors operate below 
capacity.  Manufacturers and processors must have a "localization programme" training PNG 
nationals.  
20. According to PNG authorities, the CIC's Coffee Stabilization Fund no longer operates.  An 
export levy  of K 80 per tonne funds the CRI. 
21. Imports of green coffee for processing are prohibited, as is blending of Arabica and Robusta.  
According to the authorities, this is line with  the requirements of the International Coffee 
Organization.  Imported processed coffee is subject to an MFN tariff of 25%.11 
Export controls 
22. PNG exports predominantly green beans;  the rest is roast and ground.  Only the CIC may 
directly export coffee above 10 kg.  It exercises this statutory role by annually licensing exporters, who must submit copies of invoices and register contr act details (e.g. quantity, grade, price, buyer, 
and destination).  The CIC may reject contracts for prices "significantly" below prevailing market 
levels.  Licensing is according to the Sta nding Policy Guidelines.  Export licences are non-
transferrable, and fully foreign-owned companies ar e ineligible:  they may only export coffee in joint 
ventures with nationally owned firms producing coff ee, or as domestic grower-based firms.  Entities 
with broad-based grower shareholdings receive pref erence in issuing export licences.  Exporters must 
train PNG nationals in coffee trading, export a minimum of 6,000 bags annually, and have 
testing/liquoring facilities.  Twelve firms export gr een coffee (14 are licensed), five firms undertake 
roasting and grounding, and one firm does both.  Exporters must buy from licensed processors, and 
                                                     
 
8 However, many smallholders have no option but to process parchment as the cherry must be delivered 
to the wet mill on harvest day if good quality parchment is to be made. 
9 Warner and Omuru (2008), p. 11. 
10 Existing manufacturing firms with over 25% foreign equity had to divest foreign equity to this level. 
Existing processors with foreign equity must detail th e foreign partner's involvement in coffee growing.   
11 Only one firm imports processed (instant) coffee. WT/TPR/S/239 Trade Policy Review 
Page 68 
 
 
cannot trade between themselves without CIC appr oval.  The CIC is funded by an export levy 
of K 100 per tonne, which raises some K 6-7 million annually. 
23. The CIC enforces export standards for green b ean by inspection and certification for size, 
colour, odour, and defect levels.  A sample of b eans is taken per consignment to observe quality by 
taste.  Smallholder coffee processed as cherry by re gistered wet mills can use plantation grades (AA, 
A, AB, B, C PB and X), while smallholder parchm ent must be graded as PSC, Y1-3 or T.  Two 
Fairtrade-registered exporters se ll to Starbucks under CAFE practices.  Such coffee must be grown in 
an environmentally sustainable manner and meet othe r conditions (e.g. use no child labour).  In 2007, 
this accounted for about 1% of coffee exports (by va lue).  Prices are equivalent to plantation grade. 
(c) Cocoa 
24. Cocoa is grown mainly in East New Britain  and Bougainville.  Ou tput was 53,000 tonnes 
in 2008 (40,000 tonnes in 2003).  The industry's main constraints are lack of an effective technology 
delivery system;  poor farm management practi ces;  inefficient marketing, transport, and 
infrastructure;  and pests and disease.  Annual yields are low, at 300 kg per hectare.  Exports, mainly of dry beans, rose to K 345.6 million in 2008 (K 12 0.5 million in 2001), accounting for 2.2% of total 
merchandise exports.  PNG belongs to the Inte rnational Cocoa Organization (ICCO) and is a 
signatory to the Internatio nal Cocoa Agreement.   
25. The statutory Cocoa Board of PNG, funded by an industry levy, plans to raise production to 
100,000 tonnes by 2012.  It regulates the growing, processing, marketing, and export of cacao, cacao 
beans, cocoa beans and cocoa produc ts through licensing.  Exports must be quality inspected.  Cocoa 
imports generally face an MFN tariff of 15%. 
26. The CCI, formed in 2003 by merging the PNG Cocoa and Coconut Research Institute and the 
PNG Cocoa and Coconut Extension Agency, is owned jo intly by the Cocoa Board and the CIC.  It is 
50% funded by commodity levies of K 4 and K 30  per tonne of production on copra and coconut, 
respectively.   
(d) Coconuts 
27. Copra production (excluding oil) rose to 33,000 tonnes in 2008, following a large decline to 
13,000 tonnes in 2006;  it remained at 13,000 tonnes in 2007.  Exports, mainly of crude coconut oil and copra meat, increased from K 24.1 million in 2001 to K 247.8 million in 2008 (1.6% of total 
merchandise exports).  Some 10% of copra meal is used domestically for anim al feed.  The share of 
copra crushed into crude oil rose from 77% in 2 005 to 90% in 2007.  A third major oil mill has 
commenced operations, which along with new bu yers has increased competition among mills and 
raised coconut prices. 
28. The Coconut Industry Corporation (Kokonas Ind astri Koporesen, or KIK) replaced the Copra 
Marketing Board in 2002 as part of the Govern ment's plans to deregulate the industry (Kokonas 
Indastri Koporesen Act 2002).  An interim board was to restructure the industry, including controlling 
and regulating producti on, processing, marketing, and export.  The KIK licences buyers, 
manufacturers, processors, and exporters of coconut  products.  Its exclusive marketing powers were 
removed within five years and a permanent board was formed.  The KIK also inspects and certifies 
exports of copra and coconut products for PNG qualit y standards.  It is funded by an export levy, 
initially set at K 60 per tonne on copra, K 80 on coconut oil, and K 30 on other coconut products.  Papua New Guinea WT/TPR/S/239 
 Page 69 
 
 
By 2007, these rates had fallen by 49% on copra and 45% on coconut oil, and saved exporters some 
K 1 million.12 
29. The Coconut Industry Fund was reinvigorated in 2002 to stabilize prices, provide grower 
credit, and engage in promotion.  It was finan ced from an export levy on coconut products, but no 
longer operates according to the authorities. 
30. Coconut and copra imports are subject to an MFN tariff of 25%, and coconut oil to a rate 
of 15%. 
(e) Sugar  
31. Cane sugar covers about 8,000 hectares in  PNG's Ramu Valley.  In 2009, some 
433,000 tonnes of cane was crushed and 36,000 tonnes of sugar produced.  The sugar factory can 
crush 500,000 tonnes annually.  Annual PNG sugar c onsumption ranges from 32,000 to 38,000 tonnes 
and exports, principally to the United States, ra nge from 7,000 to 10,000 tonnes.  The sole sugar 
producer, Ramu Agri-Industries Ltd (RAIL) (formerly  Ramu Sugar), a fully owned subsidiary of 
NBPOL (section (a) since late 2008, has divers ified into oil palm and beef production.13  While PNG 
is self-sufficient in sugar, shortfalls occur peri odically, such as in 2008, when RAIL imported some 
3,000 tonnes from Australia duty free. 
32. PNG sugar growing is inefficient.  Yields are lo w, at 5.7 tonnes per hectare, and it is heavily 
protected by PNG's highest MFN tariff rate of 70% until 2011, when it is due to fall to 40%.14  The 
viability of sugar production with no tariff protection is questionable w ith yields at below 8 tonnes per 
hectare, but RAIL more recently reported that it could survive with a 40% tariff.15  Sugar exports are 
"assisted" by preferential duty-free quota access to the United States, where prices are well above 
world levels.  PNG's export quota in 2010 is 7,258 tonn es of raw sugar.  It is not clear whether this 
quota has been filled in recent years.   
33. Sugar processing is also inefficient, handi capped by poor technology and small throughput, 
which prevents economies of scale.  Sugar (brown  and white) is a declared good subject to price 
monitoring by the ICCC.  RAIL's monthly ex-f actory prices are monitored against independent 
comparator prices obtained from the PNG National Statistical Office and the Australian Bureau of 
Statistics.  Until October 2009, the ICCC regulated the wholesale and retail margins on sugar, holding 
them constant in absolute kina terms. 
(f) Spices and rubber 
34. The main spice produced in PNG is vanilla, which is grown by smallholders.  Exporters of 
processed and unprocessed spices, including vanilla, must be licensed by the Spice Industry Board 
(Spice Industry Act 1989).  In 2003, a six-month moratorium was placed on issuing new licences, exports were restricted to PNG-owned firms, a nd a levy of K 10 per kg was imposed on vanilla 
exports to better manage interventi ons and the quality certification system.  However, it is not clear 
whether these arrangements still exist, especially gi ven the failure to appoint new board members 
since 2005.   Spice imports have an MFN tariff of 15%, ex cept for vanilla, which has a rate of 25%.  
                                                     
 
12 Warner and Omuru (2008), p. 10. 
13 The Government's 25% equity in Ramu Sugar was divested to NBPOL as part of the acquisition. 
14 This is well below the 10 tonnes per hectare obtained in major sugar exporting countries. 
15 NBPOL, p. 12. WT/TPR/S/239 Trade Policy Review 
Page 70 
 
 
35. Rubber production is relatively small, and exports amounted to K 32.6 million in 2008.  It is 
processed in four technically specified rubber (TSR ) factories;  two are government owned.  Rubber  
remains the only state-controlled and managed-indus try, and is the responsibility of the PNG Rubber 
Industry Board.   New board members are yet to be appointed following expiry of the previous Board 
in October 2009.16  
(ii) Forestry 
36. PNG's substantial forest resources have been pl agued by non-sustainability and illegal logging 
issues.  The sector's GDP contribution has fallen substantially to some 3-5%.  Most large-scale 
logging is in the West New Britain, East New Britain , Western, and Gulf provinces.  Log exports rose 
from K 255.7 million in 2001 to K 468 million in 2008 (3.0% of total merchandise exports).  Some 
90% of logs are exported.  Other exports are mainly timber, plywood, and woodchip. 
37. PNG logging costs are reportedly higher than As ian suppliers (e.g. Indonesia and Malaysia).  
This reflects many factors, including PNG's diffi cult terrain and large distances from forests to log 
export centres.  Timber yields of 18-20 m3 or even up to 30 m3 per hectare are also relatively low. 
38. PNG forests are traditionally on customary-land owned.  Logging is regulated by the PNG 
Forest Authority (the Forestry Act 1991) in line with  the National Forest Policy.  Its main objective is 
to manage forests sustainably in order to ach ieve economic growth a nd employment, including 
through greater PNG participation and on-shore pro cessing.  Forest concessions (timber permits) are 
issued formally by the Minister of Forestry, based on the Author ity's recommendations and input from 
the National Forestry Board.  Before concessions are tendered, the Authority negotiates a Formal 
Management Agreement with trad itional landowners to acquire th e timber harvesting rights. The 
developer signs a project agreement with th e Government and the landowner.  When an 
Environmental Plan is approved the permit is issued  and the developer submits a five-year work plan 
to the Authority for approval followed by a one-y ear development plan.  Some 3.7 million hectares 
are under 29 long-term concessions, held mainly by fore ign loggers.  Five firms fell 80% of logs, and 
one handles 45% of exports. 
39. A moratorium on issuing new permits was introduced in 1991 and extended until 2005.  
However, some areas are being logged at unsustainable  levels, largely due to past permit approvals in 
contravention of the moratorium.  It is unclear whether the moratorium is still in place.17 
40. In addition to annual royalties of some US$6 million paid to landowners, and the provision of 
services and infrastructure in remo te areas, the sector contributes substantially to government revenue 
through income tax and log export taxes, mainly one of 28.5% of the f.o.b. value of logs (excluding 
plantation logs) (Chapter III(3)(ii)).18  Loggers must also implicitly bear the export tax on domestic 
sales since these prices are also re duced by the amount of the tax.  The PNG Forest Industries 
Association claims that logging viability is threat ened by the excessive log export tax, which accounts 
for some 34% of gross export receipts, on top of th e costs of providing landowner benefits, which on 
                                                      
16 Previous board members were terminated by the Minister of Agriculture but reinstated in 2009 
following a successful court challenge. 
17 PNG Forest Authority (1993). 
18 Royalties paid to landowner s are set at a fixed rate according to species, and is estimated to average 
nationally K 13.86 per m3.  Changes can be made by Ministerial noti ce to each permit holder, and a 5% royalty 
withholding tax applies (Hunt, 2010). Papua New Guinea WT/TPR/S/239 
 Page 71 
 
 
average represent another 15% of receipts.19  The forestry industry is one of PNG's more heavily 
taxed activities, being subject to othe r levies and payments (Chapter III(4)(i)).20 
41. Draft National Forest Development Guidelines, underpinning the National Forest Plan, were 
prepared in 2009.  Efforts to preserve forests unde r carbon-trading schemes for environmental reasons 
are a potential threat to the logging industry, with  unclear implications for the PNG economy.  A 
Forestry and Climate Change Framework for Actio n 2009-2015 for the PNG Forest Authority was 
released by the Minister for Forests in November 2009.  Its main goal is for all natural forest carbon 
to be owned by the customary landowners and to be  managed by the Government by 2015.  Research 
and development is carried out by the PNG Forest Research Institute.  SGS continues to monitor log 
exports, aimed at preventing tax avoidance.  The Forest Authority is to establish a State Marketing 
Agency. 
42. Wood and timber imports are generally levied an MFN tariff of 15%, except for veneer and 
plywood, for which the rate is 40%. 
(iii) Fisheries 
43. PNG has considerable marine resources, its ec onomic zone (EEZ) is the largest in the South 
Pacific.  The fisheries sector comprises large-scal e deep-water tuna (mainly skipjack and yellowfin), 
as well as barramundi, lobster, shark, crabs, prawns, beche-de-mer (sea cucumbers), and pearl oysters.  
Fishing is mainly conducted by artisanal commun ities in inland and shallow coastal waters, medium-
sized domestic prawn and long-line boats, and fo reign purse seine tuna operators.  The National 
Fisheries Authority (NFA), overseen by the Natio nal Fisheries Board, a non-commercial statutory 
body, is responsible under the Minister of Fisher ies for regulating and developing the sector, which is 
a government priority (Fisheries Management Ac t 1998 and related regulations e.g. Fisheries 
Management Regulation 2000 and Fisheries Regula tions 2005).  It is self-financed, mainly from 
access fees from distant water fishing nations (DWFN) vessels. 
44. The average annual market value of PNG's fish eries catch is estimated at K 450-500 million 
(over 1% of GDP).  In 2008, marine products  represented 2% of PNG's total exports 
(K 293.2 million).  Tuna accounts for some two thirds , and is exported fresh, chilled (air freighted to 
Japan's sashimi market), frozen, canned, and as fishm eal.  Beche-de-mer exports, have risen gradually 
to some K 15 million annually, and annual shar k exports are worth around K 5 million.  Annual 
prawn and lobster exports average some K 3 million and K 4 million, respectively. 
(a) Structure 
45. Commercial fishing is mainly of tuna caught  by domestic and DWFN vessels under access 
arrangements, almost all using purse seine methods.  Prawns and lobsters are caught mainly in the 
Gulf of Papua, but also in Orangerie Bay and th e Torres Strait (co-managed with Australia under the 
Torres Strait Treaty Arrangements aimed at preserving th e fishery for traditional inhabitants).  Prawns 
are generally processed and packed on vessels (s mall catches from Orangerie Bay are processed on-
shore).  A number of integrated firms carry out fish ing, processing, and export;  there are also contract 
processors.  RD Tuna Canners Ltd, formed in 1996 when its subsidiary RD Fishing (PNG) Ltd 
received a 20-year fishing licence, accounts for about 40% of the domestic tinned fish market, and for some 30% of canned tuna exports. 
                                                     
 
19 FIA PNG online information.  Viewed at:  http://www.fiapng.com/forest_sector.html. 
20 PriceWaterhouseCoopers (2006). WT/TPR/S/239 Trade Policy Review 
Page 72 
 
 
46. Coastal fisheries contribute significantly to  food security and community incomes.  
Small-scale non-commercial harvesting is an importa nt activity.  Around one quarter of households 
engage in fishing, 60% of which on a subsistence basi s.  Some reef fish is exported, either frozen or 
chilled.  While still young, aquaculture especially in barramundi and prawns , is developing, and a 
National Aquaculture Policy has been adopted.  A pearl hatchery is also in operation. 
47. Seafood imports are generally subject to an MFN tariff rate of 25%.  Tuna imports for 
processing by licensed processors may be zero rated. 
(b) Regulation 
48. PNG's fisheries management consists of a numb er of Fisheries Management Plans designed to 
manage the main fisheries sustainably, based on estimates of total allowable catch (TAC).  The 
regulatory instrument is vessel licences issued by th e NFA.  Fish exports must be licensed and quality 
inspected (PNG Standards of Fish and Fishery Products Regulation 2009).  
Tuna fishery 
49. The National Tuna Fishery Management Plan 1998  covers long-line, purse-seine, pole and 
line, and handline/pumpboat methods based around TA Cs and licences.  The annual catch, at around 
430,000 tonnes, is below the estimated sustainable yield or TAC of some 500,000.  However, there 
are concerns that yellowfin and bigeye tuna are over-fished.  The plan e nvisages 100 licensed vessels 
each for long-lining and purse seining, most of whic h would be PNG-registered, and an annual catch 
by DWFN vessels of 258,000 tonnes. 21  Since 2008, the purse seine fishery in the Western and 
Central Pacific Ocean has been managed under the Vessel Day Scheme (VDS), a management and 
conservation measure adopted by the Western and Central Pacific Fisheries Commission.22   
50. Most tuna is caught by licensed DWFN purse sei ners paying access licence fees to catch fish 
for overseas processing.  Access agreements are in place with China, Chinese Taipei, Japan, the 
Philippines, and South Korea.  Negotiated annually, they establish allowed vessel numbers and the 
access fees, which are set under the plan at 6% of th e catch's f.o.b. value.  Total access fees average 
some K 50 million annually.23  There are currently 140 licensed vessels.  DWFN vessels must meet 
certain mandatory port requirements.  PNG bans transhipment at sea and requires the use of 
designated ports for transhipment and inspection. 
51. "Domestication" policies in place since 1995, and stipulated in the MTDS 2005-10, are aimed 
at greater on-shore processing, which is encourag ed as an access condition.  Foreign and domestic 
access has been linked increasingly to on-shore pro cessing.  Some 50% of purse-seine-caught tuna 
now involves on-shore processing.  The Tuna manage ment plan set the TAC for these operators at 
60,000 tonnes annually (Table IV.3).  PNG operators , including locally based foreign vessels flying 
their national flag (LBFVs) receive preferential ac cess to fishing licences, a lower access fee of 2.5% 
of the f.o.b. price, and five-year instead of annual fishing licences.24  LBFVs offload their catch at 
processing plants for export as loins or canned fish  (Box IV.1).  PNG-flagged purse seine vessels are 
exempt from licensing requirements. 
                                                      
21 The plan envisages 70 long-line licences issued to PNG-flagged fresh-chill vessels, 10 for locally 
based foreign vessels (with these reduced as PNG-flagge d vessels increase), and 20 PNG-owned freezer vessels. 
22 The VDS has been implemented by the Nauru Ag reement parties since D ecember 2007 to limit 
purse-seine fishing in their EEZs. 
23 PNG Post Courier, "Kapris announces marine park plans", 3 March 2008. 
24 PNG-flagged purse seine vessels have first priority, followed by LBFVs. Papua New Guinea WT/TPR/S/239 
 Page 73 
 
 
Table IV.3 
Allocation of fishing licences for purse seine operations 
Licensed category Allocated catch level (annual) 
PNG-registered & flagged 
vessels, & locally based 
foreign fishing vessels  The overall TAC is to be a moving average over thre e years to allow for the possibility of it being 
exceeded in any year due to the operation of more PNG vessels permitted above the estimated.  Any 
such increase will cause a corresponding reduction in  the number of licences allocated for bilateral 
vessels.  No limit is set on the number of vessels  or the level of catch, but the TAC is set at a 
maximum of 60,000 tonnes.  
FSM Arrangement vessels & 
U.S. Treaty vessels  Access to PNG waters by U.S. vessels and regiona l vessels is governed by the U.S. Treaty and the 
FSM Arrangement, respectively.  Access fees are paid to PNG based on the amount of catch.  The 
TAC of a maximum of 20,000 tonnes will be de termined as a moving three-year average.  
Bilateral agreement vessels  TAC of a maximum of 258,000 tonnes. 
TAC 338,000 tonnes. 
Source: PNG National Tuna Fishery Ma nagement Plan Schedule 2, National Gazette , March 1999. 
Box IV.1:  The National Tuna Fishery Management Plan 
Guidelines and conditions on licensing purse seine,  long-line and pole-and-line vessels are aimed at 
industry domestication.  Long-line licences are to be given preference to national fishing firms operating 
PNG-registered and flagged vessels.  First priority for purse seine fishing licences is to be give to PNG-registered and flagged boats, followed by locally based foreign vessels (LBFVs) operated by PNG firms.  
A. Long-line tuna fishing (a) Restricted to citizens and national companies. Ventures with over 49% foreign equity not 
permitted; 
(b) Domestic licensed boats must not land catch directly in an overseas port; 
(c) No wet charters allowed.  Short-term dry char ter of foreign boats allowed under quota and firms 
must have one PNG-owned vessel for each chartered boat. Charters only allowed if insufficient domestic capacity; 
(d) Chartered boats to meet national safety and survey standards and be cleared by Customs; 
(e) To avoid a monopoly, no single fleet can exceed either 20 boats (owned and chartered) or have a 
combined daily (set) fish hook capacity above 24,000; 
(f) Lease-purchase agreements are encouraged un der the same guidelines as dry charter boats; 
(g) Gear to be specific to long-lining and be certified by the NFA or an independent expert; (h) Observers are to be pl aced on board periodically  to monitor operations; 
(i) Fishing is prohibited within 6 miles from any land, island or declared reef; 
(j) Use of satellite monitoring will be mandatory when available; 
(k) Freezer vessels (below -4
oC) are allowed provided they are registered and owned, or chartered, by 
PNG firms and land and export fish through a PNG port; 
(l) Vessels can operate in territorial s ea, offshore, and archipelagic waters. 
B. Purse seine tuna fishing 
(a) Only LBFVs operated by PNG citizen s and national firms can be licensed; 
(b) Approval for continued operations will on ly be given if IPA requirements are met;  
(c) LBFVs must operate from a PNG port; 
(d) Catch of LBFVs within the EEZ (and on high seas) must be la nded in PNG for processing or 
transhipped as PNG export  from a designated port;  
(e) LBFVs granted one-year licences, renewed annua lly, and licence conditions reviewed anytime to 
consider the firm's domestic invo lvement in catching, processing, and marketing for the NFA to set 
renewal conditions;  
Box IV.1 (cont'd) WT/TPR/S/239 Trade Policy Review 
Page 74 
 
 
 
(f) Locally based foreign vessels to comply with legal reporting requirements and licence conditions;  
(g) Observers are to be pl aced on vessels with simila r conditions to crew and at  the operator's expense;  
(h) In addition to the licence fee, locally based fo reign vessels will pay an access fee set by the NFA 
similar to that for vessels licensed under the FSM Arrangement which are charged a nominal fee of 2.5%, i.e. access fee = average regional catch per vessel x average price of tuna x 2.5%; 
(i) Licensing procedures shall comply with the Fisheries Management Act 1998; 
(j) DWFN and locally based vessels can operate only in offshore waters, but PNG-registered and 
-flagged vessels may also operate in territorial seas (except within 12 miles from land) and 
archipelagic waters; 
(k) Expansion of the locally based fleet to the Plan's limit is to be met and any further demand for 
licensed vessels accommodated by reducing the num ber of vessels licensed under bilateral access 
agreements.  
C. Pole-and-line tuna fishing 
Access only for PNG-registered and flagged vessels and locally based foreign vessels operated by PNG 
firms.  No licensed pole-and-line vessels are currently operating but, as required, an appropriate number of 
licences will be allocated by reducing the numbe r of licences under bilateral access agreements. 
Source:  PNG National Tuna Fish ery Management Plan, National Gazette , March 1999 
52. PNG tuna processing capacity is about 100,000 tonnes annually, but only half is currently.25  
Locally based purse seine fleets (including LBFVs) supply the foreign-owned cannery in Madang and 
the three canneries in Lae, as well as the loin ing plant in Wewak (daily processing capacity 
of 200 tonnes) funded by Chinese Taipei (Table IV .4).  There are 43 such vessels, of which 34 are 
LBFVs.  PNG is promoting more investment in  the Madang Province by establishing the Pacific 
Marine Industrial Zone (PMIZ) capable of containing  ten tuna factories, but implementation has been 
slow.  A fourth Chinese-owned, cannery (daily capacity of 250-300 tonnes) is planned, and a 
Filipino/Thai consortium is planning another with daily processing capacity of 350 tonnes in Lae City, 
Morobe province.  However, the PMIZ is progressing  very slowly, and no formal agreements have 
been reached between the Governme nt and investors.  The State Agreements with Niugini Tuna and 
the Chinese investor in the Lae cannery are be ing negotiated, and no de tails were available on 
possible licensing arrangements.  The agreement with the Filipino/Thai consortium (Majestic 
Seafoods Ltd), which requested ten licences has been signed, but no details are available.  According 
to the authorities, no new incentives were granted except for exemptions of duties on imported goods. 
Table IV.4 
Onshore fish processors  
Fishery type Operator/company Processing capacity 
(tonnes per day) Product type Location 
Purse seine RD Tuna canners 
RD Fishing 150-200 Canning, loins Madang Province 
Purse seine Frabelle PNG Ltd 80-120 Ca nning, loins Lae, Morobe Province 
Purse seine South Seas Tuna Corporation 100 Fish ing, frozen loins Wewak, East Sepik Province 
Purse seine Pacific Marine Indust1rial 
Zonea .. .. Madang Province 
Purse seine Majestic Seafoods 300 Canning, loins Lae, Morobe Province 
Longline Fairwell PNG Ltd 120 Fresh, chilled Port Moresby 
Longline Sanko Buchan .. Fresh, chilled .. 
Processing International Food Corpora tion 50-120 Canning Lae, Morobe province 
.. Not available. 
a Proposed. 
Source:  The PNG authorities. 
                                                      
25 Investment Promotion Authority (2009), p. 17. Papua New Guinea WT/TPR/S/239 
 Page 75 
 
 
53. Long-line tuna fishing is closed to DWFN vessel s.  Licensed vessels must be majority PNG 
owned and flagged;  LBFVs must be operated by P NG companies.  Fish must also be landed at PNG 
ports (Box IV.1).  The management plan's annual TAC for long-line tuna is 10,000 tonnes.  Most 
long-lining operators had closed, but several small new operations have developed.  There are now 
26 licensed long-line vessels.  There is no pole-and-line fishing, which is open only to PNG-flagged 
vessels and LBFVs operated by PNG firms.26  The annual TAC of 20,000 tonnes was to be utilized by 
the purse seiners if unused. 
54. U.S. purse seine vessels also fish in PNG's EEZ under a multilateral treaty administered by 
the Forum Fisheries Agency (FFA), extended for te n years in 2003 (Treaty on Fisheries between the 
Governments of Certain Pacific Island States and the Government of the United States).27 While the 
U.S. fleet has declined substantially to well below the cap of 40 vessels, fishing has increased 
significantly since 2009 because Taiwanese boats that tr aditionally fished in PNG waters re-flagged to 
fly the U.S. flag.  The Plan set the TAC for tuna  under the U.S. Treaty and the FSM Arrangement (see 
below) at 20,000 tonnes.  However, in practice it seems that U.S. vessels are not subject to TAC limits 
or any conservation and management practices, but are monitored by the NFA under the VDS.  As a 
member of the Palau Arrangement for Management of the Western Pacific Purse Seine Fishery, PNG 
is committed to reducing the number of DWFN vessel s annually by 10%, and to give priority to Palau 
Arrangement members in granting fishing licences.  The NFA is updating the Western Central Pacific 
Fisheries Commission (WCPFC) registry of tuna fishing vessels (both domestic and LBFVs) operating in PNG's EEZ to effectively track them using the VDS.  This complies with the latest 
European regulation, effective in 2011, aimed at improving traceability of all fishery products traded 
with the EU.  However, the authorities are concerne d that the stringent EU requirements of the IUU 
Regulation will impose compliance difficulties for P NG-located vessels, many of which are foreign, 
thereby threatening its European exports.  They indicated that such exports are already beginning to be affected, and that PNG needs substantial t echnical assistance to enhance compliance possibilities 
as well as to administer such arrangements effectively. 
55. As a member of the FSM Arrangement for Regional Fisheries Access, PNG aims  to:  provide 
access for each parties' vessels on no less favourable terms than for DWFN vessels;  secure maximum 
sustainable economic benefits from tuna;  promote greater participation by member nationals in 
fisheries development;  and allow vessels access on terms consistent with the Palau Arrangement. Domestically registered vessels obtain reciprocal access based on a "points system" used by the FFA 
to issue regional access licences.
28  Vessels operating in PNG waters with these licences (currently 
two) pay access fees of 2.5% of the catch's f.o.b. value. 
Beche-de-Mer fishery 
56. Under the 1998 National Beche-de-Mer Fishery Management Plan provinces set annual TACs 
for high and low value species.  The annual nati onal TAC is 668 tonnes (425.5 tonnes of low value 
species).  The Plan establishes export and storage f acility licences, issued by the NFA.  Only PNG 
citizens and firms may hold export or storage facility  licences.  While the number of export licences 
in each province is unlimited, provinces may recomme nd to the NFA the issue of a specific number of 
                                                      
26 LBFVs may also fish in territorial sea and arch ipelagic waters for the first years of a licence, 
provided their catch is landed onshore, after whic h they must be PNG registered and flagged.   
27 Originally a total of 50 vessels could operate in the EEZs of participating Pacific island nations.  
Total fees paid by the U.S. to the FFA are US$21 million, of which US$3 million is from the U.S. tuna industry.  
Of this, 15% is divided equally among FFA members, and the rest distributed pro rata based on tuna weight 
landed in each EEZ.  The U.S. Government pays the other US$18 million to the FFA as aid.  
28 Vessels require a minimum score of 26 points to  qualify as domestic vessels. Points are awarded 
based on nationals employed, local purchases, and onshore investment. WT/TPR/S/239 Trade Policy Review 
Page 76 
 
 
licences based on available resources.  Licences are renewable annually and non-transferrable.  
Exporters must meet conditions, including pack ing according to species, clear libelling, and 
complying with PNG standards (Fish Quality Contro l (Export) Standards).  Beche-de-Mer  must not 
be moved across provinces unless authorized by the NFA.   The fishery is closed  for three years, until 
October 2011, due to over-exploitation. 
Prawn fishery 
57. The Gulf of Papua Prawn Management Plan 1998 controls prawn trawling.  Annual catch is 
some 1,000 tonnes, with average exports of K 10 million.  While no TAC is set, fishing is controlled by licensing and related measures, such as fishing and gear restrictions.  The maximum number of 
licensed prawn trawlers is 15, but only 6-8 vessel s are operating due mainly to unseaworthy trawlers, 
high fuel costs, and unfavourable market conditions.  The fishery is closed to foreign investment and 
only PNG firms can be licensed;  eight firms operating.  Preference is given in allocating licences to traditional resource owners.
29 
Shark fishery 
58. The National Shark Long-line Management Plan 2002 complements the National Tuna 
Management Plan, which limits the shark "by-catch " in tuna long-line fishing.  It sets annually 
renewable non-transferrable export and factory li cences, which may only be held by PNG-owned 
firms or citizens;  charter of foreign vessels is ba nned.  All crew (except the captain, engineer, and 
master fishermen) must be PNG citizens.  Only freezer vessels may operate, and licence numbers were fixed at nine;  ne w entrants are prohibited.
30  The plan sets an annual TAC of 2,000 tonnes and 
requires observer coverage on vessels of 20% of fi shing days.  Sea transhipment is prohibited. 
(3) MINING  
59. Mining, especially of gold and copper, contributes some 14% of GDP.  Mineral exports, 
which totalled to K 8.3 billion in 2008, account for over half of total mercha ndise exports.  However, 
this share is lower than the peak of some 58% in  2006, reflecting a fall in copper exports (from 33.7% 
in 2006 to 23.1% in 2008).  The share of gold ex ports increased from 24.1% to 29.8% in the same 
period.  While mining is mainly an "enclave " capital intensive activity that provides highly 
concentrated economic benefits, the economy gains from substantial government tax revenue 
(Chapter III(4)(i)).  PNG is considering joini ng the Extractive Industries Transparency Initiative 
(EITI).  
60. A major challenge is to develop new projects.  The main Porgera mine is due to close shortly 
and the Ok Tedi mine in 2014.  While there has been considerable exploration, plans to open new 
mines from 2009 have mainly stalled.  As of June 2009, there were 279 exploration licences, 
22 license renewals, and 104 applications;  13 adva nced exploration projects are nearing feasibility 
stage.  Hidden Valley Ltd has recently commenced gold mining.  The mining sector is diversifying 
slowly;  a Chinese-owned 20-year nickel and cobalt mi ne is to be established;  initially due to start 
in 2010 but recently delayed due to  court action regarding environm ental concerns.  Extraction of 
sulphides in the Bismark Sea is also planned for 2 011.  Strong mining growth is forecast, buoyed also 
by higher output from some existing mines.  
                                                      
29 Three licensed trawlers operate in the Torres Strait fishery a nd one licensed PNG-owned trawler 
operates in Orangerie Bay under the Orangerie Bay Prawn Fishery Management Plan.   
30 The plan allows for removal of two vessels after the first year, for sustainability, in view of the 
significant increases in the number of sharks  likely as by-catch by long-line tuna vessels. Papua New Guinea WT/TPR/S/239 
 Page 77 
 
 
61. The statutory Mineral Resources Authority (MRA) aims to promote sustainable mining and to 
regulate the industry to maximize opportunities (Mineral Resources Authority Act 2005).  It is largely funded by a levy of 0.25% on producer's assessable minerals income, including exports of alluvial 
gold (levied on the f.o.b. value).  This levy ra ised some K 18 million in 2007.  The MRA's Mining 
Advisory Council processes tenement applicatio ns for exploration and mining, and makes 
recommendations to the Minister of Mining (Box IV.2).   Applications for exploration licences require 
work programmes to be submitted a nd minimum annual expenditure.   
Box IV.2:  Types of mining tenements 
Tenements are issued by the Mining Minister on recommendations from the Mining Advisory Council 
(MAC) (Mining Act 1992), except for special mining licen ces, which are issued by the Head of State based 
on advice from the NEC.  The types of tenements are:  
Exploration licence  – may be granted for up to two years and extended for periods not exceeding 
two years;  
Mining lease  – usually issued for small to medium-scale alluvial and hard rock mining operation for up to 
20 years, and may be extended for periods not exceeding 10 years;  
Special mining lease  – generally issued to the holder of the exploration licence for large-scale operations 
for up to 40 years, and may be extended for periods not exceeding 20 years.  The exploration licence holder must also have a Mining Development Contract with the Government.  Before granting the mining lease, 
the Minister must convene a development forum of stakeholders e.g. lease applicant, landowners, and 
national and provincial governments;  
Alluvial mining lease  – only granted to a PNG citizen or a land group in respect of land owned by that 
person or land group for up to five years, and ma y be extended for periods no t exceeding five years.  A 
lease will not be granted over land already subject to an other tenement (other than an exploration licence or 
a mining easement).  The land must be a river bed or be located within 20 meters from a river bed and will cover a maximum area of five hectares;  
Lease for mining purpose  – granted to mining operations to be conducted for (a) constructing buildings and 
other improvements, operating plant, machinery, and equipment, (b) installing minerals-treatment plant, 
(c) deposit of tailings or waste, (d) housing and other infrastructure required in connection with mining or treatment operations, (e) transport facilities including ro ads, airstrips a ports, or (f) any other purpose 
ancillary to mining or treatment operations or to an y of the preceding purposes approved by the Minister.  
The lease term will coincide with that of the special mining lease or mining lease covered by the lease for 
mining purposes;  
Mining easement  – granted in connection with mining, treatment or ancillary operations conducted to 
construct and operate one or more of a road, an aerial ropeway, a power transmission line, a pipeline, a conveyor system, a bridge or tunnel, a waterway, or any other facility ancillary to mining or treatment or 
ancillary operations in connection w ith any of the preceding purposes approved by the Minister.  The term 
will coincide with term of the tenement covered by the mining easement.  
Source:  PNG Minerals Resource Author ity online information.  Viewed at:  http://www.mra.gov.pg/InvestorsGuide/   
tabid/122/Default.aspx . 
 
62. The Government may take minority equity in mining projects up to the statutory 30% limit, 
either when the licence is issued or retrospectively,  at cost.  These shareholdings are held by the state-
owned Mineral Resources Development Company Li mited (MRDC).  It holds the State's 31.5% 
equity in the Ramu Nickel Joint Venture, exceed ing the 30% statutory limit, and the 2.5% equity 
holding in Mineral Resource Madang Ltd.  It also holds the equity interests negotiated by provincial 
governments and landowners, currently covering a 5% e quity in the Porgera gold mine, 2.5% in the WT/TPR/S/239 Trade Policy Review 
Page 78 
 
 
OK Tedi mine, 5.1% in the Lihir gold mine, and 3.95% in the Ramu Nickel Joint Venture.  MRDC 
also holds the Western Provincial Government's 2.5% equity holding in the Ok Tedi mine. 
63. In March 2007, the state-owned Petromin Holdi ngs Ltd was formed to hold the State's assets 
and to maximize indigenous owne rship and revenue gains in th e mineral and petroleum sectors 
(Petromin PNG Holdings Limited Authorisation Act 200 7) (Box IV.3).  As the national oil, gas, and 
minerals company, it is empowered to encourage greater production and downstream petroleum and mineral processing through proactive investment strategies, including in partnership with developers.  
Petromin's group of companies includes Edna Oil Lt d (interests in the Morn Oil Project), Tolukuma 
Gold Mines Ltd, Edna Minerals Ltd, Petromin Gas Ltd, and Edna LNG Ltd.   
Box IV.3:  Petromin PNG Holdings Ltd 
The Government may nominate Petromin PNG Holdings Ltd and its subsidiaries as the state nominee 
under mining contracts.  It may also acquire oil, gas, and mineral interests from the Independent Public Business Corporation (IPBC) and the Mineral Resources Development Company Ltd (MRDC) on agreed 
terms and consideration.  The terms are to be negotiated and mutually acceptable to ensure that investment 
decisions are taken transparently.  Petromin is manda ted to be the special purpose vehicle to hold the 
State's equity in development of PNG's oil, gas, and mineral resources, to raise PNG ownership of these 
resources, and to develop them either wholly or in partnership with other investors.  It has no regulatory or  
policy function, but can make investment decisions independently.   
Through Edna Oil Ltd, Petromin holds 20.5% interest  in PDL5 of the Central Moran Oil Field with the 
option of taking up a further 20.5% interest.  This was acquired from the MRDC in August 2007.  This 
field is operated by Oil Search (PDL2) and ExxonMobil (PLD5).  Petromin acquired 100% of the 
Tolukuma Gold Mine from Emperor Mines in February 2008.  Eda Minerals Ltd is the holding company for all of Petromin's mining and exploration interests, except for Tolukuma Gold Mines Ltd,  Petromin Gas 
Ltd is the parent company of Eda LNG Ltd, the special purpose vehicle through which Petromin will 
participate in the proposed LNG project.  Eda LNG Ltd is a joint-venture partner in the ExxonMobil-led PNG LNG Project and owns a 0.244% interest.  Estimated to cost over US$10 billion, the project will 
involve producing 960mmscf/d from assigned gas fields comprising Kutubu, Gobe, Moran, Hides, and 
Juha.  Gas will be liquefied at a plant near Port Moresb y, and exported.  Petromin also has a number of oil, 
mineral, and gas exploration tenements. 
In April 2010, Petromin entered into a competitivel y tendered joint venture with a Malaysian oil and 
petrochemical shipping operator (subsidiary of Petronas), to be called the Western Pacific Shipping Ltd, with Petromin's wholly owned subsidiary owning 40%.  The joint venture will help Petromin in 
transporting LNG in future projects in support of PNG's national content plan and with other general 
shipping.  The Malaysian partner will initially manage the joint venture but this will be handed to Petromin once PNG citizens have been trained. 
Source:   Petromin PNG Holdings Ltd online information.  Viewed at:  http://www.pe trominpng.com.pg/index.html. 
64. The PNG Sustainable Development Program Ltd was established in 2002 when BHP Billiton 
divested its 52% holding in Ok Tedi Mining Ltd (OTML).  Its objective is to support selected sustainable development programmes, especially in Western province.  
(4) M
ANUFACTURING  
65. The contribution of manufacturing to GDP declin ed consistently during the review period, 
from 9.6% in 2000 to 5.9% in 2008.  It primarily serves the domestic market, except for exports of processed agricultural products (e.g. refined palm oil), fish (e.g. canned tuna), refined petroleum 
products, and forestry products (e.g. plywood).  Ma nufacturing has been pressured by cheaper imports 
and suffers from relatively high labour, powe r, raw material, and transport costs. Papua New Guinea WT/TPR/S/239 
 Page 79 
 
 
66. Government policy is to expand manufacturing by encouraging processing of primary 
products.  Priority areas include petrochemicals, canned tuna, furnitu re, and bio-fuels.  However, 
much of the sector is inefficient and relies on relatively high tariff protection, especially food processing.   
67. While the Tariff Reduction Program (TRP) reduced effective rates of protection, these remain 
high for certain products (ranging from 32% for steel  products to 96% for sugar), and disparate 
(Tables IV.5 and AIV.1).  Cigarettes and beer are as sisted by prohibitive speci fic tariffs that conceal 
high ad valorem  equivalents (Chapter III and Table IV.6).  They are produced by domestic 
monopolies, both subsidiaries of multinational companies (British American Tobacco and South 
Pacific Breweries, a subsidiary of Asia Pacific Breweries Ltd).  According to the company, one of 
PNG's two breweries would close if tariffs were reduced.
31  The major producer of plywood, veneer 
panels, sawn timber, and laminated wood (PNG Forest  Products), has faced large reductions in MFN 
tariffs (from 100% to 40%).  Fresh fruits and vegetables are also subj ect to relatively high MFN tariff 
protection generally of 40%.  High tariffs regres sively penalize PNG consumers.  Much of the 
manufacturing sector is concerned that the Govern ment did not accompany the TRP with the related 
general reforms agreed needed to reduce the costs of doing bus iness in PNG and to improve the 
country's competitiveness (e.g. enhancing public infrastructure), and hence are lobbying against 
further tariff reductions, and in some cases for incr eased rates.  Such fundamental general reforms 
would help alleviate such resistance to further tariff cuts. 
Table IV.5 
Effective rates of protection, selected products, selected years 
(%) 
Activity 1998 2001 2003 2006 
Sugar 114.1 98.5 94.9 96.2 
Rice 13.7 -0.4 -0.4 -0.3 
Salt 16.5 -2.2 97.9 36.6 
Flour 86.1 51.9 47.7  36.6 
Tinned fish 122.1 51.9 47.7 36.6 
Biscuits 86.1 73.5 72.8 62.4 
Soap 107.3 72.4 76.7 63.8 
Cooking oil, bottled for retail 28.0 62.0 51.1 38.2 
Cooking oil, other 107.3 -0.2 -0.3 -0.3 
Clothing 76.9 45.6 44.7 36.6 
Steel products 110.0 45.3 41.8 31.9 
Source: Robert Scollay (2007), Review of the Tariff Reduction Program , Report prepared for PNG Treasury by Auckland 
UniServices Ltd, July, p. 67. 
                                                      
31 Scollay (2007), p. 62. WT/TPR/S/239 Trade Policy Review 
Page 80 
 
 
Table IV.6 
Specific MFN tariff rates on alcoholic  beverages and tobacco products, 2010 
(%) 
Tariff item Description Tariff rate 
22.03  Beer made from malt  
2203.00.10 --- Beer made from malt, includi ng mixed drinks K 55 per litre of alcohol 
2203.00.20 --- Beer made from malt, includi ng mixed drinks K 55 per litre of alcohol 
2203.00.30 --- Beer made from malt, includi ng mixed drinks K 55 per litre of alcohol 
2203.00.40 --- Beer concentrates K 6.25 per kg 
2203.00.50 --- Beer concentrat es K 55 per litre of alcohol  
2203.00.90  --- Other K 6.25 per kg 
22.06 Other fermented beverages (for example, ci der, perry, mead), mixtures of fermented 
beverages and mixtures of fermented beverages and non-a lcoholic beverages, n.e.s.  
2206.00.90  --- Other K 55 per litre of alcohol  
22.08  Undenatured ethyl alcohol or an alcoholic  strength by volume of less than 80% volume; 
spirits, liqueurs and other spirituous beverages  
2208.2 - Spirits obtained by distilli ng grape wine or grape marc:  
2208.20.10  --- Containing alcohol by volume not more than 50% K 55 per litre of alcohol  
2208.20.90  --- Other K 55 per litre of alcohol  
2208.3   Whiskies: K 55 per litre of alcohol  
2208.30.10 --- Containing alcohol by volume not  more than 50% K 55 per litre of alcohol  
2208.30.90 --- Other K 55 per litre of alcohol 
2208.4 - Rum and other spirits obtained by distilling fe rmented sugar-cane products K 55 per litre of alcohol 
2208.40.10  --- Containing alcohol by volume not  more than 50% K 55 per litre of alcohol 
2208.40.90  --- Other K 55 per litre of alcohol 
2208.5   Gin and Geneva: K 55 per litre of alcohol 
2208.50.10  --- Containing alcohol by volume not  more than 50% K 55 per litre of alcohol 
2208.50.90 --- Other K 55 per litre of alcohol 
2208.6   Vodka:  
2208.60.10  --- Containing alcohol by volume not  more than 50% K 55 per litre of alcohol 
2208.60.90 --- Other K 55 per litre of alcohol 
2208.7   Liqueurs and Cordials:  
2208.70.10  --- Containing alcohol by volume not  more than 50% K 55 per litre of alcohol 
2208.70.90  --- Other K 55 per litre of alcohol 
2208.9 - Other:  
2208.90.21  --- Mixed drinks of a strength not more  than 3% alcohol by volume, not for medicinal 
purposes K 55 per litre of alcohol 
2208.90.22  --- Mixed drinks of a strength more than  3% alcohol by volume and not more than 4.5% 
alcohol by volume, not for medicinal purposes K 55 per litre of alcohol 
2208.90.29 --- Mixed drinks of a strength more th an 4.5% alcohol by volume, not for medicinal 
purposes K 55 per litre of alcohol 
2208.90.30 --- Compound alcoholic preparations used for the manufacture of beverages K 55 per litre of alcohol 
2208.90.90 --- Other K 55 per litre of alcohol 
24.01 Unmanufactured tobacco, tobacco refuse  
2401.10.00 - Tobacco, not stemmed/st ripped (tobacco leaf) K 0.40 per kg 
2401.20.00 - Tobacco, partly or who lly stemmed/stripped K 0.40 per kg 
2401.30.00 - Tobacco refuse K 0.35 per kg 
24.02 Cigars, cheroots, cigarillos and cigarette s, of tobacco or of tobacco substitutes  
2402.10.00 - Cigars, cheroots and ci garillos, containing K 0.45 per kg 
Table IV.6 (cont'd) Papua New Guinea WT/TPR/S/239 
 Page 81 
 
 
Tariff item Description Tariff rate 
2402.2   Cigarettes containing tobacco:  
2402.20.10  --- Cigarettes of dark fired tobacco wi thout filter (spear and the like) K 0.65 per 1,000 
2402.20.20  --- Cigarettes of dark fired tobacco with filter (spear and the like) K 0.65 per 1,000 
2402.20.90  --- Other K 0.65 per 1,000 
2402.90.00 - Other K 0.65 per 1,000 
24.03 Other manufactured tobacco and manufactur ed tobacco substitutes; "homogenized" or 
"reconstituted" tobacco extracts and essences  
2403.10.10 - Smoking tobacco, whether or not containi ng tobacco substitutes in any proportion K 0.45 per kg 
2403.10.30 --- Chewing tobacco K 0.45 per kg 
2403.10.40 --- Snuff K 0.45 per kg 
2403.10.50 --- Twist or trade tobacco K 0.45 per kg 
2403.10.60 --- Stick tobacco K 0.45 per kg 
2403.9 - Other:  
2403.91.00 -- "Homogenised" or "rec onstituted" tobacco K 0.45 per kg 
2403.99.00  -- Other K 0.45 per kg 
Source: PNG Tariff Schedule. 
68. As well as assisting certain industries, tariffs  on inputs penalize industries by raising prices 
and hence production costs, which continue to hamper manufacturing, along with inadequate 
infrastructure.  For example, manufacturers using suga r, e.g. makers of soft drinks, biscuits, and ice 
cream (industrial sales represent about one third) f ace higher costs due to the sugar tariff of 70%, 
which may also inhibit new industries e.g. confectionery.32  The estimated effective rates highlight the 
anti-export bias of the tariff regime:  agricultura l and mineral exports receive negative rates, 
indicating that they are penalized, on balance. 
(i) Food processing  
(a) Rice 
69. The rice industry comprises mainly one compan y (foreign-owned Trukai Industries Ltd) that 
imports rice grain, and mills, blends, and packages it.   Its market share is some 90-95%.  Elimination 
of the 11% MFN tariff on rice imports under the TRP has increased competition.  Consequently, the ICCC relaxed price controls on rice (white a nd brown) from 2006 until the end of 2010 and 
introduced monitoring of quarterly ex-factory pri ces of standard rice (Roots rice brand) in various 
sized packets.  This is based on maximum ex-factory prices set at the start of the regulatory period and 
comparing movements in ex-factory prices agains t benchmark prices supplied by the PNG National 
Statistical Office and the Australian Bureau of Sta tistics.  The ICCC also monitors internal freight 
rates from Trukai's factory to its national branch es, and controlled maximum wholesale and retail 
margins until in October 2009.  
(b) Canned tuna and beef 
70. In addition to canned tuna, tinned mackerel (u sing imported fish) and meat are an important 
part of the food processing industry.  Tinned beef is produced for the domestic market, mainly using 
imported beef.  Imported canned fish and beef repr esent about 20% of the market, and prices of tinned 
fish and beef were fully deregulated in 2006.  Canne d tuna is assisted by a relatively high MFN tariff 
of 15% (reduced from 40%), and the rate on canne d dark-meat tuna was ra ised to 20%.  Canned 
                                                     
 
32 It makes producing competitive soft drinks difficult by protecting an inferior product that involves 
additional costs to meet production quality standards (See Cocoa-Cola Amatil, 2008). WT/TPR/S/239 Trade Policy Review 
Page 82 
 
 
mackerel also has an MFN tariff of 20%.  Imports from Fiji and the Solomon Islands are subject to a 
preferential zero tariff.  The industry also re lies on exports to the EU under preferential access. 
(c) Flour, coffee, and tea  
71. Two major flour millers (one locally owned)  manufacture and distribute flour products, 
mainly importing wheat to mill and package locally.  There are also several importers of packed-flour 
products for resale, or as inputs for own use.  Wheat and flour imports are subject to an MFN tariff rate of 15% (down from 40%).  Imports represent a small but increasing market share, especially duty-free preferential imports from Fiji.  The ICCC regulates flour prices (currently under review).
33 
72. PNG has a strong export-oriented industry in growing and milling coffee as well as in 
grinding and roasting coffee beans.  While instant coffee is no longer produced in PNG, Nestlé (PNG) 
Ltd exports beans to Australia to re-import in stant coffee for filling and packaging.  Tea is  produced 
by one main company, which has four plantations .  Imported coffee products and tea face an MFN 
tariff of 25% (down from 40%).  The limited import co mpetition is increasing.  Tea and coffee prices 
were deregulated from 2008.  
(d) Poultry 
73. The poultry industry has expanded rapidly, initia lly under protection from an import ban, and 
more recently due to high specific tariff on frozen chicken of K 2.20 per kg.   
(5) ENERGY  
(i) Oil and gas 
(a) Oil 
74. The petroleum sector accounted for an estimated 13.1% of GDP in 2008.  Over 80% of crude 
oil is exported, for a total of K 1.6 billion in 2009 (K  3.5 billion in 2008), equivalent to 13.5% of total 
merchandise exports (22.4% in 2008).  Unless ther e are new discoveries, production is expected to 
continue to fall, and to cease by 2015.  Refined petroleum products have been exported since 2004, 
and were worth K 221.5 million in 2009, repr esenting 1.9% of total merchandise exports 
(K 510.7 million in 2008).  Government policy is b ased on the Oil and Gas Act 1998, administered by 
the Department of Petroleum and Energy.  Income tax incentives apply (Chapter III).34  
75. The Napa Napa refinery (foreign owned, by th e InterOil Corporation), which opened in 2004, 
refines light "sweet" crude oil from Kutubu.35  PNG is self-sufficient in petrol, diesel, and kerosene.  
In 2006, InterOil purchased Shell's retail and commercial distribution network, consisting of 
70 distribution outlets including terminals, depots,  retail service stations, and commercial re-fuelling 
facilities, and leased it back to Shell.  InterOil also bought BP PNG in 2004, which had the largest 
downstream wholesale and retail oil products busin ess in PNG (market share of some 70%).  
                                                      
33 ICCC (2010b). 
34 Standard exploration licences are for an initial six years followed by a five-year  extension for half of 
the area. 
35 Viewed at:  http://www.hydrocarbons-technology.com/projects/napanapa/. Papua New Guinea WT/TPR/S/239 
 Page 83 
 
 
InterOil's 30-year government agreement, expiring in 2035, provides a monopoly, as distributors must 
purchase refined petroleum products from the refinery at import parity.36  
76. Four major distributors (Mobil, Islands Petroleum Ltd, Niugini Oil Company, and InterOil 
Products Ltd (an InterOil subsidiary ) sell to retailers, with Inte rOil the dominant player.  They 
distribute products from the refinery, either by ship for storage at smaller ports or direct to retail 
outlets by road, either themselves or using contract  road or shipping companies.  Most distributors 
own retail sites operated on commission or as franchise outlets.   
77. The ICCC monitors prices of petrol, diesel, and kerosene, and aviation under the 
Government's import parity pricing agreement.  The ICCC determines the selling prices of petroleum 
products ex-refinery, in consultation with the re finery's owner, and is currently reviewing the 
arrangements for the next five years.  Current a rrangements include monitoring of aviation gas (all 
imported) prices, freight costs for refined produc ts, including shipping and cartage, setting wholesale, 
retail and "drum filling" margins, and annual ad justments based on the CPI-X formula (where X 
equals 1%).  It publishes "indicative" maximum reta il prices for petrol, diesel, and kerosene based on 
import parity prices and regulated margins.37 
(b) Gas 
78. InterOil, in a joint venture, is to build a Conden sate Gas plant adjacent to its refinery to export 
gas piped from its natural gas Elk/Antelope fields.  Estimated to cost US$9.3 billion, construction is 
due to start in 2011, with production planned in 2014-15.  The Government's project agreement, 
signed in December 2009, sets fiscal terms for 20 years, including a company tax rate of 30% and 
certain exemptions applicable to large-scale projects.38  The State, through Petromin Holdings Ltd, 
has 20.5% equity, and the landowners  2% equity.  The plant will e xpand to an annual capacity of 
10.6 million tonnes.  The LNG project may contribute some 15-20% of GDP by 2020. 
79. The LNG project, involving ExxonMobil Corporation, will pipe gas from the Southern 
Highlands Province to an onshore LNG processing pl ant in Port Moresby, for export to Asia, 
especially Japan, India, and China, from 2014.  The project will be the country's largest, with a capital 
cost of US$15 billion and a projected life of 30 years.  The Government signed the LNG Gas 
Agreement in May 2008 and the Um brella Benefit Sharing Agreement in May 2009.  The project 
includes gas production and processing, onshore and offshore pipelines, and liquefaction facilities 
with an annual capacity of 6.3 million tonnes.  P NG government equity will be held by the newly 
formed state-owned Kroton No. 2 Ltd, separated from the Independent Public Business Corporation 
(12.4%), Mineral Resources Development Co mpany (PNG landowners, 7.0%), and Petromin 
Holdings Ltd (0.2%).  The tax rate for the project  is 30%, and the Government's expected maximum 
capital funding requirement is US$1.6 billion, which is expected to be in the form of 30% equity and 
70% debt. 
                                                      
36 InterOil online information.  Viewed at:  http://www .interoil.com/refinery.asp/.  Import parity prices 
are set monthly and take into account prices of refined products from refineries located near and traded in 
Singapore, and the shipping costs to the equivalent Napa Napa refinery gate delivery point.  It is the average 
Singapore price converted to the average posted price plus freight charges and other costs e.g. marine insurance, ocean loss, landing charges,  inland loss, additives, and demurrage.  At InterOil's request, from November 2007, 
Singapore-posted prices were replaced by the Mean of Platts Singapore prices, another exchange rate source 
used, and different spread margins applied to develop import parity prices. 
37 In 2009, the wholesale margin was K 0.267 per litr e (K 0.24 per litre in 2005).  The corresponding 
retail margins were K 0.174 and K 0.155 per litre. 
38 InterOil News Release, "Government of PN G Signs InterOil's LNG Project Agreement", 
23 December 2009.  Viewed at: http ://www.interoil.com/newsrelease/2009 -12-23_IOC_PA_Sign ing_final_.pdf. WT/TPR/S/239 Trade Policy Review 
Page 84 
 
 
80. Excise taxes of K 0.61 and K 0.06 per litre apply to  petrol and diesel, respectively.  No excise 
tax is levied on kerosene.  All products are subject  to 10% GST.  Petroleum products and minerals, if 
imported, are free of tariff.    
(ii) Electricity 
81. Electricity is supplied by the state-owned monopolist PNG Power Ltd (PPL), corporatized in 
2002 as the successor to the PNG Electricity Commission (ELCOM) (Electricity Commission 
(Privatization) Act 2002).  Some 70% of power is h ydro generated, and supplies the systems of Port 
Moresby, Ramu (Lae, Madang and the Highlands), and Gazelle in East New Britain.  While there is no national grid, PPL plans to interconnect the Ramu and the Port Moresby systems.  Regional centres 
not connected to main centres rely on diesel-powered  thermal generating plants.  Electricity supply is 
unreliable and very expensive for the quality of ser vice, thus raising the costs of doing business in 
PNG.
39 
82. PPL has 23 independent power systems serving 27 urban centres.  Electricity demand growth 
has averaged 2.2% in the last de cade.  PPL's Ten Year Plan project s annual demand growth of 3% to 
2015, mainly from the mining sector.  While PPL has been  corporatized and prepared for privatization 
(including the Government writing off ELCOM's debt s of US$56.71 million), this has not happened.  
PPL has been under financial stress, and has had difficulties in servicing government loans and overseas borrowings.
40  However, its financial capacity has improved recently, with revenue growing 
by 5.8% in 2009 (second quarter).  A foreign- owned independent power producer (IPP), Hanjung 
Power Ltd, operating since 1997, generates about 16% of the country's electricity from its Kanudi 
thermal plant.  It supplies power to PPL under an expensive purchase agreement. 
83. As a monopoly service provider in the generation, transmission, distribution, and retailing of 
electricity, PPL is regulated by the ICCC.41  The ICC regulates competition, controls prices, and 
protects consumers.  It has issued PPL licences to se ll, generate, transmit, and distribute (Electricity 
Industry Act ), and is in the process of releasing a Revised Electricity Code, which regulates the terms 
and conditions of supply.  An associated Standard  Customer Supply and Sale Contract for PPL and 
General Licensees is also being prepared.  A Regul atory Contract established in 2002 (valid until the 
end of 2011) provides the mechanism for establishi ng and changing retail tariffs, and sets out required 
service standards.  Maximum average tariffs are set on a "bundle" basis using a formula that adjusts 
for changes to variables su ch as the local, Australian, and U.S. co nsumer price index, fuel prices, kina 
to $A and US$ exchange rates, and the cost of purchased power from the IPP.  PPL uses some 
35 million litres of fuel annually, and fuel price movements have a strong effect on its costs of 
generating power.  Electricity charges determined  by the ICCC were reduced for the first time from 
2010 (by 2.7%), due mainly to falling fuel prices.  The electricity price reduction in 2010 was on top 
of customer rebates from December 2008 for low service quality, in line with ICCC undertakings. 
84. At the end of 2006, the Inde pendent Public Business Corporation injected equity of 
K 65 million into PPL to provide on-going rural electrification.  PPL also performs the technical 
regulatory role on behalf of th e ICCC, including approving licences for electrical contractors, and 
certifying electrical equipment and appliances for sale.  The Electricity Industry Policy contains a proposal to shift this role to a neutral body (e.g. De partment of Petroleum and Energy).  An Electricity 
                                                     
 
39 Cocoa-Cola Amatil (2008). 
40 During 2003 to 2005, PPL was virtually insolvent.  A major debt facility for K 331 million with local 
financial institutions helped refinance debt and fund some major power generation and transmission projects. 
41 However, the ICCC has issued Electricity Undert akers licences to PNG Sustainable Energy Ltd and 
PNG Forest Products Ltd.  While the latter has a genera tion, distribution, and retail licence, it may operate only 
in Western Province in the ar ea designated in each licence. Papua New Guinea WT/TPR/S/239 
 Page 85 
 
 
Management Committee is also being considered  to oversee implementation of national rural 
electrification programmes. 
85. The Government is preparing the National Electricity Policy, focusing on private sector 
participation and competition, especially in genera tion and rural electrification.  This will include 
improving third-party access regimes to enable gene rators to access the electricity network and 
introducing "feed in" tariffs to provide guaranteed re venue for entrants.  A Rural Electrification Fund 
is also being considered.   
(6) SERVICES  
86. Services accounted for 33.3% of GDP in 2008.  Construction is the most important, followed 
by "community, social and personal services", wholesale and retail trade, and "finance, real estate and 
business services". 
87. PNG has not submitted GATS offers on services in the Doha negotiations.  Its commitments 
have not changed from those scheduled in the Ur uguay Round, which covered a limited number of 
sectors. 
(i) Telecommunications 
(a) Structure 
88. PNG's inadequate telecommunication services are mainly supplied by the state-owned PNG 
Telikom, which has a monopoly in local, national, a nd international fixed-line services.  Its monopoly 
in mobile services, held initially by its subsidiary , Pacific Mobile Communications, and by BeMobile, 
ended formally in March 2006.  Digicel, which en tered the market in July 2007, also provides a 
comprehensive GSM network.42  BeMobile was partially privatized  through divestment of 50% equity 
for US$45 million in 2008.43  Competition has lowered mobile call charges by as much as 60% and 
improved quality and coverage.44  The Government has estimated that the expansion of mobile 
services boosted GDP by 0.7 percentage points in 2007.45  However, telephone services are still 
inadequate, especially for fixed-line and internatio nal services, on which Telikom relies heavily for 
revenue.  Plans to privatize 51% of equity in Telikom to an overseas company and to liberalize 
telecommunications were abandoned by th e Government in the early 2000s. 
89. Telephone density remains low.  There are some 61,000 fixed lines, corresponding to a 
density of less than 1%, most of which are used by government and business.   Mobile penetration 
rates also remain low, at some 13% (900,000 sub scribers) in 2009 (48,300 subscribers in 2004), after 
especially jumping since 2007.  Digicel already had so me 65% of the mobile market in 1999.  Internet 
penetration in 2009 was very low at almost 2%.  Telecommunications density is lower than any other 
                                                      
42 Two mobile licences were tendered.  The other licensee, an Indonesian firm, has since been 
liquidated.  Telikom challenged the legality of these new licences in the courts.  Digicel's licence requires it to 
roll out its network over five years to all major and mid-sized towns and to a significant number of smaller and 
more remote population centres.  Digicel is well ahead of this commitment.  BeMobile is under the same obligation. 
43 Consortium domestic partners are Nambawan Super Ltd (5%) and Nasfund Super Ltd (5%), and 
international partners are the Hong Kong investment fund , General Enterprise Management Services (20%), and 
U.S. Trilogy International Partners LLC (20%).  They in tend to float 10% of the company domestically within 
three years. 
44 Budde Comm (2008). 
45 Pacific Economic Survey (2008), Chapter 4 Telecommunications, p. 43. WT/TPR/S/239 Trade Policy Review 
Page 86 
 
 
pacific island country and is also low relative to  most other economies with  comparable per capita 
GDP levels.   
(b) Policy 
90. Uncertainty in the Government's telecommuni cations policy ended with the NEC approving 
the National ICT Policy Phase II Reforms Final Repor t in March 2009 (in the National Information 
and Communications Technology Act of Novemb er 2009).  The Act provides a comprehensive 
reform package for introducing open competition.46  Some parts, relating to the transition to the new 
regulator (the National Information and Communi cations Technology Authority (NICTA)), became 
operative on 3 March 2010.  The rest of the Act, re garding the succession of f unctions, will enter into 
force on 2 August 2010, when the independent industry-specific telecommunications regulator, 
NICTA, will replace PANGTEL and take over the I CCC's regulatory functions.  The international 
gateway will also be liberalized by allowing all ne twork licensees to operate them provided they meet 
the minimum specified licensing criteria.  Whol esale access and interconnection obligations will be 
applied to "declared" services, including the fixed network and terminating of mobile calls, for all 
relevant licenses. 
91. This followed revision of the Government Na tional ICT Policy of June 2007, which had 
proposed an indefinite network monopoly, to no long er structurally separate Telikom into a network 
company and a service company, or indefinitely restrict competition to resale (NEC Decision No. 188/2007).
47  Mobile services would continue to be  provided by Telikom and Digicel under 
existing licences until Phase I of the National ICT Poli cy started (no later than 14 February 2008).48  
(c) Regulation 
92. Telikom is regulated as a "declared" entity under a Telecommunications Regulatory Contract, 
currently covering 2007-11.  These regulatory powers were transferred from PANGTEL to the ICCC in 2002 (Telecommunications Act 1996, as amended), which left PANGTEL to regulate and manage the radio spectrum (Radio Spectrum Act 1996)  and to issue technical standards for 
telecommunications equipment.
49  There are four types of telecommunications licences, all valid for 
ten-year periods:  the General Telecommunications Carrier License (GL) (currently only held by 
Telikom);  Public Mobile Telecommunications Lice nse (MC) (currently three licensees but one is 
non-operational);  Value-added Services (carrier gr ade and ISP grade) (three carrier grade licensees, 
Telikom, Digicel, and BeMobile, and 16 ISP licensees);  and Restricted General License/Private Network License (RGC) (two licensees but one li cence was revoked).  Government policy sets the 
limit to the number of licences, and the ICCC cannot issue any new GL or MC licences.  VOIP is not 
illegal, but is not widely available.  Access to th e internet is unavailable at reasonable speeds, and 
                                                     
 
46 PNG Department of Communication and Information (2009). 
47 PNG National Gazette , "Notification of Government Policy on Telecommunications", No. G167, 
25 October 2007.  Viewed at:  http://d1567396. u165.pngconnect.com/docs/National%20Gazette%20No.%20 
G165%20251007.pdf#search="telecommunications".  The revised policy also called for the staged introduction 
of competition in all sectors, and the transformation of  the incumbent operator, Telikom, through restructuring 
and a transitional period to open competition.   
48 PANGTEL tried to revoke the spectrum licences issued to Digicel, but this was successfully 
challenged in the courts.  Because Digicel was una ble to connect to the Te likom network, the ICCC 
"temporarily" allowed Digicel, under its mobile licence, to own and operate a second pair of international 
gateways from July 2007.  Telikom  and the Minister of Communicati ons and Information unsuccessfully 
challenged the legality of this in the courts, and Digicel was permitted to continue operating its own gateway 
even though the origin al "temporary" reason no longer applied.   
49 PANGTEL's Board is appointed effectively by the Minister and, un like the ICCC, is not 
independent. Papua New Guinea WT/TPR/S/239 
 Page 87 
 
 
limitations are placed on the international data gateway capacity, which also greatly reduces service 
quality. 
93. BeMobile was subject to retail price regulati on when it was a full Telikom subsidiary, but 
prices are now freely set, as with Digicel.  Competition may appear to be limited in mobile services 
due to licensing constraints placed on using the lat est technology (3G) or data services, whereby the 
licensee (especially Digicel) must obtain the ICCC's c onsent.  This is intended to provide time for all 
participants to be able to apply the latest technology.50  Telikom's fixed-line services are regulated by 
a price cap arrangement that sets a future price path, minimum service standards, and future capital expenditure requirements.   
94. Under Part XI of the Telecommunications Act, carriers may access other carriers' networks 
under arrangements enforced by the ICCC.  Carrier s negotiate access agreements, and either party 
may request the ICCC to arbitrate if  commercial agreement is impossible.
 51  The ICCC determines 
access fees taking into account, inter alia , the access provider's direct and indirect attributable 
incremental capital costs, as well as direct and i ndirect attributable incremental operating costs and 
"reasonable" contribution to the provider's common costs.  Access determination and fees are not 
released due to commercial confidentiality;  only retail prices, which include margins, are made 
public.  BeMobile and Digicel signed an access agreement in April 2010.52 
95. Under NICTA's regulation, Phase II reforms from August 2010 will establish a three-tier 
horizontal licensing regime, based on the categoriz ation of operator licensees as network licensees, 
applications-service licensees, and content-service licensees.  Current licensees will be required to 
operate in accordance with their existing licences until they have been  fully transferred to NICTA.  
Regulatory barriers to market entry will be reduced by increasing the use of class licensing.  Operator 
licences may either be individual licences or cl ass licences.  Phase II reforms also contain a 
framework to regulate the radiofrequency spectrum,  involving spectrum, apparatus, and class licences, 
and a clear mechanism for allocati ng the spectrum adopted.  Interconnec tion (a form of access needed 
by a company to terminate phone calls of its custom ers in another company's network) charges will be 
based on internationally accepted costing methodologi es to achieve full cost recovery, with NICTA 
arbitrating on access disputes.  Access providers may submit binding reference interconnection offers 
to NICTA for pre-approval for an appropriate time period (3-5 years).  The Reference Paper adopted 
by PNG in its GATS schedule requires the Govern ment to publish interc onnection or reference 
interconnection agreements.    
96. NICTA is to review whether on-going price regul ation of Telikom's fixed network services is 
required.  It will take into account whether the ope rator has substantial mark et power in providing the 
service, the harm that could be substantially m itigated if retail price regulation was imposed, and 
whether the benefits of imposing retail price regulation outweigh any detriments, including any 
potential costs arising from market distortions or delays to the development of competition.  A 
Universal Access Scheme retaining mandatory roll-out obligations w ill be established to meet the 
Government's Community Service Obligations of providing internet access and VOIP access to other 
areas, with all telecom operators to be eligible for funding.  It will be partially funded by an ad 
valorem  levy on net revenues of licensed opera tors, to be implemented after 2010.  
                                                      
50 ICCC (2008), p. 17. 
51 ICCC (2006b). 
52 Digicel incurred major delays in obtaining access to Telikom's network, and bo th parties appealed to 
the ICCC's arbitrated Access Agreement. WT/TPR/S/239 Trade Policy Review 
Page 88 
 
 
(ii) Financial services 
(a) Structure and performance 
97. The expanding financial sector currently comprises mainly 4 commercial banks and 
10 financial institutions (i.e. finance companies), 21 savings and loan institutions, 5 life insurance 
firms, 4 life insurance brokers, 7 superannuatio n funds, 7 trustees of superannuation funds, 
3 investment managers, and 4 fund administrators.  The PNG-owned Bank of the South Pacific Ltd is 
listed on the Port Moresby Stock Ex change, and is the largest bank, with 35 branches and a market 
share of 50%.  It had total assets of K 6.8 billion at the end of 2008.  The other three banks are foreign 
bank subsidiaries.  The financially troubled state- owned PNG Bank was acquired by the BSP in 2002. 
98. Commercial banks continue to dominate the sector  and their profitability has improved.  Total 
assets were K 15.2 billion at the end of 2009.  Bank in terest rate spreads, measured as the difference 
between the weighted average interest rate charge d on loans and that paid on deposits, fell from 
10.5 percentage points (14.6% less 4.1%) in 2001 to 8% in 2009 (10.2% less 2.2%).  Margins remain 
relatively high reflecting several factors, including the inefficiency of financial intermediation and 
risk.  Assets of finance companies and savings a nd loans societies were worth K 380.2 million and 
K 739.2 million, respectively at the end of 2009.  
(b) Regulation and supervision 
99. The Bank of PNG (BPNG) is prudential regulator  of the financial sector, and is responsible 
for the financial system's stability (Central Ba nking Act 2000).  It regul ates banks and finance 
companies (Banks and Financial Institutions Act 2000), life insurance companies (Life Insurance 
Act 2000), superannuation funds (the  Superannuation (General Provisions) Act 2000), and savings 
and loan societies (Savings and Loan Society Act 19 95).  Government policy is to maintain an "open" 
regime for establishing banks and other financia l institutions that meet the licensing criteria.53 
100. BPNG's prudential supervision aims to minimi ze bad loans and to protect depositors from 
poor financial practices and management.  Its superv isory framework includes strict entry criteria, 
off-site surveillance, on-site examinations, and en forcement and compliance.  Off-site supervision 
covers analysis to ensure specific requirements  are met on capital levels, large exposures, and 
concentration;  provisioning of asset quality and cl assification;  foreign exchange and single currency 
exposure;  and diversification of investments.   Board directors and senior management must 
continually address risk management polices and contro ls to risk to ensure that these are correctly 
measured and managed.  On-site verification involv ing reviewing the institution's operations, policies, 
and procedures is performed if probl ems are detected.  External auditors must submit reports to the 
BPNG on the institution's financial performance and a dherence to prudential standards, directives and 
guidelines.  According to the BPNG, these are consistent with intern ational best practice .  
Banks and finance companies 
101. All banks must maintain minimum capital adequ acy ratios of 6% for leverage capital, 8% for 
Tier 1 risk-based capital, and 12% for total risk-b ased capital (PS 1/2003, Capital Adequacy).  The 
BPNG has also issued prudential standards on "fit and proper" requirements (PS 8/2005), transactions 
with related parties (PS 6/2005), and external a udits (PS 7/2005).  The minimum paid-up equity 
capital of banks is K 15 million.  Only PNG incorporated entities may have a bank licence, i.e. foreign branches are not allowed.  Applicants must subm it a viable business plan, and an institution will 
generally not be considered to be in PNG's best interests if it will hold over 40% of all bank and 
                                                     
 
53 BPNG, 2009. Papua New Guinea WT/TPR/S/239 
 Page 89 
 
 
finance company deposits.  A business plan must  also be submitted when opening a branch or 
significantly changing operation, such as an amal gamation.  Licences must be renewed annually.  
There is no joint venture or foreign ownership c ontrol.  While the number of bank licences is not 
limited, in principle, it appears that obtaining one may not be free of political influence. 
102. Non-performing loans fell from some K 275 milli on in mid 2001 (21% of total loans) to 
K 35 million in mid 2004, before rising to around K 65 million by mid 2007 (2% of total loans). 
103. The NDB succeeded the Rural Development Ba nk in 2007 (National Development Bank Act 
2007).  It has 18 branches and provides long-term ag riculture and commercial loans, as well as credit 
scheme loans, like the fisheries credit facility, the SBDC Credit Gu arantee Scheme, and the Village 
Oil Palm Credit Scheme.54  The NDB launched a commercial micro-finance scheme in 2007.  It also 
operates a Tourism Promotion Credit Scheme with the Tourism Promotion Authority.  The BPNG does not prudentially supervise the NDB. 
104. The minimum paid-up equity capital for finance companies is K 1.5 million. 
Life insurance 
105. Only PNG-incorporated firms may sell life insu rance policies or act as insurance brokers;  
foreign branches cannot be licensed.  Licences must be renewed annually.  Life insurance companies 
must maintain a minimum equity capital outside stat utory funds of K 4 million, consisting of paid-up 
share capital represented by ordinary shares and/or irredeemable preference shares.  This must be 
maintained in shareholders' funds as "excess" assets, with at least 50% (K 2 million) held as "eligible" 
assets.
55  Licence holders must maintain statutory funds that ensure adequate capital to support 
solvency.  The BPNG may also require life insura nce firms to hold an approved minimum guarantee 
of K 4 million.  It has also issued standards on valuation of policy liabilities for life insurance 
companies, external audits (PS 5.2008), financial statements formats and disclosure requirements, life 
insurance companies investments (PS 7/ 2008), and fit and proper requirements. 
General insurance 
106. There are 13 general insurers and 1 reinsurer (P acific Reinsurance Ltd) in PNG.  They are 
predominantly subsidiaries or branches of foreign in surance companies.  Allianz (New Zealand) Ltd 
operated a shared joint venture with the state-owned Motor Vehicle Insurance Ltd (MVIL), called Pacific MMI Insurance Ltd, until late 2009 when  MVIL acquired its 50% interest.  Pacific 
Reinsurance Ltd is 52% state owned through MVIL, with the remaining equity held by foreign PNG 
subsidiaries.  The Office of Insurance Commissione r regulates general insurance firms (Insurance Act 
1995).  Risks in PNG must be insured with PNG insurers unless local insurers have insufficient 
capacity, e.g. PNG airline carriers must use loca l underwriters, which allegedly raises insurance 
costs.
56  Broking services are provided by internationa l groups and local firms.  Most high-risk 
insurance is placed offshore.  Reinsurance must be  placed through Pacific Re insurance Ltd, unless 
rejected, when it can be placed directly overseas. 
                                                      
54 The National Fisheries Authority (NFA) signed a Memorandum of Agreement in January 2007 to 
establish a commercial Fisheries Credit Facility to assist  coastal fisherman, inland fish farmers, and fish 
exporters. 
55 "Excess" assets are the extent to which assets of shareholders' fund ex ceed liabilities.  "Eligible" 
assets are the assets of the shareholders' fund excluding those invested in related companies. 
56 ICCC (2006a). WT/TPR/S/239 Trade Policy Review 
Page 90 
 
 
107. MVIL has a statutory monopoly for the supply of compulsory third-part motor-vehicle 
insurance (Motor Vehicles (Third Party Insurance) Ac t, Chapter 295).  It is regulated by a Regulatory 
Contract that controls premiums using a maximum average net premium set by the ICCC.   
(iii) Tourism 
108. The embryonic tourism sector, a government priority, contributes some 2-3% of GDP.  The 
National Tourism Master Plan 2007-17 plans to double tour ist arrivals every five years.  It is based on 
inter-agency cooperation,  and government/industry partnerships.  The statutory PNG Tourism 
Promotion Authority, which is implementing the pl an, has conducted substantial overseas promotion 
and marketing of PNG tourism.  Tourism arri val numbers rose strongly from 56,200 in 2003 to 
120,100 in 2008.  Estimated tour ist expenditure in PNG grew from K 394 million to K 960 million 
during this period.  Tourist arrivals are expect ed to reach 202,150 by 2012.  Business travellers 
account for some 45% of arrivals.  Holiday tourism has also grown significantly.  Tourists are predominantly from Australia (50%), followed by the United States (9%), New Zealand (5%), Japan 
and the United Kingdom (4%). 
109. PNG tourism continues to face many of the same hurdles confronting other sectors, including 
expensive air travel, law and order and security  concerns, poor quality and expensive utilities, 
inadequate infrastructure (e.g. roads, tourism resort s), and insufficient foreign investment.  To tackle 
these issues, the National Plan has prioritized ma rketing, product develo pment and investment, 
transport and infrastructure, human resource deve lopment, and institution/industry partnerships.  
Recent land tenure reforms (Chapter II(6)(i)) and the introduction of competition on major Australian 
PNG air routes in 2008 is expected to boost tourism.   Income tax concessions were introduced in 2007 
to promote tourism investment (Chapter III(4)(i)).   
110. Tour operators are mostly locally owned.  Fore ign-managed operators must  be registered with 
the IPA.  Some have Australian offices to service customers directly, and a growing number are also operating from Australia without a PNG partne r and contracting services to PNG firms. 
(iv) Transport 
111. The National Transport Development Plan (2006- 10) sets priorities for transport expenditure 
and development.  Poor prioriti zation of expenditure has hampered  construction and maintenance of 
transport infrastructure.  The Department of Tr ansport is currently formulating a new National 
Transport Strategy (2010-2030) to be implemented th rough five-year medium term transport plans.  
To assist construction of transport infrastructure, the Government intends to use its National Public 
Private Partnership (PPP) Policy, endorsed in December 2008, to establish PPP's as a means of 
harnessing private investment and management in ma jor projects.  Inadequate public infrastructure, 
including in transport modes, impedes development and is a major barrier to trade, both domestic and 
international.  
(a) Air transport 
112. The Civil Aviation Authority (CAA) was cor poratized from 2001 and has been progressively 
separating its commercial functions from its regulat ory and safety role under the Public Sector 
Reform process (Civil Aviation Act 2000).  The CAA owns and runs 22 airstrips:  13 are of jet 
standard and have been certified as meeting the saf ety standards of the national civil aviation rules 
applied from 2004;  the nine non-jet airp orts are still to be certified and all are expected to be by 2011.   
Aropa (Kieta) airport remains unavailable for commercial flights due to the safety and security issues 
related to the Bougainville crisis, and seven were certified as meeting safety standards by 
October 2009.  Airline operators conduct business through lease arrangements (Aerodrome (Business Papua New Guinea WT/TPR/S/239 
 Page 91 
 
 
Concessions) Act 2000).  The Government is committe d to "open skies" but until recently competition 
on international services was minimal.57  International rights are negotiated under reciprocal bilateral 
air services agreements.  Cabotage, although not cu rrently feasible, is prohibited.  Poor airport 
infrastructure has impeded air transport operations , but an infrastructure improvement programme 
funded by an Asian Development Bank is targeting improvements at 21 airports. 
113. Two companies, the fully state-owned national carrier Air Niugini (National Airline 
Commission Act 1973), and the privately listed carrier  Airlines PNG, provide international services to 
PNG.  Air Niugini's international destinations cover Australia, Singapore, Japan, the Philippines, 
China, and Malaysia as well as the Pacific islands of Fiji, and the Solomon Islands.  Due partly to bad 
management, the firm almost went bankrupt in 2 002, and was assisted by a government guarantee on 
loans from the Bank of South Pacific Ltd (since e xpunged and repaid).  Airlines PNG competes on the 
two Australian routes, Cairns and (since August 2006) Brisbane.  Air Niugini and Qantas provide 
code-share services between PNG and Australia.  In the past, lack of competition was found to be a 
probable major explanation for the expensive international airfares charged by Air Niugini.  Competition, through the entry of Pacific Blue as code-share partner for Airlines PNG on both 
Australian routes, has reduced airfares and freight  charges.  The ICCC must approve code-share 
arrangements. 
114. National carriers providing international services must be majority PNG-owned and be less 
than 25% owned by a single foreign airline.  In ternational charter passenger, freight, and cargo air 
services will be licensed on a case-by-case basis, to balance the commercial interests of existing 
operators for users and the economy generally.  Majo rity-foreign-owned operators will not be licensed 
unless authorized by law or permitted under a state agreement.  
115. Domestic aviation services are open to any licensed carrier on all routes.  Some 23 licensed 
carriers operate, as well as a number of smaller, third-level operators.  While several firms service more profitable routes (e.g. Port Moresby to Lae or Port Moresby to Mount Hagen), Air Niugini is the 
dominant carrier, with some 60-70% market share,  especially on the major routes.  Airlines PNG 
operates in competition with Air Niugini on most routes, and provides charter services to the mining 
sector, along with Airlink.  Foreign-owned compan ies may operate domestic services provided they 
divest to majority PNG equity within five years.   Contracted charter services, including by mining 
companies, are only allowed as joint ventures with a majority PNG-owned air service operator.  
116. At many airports, Air Niugini and Airlines PNG operate their own terminal building, paying 
nominal leasing charges to the CAA.  Elsewhere, th e CAA provides the terminal space.  Air Niugini 
has long term leases over three terminal facilities ow ned by the CAA.  Terminal space is allocated 
based on historical arrangements, seemingly at uneconomic charges that do not recover the CAA's 
costs of providing services at most airports.   
117. Air refueling services at Jackson's Airport have been provided by Airlines of PNG (PNG 
Ground Services), which supplies only its own fleet , and by Shell Oil Products (PNG) Ltd, an 
overseas subsidiary.  ICCC has granted conditional cl earance for Aviation Operations and Aircraft 
Refueling (PNG) Ltd (AOAR) to acquire Shell Oil Products (PNG) Ltd's (SOPL) aircraft refuelling 
facilities at Jackson's Airport.  These consist of fi xed storage tanks, a hydrant distribution system, and 
                                                     
 
57 PNG has signed but not ratified the Pacific Islands Air Services Agreement (PIASA), which came 
into force in October 2007 between six Forum countries.  WT/TPR/S/239 Trade Policy Review 
Page 92 
 
 
various offices and workshops.58  Current market shares are Shell 65%, InterOil 35%, and Airlines 
PNG 5%. 
(b) Maritime transport 
118. Maritime shipping is regulated by the Depa rtment of Transport (Merchant Shipping Act 
(Chapter 242) consolidated to No. 11 of 2003).  The National Maritime Safety Authority handles 
safety (National maritime Safety Authority Act 2003),  and is responsible for registration of domestic 
merchant vessels, and for controlling shipping pollu tion in PNG waters.  The Authority is a member 
of the International Maritime Organization. 
119. Coastal shipping has been restricted to domes tic-flagged and -licensed ships since the early 
1960s to protect local shipping:  i.e. cabotage is not permitted as foreign vessels may unload cargo 
only to certain ports (e.g. Lae and Port Moresby), and local freighters distribute this cargo to other feeder ports.  This is implemented by restricting the issuance of licences and permits to local shipping 
companies to operate on certain routes e.g. Laurab ada Shipping for the Southern Region and Lutheren 
Shipping for the Northern Region.  Several tempor ary permits have been issued to foreign firms 
recently to ferry overseas cargo directly to feeder ports under charter arrangements. 
120. A licence is required to operate in the coastal shipping market.  The licence is issued by the 
Minister for Works, Transport and Civil Avia tion based on the advice of the Coastal Trade 
Committee.  Any IPA-registered foreign firm that  is competent and knowledgeable in shipping and 
has a registered office in PNG can be licensed.  Lice nces are generally not restricted to routes. There 
are 14 coastal shipping companies.  Consort provi des most cargo services to the northern ports and 
Laurabada Shipping Services (Steamsh ips) to the ports in the Central, Western, and Gulf provinces.  
Rabual and Lutheran Shipping provide p assenger services to regional ports.   
121. Maximum rates for coastal freight are set by the Department of Transport;  then have not been 
adjusted since 2002.   
Ports 
122. In 2002, the Harbours Board was corporatized  to become the PNG Harbours Ltd, and was 
renamed the PNG Ports Corporation Ltd (Harbour s Act (Chapter 24) in November 2006).  It 
regulates, manages, operates, and controls "declared " ports, the movement of shipping in them, and 
the provision and maintenance of machinery and equi pment.  The ports operated by PNG Ports handle 
over 90% of overseas ships:  it operates 16 of the 23 d eclared ports (the port of Samarai is operated by 
an agent).  The remaining seven declared ports are either operated by commercial interests (e.g. Bialla 
and Lihir) or are non-operational.  The three self-funding ports (Lae, Port Moresby and Kimbe) 
cross-subsidize the PNG Ports' other ports, which e ither break even or run at a loss.  A few private 
ports are operated by companies for their own needs, and are regulated by the Department of Transport. 
123. The ICCC regulates PNG Ports under a Regulatory Contract that sets the maximum prices 
PNG Ports can charge for essential port services (berth reservation, wharfage, and berthage) and 
                                                     
 
58 The ICCC held that the acquisition would not substantially lessen competition in the market for the 
into-plane supply of aviation fuel in PNG, conditional on AOAR giving the Commission the same undertaking that Shell provided when acquiring Mobil' s interest in these facilities.  This c ondition is that, in the event that in 
future, other persons wish to supply fuel through these facilities, AOAR will offer to divest the requisite share of 
these facilities to them on the terms applying under clause 19 of the Joint Venture Agreement governing these facilities (ICCC, 2010a). Papua New Guinea WT/TPR/S/239 
 Page 93 
 
 
stevedoring, and stipulates minimum service standards (a new five-year contract was implemented 
from February 2010).  The ICCC is also the licen sing authority for essential port services, and such 
charges are reviewed annually based on CPI changes.  Under the tariff structure there are two tiers:  
tier 1 ports include the ports of Lae, Port Mores by, Kimbe, Samarai, and Aitape, and tier 2 ports 
comprise all other declared ports.  PNG Ports is licensed as an essential port services operator to 
provide wharfage, berthage, berth reservation services,  and stevedoring services in declared ports.  It 
also provides container storage and pilotage servic es as the sole declared Pilotage Authority by 
instrument of delegation under the Harbours Act.   PNG Ports performs the harbor management 
functions for declared ports, and administers st evedoring licences by issuing five-year licences to 
private operators.  Terminal handling and equipment are out-sourced to private operators.  At the port 
of Port Moresby, licensed firms must use labourer s from PNG Ports' registered labour pool;  the 
labourers are paid a minimum wage funded from a cargo levy of K 1.28 per tonne administered by 
PNG Ports. Papua New Guinea WT/TPR/S/239 
 Page 95 
 
 
 REFERENCES 
ADB (2007), Background Paper: Small Pacific States.   Viewed at:  http://www.aric.adb.org/pdf/a4t/ 
Background%20Paper%20-%20Small%20P acific%20States.pdf) [24 March 2010]. 
ADB (2010), Asian Development Outlook 2010 Papua New Guinea , Manila. 
Australian Centre for Internati onal Agricultural Research (2009), Assessing and extending schemes to 
enhance the profitability of PNG coffee industry via price premiums for quality , Final Report No. 
FR2009-40, September, Canberra.  
BPNG (2009a), Determinants of Exchange rate in Papua New Guinea: Is the Kina a Commodity 
Currency? , Working Paper No. BPNGWP 2009/01, June.  Viewed at:  http://www.bankpng.gov.pg/ 
images/stories/researchwp06/a5%20working%20paper_1.pdf.  
BPNG (2009b), Speech opening the new ANZ Harbour City Head Office , Governor, 24 July 2009.  
BPNG (2010a),  Governor's Address on the Semi Annual Monetary Policy Statement , Port Moresby 
Chamber of Commerce and Industry, 31 March 2010 
BPNG (2010b), Monetary Policy Statement by the Governor , 31 March.  Viewed at:  
http://www.bankpng.gov.pg/images/stori es/MPS/2010/MPS_March_2010.pdf.  
Budde Comm (2008), South Pacific Islands, Analysis of Mobile Competition 2008.  Viewed at:  
http://www. budde. com. au/ Research/ South- Paci fic- Islands- Analysis- of- Mobile- Competition-
2008.html. 
Chenyang, Liu and Robert Scollay (2009), Peer Review Report 2009 PNG , June.  Viewed at:  
http://www.apec-iap.org/document/PNG_2009_2 009_SOM2_014anx2_IAP_Review_Study_Report_ 
Peer_Review.pdf.  
Cocoa-Cola Amatil (PNG) Ltd (2008), Submission to the ICCC Review of the Wholesale and Retail 
Industry , 28 October 2008.  Viewed at:  http://d 1567396.u165.p ngconnect.com/docs/CCA% 
20submission%20 to%20 Whol esale%20%26%20%20Retail%20I ndustry%20Review%20Issues%20 
Paper.pdf#search="electricity. 
Department of Commerce & Industry, Statistical Digest 2008 , December, Port Moresby. 
Department of Communication and Information, National ICT Policy Phase II Reforms , Final Report, 
March 2009.  Viewed at:  http://www.communication.gov.pg/.  
Department of Trade and Industry (undated), The Government's Tariff Reform Programme as it 
Affects the Wood Processing Industry from 2006 .  
Economist Intelligence Unit (2008), PNG, Country Profile 2008 , London. Viewed at:  
http://www.eiu.com/index.asp?layout=country&geography_id=450000045.  
Fleming, E. (2007), "Agricultural productivity change in Pacific island economies", Pacific Economic 
Bulletin , 22(3):32–47.  WT/TPR/S/239 Trade Policy Review 
Page 96 
 
 
 Government of PNG (2010a), Mid-Year Economic and Fiscal Outlook Report 2010 .   Viewed at: 
http://www.treasury.gov.pg/index.html. 
Government of PNG (2010b) 2010 National Budget , Vol. 1 "Economic and Development Policies For 
the year ending 31 December 2010", Port Moresb y. Viewed at:  http://www.treasury.gov.pg/ 
html/national_budget/files/2010/budget_html/Vol1.html.  
Hunt, Colin A.G. (2010), The Costs of Stopping Deforestation in Papua New Guinea. Report for the 
PNG Department of Environment a nd Conservation, 6 April.  View ed at:  http://www.crawford.anu. 
edu.au/pdf/seminars/2010/colin_hunt.pdf.  
ICCC (2006a), Review of the PNG Air Transport Industry , Final Report, 20 September. Viewed at:  
http://www.iccc.gov.pg/docs/AIRLINES%20Final%20REPORT.pdf#search="Air transport".   
ICCC (2006b), Telecommunications Interconnection Code of Practice , November. Viewed at:  
http://www.iccc.gov.pg/docs/Telco%20Interconnecti ons%20Code%20of%20Prac tice.pdf#search="Te
lecommunications code". 
ICCC (2008), Submission to the Department of Communication & Information ("DOCI") , National 
ICT Policy Phase II Consultation, 28 October.  Viewed at:  http://www.iccc.gov.pg/docs/ICCC_ 
Submission_to_ICT_Review_-_Final%20%20Master%20Copy%20101108.pdf.  
ICCC (2010a), Determination on the Clearance Applicati on for the Acquisition of Shell Oil Products 
Ltd (SOPL) by Aviation Operations and Aircraft Refuelling Ltd (AOAR), 19 April 2010.  Viewed at: 
http://www.iccc.gov.pg/docs/ICCC%20Determina tion_AOAR%2019042010.pdf#search= "Aviation 
Operations and Aircraft Refuelling Operations". 
ICCC (2010b), Flour Industry Pricing Review , Issues Paper, 30 April. Viewed at:  
http://www.iccc.gov.pg/docs/Issues%20Paper%20Fl our%20Pricing%20Revie w%20-%20Draft.pdf# 
search="Flour industry". 
IMF (2009a), Papua New Guinea: Selected Issues and Statistical Appendix , Country Report 
No. 09/113, 27 February.  Viewed at:  http://www. imf.org/external/pubs/cat/longres.cfm?sk=22858.0.  
IMF (2009b), Staff Report for the 2008 Article IV Consultation , Country Report No. 09/112, 
27 February, Washington, D.C. Viewed at:  ht tp://www.imf.org/external/pubs/cat/longres.cfm?sk 
=22857.0.  
IMF (2010), Papua New Guinea – 2010 Article IV Consultation , Preliminary Concluding statement of 
the IMF Mission, 22 February, Washington, D.C.  Viewed at:  http://www.imf.org/external/np/ms/ 
2010/022210.htm.  
Investment Promotion Authority (2009a), Investment Papua New Guinea , Vol. 10, Issue 17, January-
June, Boroko. 
Investment Promotion Authority (2009b), The Papua New Guinea Directory of Exporters 2008-2009.  
Port Moresby. 
Investment Promotion Authority online information, Investment Incentives .  Viewed at:  
http://www.ipa.gov.pg/ index.php? option = com_content & task = view&id = 68&Itemid = 57 
[24 March 2010].  Papua New Guinea WT/TPR/S/239 
 Page 97 
 
 
 Investment Promotion Authority online information, National Investment Policy .  Viewed at:  
http://www.ipa.gov.pg/ index.php? option = com_content & task = view&id = 60&Itemid = 57 [24 March 2010]. 
Minister for the Treasury, "The PNG Economy and Constraints on the Private Sector Achieving 
Sustainable Economic Growth in PNG", Speec h at the 22nd Australia-PNG Business Forum, 
15 May 2006, Cairns. 
NBPOL (2008), Annual Report 2008 . Viewed at:  http://www.nbpol.com.pg/downloads/Annual_ 
Report_2008_FINAL.pdf. 
Pacific Economic Survey (2008), Pacific Economic Survey: Telecommunications .  Viewed at:  
http://www.pacificsurvey.org/UserFiles/file/P acific%20Economic%20Sur vey08_ Chapter%204.pdf. 
Pacific Institute of Public Policy (2008), "MS G: trading on political capital and Melanesian 
solidarity", Briefing Paper 02,  July.  Viewed a t: http://www.pacificpolicy.org/index.php?option=com 
_rubberdoc &view=category&id= 58&Itemid=93 [24 March 2010].  
Papua New Guinea Forest Authority, Chairman's Report 1993,  Port Moresby .  
PNG Department of Treasury (2003), 2003 Tariff Review:  A Review of the Tariff Reduction Program , 
October.  Viewed at:  http://www.treasury.g ov.pg/html/publications/publications.html.  
PriceWaterhouseCoopers (2006), Economic Analysis and Potential of PNG Forestry Industry.  Report 
commissioned by the PNG Forest Industries Associ ation, Final Report, November. Viewed at:  
http://www.fiapng.com/PDF_files/PWC_ECONOMIC_REPORT_07.pdf.  
PricewaterhouseCoopers (2009), Tax facts and figures Papua New Guinea .  Viewed at:  
http://www.pwc.com/en_PG/pg/publications/assets/2009-png-tax-facts-figures.pdf.  
Radio New Zealand International (2009), PNG lines up for ASEAN membership , 1 April.  Viewed at:  
http://www.rnzi.com/pages/news.php?op=read&id=45707.  
Reddy, M. (2007), "Enhancing the agricultu ral sector in Pacific island economies", Pacific Economic 
Bulletin , 2(3):48–62. 
Scollay, Robert (2006), Regional Trade Agreements  and Developing Countries:  the Case of the 
Independent Pacific Island States, APEC Study Ce ntre and Economic Department, University of 
Auckland. 
Scollay, Robert (2007a), PACP Adjustment Needs Analysis, A Report for the Pacific Islands Forum 
Secretariat , University of Auckland. 
Scollay, Robert (2007b), Review of the Tariff Reduction Program .  Report prepared for PNG 
Treasury, July. Viewed at:  http://www.treasury.gov.pg/html/publications/publications.html.  
Soni, N., B. Harries and B. Zinner-Toa (2007), Responding to the Revenue Consequences of Trade 
Reforms in the Forum Island Countries , Report for the Pacific Island Forum, September.   
Transparency International (2009), Global Corruption Report 2009 .  Viewed at:  
http://www.transparency.org/publications/gcr/gcr_2009#dnld.   WT/TPR/S/239 Trade Policy Review 
Page 98 
 
 
 UNCTAD (2006), PNG Trade Policy Framework, New York and Geneva. 
UNCTAD (2008), Generalized System of Preferences – List of beneficiaries, 2008 .  Viewed at:  
http://www.unctad.org/en/docs/itcdtsb misc62rev3_en.pdf [24 March 2010] 
UNCTAD (2009), World Investment Report 2009 , Country Fact Sheet: Papua New Guinea.  Viewed 
at:  http://www.unctad.org/Template s/Page.asp?intItemID=2441&lang=1. 
Warner, B. and Eric Omuru (2008), "PNG commodity  prices – an opportunity not to be missed, 
Economic Survey", Pacific Economic Bulletin,  Vol. 23, No. 1, Asia Pacific Press, Canberra. 
World Bank (2006), PNG Country Procurement Assessment Report , Report No. 36807-PG, June, 
Washington DC.   
WTO (2009), Country profiles PNG, October, Geneva.  Viewed at:  http://stat.wto.org/countryprofile/ 
wsdbcountrypfview.aspx?language=e &country=pg [24 March 2010].