HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements...Papua New Guinea

# 					2023 Investment Climate Statements: Papua New Guinea			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                  -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Additional Resources 
                  -  Climate Issues 
                  -  Additional Resources 
                -  9. Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment Statistics 
                -  14. Contact for More Information 

## EXECUTIVE SUMMARY

Papua New Guinea (PNG) is the largest economy among the Pacific Islands and offers enormous trade and investment potential. Key investment prospects are in infrastructure development, a growing urban-based middle-class market, abundant natural resources in mining, oil and gas, forestry, and fisheries.

Prime Minister James Marape’s government is concentrating efforts towards large scale investments and trade and is looking to increase manufacturing and downstream processing to reduced dependency on imports and increase the country’s export marketplace. The Government of Papua New Guinea (GoPNG) endorses a fair, open, and collective approach in its decision-making processes, especially decisions concerning the proper management of the country’s resources and investment returns.

Under Marape, PNG aims at creating a conducive socio-economic environment for businesses to grow and flourish. Focusing efforts to build and maintain infrastructure, increase measures in safety and security, support strong regulatory practices, strengthen governance, and increase health and education access will aid in creating strong livelihoods and businesses. Current reforms are shrinking the high debt levels and foreign direct investment (FDI), especially in the natural resources sector, will stimulate the economy for many years.

The Marape administration recognizes the high cost of logistical services, the breakdown of law and order, a cumbersome public sector, and poorly performing state-owned enterprises. “Friends to all, enemy to none,” is the administration’s rallying call to address these problems, as GoPNG regularly reaffirms its need for FDI and partnerships to stimulate its economy.

Australia was the top investing country in 2021, followed by Malaysia, the USA, Hong Kong, and China. In 2022 investment from China significantly increased. Much of the investment from China has been in Chinese-owned energy and infrastructure adding power generation to support Chinese-owned mining entities. By sector investments, the energy sector had the highest investments, and investment proposals, followed by the retail, and wholesale sector, then manufacturing, mining and petroleum, and other sectors. Mining companies continue to be an attractive investment destination. Growth in mining industry is estimated to be 5.4 percent, underpinned by the expected reopening of the Porgera mine and improvements in OK Tedi and Wafi-Golpu production in 2023. Papua LNG enters the next phase of liquid natural gas commercialization that bring TotalEnergies, ExxonMobil, and Santos collaborating for years to come. Furthermore, telecommunication companies are also anticipating growth and seen as good foreign investment opportunities in PNG and the Pacific. Telstra Australia acquired telecommunication giant Digicel Pacific which has the largest market share in PNG. Vodafone PNG – Amalgamated Telecom Holdings Ltd started operations as the third mobile operator in PNG with an anticipated investment exceeding $399 million.

The GoPNG recognizes the need for climate change action and has submitted its Enhanced National Determined Contributions (NDC). PNG’s proposed climate change mitigation, and adaptation strategies to achieve full carbon neutrality by 2050 are conditional. The GoPNG made climate change mitigation and adaptation strategies into its national long-term visions, plans, and strategies. As PNG is already beginning to see climate refugees on its shores, the climate change envoy at COP27, stressed, and leveraged preservation of the country’s rainforests and oceans for climate change action, and the need for economic development and sustainable FDI along these lines.

The economy is healing from COVID-19 deficits but shipping cost, fuel fluctuations, and food insecurity are still major concerns as the Russian war of aggression in Ukraine still rages on.

 

							1. Openness To, and Restrictions Upon, Foreign Investment					

The GoPNG remains focused on fostering an enabling environment for businesses to grow and attracting foreign direct investment. PNG aims to increase FDI in mining and the petroleum/gas sector from $40 million in 2016 to $100 million in 2022. FDI stock reached $4.2 billion in 2016. The mining, oil, and gas sectors attract most of the FDI. There is a target to increase stock to $10 billion in 2022, the total proposed FDI value at the end of 2021 was $370.5 million. The GoPNG also aims to increase FDI in the renewable non-resource sector.

The goal of the 2017-2032 PNG National Trade Policy (NTP) (http://www.pngeutra2.org.pg/wp-content/uploads/2017/08/PNG-National-Trade-Policy-2017-2032.pdf) is to maximize trade and investment by increasing exports, reducing imports on substitute goods, and increasing FDI that generates wealth and contributes to growing the economy. The NTP envisions a future PNG with “an internationally competitive export-driven economy that is built on and aided by an expanding and efficient domestic market.”

The policy lays out numerous legal, regulatory, and administrative measures to be adopted by the GoPNG in furtherance of these objectives. It also sets very ambitious economic targets, including the creation of over 100,000 new jobs, $10 billion in foreign investment, increased foreign exchange reserves, reduced GoPNG’s debt to GDP ratio, and a more diversified economy in the next five years. In support of that, the GoPNG approved the creation of twenty-two Special Economic Zones (SEZ). The creation of the SEZs signifies the government’s commitment to supporting foreign direct investments (FDIs) in Papua New Guinea. These SEZs will serve as designated areas that provide specific incentives and favorable conditions for businesses, with the aim of attracting and facilitating investment from foreign companies. The GoPNG aims to stimulate economic growth, create employment opportunities, enhance technological advancements, and boost trade and export activities.

SEZs offer various benefits to foreign investors, including tax incentives, streamlined regulatory procedures, access to infrastructure and utilities, and potentially favorable labor regulations. The GoPNG recognizes the importance of attracting foreign direct investment as a catalyst for economic development and diversification. This demonstrates GoPNG proactive approach in creating an investment-friendly climate, promoting job creation, and fostering economic diversification. It also highlights the government’s recognition of the potential benefits that foreign direct investments can bring in terms of technology transfer, knowledge sharing, and economic spillover effects.

The SEZs are expected to attract investments in sectors such as mining, energy generation, manufacturing, agriculture, tourism, information technology, and more. They can provide a conducive environment for businesses to thrive, encouraging both local and international companies to establish their presence and contribute to the country’s economic growth.

In addition to the SEZs, the GoPNG announced it would establish eight new trade missions in 2023 with the first mission in Shanghai, China. The primary responsibility of these trade missions will be to look for export markets for PNG goods and promote trade investment opportunities in PNG, especially to attract FDI. A key priority for these trade missions is to attract investors for the SEZs and increase free trade negotiations with various countries. These proposed Trade missions will be in China, Australia, Thailand, Indonesia, European Union, United Arab Emirates, Philippines, and Singapore.

### Limits on Foreign Control and Right to Private Ownership and Establishment

PNG does not have any specific policy or law that promotes discrimination against foreign investors.

The GoPNG is an active partner in hosting regular resource sector forums that attract large numbers of international industry experts and investors. The GoPNG co-hosts the annual Petroleum and Energy Summit in Port Moresby and supports the bi-annual PNG Mining and Petroleum Conference.

The Investment Promotion Act facilitates, regulates, and monitors foreign investment in Papua New Guinea. Section 37 of the Act guarantees that the property of a foreign investor shall not be nationalized or expropriated except in accordance with law, for a public purpose defined by law and in payment of compensation as defined by law. Foreigners are not allowed to own land in PNG. Most foreign businesses use long-term leases for land instead of direct purchases. There are no other specific requirements. PNG recently changed its citizenship laws to allow dual citizenship, which had previously been a limiting factor for Papua New Guineans returning from overseas that naturalized elsewhere. Additionally, it allows long-term residents to naturalize as PNG citizens with full legal rights and responsibilities. PNG does not have any specific policy or law that promotes discrimination against foreign investors.

Although the GoPNG does not have a minimum investment requirement, the Investment Promotion Authority (IPA) may, pursuant to Section 28(7) of the Investment Promotion Act, require a potential investor to deposit the prescribed amount prior to IPA approval. The purpose of the screening mechanism is to assess the net economic benefit and alignment with national interest. The possible outcomes of a review are prohibition, divestiture, and imposition of additional requirements. The IPA and other regulatory bodies in their sectors make the decision on the outcome. Appeal processes differ among the sectors. For IPA-related matters, a company must submit its appeal to the Ministry of Commerce and Industry. Appeals may be lodged in response to any decision made by the IPA, including rejection of an application or the cancellation of a registration. Moreover, Special Economic Zone Authority (SEZA) in Papua New Guinea is a regulatory body that was established under the Special Economic Zones Act of 2019. The primary objective of SEZA is to create, develop, operate, and regulate Special Economic Zones (SEZs) within the country. SEZs are designated geographical areas that are governed by specific regulations and incentives to attract both local and foreign investment.

The Bank of Papua New Guinea (BPNG), PNG’s Central Bank, approves all foreign investment proposals. Such proposals include the issue of equity capital to a non-resident, the borrowing of funds from a non-resident investor or financial intermediary, and the supply of goods and services on extended terms by a non-resident. In its review, the Bank is mostly concerned that the terms of the investment funds are reasonable in the context of prevailing commercial conditions and that full subscription of loan funds are promptly brought to Papua New Guinea. A debt-to-equity ratio of five-to-one is generally imposed with respect to overseas borrowing and a ratio of three-to-one is generally imposed on local borrowing.

### Other Investment Policy Reviews

There were no third-party investment policy reviews in the past five years through a multilateral organization such as the OECD, WTO, or UNCTAD, despite a request for such a review to the latter organization. While the GoPNG is focusing on attracting foreign investments into the country, a review of investment policies to protect the environment and society is needed. The lack of environmental law enforcement and a weak justice system are major concerns with civil society organizations. Global Witness notes undocumented logging activities, inequalities in the distribution of benefits from this investment, and escalating social issues as major concerns for PNG.

### Business Facilitation

The IPA, through the Companies Office, is responsible for the administration of Papua New Guinea’s key business laws such as the Companies Act, Business Names Act, Business Groups Incorporation Act, and the Associations Incorporation Act.

The services provided by the Authority include: Business, registration, regulation, and certification (under the Business Registration and Certification or Office of the Registrar of Companies), Investor Servicing and Export Promotion (under the Investor Services and Promotion Division), Protection of Intellectual Property Rights (under the Intellectual Property Office of PNG), and regulating capital Markets (under the Securities Commission of PNG).Service information is available at http://www.ipa.gov.pg/business-registration-regulation-and-certification.

The IPA is the lead agency for PNG’s business facilitation efforts. It can be reached online at http://www.ipa.gov.pg/. The new “Do It Online” section allows both overseas and domestic business registration. Previously, the processing times were substantial, but the current processing time for IPA is seven days or less. A foreign company must first register under the Companies Act of 1997. Foreign companies have two options for registration in PNG: to incorporate a new company in PNG or to register an overseas company under the Companies Act of 1997. In practice, most foreign companies incorporate a new PNG subsidiary when entering the PNG market. Once incorporated and registered with the IPA, a newly incorporated PNG company or overseas company should also register with the Internal Revenue Commission for tax and employment purposes. Typically, this process takes nine days.

Some hurdles observed by companies entering the market include having to have a localization and training plan submitted to IPA ensuring there are local hires and components to companies entering PNG’s markets, having to produce company financial statements on earnings yearly, and being limited to $145,000 (PGK500,000) in repatriating funds in any 12-month period, however companies can apparently request a Tax Clearance Certificates from PNG’s Internal Revenue Commission.

### Outward Investment

Through the IPA, GoPNG has a range of direct and indirect taxation-based incentives for large and small proposals. There are international treaties, agreements and pacts which give Papua New Guinea’s manufactured goods preferential access to various export markets, including duty free and reduced tariff entry to some of the largest markets in the world. These treaties include access to the European Union (EU) under the Cotonou Agreement, and the United States Generalized System of Preferences Program (GSP). The GSP Program is a U.S. government arrangement that provides enhanced access to the U.S. markets and designed to help countries grow their economies through trade. The GSP provides duty-free treatment for almost 3,500 products from PNG and its neighbors.

The Multilateral Investment Guarantee Agency’s (MIGA) principal responsibility is promotion of investment for economic development in member countries through:* guarantees to foreign investors against losses caused by non-commercial risks; and* advisory and consultative services to member countries to assist them in creating a responsive investment climate and information base to guide and encourage flow of capital.

There are no explicit legal restrictions on outward investment. The most likely barrier for this type of investment would be securing sufficient access to foreign currency. There have been no recent large-scale outward investments originating from PNG.

							2. Bilateral Investment and Taxation Treaties					

PNG has Bilateral Investment Treaties (BITs) with Australia, China, Germany, Japan, Malaysia, and the United Kingdom. PNG has a free trade agreement (FTA) with the countries of the Melanesian Spearhead Group: Solomon Islands, Vanuatu, and Fiji.

PNG does not have a bilateral taxation treaty with the United States. PNG has “double tax treaties” with the following countries: Australia, Canada, China, Fiji, Germany, Indonesia, South Korea, Malaysia, New Zealand, Singapore, and the United Kingdom. PNG also has a tax information exchange agreement with Australia.

The country is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting since 2016. PNG signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2021. PNG’s accession to the convention extends its tax information sharing network and is a party to the Inclusive Framework’s two-pillar plan to address the tax challenges arising from the digitalization of the economy.

							3. Legal Regime					

### Transparency of the Regulatory System

The Independent Consumer and Competition Commission (ICCC) is charged with fostering competition. While there are transparent policies in place, the competition regime is oriented towards regulating existing monopolies and does little to foster competition. Tax, labor, environment, health, and safety and other laws do not distort or impede investment.

The IPA and GoPNG are moving, with the assistance of the International Finance Corporation, towards a more streamlined regulatory framework to encourage foreign investment. One example of this trend is the IPA’s move to an online registration process for businesses. Nongovernmental organizations and private sector associations manage informal regulatory processes. Local professional associations have created impediments to the licensing of skilled foreign labor that foreigners must go through before they can work/practice in the country.

There are no private sector or government efforts to restrict foreign participation in industry standards-setting consortia or organizations. Proposed laws and regulations are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers or regulators. Legal, regulatory, and accounting systems are transparent and consistent with international norms, but there are delays in the dispute resolution system due to a lack of human resources in the judiciary.

The Companies Act requires all banks and financial institutions, insurance companies, listed companies on the stock exchange, securities companies, superannuation funds, and private companies (including exempt companies) to utilize the International Financial Reporting Standards (IFRS) when preparing their financial statements. Foreign companies and their subsidiaries are required to follow similar financial reporting and audit requirements as domestic companies, regardless of size. Although the listing rules of the Port Moresby Stock Exchange do not set out additional financial reporting requirements for listed companies, the rules do require listed companies to publicly disclose their audited financial statements.

The GoPNG, through the Environmental Act 2000, encourages businesses to prevent and minimize environmental harm. The Conservation Environmental and Protection Authority (CEPA) ensures businesses comply with environmental regulations imposed under the Environmental Act 2000. Companies seeking to invest in businesses that pose a threat to the environment are required to conduct an environmental impact assessment report. Environmental impact reports, however, are rarely made public.

When possible, proposed laws are made available for public comment, but comments are not always taken into consideration or acted on by lawmakers. Frequently, important Parliamentary decisions, such as the annual budget, are taken with no hearings and little or no debate before voting.

Regulatory decisions can sometimes be capricious and opaque, but they do not specifically target foreign-owned businesses. Most regulatory decisions can be appealed to courts with jurisdiction. Many PNG government functions and documents are available online, but not all, and they are not centralized. Government agencies have acts and regulations that encourage transparency in the administrative process, which are rarely enforced.

Treasurer Ian Ling-Stuckey commissioned the review and amendment of the Central Bank Act 2000 by an appointed independent advisory group. The findings were made public and proposed amendments to the act were passed in parliament which included governance reforms. The reserve bank’s objectives were also expanded from primarily controlling inflation and unemployment to now include economic growth, the general development of PNG economy, and managing national economic crises. Following these changes, the GoPNG appointed a monetary policy board and replaced the head of the reserve bank. The Marape government also amended the Kumul Consolidated Holdings Act to promote good governance, increase transparency, and improve the performance of the country’s state-owned enterprises (SOEs).

There is strong political will in PNG to restore public confidence and engagement in the GoPNG’s fiscal reporting systems. However, greater action by reporting agencies is critical to realize full and timely reporting practices in PNG’s public finance management systems.

Overall, the GoPNG needs greater coordination among reporting agencies to deliver their mandated functions and responsibilities effectively. This includes all government agencies consistently and fully reporting all required financial activities, with proper financial statements to the supreme audit institution. The lack of full and timely reporting practices continues to undermine public finance management systems, and publicly available budget information.

At the same time, most budget documents remain incomprehensible to many ordinary citizens due to low financial literacy levels and the lack of proper public and civic awareness programs.

### International Regulatory Considerations

PNG is a party to the Melanesian Free Trade Agreement. The agreement came into effect in 2017 and does address the need for competent regulatory authorities in each country (PNG, Solomon Islands, Vanuatu, and Fiji). However, the regulatory chapter is small and is designed to be strengthened and improved going forward.

When international standards are used in PNG, they are most often Australian models due to PNG’s history of Australian colonial governance and their continuing close economic ties.

The GoPNG has notified the WTO Committee on Technical Barriers to Trade only once. That notification covered food safety issues and was issued in 2006.

### Legal System and Judicial Independence

The legal system is based on English common law. Contract law in Papua New Guinea is very similar to and applies in much the same way as in other common law countries such as Great Britain, Australia, Canada, and New Zealand. There is, however, considerably less statutory regulation of the application and operation of contracts in Papua New Guinea than in those other countries.

The Supreme Court is the nation’s highest judicial authority and final court of appeal. Other courts are the National Court; district courts, which deal with summary and non-indictable offenses; and local courts, established to deal with minor offenses, including matters regulated by local customs.

While often slow, the judiciary system is widely viewed as independent from government interference. The Supreme Court has original jurisdiction in matters of constitutional interpretation and enforcement and has appellate jurisdiction in appeals from the National Court, certain decisions of the Land Titles Commission, and those of other regulatory entities as prescribed in their own Acts. The National Court also has original jurisdiction for certain constitutional matters and has unlimited original jurisdiction for criminal and civil matters. The National Court has jurisdiction under the Land Act in proceedings involving land in Papua New Guinea other than customary land.

### Laws and Regulations on Foreign Direct Investment

Foreign investors can either be incorporated in PNG as a subsidiary of an overseas company or incorporated under the laws of another country and therefore registered as an overseas company under the Companies Act 1997. The 1997 Companies Act and 1998 Companies Regulation oversee matters regarding private and public companies, both foreign and domestic. All foreign business entities must have IPA approval and must be certified and registered with the GoPNG before commencing operations in PNG. While government departments have their own procedures for approving foreign investment in their respective economic sectors, the IPA provides investors with the relevant information and contacts. In 2013, the GoPNG added a Takeover Code to include a test for foreign companies wishing to buy into the ownership of local companies. The new regulation states that the Securities Commission of Papua New Guinea (SCPNG) shall issue an order preventing a party from acquiring any shares, whether partial or otherwise, if the commission views that such acquisition or takeover is not in the national interest of PNG. This applies to any company, domestic or foreign, registered under the PNG Companies Act, publicly traded, with more than $1.42 million in assets, with a minimum of 25 shareholders, and more than 100 employees.

In recent years, the government did not enforce this law, which allowed ExxonMobil to acquire InterOil and the Chinese company Zijin Mining’s purchase of 50 percent of the Porgera Joint Venture gold mine. The IPA website (https://www.ipa.gov.pg) is the official online information platform to engage with the public on matters relating to the IPA’s mandated roles and function.

### Competition and Antitrust Laws

The 2002 Independent Consumer and Competition Commission Act is the law that governs competition. It also established the Independent Consumer and Competition Commission (ICCC), the country’s premier economic regulatory body and consumer watchdog; introduced a new regime for the regulation of utilities, in relation to prices and service standards; and allowed the ICCC to take over the price control tasks previously undertaken by the Prices Controller as well as the consumer protection tasks previously undertaken by the Consumer Affairs Council. The ICCC’s website is http://www.iccc.gov.pg.

The ICCC reviewed the merger and acquisition of Oil Search Limited by Santos Australia, Digicel Pacific by Telstra Australia, and the proposal by Kina Bank to acquire Westpac. ICCC conducted stakeholder consultations for each of the mergers and acquisitions to determine the effect on consumers and market competition. It approved the Santos/Oil Search and Digicel/Telstra deals while denying Kina Bank’s proposed acquisition of Westpac.

### Expropriation and Compensation

The judicial system upholds the sanctity of contracts, and the Investment Promotion Act of 1992 expressly prohibits expropriation of foreign assets. The 2013 nationalization of the Ok Tedi copper-gold-silver mine was an act of parliament, considered and voted on in the regular order of business. There was no recourse or due process beyond the Parliament.

### Dispute Settlement

#### ICSID Convention and New York Convention

PNG signed the instrument of Accession to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on June 22, 2019. The Instrument of Accession was deposited with the UN Treaties Depository in New York on July 17, 2019, and PNG became the 160th country to accede to the New York Convention. As a signatory to the New York Convention, PNG’s National Executive Council endorsed reform to the country’s outdated Arbitration Act 1951 (Chapter 46 of the Revised Laws of PNG) through the adoption of new legislation based on international model laws to implement the New York Convention and to provide enhanced support for modern arbitration in PNG.

PNG has been a member of the International Center for Settlement of Investment Disputes (ICSID Convention) since 1978. In agreements with foreign investors, GoPNG traditionally adopts the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL model law). While no specific domestic legislation exists for enforcement of awards under the 1958 New York Convention or ICSID Convents, in early 2018, an Arbitration Technical Working Committee (ATWC) was formed to advance arbitration reform in PNG. Consisting of members of the PNG Judiciary and representatives of the First Legislative Counsel and other relevant inter-governmental departments and agencies, the ATWC produced a draft Arbitration Bill 2019 in consultation with the United Nations Commission on International Trade Law (UNCITRAL), Asian Development Bank and internationally recognized arbitration experts. The draft Arbitration Bill 2019 aims to conform with best modern international arbitration law practice. The draft bill is subject to further vetting before its enactment.

#### Investor-State Dispute Settlement

Investment disputes may be settled through diplomatic channels or through the use of local remedies before having such matters adjudicated at the International Center for the Settlement of Investment Disputes or through another appropriate tribunal of which Papua New Guinea is a member. The Investment Promotion Act 1992, which is administered by the IPA, also protects against expropriation, cancellation of contracts, and discrimination through the granting of most favored nation treatment to investors. PNG does not have a Bilateral Investment Treaty (BIT) with the United States, and no claims have been made under such an agreement. There is not a recent history of international judgments against GoPNG nor is there a recent history of extrajudicial action against foreign investors. PNG does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

Over the last 10 years, there here have been no known disputes involving a U.S. person or other foreign investors, nor have the local courts heard cases to recognize or enforce foreign arbitral awards issued against the GoPNG. There is no history of extrajudicial action against foreign investors.

#### International Commercial Arbitration and Foreign Courts

According to the Port Moresby Chamber of Commerce & Industry, local and foreign parties settle disputes in Papua New Guinea through the courts. Litigation in PNG is perceived to be an expensive and drawn-out process, sometimes taking years for a decision to be handed down.

There is no domestic arbitration body outside of the courts and contract enforcement. A 2015 international arbitration decision in favor of Interoil (which has since been acquired by ExxonMobil) and against Oil Search was reportedly respected in PNG. To date, there have been no cases in which SOEs were involved in investment disputes.

### Bankruptcy Regulations

Papua New Guinea’s bankruptcy laws are included in chapter 253 of the Insolvency Act of 1951 and sections 254 through 362 of the Companies Act of 1997, which covers receivership and liquidation. Bankruptcy and litigation searches can only be conducted in person at the National Court in Port Moresby.

According to the World Bank’s Doing Business Report, resolving insolvency in Papua New Guinea takes an average of three years, and typically costs 23 percent of the debtor’s estate. The average recovery rate is 25.2 cents on the dollar. Globally, Papua New Guinea stands at 141 out of 189 economies for the Ease of Resolving Insolvency on the World Bank Ease of Doing Business Survey.

							4. Industrial Policies					

### Investment Incentives

Performance requirements/incentives are applied uniformly to both domestic and foreign investors. The investment incentives currently available are designed primarily to encourage the development of industries that are considered desirable for the long-term economic development of Papua New Guinea or specific underdeveloped regions within the country.

A 10-year exemption from tax is available where certain new businesses are established in specified rural development areas. Businesses, resident, or non-resident, engaged in the following activities qualify for this exemption:

- Agricultural production of any kind;
- Manufacturing of any kind;
- Construction;
- Transport, storage, and communications;
- Real estate;
- Business services; and
- Provision of accommodation, motels, or hotels.

The following have been specified as rural development areas:

- Central province – Goilala;
- Enga province – Kandep, Lagalp, Wabag, Wapenamunda;
- Gulf province – Kaintiba, Kikori;
- Eastern Highlands province – Henganofi, Lufa, Okapa, Wonenave;
- Southern Highlands province – Jimi, Tambal;
- Madang province – Bogia, Rai Coast, Ramu;
- Milne Bay province – Losula, Rabaraba;
- Morobe province – Finschaffen, Kabwum, Kaiapit, Menyamya, Mumeng;
- East New Britain province – Pomio;
- West New Britain province – Kandrian;
- East Sepik province – Ambuti, Angoram, Lumi, Maprik;
- West Sepik province – Amanab, Nuku, Telefomin; and
- Simbu province – Gumine, Karimui.

The Investment Promotion Act contains guarantees that there will be no nationalization or expropriation of foreign investors’ property except in accordance with law, for public purposes defined by law, or in payment of compensation as defined by law.

Accelerated depreciation rates are available for new manufacturing and agricultural plants, generous deductions are available for capital expenditure on land used for primary production, and accelerated deductions are available for mining and petroleum companies. A 10-year exemption from tax is available where certain new businesses are established in specified rural development areas. The exemption does not apply to businesses in areas in which a special mining lease or a petroleum development license is granted.

Businesses that commence exporting qualifying goods manufactured by them in Papua New Guinea are exempt from income tax on the profits derived from those sales for the first three complete years. For the following four years, the profit derived from the excess of export sales over the average export sales of the three previous years is exempt from income tax. The list of qualifying goods includes, among other items: motor vehicles, matches, paint, refined petroleum, soaps, wooden furniture, dairy products, flour, chopsticks, artifacts, clothing and manufactured textiles, and jewelry.

A wage subsidy is payable to new businesses that manufacture new manufactured products. The business will receive a prescribed percentage of the value of the minimum wage paid by the business, multiplied by the number of Papua New Guineans permanently employed by the business.

Eligible products are, broadly, all products listed under division D of the International Standard Classification of All Economic Activities (Third Revision), provided the products are not subject to quota pricing without import pricing or to tariff protection.

Registered foreign companies must file an annual certification with the Registrar of Companies accompanied by audited financial statements. A foreign company must apply for Certification under the Investment Promotion Act 1992 within 14 days of registering. Any foreign company automatically falls under this category and therefore must complete the same process.

A company may apply to be exempted from certain requirements. A company which chooses to conduct business through a branch registered in Papua New Guinea can repatriate its profits without being subject to withholding tax. On the other hand, the dividends of a Papua New Guinea incorporated subsidiary may attract dividend withholding tax. The law imposes a higher rate of income tax on non-resident companies. If a foreign company merely wishes to have a representative office in Papua New Guinea, it may be exempt from lodging tax returns if it derives no income in Papua New Guinea. The Companies Act adopts similar principles and standards of corporate regulation to those in place in New Zealand. Companies registered in Papua New Guinea must lodge an annual return every year with the Registrar of Companies within six months of the end of its financial year.

There are no discriminatory or preferential export and import policies affecting foreign investors, and there are low levels of import taxes.

The GoPNG is removing import taxes on electric vehicles, effective in 2022 to support green energy investments; there are no other tax incentives for green investments.

### Foreign Trade Zones/Free Ports/Trade Facilitation

PNG Parliament passed the Special Economic Zone Authority Act in November 2019. There are currently twenty-two areas throughout PNG set up operate as SEZs. The Act also repelled the Free Trade Zone Act 2000 and the ICDC Act 1990. A special economic zone can be any declared geographic area physically secured comprising serviced lands that are designated as an SEZ under the SEZ Authority Act 2019. PNG SEZs shall operate free of taxes and duties for ten years, to promote Foreign Direct Investment (FDI), the building of critical capital infrastructures and industries, and establishes and increases export.

Kokopo Tourism Zone, Tokua Airport City SEZ and Gazelle Agro SEZ (East New Britain), Sepik Plains SEZ (East Sepik), Vanimo Free Trade Zone (Sandaun), Central Province Rice Zone, Baiyer Agriculture Zone (Western Highlands), Karamui Agriculture Zone (Simbu), Middle Ramu Economic Zone and PMIZ (Madang), Western Province SEZ, Labu SEZ, Nadzab Airport City SEZ and Lae- Nadzab SEZ (Morobe), Ihu SEZ (Gulf), and Manus Special Economic Region.

GoPNG designated various types of Special Economic Zones (SEZs) to harness the different potentials and opportunities available in the country. These SEZs are strategically categorized to cater to specific industries and economic activities. The Free Trade Zones aim to facilitate international trade by providing a platform for duty-free import and export activities. The Export Processing Zones focus on encouraging manufacturing and processing industries to add value to raw materials and promote export-oriented production. The Free Port Zones aim to enhance logistics and maritime activities by offering customs and tax benefits for trans-shipment and trading activities. The Enterprise Zones are designated to attract both local and foreign investment in various sectors, fostering economic growth and job creation. The Tourism Zones focus on developing tourism-related infrastructure and services to support the growing tourism industry in Papua New Guinea. The Single Factory Zones are dedicated to facilitating the establishment and growth of individual manufacturing units. The Marine Industrial Zones aim to promote activities related to the maritime industry, such as shipbuilding and repairs. The Science Technology Park aims to foster innovation and technological advancements by providing a platform for research, development, and collaboration among scientific and technological institutions. The Petroleum Park is dedicated to the oil and gas industry, providing a supportive environment for exploration, extraction, and processing activities. The Logistics Park focuses on enhancing transportation and logistics capabilities to facilitate trade and commerce. The Airport Free Zones aim to attract aviation-related industries and services. Lastly, the Forestry Park is dedicated to the sustainable management and utilization of forest resources, promoting value-added activities in the forestry sector.

For each SEZ, the GoPNG plans to operate Gold and Regional Value Chain Industries, maintain one-stop shop regimes, and grant fiscal, customs, and operational incentives up to ten years.

### Performance and Data Localization Requirements

All non-citizens seeking employment in PNG must have a valid work permit before they can be hired. The work permit must be granted by the Secretary of the Department of Labor and Industrial Relations (DLIR) in accordance with the Employment of Non-Citizens Act of 2007. It can take weeks or even months to obtain both a work permit and visa for non-citizens to work in Papua New Guinea, and delays are common due to a lengthy bureaucratic clearance process. In the past, the GoPNG has used its immigration powers to block visas for personnel coming to Papua New Guinea to fill positions that it believes can be filled by Papua New Guineans.

There are no governmental authority-imposed conditions on permission to invest, nor forced localization imposed on foreign investors.

NICTA (National Information & Communication Technology Authority) Data Integrity Act called CCE (Controlled Customer Equipment) is strictly enforced. Only illegal transmission of state/military data will be charged against the state or military. These are the two Acts that enforce data integrity (Data Interference and System Interference). In any case the fine is an amount not exceeding US $28,500 or 10 years in prison.

							5. Protection of Property Rights					

### Real Property

Property rights exist and are enforced. Mortgages and liens do exist. For non-customary land, the system is reliable. PNG’s legal system does not allow direct foreign ownership of land. To get around this limitation, long-term government leases are used. The legal system protects and facilitates acquisition and disposition of all property rights, but there are substantial delays particularly within the Department of Lands.

### Intellectual Property Rights

The Investment Promotion Authority through the Intellectual Property Office of PNG (IPOPNG) administers the Trademarks Act, Chapter 385, Copyright and Neighboring Rights Act (2000) and the Patents and Industrial Design Act (2000).

Protections for intellectual property rights relating to the reproduction and sale of counterfeit and pirated products, particularly music and movies, are insufficient. Such counterfeit products are openly sold on the streets and in shops. Sales persist despite sporadic law enforcement action. Other counterfeit products that infringe on copyrights, patents, and/or trademarks are often imported from Asian countries and sold in Papua New Guinea. Customs periodically seizes such shipments, but there are significant gaps in their enforcement regime. Adequate protection for trade secrets and semiconductor chip layout design exists in law, and minimal infringements appear to occur.

PNG primarily tracks seizures of counterfeit goods through media reports, as no formal publication process exists. PNG does prosecute IPR violations. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

							6. Financial Sector					

### Capital Markets and Portfolio Investment

Portfolio investments are unregulated and limited to the availability of stocks. PNG has one stock market in Port Moresby, PNGX Limited (Formerly POMSoX). Founded in 1999, it is closely aligned with the Australian Stock Exchange (ASX) and mimics its procedures.

Credit is allocated on market terms, and foreign investors are able to get credit on the local market, much more so than in previous years due to the liberalization of policies, provided those foreign investors have a good credit history. Credit instruments are limited to leasing and bank finance.

### Money and Banking System

PNG’s commercial banking sector comprises four commercial banks. Two are Australian institutions, Westpac and Australian and New Zealand Group (ANZ) banks, with local banks Bank of South Pacific (BSP) and Kina Bank.

BSP is both the largest bank and non-mining taxpayer in PNG. BSP operates 79 branches, 52 sub-branches, 351 agents, 499 ATMs, 11,343 electronic funds transfer at point of sale (EFTPOS) units and 4261 employees.

Official government sources indicate that much remains to be done in terms of financial inclusion, with nearly three quarters of PNG’s population lacking access to formal financial services. Most of those excluded represent the low-income population in rural areas, urban settlements, especially women.

Based on the Oxford Business Group business update issue of 2018, assets in the commercial sector have recorded exponential growth since 2002, with the Bank of PNG reporting that total commercial banking assets rose from $1.2 billion in that year to reach $6.3 billion in 2011. Growth has been slower in recent years, however, with total assets rising from $7.1 billion in 2012 to a high of $8.49 billion 2020.

The banking system in Papua New Guinea is sound. The Bank of Papua New Guinea acts as the central bank for Papua New Guinea. The Central Banking Act of 2000 outlines the powers, functions, and objectives of the Bank. Foreigners are required to show documentation either of their employment or their business along with proof of a valid visa in order to register for a bank account.

### Foreign Exchange and Remittances

#### Foreign Exchange

While there are no legal restrictions on such activities, a lack of available foreign exchange makes such conversions, transfers, and repatriations time consuming. Bank of Papua New Guinea requires that all funds held in PNG be held in PNG kina. This rule was announced with little notice and caught many businesses off-guard in 2016. While there was an appeal process for businesses that wished to keep non-PGK accounts, none of the appeals were granted. Due to the backlog on demand, and insufficient foreign exchange, the reserve bank rations foreign exchange. The reserve bank rations foreign exchange, by prioritizing business activities, and demand.

The Bank of Papua New Guinea (BPNG) determines the exchange rate policy, and since 2014 uses a crawling pegged foreign exchange rate policy, such that the local currency is pegged and fluctuates, with its major trading partners currencies including the USD.

PNG maintains a foreign exchange reserve, which serves as a buffer to manage the inflow and outflow of foreign currencies. This reserve primarily consists of mining tax revenues and overseas income, and its value fluctuates between $2 billion to $4.8 billion. In instances where there is a deficit in the Balance of Payments, BPNG intervenes by engaging in foreign currency trading with commercial banks to address the deficits. However, these interventions led to the depletion of the foreign exchange reserve. Consequently, the country is currently experiencing foreign exchange shortages, which pose challenges to various sectors of the economy. To replenish the depleted foreign exchange reserve, the GoPNG is considering external borrowing as a potential solution especially when major economic activities are delayed. By seeking external funds, the aim is to restore stability to the foreign exchange reserves and address the immediate challenges posed by the shortages. An increase in external funds would allow the country to meet its foreign currency requirements for essential imports and maintain stability in its economy.

### Remittance Policies

There have been no recent changes or plans to change remittance policies. Remittance is done only through direct bank transfers. All remittances overseas in excess of $15,340 per year require a tax clearance certificate issued by the Internal Revenue Commission (IRC). In addition, approval of PNG’s Central Bank – the Bank of Papua New Guinea – is required for annual remittances overseas in excess of $145,000.

While there are no legal time limitations on remittances, foreign companies have waited many months for large transfers or performed transfers in small increments over time due to a shortage of foreign exchange.

### Sovereign Wealth Funds

A Sovereign Wealth Fund Bill was passed in Parliament on July 30, 2015. However, falling commodity prices have severely impacted government revenues. Plans for the SWF have been put on hold indefinitely. Following legislative changes to SOE’s policy on dividend payments to the GoPNG, enabling the Marape administration to transfer annually seven percent of dividends received from SOE’s in the resources sector to the SWF.

							7. State-Owned Enterprises					

SOEs in PNG continue to dominate critical public utilities ranging from electricity, water and sewerage, transport, and telecommunications. PNG’s total state assets stand at $2.65 billion with staff strength of 7,000 employees. Papua New Guinea’s nine SOEs altogether comprise 4.8 percent of GDP with a total revenue of $855 million.

The SOEs operate and provide services in aviation, mobile services and telecommunications, water and sewerage, motor vehicle insurance, development banking and finance, petroleum sector, data service, port services, electricity, and postal and logistics services. Each SOE has an independent board that is appointed by the cabinet which then reports to the Minister of State-Owned Enterprises.

Recent reports highlighted the rapid growth in the assets of the nine largest SOEs. Asset use, however, has been inefficient and with their profitability steadily declining since 2005.

Structural reform in 2015 established Kumul Consolidated Holdings (KCH). The purpose of the reform was to give SOEs greater autonomy and accountability, but this is still lacking in day-to-day operations. Under the Kumul Consolidated Holdings Act 2015, the cabinet can appoint SOE directors, grant approvals for corporate plans, remuneration levels, tenders, engagement of consultants, and other powers, thereby reducing the autonomy of the SOE. It has also been reported that the Act allows the cabinet to direct governance control over the SOEs, a responsibility normally reserved for SOE boards. This increases the risk of political considerations overriding commercial targets. PNG’s SOEs generally lack transparency, accountability, autonomy, and a robust legal framework that requires the SOEs to operate as viable commercial entities. Most SOEs in PNG continue to fail to produce financial accounts in a timely manner to allow for more informed government and legislative decision-making. This includes KCH’s failure to publicly report its audited financial statements to date.

### Privatization Program

There is no privatization program in place and thus no guidelines or structure on when and how foreign investors are allowed to participate in privatization programs. The GoPNG has funding available for privatization and is currently using the Public Private Partnership (PPP) structure as a model for privatization. PNG has employed a mixed strategy of growing some SOEs while encouraging partial privatization of other SOE’s through PPP as evidenced by the recent sale and merger of its telecommunications company where the state invited interested private sector investors to purchase an undisclosed share in this SOE.

							8. Responsible Business Conduct					

PNG does not have a national action plan for responsible business conduct (RBC). However, most multinational companies in PNG do operate with a set of standards. The concept of social responsibility activities is pervasive in the extractive industries and guides conducive interactions with all stakeholders. There are currently no NGOs specifically monitoring RBC in PNG.

While PNG does not have specific policies, most large, international companies use international best practices as standards.

PNG is a member of the Extractive Industries Transparency Initiative (EITI). PNG EITI’s efforts have thus far been hampered by a lack of cooperation from relevant government ministries and a severe lack of data.

### Additional Resources

Department of State

- Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ )
- Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/ )
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/ )
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/ )
- Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/ )

Department of the Treasury

- Office of Foreign Asset Controls (OFAC) Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions ).

Department of Labor

- Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings )
- List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
- Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

### Climate Issues

The national climate change strategies, and policies are aimed at addressing climate change and achieving economic development, and growth, without specific expectations on the private sector to divest from intensive greenhouse gas emitting input sources.

There are existing policies for sustainable forest and land management, conservation of biodiversity, and other ecosystem management. However, enforcement in conservation areas lack resources and often landowners do not see immediate benefits and therefore choose more profitable options with immediate returns. During the Somare led government carbon trading schemes were trialed through the REDD+ program as an incentive for rainforest preservation. The trial schemes, however yielded substandard outcomes due to poor governance and limited information sharing on the carbon trading scheme. The Marape government is pursuing carbon trading schemes; in 2021 the government signed an agreement with Australia to develop the carbon trading markets in the country.

The country’s national procurement policy considers the efficient use of resources, and environmental sustainability. Public investment projects are either funded by donors or co- financed through loans from development partners that have their own procurement policies and guidelines, which the GoPNG includes in its procurement process when tendering projects. For example, the Australian loan funded $420 million to upgrade PNG’s major port infrastructure, and the upgrade of the Milne Bay wharf funded through the Strategic Climate Fund Pilot Program for Climate Resilience. Although the national procurement policy includes environmental considerations, however, fully funded government infrastructure projects are rarely climate resilient and environmentally sustainable. The awarding of infrastructure contracts follows procurement policies but lack monitoring and compliance checks on the quality and standard of infrastructure built.

The GoPNG has several national climate change action strategies, including; the Sustainable Development Goal 13 Roadmap, the Climate Compatible Development Policy, PNG’s Action Plan for Enhanced Transparency Framework on AFOLU, and the REDD+ National Forest Monitoring System (2021-2025); National REDD+ Strategy (2017) PNG REDD+ Finance, and the Investment Prospectus (2020). These strategies outline the country’s response to climate change and map a pathway to reduce the country’s climate change vulnerability and greenhouse gas emissions.

The Climate Change Development Authority (CCDA) is the agency responsible for coordinating and facilitating climate change actions, working in partnership with the PNG National Forestry Authority (PNGNFA) and CEPA to monitor natural resources. The CCDA and PNGNFA are developing and maintaining a monitoring and reporting database on forest change and greenhouse gas emissions.

The GoPNG started implementation of the SDG13 Roadmap by banning round log exports starting in 2030; ceasing the issuance of new logging permits; piloting a forest conservation program; developing carbon trade markets with the assistance from the Indo Pacific Carbon Offset Scheme; and restricting the import, trade, and handling of ozone depleting substances in all equipment in 2022 to be followed by a complete ban in 2025.

### Additional Resources

Department of State

- Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ );
- Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/ );
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/ ) and;
- North Korea Sanctions & Enforcement Actions Advisory ( https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf ).

Department of Labor

- Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  );
- List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;
- Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

							9. Corruption					

Corruption is widespread in Papua New Guinea, particularly the misappropriation of public funds, “skimming” of inflated contracts, and nepotism. In January 2022, Transparency International ranked PNG 142 out of 180 countries and rated it the most corrupt of the Pacific Island nations. PNG’s backslide in corruption rankings is attributed to a lack in government financial transparency, instability in governance and civil services, and an inability to properly prosecute crimes of corruption.

Although giving or accepting a bribe is a criminal act, penalties differ for Members of Parliament (MPs), public officials, and ordinary citizens. For MPs the penalty is imprisonment for no more than seven years; for public officials the penalty is imprisonment for no more than seven years and a fine at the discretion of the court; for ordinary citizens the penalty is a fine not exceeding $123 or imprisonment of no more than one year. A bribe by a local company or individual to a foreign official is a criminal act. A local company cannot deduct a bribe to a foreign official from taxes. The GoPNG encourages companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. However, overall enforcement of existing laws is insufficient.

Most of the larger domestic companies and international firms from Europe, North America, Japan, Australia, and New Zealand have effective internal controls, ethics, and compliance programs to detect and prevent bribery. Many firms from elsewhere in East and Southeast Asia, particularly those in the resource extraction sectors, lack such programs.

Papua New Guinea has signed and ratified the UN Convention against Corruption. Papua New Guinea is not a party to the UN Convention against Transnational Organized Crime or the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

PNG’s Ombudsman Commission and the Police Fraud & Anti-Corruption Directorate are generally the main avenues to report and seek protection to matters pertinent to investigating corruption. The Ombudsman Commission is mandated to investigate and recommend to concerned authorities to take action, while the Police Fraud & Anti-Corruption Directorate has the powers to prosecute.

The GoPNG’s efforts to address corruption in the country has resulted in the establishment of PNG’s Anti-Corruption Agency, Independent Commission Against Corruption (ICAC). The primary functions of ICAC once fully operational will be to prevent and reduce corrupt conduct. ICAC will also be responsible for investigating and prosecuting corrupt conduct. The functions of ICAC will not overlap other existing constitutional offices and will serve to empower citizens to act against corruption.

U.S. firms routinely identify corruption as a challenge to foreign direct investment. Some critical areas in which corruption is pervasive include budget management, forestry, fisheries, and public procurement. In addition, the findings from the recent business survey, “Results of the 2017 Survey of Businesses in Papua New Guinea,” highlighted that “corruption is becoming an increasing problem with most firms reporting that they make ‘irregular payments’ to government officials.” A considerable number of those surveyed indicated that problems lay in either Lands or Customs/Finance/Tax institutions.

Resources to Report Corruption

Ombudsman Commission Hausinfo@ombudsman.gov.pg(675) 308 2600/308 2692

PNG Independent Commission Against Corruption(675) 325 3737

Transparency International PNGinfo@transparencypng.org.pg+675 3237517 or 3234917

							10. Political and Security Environment					

Tribal conflicts occur regularly, particularly in the Highlands and Sepik regions of the country, and election-related violence broke out following the 2017 national elections. While foreign investors/interests are not generally the target of these confrontations, project infrastructure can be inadvertently damaged, or their operations disrupted.

Most of the disruption and damage caused to projects is due to disputes between landowners and the central government, which are fueled by an often-true perception that the central government has failed to uphold its financial commitments to landowners. Landowners in these disputes have taken out their frustration with the central government by damaging the infrastructure or disrupting the operations of foreign projects in their regions.

The central bureaucracy is increasingly politicized, which has eroded the capacity of government departments and allowed nepotism and political cronyism to thrive in parts the public service. The GoPNG’s failure to deliver financial and development commitments, particularly to landowners in the resource project areas, have triggered civil disturbances. Disturbances have also occurred in major urban areas based on disputes between long-term residents and newly arrived migrants or between competing criminal networks.

							11. Labor Policies and Practices					

Papua New Guinea does not have a primary information system to keep track of the country’s labor market. PNG’s Department of Labor & Industrial Relations is responsible for labor and industrial matters in the country. The absence of a proper information system hinders reliable and readily available labor data and statistics. In addition, the lack of specific legislative and policy guidelines has limited plans and exercises on collecting data on a regular and reliable basis over the years. The Department confirmed the use of sectoral employment movements and trends to track PNG’s labor market.

PNG’s informal economy sector is concentrated in the sale of agricultural products in primarily local open marketplaces. According to the United Nations Socio-Economic Impact Assessment Report 2020, the informal sector contributes 30 percent of the country’s GDP, where 65 percent of informal sector workers are in rural areas engaged in cash cropping, vegetable farming, and retailing. In urban areas the informal activities include the selling of vegetables; roadside and street vending of retail products; and services and labor-intensive manufacturing services. The GoPNG rarely regulates informal market activities, providing the opportunity for individuals to engage in the selling of counterfeit and cheap manufactured products. Transactions in the informal sector rely on social networks and kinships utilizing verbal agreements. There have been reported cases of exploitation of these informal agreements by foreign nationals to acquire traditional and customary land to establish businesses.

The Central Bank of Papua New Guinea’s quarterly employment index is the widely used reference for labor market statistics in the country. The index covers 500 private companies, which represent 80 per cent of the formal private sector, employing about 10,000 workers. The Bank conducts periodic interviews with each company to verify their employment and revenue levels on a quarterly basis. The index generally represents employment levels by region and industry throughout the country.

With limited accountability in PNG’s labor market, most private businesses tend to have more bargaining power to determine the size and level of skilled workers for their operations. This has largely seen highly paid jobs dominated by mostly expatriate workers under contractual arrangements. It has also given rise to large numbers of skilled jobs occupied by expatriate workers. The lack of proper national labor market surveys continues to keep the actual availability of employment and workforce unchecked and open to displacement of national skilled workforce.

Youth unemployment is rampant throughout the country with fifty per cent of the population under the age of twenty-five years. The high unemployment figures reflect the small sector of formal business activities, as well as a downturn in the extractive resource sectors, which is heavily relied on to generate government revenue streams and create employment.

The country continues to see a shortage of highly skilled or specialized and experienced workforce in financial and industry management capacities. This is mainly due to high turnover in national staff in organizations and the slowness in localizing roles in a business.

Department of Labor & Industrial Relations 2009 Work Permit Guideline explains the Papua New Guinea Classification of Industrial Divisions and the country’s Classification of Occupations, which are an integral part of the Work Permit System. In practice, the Guideline is accommodative to industry labor demands. Permits are accessible by providing a simple justification suitable for hirer’s work requirements.

There are no seasonal adjustment restrictions in PNG. While companies do provide severance packages as a practice when conducting layoffs, there is no specific legal requirement to do so. There is no social insurance or other safety net programs for unemployed workers.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

DFC has one project in Papua New Guinea offering a $50 million guaranty to Export Finance Australia (EFA) who is providing debt financing for share acquisition by Telstra Corporation Limited (Telstra) for Digicel Pacific Limited, a telecommunications company in PNG and five other islands in East Asia Pacific region. DFC is providing the partial risk guaranty to EFA supporting the acquisition finance provided by EFA to Telstra. DFC’s involvement in this project reflects their shared commitment to high quality infrastructure in Papua New Guinea.

							13. Foreign Direct Investment Statistics