The Papua New Guinea Government’s development objective is to provide an environment which is conducive to community and private sector growth and development, improved delivery of public services, growing opportunities for increased rural production and improved access to services and opportunities.
The Government has taken an integrated approach to the implementation of social, institutional and economic policies.
The Government realises the importance of policies which are specifically aimed at improving the country’s competitiveness and profitability. The aim is to create an investment environment which encourages domestic savings.The relevant Government policies with a major impact on the private sector and which affect investor confidence include:
- A fiscal policy designed to broaden the tax base with expenditure directed to strengthening physical infrastructure;
- Maintaining public assets;
- Reducing law and order problems;
- Improving health and education standards;
- An attractive taxation regime and low or zero tariffs on many business inputs;
- Tariff policy reform with the replacement of quantitative restrictions by tariffs;
- A progressive removal of price controls on domestically traded goods;
- A market orientated approach to monetary policy with a non-intervention stance which allows for appropriate private sector credit growth and pursues internationally competitive interest rates;
- Further liberalisation of exchange control regulations to facilitate capital flows and the achievement of a less regulated investment regime; and,
- A labour policy allowing for continued deregulation of the labour market and flexibility in the wage setting process.
Several programmes being pursued by the Government which will have a major impact on Papua New Guinea’s investment climate include the establishment of a stock exchange and a securities market.
By allowing increased access to capital, skills and competition, benefits including lower prices and jobs should accrue to consumers and the labour market.
The Government is also stepping up the privatisation of its public corporations. This will create room for private business to operate in key areas of the economy previously the domain of State-owned enterprises.
Industrial Development Policies
An essential component of the Government’s structural adjustment programme is the promotion of non-mining sectors of the economy to ensure economic growth can be sustained after the depletion of the mineral resources.
Government policies encourage the development of Papua New Guinea’s non-mining sectors, including manufacturing, renewable resources, agriculture and business services, to promote economic self-sufficiency by the Year 2000.
The focus of these policies is on industries and businesses where private sector investment is more likely to contribute significantly to the Government’s desired objectives of growth and employment.
The implementation of industrial policies remains the responsibility of various statutory authorities which were established for that purpose within the Ministry of Commerce and Industry. They are the Investment Promotion Authority (IPA), the Small Business Development Corporation (SBDC) and the Industrial Centres Development Corporation (ICDC).
While macro-economic policy reforms are prime objectives of the Government, micro-economic reforms are equally crucial in facilitating the development of private enterprise. In that context, the Government is committed to a privatisation policy that will see Government involvement in commercial activities transferred to the private sector.
The establishment of a stock exchange complements these initiatives. It will allow for greater opportunities for businesses and individual investors, as new and existing investment entities become listed on the exchange. Investors will benefit from a more liquid and transparent capital market.
The liberal foreign exchange control measures pursued by the Government will permit speedier remittances, allowing investors to meet their overseas obligations on a more timely basis. The principle of “what is due and payable is immediately approved” will apply. Once given clearance by agencies such as the taxation authority, the Internal Revenue Commission, investors can obtain endorsement from the Foreign Exchange Controller to remit funds offshore.
The Government is also committed to the provision of adequate physical infrastructure and a favourable taxation regime. Papua New Guinea currently has one of the lowest rates of corporate tax in the Asia Pacific region.
There are significant reforms underway in the area of trade. Import bans and quotas are being replaced with low tariff rates, consistent with World Trade Organisation requirements. Other forms of protection afforded to locally-produced goods, such as price controls, are also being removed. However, some price controls will prevail in certain industries where a natural monopoly exists, such as electric power, telecommunications and water. That protection may not be expected to remain, however, when these monopolies are run by the private sector.
Papua New Guinea ‘s three-tier governing system comprises the national government, provincial and local level governments.
The Organic Law on Provincial Governments and Local Level Governments passed by parliament in 1994 followed reforms aimed at enabling better cooperation of both national and provincial politicians on development issues affecting provinces.
At the administrative level, the Law provides for local participation and funding to district levels, enabling local populations to be closely involved in developments affecting them, leading to greater economic development at the district and village levels.
The Organic Law on Provincial Governments and Local Level Government does not affect any laws relating to general business and investment.
Under the law, each province is headed by a Governor who is also the Regional Member of Parliament for the province. Each province also has a Chief Executive Officer.
The major economic sectors in Papua New Guinea are:
- Minerals and Petroleum
- Retail and Wholesale
- Building and Construction
- Transport and Telecommunications
- Finance and Business
Papua New Guinea’s main imports are sourced from Australia, Japan, the United States of America, Singapore, New Zealand, the United Kingdom, China and Hong Kong.
The main destination of Papua New Guinea’s exports are Australia, Japan, South Korea, China, Germany, the United States of America, the United Kingdom and Singapore.
Papua New Guinea enjoys a surplus in its trade account. Most exports are commodity based. The main thrust of the Government’s economic development and industrial policies is aimed at increasing the value and volume exports of value-added products.