Land Mobilisation Programme
Land and Environmental Considerations
Department of Commerce and
Investment Promotion Authority
Export Pacific Program (EPP)
Integrated Investment Promotion
Company Registry and Investment
Small Business Development
Industrial Centres Development
There are business facilities for medium
and small scale industries in and near the
main towns in all provinces in Papua New
Guinea. These areas are generally well served
by the appropriate air, sea and road transportation
networks, as well as other necessary components
of infrastructure such as the supply of
water and electricity and telecommunications
The city of Lae has earned the reputation
of being the manufacturing capital of Papua
New Guinea because of its location among
major shipping, road and airline routes.
Port Moresby, Mt Hagen and Madang are other
well developed cities where major industries
and businesses are located.
The development of resource projects in
non-urban areas has also resulted in the
emergence of almost self-sufficient communities
in parts of the country which otherwise
may have remained isolated with only limited
formal economic activity.
The physical characteristics of the country
have prohibited the development of an extensive
road network and the often extreme weather
patterns present enormous challenges to
the architects and engineers of infrastructure
However, the mountainous terrain has resulted
in the development of hundreds of airstrips
throughout the country enabling inter-village
and inter-provincial travel. Shipping and
other forms of water transport have evolved
also out of necessity in response to the
great expanses of ocean and huge inland
Essential services for the operation of
basic businesses are available in most towns
and villages but there is still room for
further improvement and development. The
Government places infrastructure development
and maintenance high on its agenda but,
like other Governments, is constantly juggling
resources to meet the demands from the community.
However, investors can be assured that
all basic infrastructure is available for
business in Papua New Guinea. For larger
scale investment projects, the Government
and the private sector have the resources
to put in place any other specific requirements.
In this section, the business environment
and institutional framework is highlighted.
Further details on transportation and telecommunications
infrastructure can be found in Section 8.
The legal system in Papua New Guinea is
based largely on the Australian system which,
in turn, has its roots in the English system.
Court hearings are held in English and the
law is applied fairly. The final court of
appeal is the Supreme Court of Papua New
Guinea. There are, however, areas where
the traditional or "customary"
law applies. Under the Constitution, courts
are required to have regard to both the
common law and the customary law. This "underlying"
law is determined by the courts and can
be particularly important when dealing with
cases about land tenure and the use of natural
resources. Further information about the
regulatory environment for business can
be found in Section 6.
The Papua New Guinea banking system is
made up of the Central Bank, Bank of Papua
New Guinea, a number of commercial banks
and finance companies, and the Rural Development
Bank of Papua New Guinea. The Papua New
Guinea Banking Corporation is wholly-owned
by the Government. Most others are subsidiaries
of international (mainly Australian) banks.
The main objective of the Rural Development
Bank of Papua New Guinea is to provide finance
to Papua New Guinea enterprises for agricultural,
industrial and commercial projects.
Other financial institutions include savings
and loan societies and larger government-owned
superannuation funds. Some of these institutions
are tipped to become listed on the stock
exchange when it is established in Papua
New Guinea. Already, there are many companies
operating in Papua New Guinea which are
listed on stock exchanges in Australia and
Asia, Europe and the United States. Many
other companies have indicated their intention
to list on the new domestic exchange.
Fund raising in Papua New Guinea is limited
by the small domestic market. While some
finance is available from the banking system,
overseas investors are unlikely to secure
substantial funds locally. A new operation
would normally need to bring funds from
overseas to establish a project, in which
case the central bank generally requires
a debt to equity ratio of 5:1.
Exchange controls are applied in Papua
New Guinea and are administered by the central
bank, the Bank of Papua New Guinea. These
controls are applied to protect the country's
reserves. Approval is readily given for
the repatriation of after-tax profits of
foreign-owned enterprises. Other current
account payments for legitimate business
reasons generally present no problems.
Papua New Guinea has many professional
firms in operation which support the broader
business community. These include accounting
and legal firms, engineers, architects,
surveyors, and other technical fields. There
are a large number of retail and wholesales
operators, building and road construction
contractors, manufacturers of a wide variety
of products and generally, all the types
of businesses which could be expected to
be found in a vibrant and rapidly growing
There is a large pool of labour in Papua
New Guinea. The wage rates are low by developed
country standards and productivity continues
to improve as training is increased and
As the skills of the local workforce are
still being upgraded, many new ventures,
particularly those requiring technical know-how,
still rely on some contracted foreign managerial
and supervisory staff.
While recognising the legitimate need and
use of overseas personnel for skills transfer,
the Government of Papua New Guinea also
insists that there is concurrent training
of Papua New Guineans to eventually assume
more responsible roles in the workforce.
Before employing expatriates, a business
must submit a plan to the Department of
Industrial Relations outlining the training
to be given to Papua New Guinea staff. Once
the requirements are satisfied, a new business
may obtain work permits for expatriates.
Further information about human resources
can be found in Section 5. Further information
about the regulations relating to visas
and work permits for expatriates can be
found in Section 6.
Legitimate land ownership and the right
to exploit most natural resources is vested
with the people of Papua New Guinea. Ownership
is mainly governed by traditional law. About
three per cent of the land in Papua New
Guinea, or about 600,000 hectares, is outside
of this system and this is almost entirely
owned by the National Government. It is
generally referred to as alienated land.
Most alienated land is in urban areas but
some plantations in rural areas occupy alienated
land. Only 30,000 hectares of alienated
land is freehold and 60,000 hectares is
used for public purposes. About 200,000
hectares is leased to the private sector.
Under the Land (Ownership of Freehold)
Act, no foreign investor or non- citizen
is allowed to own freehold land. Leasehold
land for specified purposes is, however,
available for long-term tenure (usually
99 years). Investors involved in manufacturing
operations usually face little difficulties
with land availability. Those involved with
resource or agricultural projects should
appreciate, however, that access to land
may require more effort and understanding.
But it is certainly not impossible to mobilise
land for investment if the traditional landowners
are involved in all aspects of development.
The Government will assist investors in
large projects that are vital to the economic
growth of the country - it has the right
to do so under the Land Act. Nonetheless,
the Government is generally restricted to
protecting traditional property rights and
investors will not be allowed to negotiate
directly with the local owners. If handled
properly, with the Government's involvement,
the experience of other investors has shown
that mutually satisfactory agreements can
be readily developed.
The Government's reform initiatives in
land tenure will contribute to economic
growth and employment creation through more
productive use of land resources.
The institutional reforms being implemented
under this programme emphasise the Government's
commitment to social and economic development
throughout the country. The reforms ensure
the promotion of land-based activities in
co-operation with the provinces.
The main objectives of the LMP include
providing effective land services to all
land users (surveying, land transfer and
disposal, title registration, valuation,
land acquisition, dispute settlement, mapping,
and physical planning). The programme is
also designed to enable customary landowners
to increasingly participate in the development
of their land and to optimise the use of
the stock of alienated land.
The Government's policy and priorities
on land resources in the medium term are
contained in the LMP. It is promoting the
formation of landowner groups and investigating
ways to mobilise their land for development.
Measures being considered include lease-back
arrangements and land tenure conversions.
Investors will be encouraged to accept those
communal arrangements as security against
which to extend credit for priority development
purposes, especially for the development
of trade and industry.
The LMP ceased in June 1996, however, some
components of the program exist today.
Papua New Guinea is home to as much as
5% of the world's fauna and flora in a variety
of diverse ecosystems. The principal threat
to biodiversity comes from the conversion
of prime habitats to other uses.
A majority of the population is dependant
upon the renewable resources sector - agriculture,
hunting, fisheries and forestry - for subsistence.
Such resources are, however, only conditionally
renewable - subject to sound resource management
and the use of appropriate harvesting practices.
The Government is promoting alternative
income-earning opportunities to create a
conservation interest in land.
The scope for the development of ecologically-sustainable
industries is excellent. There are great
prospects for biogenetic engineering, utilisation
of traditional medicines in the pharmaceutical
industry, the development of other extractive
industries and eco-tourism.
The Government's plan for developing all
industrial and commercial sectors in Papua
New Guinea by the Year 2000 recognises the
vital contribution of the private sector
to the overall development of the national
A major revitalisation of existing investment
incentives, along with the institutional
strengthening for implementation of industrial
policies, is already in place.
The actual implementation of industrial
policies is undertaken by various statutory
authorities within the Ministry of Commerce
Those authorities and their briefs are
of Commerce and Industry
The department is responsible for the formulation,
co-ordination and monitoring of industrial
development policies and relevant programme
implementation. It aims to be the catalyst
for development and the private sector's
partner in progress by:
Assisting with the provision of a conducive
Promoting international competitiveness;
Providing an effective and co-ordinated
infrastructure and service support system;
(4) Mobilising and organising people, institutions
and resources to achieve the Government's
objectives and goals for industrialisation.
The department's programme initiatives include,
among others, the development of the garment
and textile industries, as well as wood
and marine-based industries.
Generally, the department is responsible
for policy formulation while actual programme
development and implementation is carried
out by statutory authorities within the
Promotion Authority (IPA)
An integral component of the Government's
industrial development strategy is the promotion
of investment in Papua New Guinea. The IPA
is responsible for these activities. Its
focus is centred on attracting new investors
to the country as well as encouraging existing
investors, both foreign and domestic, to
expand their investment.
The IPA's corporate plan clearly outlines
its long and short-term objectives and programmes.
It has specified the following investment
To increase the total value of annual investment
in Papua New Guinea;
To increase the percentage of annual investment
in the Papua New Guinea manufacturing sector;
To increase the percentage of annual investment
from the domestic sector.
The IPA has developed close links with the
private sector and has proven that it can
successfully attract investment. It provides
assistance to investors through marketing
activities and by assisting with the identification
of joint venture partners for both foreign
and domestic businesses. One of its main
tasks is the dissemination of relevant information
to potential investors.
The IPA is currently committed to assisting
foreign investment in Papua New Guinea through
a number of donor assisted programmes. These
Pacific Program (EPP)
EPP is an IPA funded initiative aimed at
encouraging PNG export potential companies
to seriously consider exporting to neighbouring
countries under the Melanesian Spearhead
Group concept of free trade.
Investment Promotion Programme
This programme is supported by the United
Nations Industrial Development Organisation
(UNIDO). It is a specific program, led by
a versatile business specialist and supported
by several IPA staff, designed to identify
projects for investment through industrial
co-operation between local businesses and
foreign partners. This may occur through
the formation of joint ventures, marketing
and supply agreements, technology transfers,
or other ways. The projects promoted under
this program can be promoted in any country
in the world.
Registry and Investment Information Database
AusAID is assisting the IPA by funding a
significant database project which will
result in the full computerisation of the
IPA's business registration division. This
division houses the records of Papua New
Guinea's companies and other business structures.
The project will also benefit investors.
At the completion of the project, investors
will be able to access quickly and efficiently
the most comprehensive information available
on investment in Papua New Guinea.
Business Development Corporation (SBDC)
The corporation is responsible for the
implementation of the Government's national
business development programme, which is
designed to encourage, promote and support
the participation of Papua New Guinean entrepreneurs
in ownership and management of business.
The SBDC's goals are:
To create a national cost-effective and
efficient mechanism for the delivery of
entrepreneurial development assistance to
the small business sector;
To create an environment that will facilitate
maximum small enterprise development in
the country through the recommendation,
development and implementation of appropriate
policies and programmes and through the
collection and dissemination of relevant
To improve the success rate and increase
the number of Papua New Guinean-owned and
operated small businesses through the provision
of direct support and assistance.
To achieve its goals, it promotes networking
arrangements, designed to foster co-operation
among small business organisations. It also
provides an information service, conducts
various training courses and provides some
consultancy services and offers certain
Centres Development Corporation (ICDC)
The ICDC was established by an Act of Parliament
to implement the Government's industrial
centres development programme. This is an
integral component of the Government's infrastructure
and support services programme.
It has programmed the establishment of
industrial centres in four regions of the
country by the Year 2000. The Malahang Industrial
Centre in Lae, Morobe Province, is the first
of those developments to be completed. The
programme is designed to provide serviced
land and factory facilities as an incentive
for private investment in manufacturing
and related enterprise.
The ICDC collaborates with IPA so it may
take advantage of the Authority's facilities,
particularly with respect to feasibility
study programmes. They are an effective
means of identifying industries and product
lines suited to potential tenants of industrial
centres. The IPA can assist with private
sector contacts for identifying local sponsors
and foreign investors who may be interested
in locating at industrial centres.
The Government will assist local producers
with export potential. Activities are targeted
in areas where supply capabilities are available
or have the potential for development.
Papua New Guinea has commercial representatives
located in Australia and Europe, while Papua
New Guinea's diplomatic representatives
in other countries can help to bring about
greater foreign market awareness and demand
for Papua New Guinea products.