Business Advantage PNG looks to the year ahead and considers what Papua New Guinea-focused businesses can expect in the coming 12 months.

Barrick Gold’s President and CEO Mark Bristow during a visit to the Porgera mine site in October 2021. Credit: Porgera Joint Venture

Economic growth

Is this the year PNG bounces back after two tough years?

In the 2022 National Budget, delivered at the end of 2021, Treasurer Ian Ling-Stuckey predicted the economy will grow by an encouraging 5.4 per cent this year.

While other predictions from the World Bank and the Asian Development Bank are more conservative (around four per cent), such growth would restore PNG back to pre-COVID levels of economic activity.

Supporting this growth is record budgeted government spending of K22.175 billion, including K4.8 billion for its public investment program in 2022 but a lot will depend on …

Porgera’s reopening

The final deal between the government and Barrick Niugini to reopen PNG’s largest gold mine in Enga Province is not quite done as we enter 2022, but the Prime Minster James Marape has already expressed a goal of having the mine open by April. Many in business are expecting a later date.

Having Porgera open again after two years is the key to PNG achieving its GDP growth targets this year. Fitch Solutions’ assessment is typical: ‘the potential for further delays represents an important risk to our short-term forecasts,’ the ratings company said in its most recent assessment of PNG’s economic outlook, issued earlier this month.

‘If the government can get that [Porgera] over the line, that will be a big signal to foreign investors,’ Kishti Sen, ANZ’s Pacific Economist, observed recently.

Elections

PNG’s National Elections will be held in June this year, with the results likely in July. Election years in PNG come once every five years and have their own character and momentum. Some aspects – a likely boost in pre-election spending and government getting its business done in the first few months of the year due to the requirement to go into ‘caretaker mode’ – can be predicted.

The actual outcome of the election is less predictable, given governments in PNG are typically formed in coalition. While incumbency can favour existing governments, these elections are likely to be keenly contested.

Papua LNG to go into FEED

PNG’s second major gas project is expected to go into its front end engineering and design (FEED) stage in the second quarter of this year, according to the Managing Director of Total Energies E&P PNG, Jean-Marc Noiray.

While a final investment decision won’t be made until the end of 2023, FEED is an essential and critical stage of the project, and will drive some economic activity this year after two quiet years on the US$10 billion project.

Deals on P’nyang and Pasca A?

There are still negotiations ongoing on two other gas projects: the ExxonMobil-led P’nyang project based on gas fields in Western Province and PNG’s first offshore gas project, Pasca A.

P’nyang’s construction phase is being designed to follow Papua LNG’s commissioning, thereby ensuring PNG has almost a decade of gas investment to look forward to.

Given the difficult history of negotiations on both P’nyang and Pasca A, completion of agreements this year would be warmly welcomed.

Telecommunications transformation

Detail of Bmobile’s ad at Jacksons International Airport. Credit: BAI

PNG’s telecommunications sector is set for some big changes this year, with Australia’s Telstra cleared to acquire Digicel Pacific and Fiji’s Amalgamated Telecoms Holdings planning to launch the Vodafone business in PNG.

Add to this the uncertainty surrounding Telikom PNG, the subject of recent privatisation talks between the State’s holding company Kumul Consolidated Holdings and PNG’s two main superannuation funds, and this sector is one to watch this year.

Infrastructure spending

There have already been several announcements about new road projects this year. As signalled in the Budget, infrastructure spending is on the menu for 2022, notably money for roads and bridges through the Connect PNG infrastructure project and funds to support the country’s electrification, much of it provided at concessionary rates by international partners.

Price pressures

Inflation is predicted to rise by 5.6 per cent in 2022, which is not high by PNG standards. However, increased port and shipping costs, caused in part by global factors beyond PNG’s control, plus firming oil prices, are likely to put pressures on the prices of some locally manufactured goods.

Central bank changes

In 2021, the government commissioned a review of the Central Banking Act 2000, which has already presented its first report, which includes recommendations that the power of the governor of the Bank of PNG be diluted. The government has already introduced legislation to end the term of Governor Loi Bakani, a long-time opponent of devaluing the kina.

Will likely changes to the bank’s governance bring a change in monetary policy? With the shortage of foreign exchange still a major issue, many in business will be watching developments in Douglas Street closely.

COVID-19 and travel

You’ll get no predictions about the course of the global pandemic here, except the observation that, with PNG confirming its first case of the Omicron variant this week, COVID-19 is not going away anytime soon.

However, travel arrangements between countries and the changing arrangements for crossing borders is of great interest to many PNG-focused businesses. For instance, neighbouring Australia is very likely to open to vaccinated tourists and business visitors very soon, which will mean vaccinated Papua New Guineans should be able to travel there more easily. It also opens up the possibility of PNG reciprocating.

Helpfully, Air Niugini has launched an interactive map to help us keep track of the changes to international travel requirements this year.

What are you looking forward to in the year ahead?

Let us know in the comments below.