Companies are now using excess capital to acquire domestically but may be switching to starting up operations next year. They were some of the observations in a round table discussion about Papua New Guinea’s investment environment at the Business Advantage Invest Forum in Brisbane.

Investment Round Table. From left: Clarence Hoot, Zanie Theron, Kip Hanna, John Vivian. Source: BAI

Zanie Theron, Managing Partner of consultancy KPMG in Port Moresby said this year most of the investment activity has been ‘transactional operations’ aimed at acquiring within the country.

‘In terms of domestic investments, it has a direct link to the foreign exchange challenges,’ she said.

‘There are challenges in repatriating those funds.

‘A lot of businesses have been right sizing.’

‘So with large amounts of available funds to invest in-country, the local organisations have been looking at profitable (domestic) companies to invest in.’

Strong balance sheets

Kip Hanna, Westpac’s Pacific Regional Head said ‘the last 12 to 18 months has been pretty tough’.

‘A lot of businesses have been right sizing and reducing businesses.’

Hanna agrees that a lack of access to foreign exchange has been an issue.

‘In 2019 we are expecting a lot of increase in the start-up side.’

‘Another problem is the dampening of demand. So we haven’t seen a heap of activity.’

Hanna said there has been some activity with corporates that have strong balance sheets positioning ‘in a complementary area.’

‘We have also seen some business in property via some of those corporates as well, where they are actually acquiring property through leasing and so forth.’

Start-ups

Theron said in 2019 ‘we are expecting a lot of increase in the start-up side’.

She said the activity may be similar to what was seen in 2012, when the PNG LNG project was starting up.

‘This year is going to be the FEED (Front End Engineering Design) process for the final investment decision, probably at the end of next year (for the Papua LNG project).

‘The emphasis is on improving SME’s access to finance.’

‘So we expect a lot of the hopeful potential sub contractors will come into the country. They will be looking for structuring advice.’

Foreign investment

Clarence Hoot, Managing Director of the Investment Promotion Authority of Papua New Guinea, said in the year of the APEC Leaders Forum in Port Moresby in November, ‘there is a lot of work in terms of policy’ being done to aid investment.

He said the IPA undertakes ‘a lot of work’ with the International Finance Corporation (IFC) aimed at improving the ease of doing business in PNG.

In particular, the emphasis is on improving Small and Medium Enterprises’ (SME’s) access to finance.

‘The hope is to create a centre of excellence for SMEs to attract investment,’ he said.

‘Typically, Australia is always the No.1 investor in PNG.’

Hoot said there has also been interest from Malaysia, Singapore and Thailand, particularly in forestry, mining and energy.

Support

John Vivian, Papua New Guinea Resident Representative for the International Finance Corporation (part of the World Bank Group), said getting the right support is critical for investors.

‘You can borrow money from a bank but then the IFC will get a lot of the other supporting services and expertise that will help you do that.

‘Often we will do that and then the bank will come along.

‘We might play just a crystallisation role in helping manage those risks.’