Foreign direct investment in Papua New Guinea is starting to return this year after a ‘huge slump’ over the previous two years, according to Clarence Hoot, Managing Director of the country’s Investment Promotion Authority.

The Investment Promotion Authority’s Clarence Hoot. Credit: BAI/Stefan Daniljchenko

After a dramatic drop in foreign direct investment due to COVID-19, figures collected by Papua New Guinea’s Investment Promotion Authority (IPA) suggest foreign direct investment is slowly starting to return this year.

‘In 2020, in 2021, there was a huge slump in terms of investment,’ Clarence Hoot, the IPA’s Managing Director, told the recent Papua New Guinea Investment Conference. ‘With the effects of COVID and the complete shutdown of global travel and all that, not a single new investment came in 2020 and 2021. Not one.’

‘For instance, in the real estate sector, the total amount of interest was almost half a billion kina interest that we received [before COVID-19]. From half a billion, it dropped to almost K6 million: a huge slump indeed in terms of foreign investment.’ The figures that were recorded came from investors varying their existing activities in the country.

‘What it’s telling us is there’s a positive picture, there’s interest coming back in.’

This year, figures are starting to improve, he noted, albeit from a low base.

‘The same sector, we’re seeing an improvement: it’s come up to K36 million in the first four-to-six months of this year.’

Biggest investors

Hoot said neighbouring Australia had been the largest single source of investment in recent years.

‘Consolidating the last three years and into the first six months of this year, Australia was the number one investing country, followed closely by Malaysia, China, Singapore and the United States.’

The industry sectors receiving the most investment over the same period were real estate, construction, wholesale, retail, financial services, and mining and petroleum.

Hoot observed that, from 2021, there had been increased investment in the mining and petroleum sector, and he expected this to continue.

‘There’s a positive picture, there’s interest coming back in.’

‘In 2021, the government started re-engaging on the Papua LNG and the P’nyang projects and that witnessed some interest coming in the mining and petroleum sector. That was the number one interest sector in 2021.

‘We are certainly looking forward to seeing a big jump in the mining and petroleum [investment] once the government progresses the conversations about the projects that are on stream.’

In the first four months of 2022, up to April, the wholesale sector was the number one sector of interest, followed mining and petroleum second, real estate, construction and financial services.

‘What it’s telling us is there’s a positive picture, there’s interest coming back in.’

Revised investment law

Hoot also flagged that a revised Investment Promotion Authority Act would also be introduced in Parliament ‘hopefully by the end of the year’. The revision would see the introduction of a registrar for foreign direct investment.

‘By having a foreign direct investment registrar, their main role will be basically to manage the Reserved Activities list [a list of economic activities reserved for local businesses], which I’m also happy to announce was passed by Parliament towards the end of last year.

‘Other changes are basically in line with getting our laws updated to address issues of anti-money laundering and counter-terrorism financing.’

He said the new legislation would also see a simplification of the current online registry system for companies and businesses.

‘We hope to to make the system more user-friendly and allow you to do more. Things like, for instance, digging out data on the number of registrations, where businesses are located, which provinces are the best performing provinces. This will all be available to the public … at, of course, a minimal fee.’