Local and international investment trends suggest there is still a long way to go before the economy returns to pre-COVID levels, but some trends offer optimism and Papua New Guinea could take advantage of them.

Global FDI flows collapsed in 2020, falling 42 per cent from US$1.5 trillion in 2019 to an estimated US$859 billion in 2020.

‘Such a low level has not been seen since the 1990s, and global FDI flows were even 30 per cent lower than the investment trough that followed the 2008-2009 global financial crisis.

‘Within the Pacific subregion, the largest [FDI] declines were in Papua New Guinea (declining by 380 per cent to US$935 million), and Samoa.’

— Foreign Direct Investment Trends and Outlook in Asia and the Pacific 2021/2022, United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)

As the above quote suggests, we’re now able to quantify just how badly COVID-19 has affected investment globally.

For Papua New Guinea, the drop in FDI was the worst in our region.

While 2021 saw FDI rebound, UNESCAP says there’s a way to go before it returns to pre-COVID levels:

‘A growing number of deals have also been put on hold. Remote communication, increased cautiousness of buyers and delayed regulatory approvals have led to prolonged negotiations and an increase in pending M&As [mergers and acquisitions]’.

Sound familiar?

Investment trends

We can see international investment trends playing out in PNG:

• There is more investment being made in low-carbon projects (eg USAID funding solar and miner Mayur Resources using the REDD+ framework for forests)
• Geopolitics is driving investment finance (eg Telstra’s acquisition of Digicel being largely funded by the Australian taxpayer)
• Governments and multilateral agencies are filling the gap until private sector investment rebounds (eg record Public Investment Program spending in PNG’s 2022 National Budget)

Locally, we can identify some trends more specific to the PNG market:

• Interest in non-resources investment, in areas such as manufacturing (eg new plants for Coca-Cola and Goodman Fielder), infrastructure (ports expansion and road building), renewables and construction (eg Steamships’ Harbourside South and residential housing)
• While bank lending is currently flat, there is the prospect of greater competition in lending in the medium term, with three non-banks currently aiming for banking licences
• Big new players such as TotalEnergies, Fortescue, Telstra and Santos are coming to PNG, bringing know-how, cash and international connections
• PNG’s capital markets are set for innovation and growth, with legacy legal issues around the Securities Commission of PNG seemingly behind us
• While we can expect a mid-year ‘sugar hit’ to the economy from the National Elections, we hear many investment decisions are being to be held off until investors know the make-up of the new government
• The Special Economic Zones Authority Act is paving the way for a lower-taxing zones across the country, starting in Gulf Province.
• Reform of PNG’s state-owned enterprises offers the prospect of private sector participation in SOEs, starting with Telikom PNG

Add to these the prospects of new mining and petroleum projects in PNG, and the reopening of Porgera, and these trends offer cause for optimism, provided PNG can position itself to take advantage of them.

So, how should PNG go about this?

That will be the hot topic at the 2022 Business Advantage Papua New Guinea Investment Conference, set for 15 and 16 August this year in Brisbane.

It’ll be the tenth investment event on PNG we have organised since 2011 and will attract some of the most dynamic companies in the region, as well as government and institutional investors.

At the start of a new five-year term for PNG’s government, it couldn’t be more timely.

To register your interest in attending, you can click here, or email events@businessadvantageinternational.com if your business would like to get involved.

Andrew Wilkins is Publishing Director at Business Advantage International.