Papua New Guinea’s foreign investment laws are under review, with the government trying to balance the interests of local businesses and foreign investors. David James looks at what is being proposed so far.

Local and international investors at last year’s Business Advantage PNG Investment Conference. Source: BAI

Papua New Guinea’s Investment Promotion Authority is circulating information to both local businesses and foreign investors about what to expect from the review of the country’s Investment Promotion Act 1992, arguably the key legislation governing foreign investment in the country.

The IPA has also issued an explanatory memorandum for an expected Investment Promotion (Amendment) Bill 2019.

The review, which has involved consultation with business groups, follows the withdrawal in March of a proposed Foreign Investment Regulatory Authority Bill, which proposed to reserve all investments below K10 million either for PNG citizens or for ‘national enterprises’ (ie those more than half PNG-owned).

‘The proposed changes are designed to make it easier for responsible foreign investment while addressing some shortcomings in the system that were being exploited by a small number of foreign investors.’

The IPA’s information says the review is designed to achieve a balance between local and foreign interests, thus ensuring that the new legislation ‘does not create an unfair investment environment for foreign investment in the process of trying to protect the citizen-owned businesses.’

‘The PNG Government recognises the important contribution that foreign investment makes in the human and economic development of PNG.’

‘The proposed changes are designed to make it easier for responsible foreign investment while addressing some shortcomings in the system that were being exploited by a small number of foreign investors.’

The aim is ‘to better protect MSMEs (Micro, Small and Medium Enterprises) from competition in business activities that tend to be smaller-scale, onshore, and where PNG citizens have already demonstrated capability.

‘These changes will not affect the majority of foreign investors in PNG,’ it reassures.

The IPA’s flagged changes are:

1. Minimum investments for business/investor resident visas. ‘Non-citizen owners of foreign investments will be required to show a minimum investment in PNG in order to obtain their residence visas.’
2. Reserved activities for PNG citizens. ‘The IPA will continue to reserve activities for citizens under the Reserved Activities List and regularly review the list.’
3. Promotion of local-foreign partnerships, which will include minimum local ownership and minimum investment levels. ‘A new ‘Restricted Activities List’ will be introduced to encourage PNG citizen participation in larger, more complex, and/or more capital-intensive businesses.’
4. Some grandfathering of existing businesses where existing foreign investors are engaged in activities which later become reserved or restricted (see below).
5. Improved compliance and enforcement. ‘Government agencies will upgrade their compliance and enforcement capacity and activities.

Registrar of Foreign Investment

There will also be an effort to make the approval of ‘responsible foreign investment’ quicker and easier.

To achieve this, it is proposed that day-to-day foreign certification approvals will be undertaken by a Registrar of Foreign Investment.

‘The majority of applications will be granted by the Registrar unless the applicant proposes to carry on an activity that is reserved for citizens; or, in the opinion of the Registrar, the application is either incorrect or misleading; it does not otherwise comply with the Act or Regulations; the applicant fails certain character requirements; or the Registrar has reasonable grounds for believing the application is not genuine.’

Grandfathering

The IPA is still reviewing ‘grandfathering’, whereby existing foreign investors may not be affected by the new legislation in some circumstances.

‘There will be an effort to make the approval of ‘responsible foreign investment’ quicker and easier.’

The minimum investment threshold for a foreign investment is yet to be set. The IPA says it will be established ‘after careful consideration of amounts used in other countries to ensure that the threshold is competitive.’

There are no proposed changes to work permit requirements.

Reporting requirements on foreign investors are likely to be made more strict, however, with holders of foreign investment certificates required to file ‘annual status reports containing prescribed information’.