Papua New Guinea is ranked as the tenth worst destination for investment in mining, according to the Fraser Institute’s Survey of Mining Companies 2020. Infrastructure and security were nominated as areas of particular concern.

Comparison of regional median investment attractiveness for 2019 and 2020. Credit: Fraser Report

In terms of investment attractiveness, the survey found that Papua New Guinea has fallen from a ranking of 54 out of 77 localities in 2019 to a ranking of a ranking of 65 out of 77 in 2020.

PNG’s investment attractiveness score has been declining in recent years. In 2016, it was 63.48; in 2020, it was 54.67. Only Venezuela, Argentina’s Chubut and Mendoza, Zimbabwe, Bolivia and Tanzania were considered worst destinations for investment in 2020.

When it comes to investors’ perception of policies, PNG fell from 63 out of 77 in 2019 to 71 out of 77 in 2020.

‘Papua New Guinea’s PPI (Policy Perception Index) score improved by almost four points this year, but its rank dropped from 63rd in 2019 to 71st in 2020 and it continues to be the lowest ranking jurisdiction in Oceania when considering policy alone,’ the report said. ‘Eighty-nine per cent of respondents indicated that the country’s infrastructure and security are the two main policy factors deterring investment.’

‘PNG ranked the fifth worst on the quality of infrastructure, ninth worst on political instability and sixth worst on security with 90 per cent of respondents saying it is a concern.’

There were other negative indicators, including suggestions of falling interest in exploration. The survey, which was sent to 2200 mining-related companies and was conducted between August and November 2020, looked at Best Practices Mineral Potential, a ranking of the jurisdictions based on which region’s geology either encourages exploration investment or is not a deterrent to investment. PNG fell from 38 out of 76 in 2019 to 54 out of 77 in 2020.

Issues

K92 Mining underground operations. Credit: MRA via Facebook

PNG ranked the fifth worst on the quality of infrastructure, ninth worst on political instability and sixth worst on security, with 90 per cent of respondents saying it is a concern.

Twenty six per cent of respondents said uncertainty concerning the administration, interpretation and enforcement of existing regulations ‘did not deter’ investment.

Sixty-two per cent of respondents said PNG’s environmental legislation was not a deterrent to investment but 62 per cent nominated regulatory duplication and inconsistencies as an investment issue.

The legal system was considered an issue, with 76 per cent saying it could be a deterrent in PNG.

Thirty-six per cent said the tax system was either an encouragement to invest or not a deterrent, while 78 per cent of respondents nominated disputed land claims as a potential issue, the sixth worst ranking.

Economic importance

Meanwhile, a new report by Fitch Solutions has emphasised the importance of mining to PNG’s future economic growth.

‘The country’s wider economic recovery hinges on investment into big-ticket resource developments in the energy and mining sectors,’ it observes.

‘Fitch has downgraded its forecast for real (after inflation) GDP growth between 2026-2030, from 5.7 per cent to 5.1 per cent per annum.’

The report describes the issue of an environmental permit for the Wafi-Golpu mining project as an important milestone ‘necessary for a favourable economic outlook’. It says if the Wafi-Golpu and Papua LNG projects go ahead, this will ‘underpin a return to robust growth’ over the medium-term and ‘should also have a positive short-term impact on investor confidence.’

Fitch has downgraded its forecast for real (after inflation) GDP growth in PNG between 2026-2030, from 5.7 per cent to 5.1 per cent per annum.