Papua New Guinea’s Minister for Commerce and Industry, Wera Mori, outlined an ambitious plan to boost Special Economic Zones and attract foreign direct investment to PNG at the 2019 Business Advantage Papua New Guinea Investment Conference. Here’s what you need to know.

PNG’s Minister for Commerce and Industry, Wera Mori, at the 2019 Business Advantage Papua New Guinea Investment Conference.

The Minister said that to attract more foreign direct investment to PNG, the ‘Cabinet recently approved the creation of Special Economic Zones (SEZ) to stimulate economic growth.’

The SEZs will be developed in Vanimo, Manus Island, Madang, Bougainville, Lae and Paga Hill. Several industrial parks are also planned, Mori said.

Mori said at the 2019 Business Advantage PNG Investment Conference this week in Sydney that the new government is putting together a legislative framework, ‘which has been lacking for the last 20 years.’

‘PNG is becoming the untapped gateway for the Asian time zones—70 per cent of global trade is happening in Asia. PNG is where some of you should be located.’

‘The Special Economic Zone Act will go to the Parliament in October of this year. It will give rise to the development of the local area Special Economic Zones.

‘It [the SEZ] will be regulated under a Special Economic Zone Authority to ensure they deliver the mandates.’

Mori explained that the aim is to attract foreign direct investment from ‘global value chains.’ Investing companies will receive ‘operational incentives’ for up to 10 years.

‘The legislation will also ensure we protect existing businesses.

‘PNG is becoming the untapped gateway for the Asian time zones—70 per cent of global trade is happening in Asia. PNG is where some of you should be located.’

PNG’s Wera Mori. Credit: Business Advantage International

Mori said to qualify for the SEZ investors would have to invest at least $A10 million in order get 10 years of concessions. He said there would be a simultaneous focus on boosting domestic businesses. Such legislation would include grandfathering (not made retrospective) so that PNG does not ‘simply shut the door’ on long standing businesses in the country founded by non-PNG natives.

‘We need to grow SMEs, especially in agriculture because 85 per cent of people are rural based and the only thing they know is agriculture. If we can organise them one way or the other, I am pretty sure they will succeed.’

Reliance

The government wants to move away from its reliance on the extractive industries, said Mori.

‘We are now focusing more on renewable resources such as agriculture, fisheries, manufacturing, downstream processing of raw materials. After 2020, there will be no more export of round logs.

‘In the past, our fiscal policies only forecast the upstream part of the industry, but we are also moving on to look at the downstream, including processing.’

‘We are in the process of developing the framework to retain at least 30 per cent of the gold that we export every year.’

Mori acknowledged that the country is ‘faced with serious macro-economic imbalances and a low productivity ratio.’

Wera Mori in conversation with Business Advantage International’s Andrew Wilkins. Credit: Business Advantage International

He said Papua New Guinea is looking at reviewing the ‘benefit arrangements’ with past resource projects that have not paid sustainable dividends to the state.

‘We are in the process of developing the framework to retain at least 30 per cent of the gold that we export every year. We would like to create our own wealth as such.’

Mori implied that the government would look at stockpiling gold as a way of diversifying away from the US dollar, a strategy being adopted by a number of countries.

Cooperatives

Mori said that PNG agriculture could benefit from using ‘cooperative societies, pointing to Australia’s Farmers Bank and Bendigo Bank as potential models.

‘The cooperative societies model will work in PNG due to the family units, clans and tribal groups owning land and resources.

‘Private equity investors can help organize cooperative groups in agriculture. We in PNG were amongst the first people in the world to farm 9000 years ago.’

Mori said one of the challenges is to get more revenue from taxes. ‘At the moment the number of people paying taxes in PNG is very small compared with Australia. Probably less than five or 10 per cent.’

Mori said 85 per cent of the people are not in the formal economy. ‘How do you migrate them from a position where they are not paying taxes into some form of activities where they could be paying tax? If we can migrate to a situation where they have some form of cash earnings then they can pay tax. This is why we have the SME policy.’

He added that Papua New Guinea requires an ‘independent bilateral free trade agreement’ with Australia.

PNG’s Treasurer Sam Basil, who also attended the 2019 Business Advantage Papua New Guinea Investment Conference, went to Canberra on Monday to discuss possible Australian support for PNG’s budget.