Prime Minister James Marape

‘We do not intend to chase away our investors—they’re here to stay, we encourage them—but we will look into maximising gain from what God has given this country from our natural resources.’
—New PNG Prime Minister James Marape

Papua New Guinea has a new Prime Minister, James Marape, and also, if not an entirely new government, at least a government representing a generational change in PNG’s body politic (Marape is 48).

It’s worth noting that, after seven years with Peter O’Neill as Prime Minister, PNG’s Parliament has delivered a transition of power according to the Constitution and without major social upheaval.

What can business expect from a Marape-led government?

In his maiden speech to Parliament as PM (a transcript of which is now available on our website), he captured a mood for change.

‘We do not intend to chase away our investors—they’re here to stay, we encourage them—but we will look into maximising gain from what God has given this country from our natural resources,’ he told Parliament.

While he’s already stated that ‘we are not here to break legally-binding agreements,’ Marape, a critic of the recent Papua LNG gas agreement, can be expected to champion greater benefits for local interests, including landowners.

He can also be expected to champion onshore processing of raw commodities, singling out the forestry sector for particularly firey scrutiny during his maiden speech.

There are a number of issues in play as far as PNG’s business environment is concerned and business will be watching to see how a Marape government manages the current reviews into foreign investment laws, taxation, and the ongoing saga of amendments to PNG’s Mining Act, to name just three.

A Marape government will also need to examine how PNG can reduce its exposure to the boom-and-bust nature of resources (LNG prices are down 47.5% this year to date, according to our latest commodities update).

This issue is raised in a recent World Bank report on PNG, which doesn’t pull its punches:

‘This volatility has undermined the government’s ability to provide—and maintain—good quality services with relatively larger negative impacts on the poor and vulnerable.’

Another feature of PNG’s over-exposure to resources has been the backlog in foreign exchange orders. Last week, we polled business on whether supply was improving and the response was an overwhelming ‘no’.

Even with its challenges, however, it’s worth observing that the World Bank expects PNG’s economy to grow by between 3% and 4% in coming years. The Asian Development Bank largely concurs, predicting 3.7% growth this year.

Those aren’t bad figures and suggests that PNG’s economy is turning a corner, albeit slowly. The Bank of PNG’s latest Quarterly Economic Bulletin, released quietly this week while everyone was following events in the Laguna, Crown and Grand Papua hotels, has some green shoots: employment picked up by 1.8% last year, after falling 4.8% in 2017. Merchandise exports grew by K1.14 billion in the December quarter, year-on-year.

We’ll publish David James’ analysis of the latest central bank figures on Monday.

Even as we look to the new government to facilitate PNG’s three major resources projects—Papua LNG, Wafi-Golpu and P’nyang—Bank of PNG Governor Bakani has a some advice for it:

‘Large investment projects such as the Papua LNG and Wafi-Golpu projects are expected to increase foreign exchange inflows in the near future …. Therefore, growing the non-mineral export sector is critical for long term sustainable and inclusive growth.’

Our story this week on the potential for PNG coffee to move up the value chain provides just one example of how this might be achieved.