With the Marape government surviving a challenge late last year and vaccines for the COVID-19 virus starting to emerge, Business Advantage PNG considers what business in Papua New Guinea can expect from the year ahead.

Prime Minister James Marape wrote in a Facebook post on his personal page ‘if not now then when? If not me then who?’. Credit: JamesMarape/Facebook

Papua New Guinea has entered 2021 with an intact government (until 20 April, at least), following Prime Minister Marape’s successful riposte to the pre-Christmas challenge from PNG’s Opposition.

With National Elections due in July 2022, and no vote of confidence permitted in the last 12 months of a government’s life, the Opposition will have just two months to have another tilt if they wish to change the course of government.

In the meantime, we can expect that the Marape government will move ahead in pursuit of its policy objectives. New legislation covering foreign investment is likely to appear this year, in the form of a revised Investment Promotion Act. We can expect the focus on small and medium business to continue, and also to see greater progress on special economic zones.

The economy

After a four percent drop in GDP during 2020, most economists are expecting some return to positive growth for PNG in 2021. The Asian Development Bank is predicting 2.5 per cent growth this year, while the World Bank and PNG’s Treasury are slightly more optimistic.

PNG’s currency, the kina, has fallen in value against the US dollar over the past twelve months by 3.6 per cent. There is still a view in business circles that the kina needs to be devalued, and there is some talk that measures could be taken that would result in that happening this year.

Meanwhile, the government is working to address a growing budget deficit through a mix of debt consolidation, better tax compliance and expenditure controls.

Infrastructure

Connect PNG map.

The government has committed itself to a substantial program of road building in pursuit of its Connect PNG masterplan this year. It will be managed by the Department of Works and Implementation, so PNG’s building and construction sector should have work.

While much of the construction is being funded by multilateral agencies such as the Asian Development Bank, getting paid for government work has proved to be an issue in recent times. Business will be buoyed somewhat by the Prime Minister’s stated aim of settling some K1 billion in arrears this year.

For Morobe-based businesses, the commencement of major works at Lae-Nadzab Airport and the highway that connects it to Lae City will be particularly welcomed.

With greater international funding available for electrification in PNG, business will also be looking to PNG Power’s new Managing Director, Flagon B Bekker, for progress in providing more reliable power. Bekker has already warned the country’s independent power producers that reform is on its way.

A question mark sits over the future of PNG’s largest telco, Digicel PNG, which has received a number of ‘unsolicited’ bids from international investors, rumoured to be Chinese in origin. With its Irish parent focused on managing its debt in recent years, there is a chance of a sale. Geopolitical factors are likely to play a role in any sale.

Meanwhile, will 2021 be the year a new player arrives in PNG’s telecommunications market, in the form of Fiji’s Amalgamated Telecom Holdings?

Resources

Credit: Zijing Mining

The last time PNG’s economy boomed was during the construction phase of the PNG LNG project, which finished in 2014. Most business leaders believe that the commencement of the new resources projects such as the Wafi-Golpu gold and copper mine and the Total-led Papua LNG project are the keys to PNG’s next phase of economic growth.

While there is substantial progress to be made before a final investment decision, Wafi-Golpu looks closest to receiving approval this year. Smaller resources projects such as the Twinza Oil’s Pasca A undersea gas project and Mayur Resources’ cement and mineral sands projects are also expected to progress this year.

Meanwhile, the reopening of the troubled Porgera gold mine appears to be something that everyone wants, and there are strong hopes that progress will be announced soon.

Financial services

September 2021 should see the finalisation of Kina Bank’s acquisition of Westpac’s operations in PNG, which was announced last year. The acquisition is subject to ICCC approval.

Travel

Credit: Air Niugini

A major challenge for larger businesses in 2020 has been the constraint on international travel. While business has now proven itself capable of moving a lot of meetings online, the resumption of commonplace international travel would enable investors and service providers to visit PNG again without the need for extensive quarantine and allow local business people to visit their international customers and partners with greater ease.

When can we expect international travel to resume at scale? Not for a while. While Qantas is taking bookings on its major international routes from July 2021 many others are sceptical of an early resumption.

‘I think that we’ll go most of this year with still substantial border restrictions – even if we have a lot of the population vaccinated, we don’t know whether that will prevent transmission of the virus,’ said the head of Australia’s Department of Health, Professor Brendan Murphy, this week. In the meantime, pre-flight testing is being introduced in many jurisdictions, including the US and Australia.