Ground has been broken at the Ihu Special Economic Zone (ISEZ) in Papua New Guinea’s Gulf Province. Project Director Peter KenGemar says companies are already contemplating a move into the zone to take advantage of generous incentives.

With new roads, airstrips and increased interest for business, it has been a busy two years for Ihu Special Economic Zone (ISEZ) in Gulf Province, and a reminder of the adage (from the classic baseball film Field of Dreams), ‘if you build it, they will come.’

The impetus for the zone was to support the TotalEnergies-led Papua LNG gas project, set for a final investment decision at the end of 2023, and localise some of the project’s expected economic benefits.

The National Executive Council’s approval of the ISEZ was announced in 2019. Two years on, momentum is building, not only in anticipation of Papua LNG but also Mayur Resources’ nearby Orokolo Bay Industrial Sands Project, the mining lease for which was granted last December.

Ihu Special Economic Zone (ISEZ). Credit: Office of Member for Kikori Open Electorate

Seed funding

While a green light for Papua LNG will be the trigger for the zone’s construction, Peter KenGemar, Project Director of ISEZ, told the recent the 2021 Business Advantage Papua New Guinea Investment Conference that the necessary seed funding to advance the zone was now in place.

‘The government has approved the funding of up to K100 million,’ says KenGemar. ‘That’s K20 million annually to support the administration and the office and the work that we are doing. The national government also passed the Special Economic Zone Authority Act in 2020.’

‘The Special Economic Zone Authority Act clearly states that there will be concessions and relief from taxes for the first ten-to-fifteen years for any new companies that come into our space.’

The ISEZ has also attracted international funding of K80 million from China in a deal signed last year with China’s Ambassador to PNG, Zeng Fanhua.

In the first instance, that means infrastructure and ISEZ has wasted no time in getting to work.

‘We are working with state agencies and other agencies that are responsible for that infrastructure such as the works department and the department of transport and port facilities as well as telecommunication companies like DataCo.’

Work has begun on roads from Petoe to Ihu and from Purari to Ihu as well as the rehabilitation of local airfields. Ihu Airstrip was re-opened in 2021 after 17 years. More recently, the Baimuru airstrip was re-opened after 14 years.

Incentives

ISEZ’s Peter KenGemar

KenGemar said there was already interest in the ISEZ not only from international companies but also local ones.

‘We are already hearing in Port Moresby companies say that, if we can give them incentives, they might migrate from Moresby, where the cost is high and the taxes are high [compared] to our location.

‘The Special Economic Zone Authority Act clearly states that there will be concessions and relief from taxes for the first ten-to-fifteen years for any new companies that come into our space. So, that is the attractive part about it.’

The hope is that ISEZ will also help to empower local Gulf businesses to grow with the help of these incentives, combined with the business knowledge and experience that will be moving into the area from elsewhere.

‘Our people in Gulf are good fishermen and they have a lot of access to fisheries. The other area is agriculture,’ KenGemar says. ‘Those are two of the low-hanging fruits that we are looking for our people to get engaged in and local investors and other investors want to invest in that space.’

KenGemar points to the fact that 20 per cent of PNG’s forest acreage resides in Kikori District, where there are a couple of timber permits already operating.

‘They are exporting round logs. Now, we want to go into downstreaming, so we are looking at SME spaces so that people could engage in that.’  A corresponding SME training and funding program will roll out to support this, he says.