Papua New Guinea - Country Commercial Guide
Market Challenges
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PNG continues to be prone to international shocks like the Russian invasion of Ukraine.  Falling global commodity prices and the COVID-19 pandemic-related economic downturn negatively affected the country.  The fall in global commodity prices has resulted in a decline in capital/infrastructure investment, a drop in income tax collections, and a shortage of foreign exchange.  Core industries like manufacturing and retail have not performed as expected due to a foreign exchange shortage which has discouraged foreign direct investment inflows and impacted the economy.

PNG is a low-income country where the average consumer has limited purchasing power.  PNG’s economy contracted 2019-2021 while the cost of living and doing business has increased with headline inflation reaching 6.3 percent in Quarter 3 of the 2023 calendar year.  Higher costs are mostly felt by lower income households in urban areas like Port Moresby, the capital city and commercial hub of PNG and most developed urban center, and Lae the second largest city and the industrial hub connecting the Highlands with the Lowlands.  The Asian Development Bank forecasts that inflation in PNG will persist in 2023, as the PNG Kina continues to depreciate against the U.S. dollar and other currencies.  

Although CEOs have a positive outlook, as identified in the 2023 PNG 100 CEO Survey, the lack of access to foreign exchange is the most critical impediment to doing business in PNG.  In addition to foreign exchange issues, businesses faced constant challenges in security, skill shortages, unreliable telecommunications and utilities, a lack of government capacity, corruption, and regulatory uncertainty.

PNG’s complicated land tenure system and widespread insecurity continue to hinder public and private investment activities across the country.

Corruption also hinders business and investment opportunities.  According to the PNG National Research Institute, corruption in the public sector is one of the main constraints to business in PNG, particularly for small enterprises.  The high rate of corruption is reflected in PNG’s relatively low ranking in Transparency International’s 2022 Corruption Perceptions Index, where the country is ranked 30 most corrupt out of 180 countries.

Political instability and frequent changes to key cabinet ministerial positions often result in new policy reforms that are less socialized and often have a negative impact on the private sector.  Increasing regulatory concerns also continue to be a challenge for potential investors.