Economic Report
The economy of Papua New Guinea is dominated by the agricultural, forestry, and fishing sector and the minerals and energy extraction sector. The agricultural, forestry, and fishing sector accounts for most of the labor force of Papua New Guinea, while the minerals and energy extraction sector is responsible for most of the export earnings.
The International Monetary Fund has reported that despite PNG’s poverty, it is richly endowed with natural resources, but exploitation has been hampered by the rugged terrain and the high cost of developing infrastructure. Agriculture provides a subsistence livelihood for the bulk of the population. Mineral deposits, including oil, copper, and gold, account for 72% of export earnings.
Government policy has been to aim for steady, sustainable growth with an even sharing of the benefits throughout the country. To this end, it took minority shareholdings in most major industrial and mining developments (up to a maximum of 30 per cent in mineral projects and 22.5 per cent in petroleum projects). As a result, its major cities like Port Moresby and Lae have received increased international investor attention, giving rise to unprecedented building boom to exploit the opportunities presented by the country’s rise as a regional economic leader in the South Pacific region.
This is well supported by its strategic location as a Pacific’s gateway to Asia as well as its comparatively huge landmass and demographic profile (almost 7 times that the rest of smaller Pacific Island nations).
Main sectors in Papua New Guinea
Mineral Resources
Government revenues and foreign exchange earning minerals. Copper and gold mines are currently in production at Porgera, Ok Tedi, Misima, Lihir, Simberi and Hidden Valley.
Talks of resuming mining operations in the Panguna mine have also resurfaced, with the Autonomous Bougainville Government and National Government of Papua New Guinea expressing interest in restarting mining operations in the area. New nickel, copper and gold projects have been identified and are awaiting a rise in commodity prices to begin development.
Agriculture, Timber, and Fish
Papua New Guinea produces and exports agricultural, timber, and fish products. Agriculture currently accounts for 25% of GDP and supports more than 80% of the population. Cash crops ranked by value are coffee, oil, cocoa, copra, tea, rubber, and sugar. About 40% of the country is covered with timber rich trees, and a domestic woodworking industry has been slow to develop. Fish exports are confined primarily to shrimp, although fishing boats of other nations catch tuna in Papua New Guinea waters under license. Papua New Guinea is the largest yam market in Asia.
Industry
In general, the Papua New Guinea economy is highly dependent on imports for manufactured goods. Its industrial sector, exclusive of mining, accounts for only 9% of GDP and contributes little to exports. Small-scale industries produce beer, soap, concrete products, clothing, paper products, matches, ice cream, canned meat, fruit juices, furniture, plywood, and paint. The small domestic market, relatively high wages, and high transport costs are constraints to industrial development.
Taxes in Papua New Guinea
PNG resident companies are liable for income tax on their worldwide income. Companies that are not resident in Papua New Guinea are only required to remit tax on income sourced in Papua New Guinea. A non-resident’s PNG-sourced passive income, including dividends, interest, and royalties, may be subject to withholding tax (WHT). It is ordinarily the case that the payer of the dividend, interest, or royalty must withhold the relevant amount of the tax and remit this to PNG’s Internal Revenue Commission (IRC).
Papua New Guinea levies corporate income tax (CIT) on companies on a flat rate basis.
Generally, trading profits and other income (except income that is specifically exempt) of resident companies in Papua New Guinea are assessed tax at a rate of 30%, whereas non-resident companies operating in Papua New Guinea are assessed tax at a rate of 48%.
Investing in Papua New Guinea
Papua New Guinea is rich with natural resource. Its economy is distinctively dualistic – a modern economy based on mining (gold, silver, copper, nickel) and petroleum and natural gas production, and a traditional economy based on fishing, forestry, coffee, palm oil, copra, cocoa and vanilla which provides livelihood for 85% of the rural population.
With such abundance of resources, Papua New Guinea is among the top of the world’s investment destination.
Liberal Investment Environment
PNG aspires for an investment regime that is transparent and compatible with international best practice which is conducive for Foreign Investment. It promotes a liberal investment environment, which welcomes Foreign Investment in any sector.
Papua New Guinea is continuously embarking on creating a conducive environment by undertaking major reforms.
The current investment condition is also comparable as any conducive investment environment in the world.