Proposals for investment in Papua New Guinea’s forestry sector are almost as high as in its mining and petroleum sector, according to figures from the Investment Promotion Authority. The IPA has also flagged a crackdown on compliance.

FDI approvals, proposed employment and FDI values by sector in PNG for Q1 2017. Source: IPA

The IPA figures show that FDI proposals in the forestry sector ran at about K1.07 billion for the first quarter of 2017, just below proposed investment in mining and petroleum, at about K1.1 billion.

Next highest were wholesale and retailing (K400 million), real estate (almost K300 million), construction (about K220 million) and architecture and engineering (about K180 million). Proposed energy investment is about K100 million.

‘Foreign interest in Papua New Guinea has generally been strong.’

The high level of interest in forestry suggests that foreign investors have not been adversely affected by controversy surrounding Special Agricultural and Business Leases (SABLs). It is estimated that about 12 per cent of PNG land is leased in this way.

The Minister for Lands and Physical Planning, Justin Tkatchenko, has reportedly said he is formulating a five-year plan to change practices in the sector.

Foreign interest

The IPA’s Alex Tongayu. Source: Business Advantage International

According to Alex Tongayu, Director of the Business Registration and Certification Division of the Investment Promotion Authority (IPA), foreign interest in Papua New Guinea has generally been strong.

‘In the first quarter of this year, we have had 213 foreign businesses approved,’ he says.

‘With 213 businesses having been approved, they decided to bring in K1.08 billion in investment for the first quarter. There is always interest from foreign businesses despite the doom and gloom about the economy—don’t believe that.’

Tongayu says there were 103 variations by existing investors, ‘mainly to adjust to current economic conditions and to reinvest in the economy.’

The highest proposed investment came from the Philippines and South Africa, both of which are about K1 billion. Next comes Australia (about K500 million) and China (about K350 million).

Spread

Tongayu says the IPA hopes to spread investments through different sectors. ‘Three countries have been prominent in the last 10 years: Australian, China and Malaysia. They are [the] biggest investors in the country.

‘The biggest employment is coming from the Chinese. The second from Australia and the third from Malaysia.’

‘Only about a fifth of companies comply with their obligations.’

Two significant investments were approved earlier this year, says Tongayu. One is a K300 million investment into the logging sector from the Philippines.

‘The second is in the mining sector, from Harmony Gold: about K300 million plus for the Hidden Valley, Wafi Golpu project.’

Compliance

Tongayu says most foreign businesses go to Port Moresby, Lae and Kokopo. ‘That is where the infrastructure is. It is harder to get them out to regional areas.’

However, only about a fifth of companies comply with their obligations, he says.

‘There is a lot of challenge there. How do we bring them in and take them through the process?

‘Starting from next year, any company that files annual returns will have to have an IFC tax file number.’

‘We are introducing a new law, a limited liability bill, to simplify those reporting requirements to make sure that in terms of compliance it is more relaxed for business people (to comply).’

Tongayu said that, starting from next year, any company that files annual returns will have to have an IRC tax file number.

‘What will happen is that we will modify the form to make sure that a tax file number is compulsory to file your annual returns and also renew your business name.

‘If there is not a tax file number, we will reject it and you will have to come back.

‘By the end of the year, we should have 100 per cent of the companies with business names that operate in the country having tax file numbers.’

FDI by country for Q1 2017. Source: IPA