With the worst of the COVID pandemic behind it, Papua New Guinea is preparing itself for a decade of sustained economic growth. While the investments that will drive this growth are still being finalised, business leaders tell Business Advantage PNG the country is already starting to get ready.

Port Moresby’s old port site has been cleared for redevelopment by state-owned Kumul Consolidated Holdings. Credit: BAI

PNG was a major beneficiary of higher global commodity prices in 2022, especially for its largest export commodity, liquefied natural gas (LNG). Improved export receipts have helped it not only claw back some of the lost growth caused by the COVID pandemic and consequent supply chain constraints but also to bring record levels of national debt largely under control.

As it enters 2023, the country now faces the very real prospect of a decade of growth on the back of some major resources investments.

The final investment decision for the first of these – the US$10 billion TotalEnergies-led Papua LNG project – is due at the end of 2023 and early works have already commenced.

Assuming this project is ready to start exporting as hoped in 2028, construction of ExxonMobil’s marginally smaller P’nyang LNG project is scheduled to follow.

Add to these the prospect of the long-awaited US$2.8 billion Wafi-Golpu copper-gold project in Morobe Province, another project nominated as a national priority by Prime Minister James Marape, and one can see why there is a cautious feeling of confidence in business circles.

‘With Papua LNG ready to kick-off any time soon, business morale is improving,’ Paul Barker, Executive Director of the Institute of National Affairs, tells Business Advantage PNG.

Marape government returns

The Pangu Party government led by James Marape was returned to power after national elections in August 2022. Marape first came to power in 2019 on a platform of achieving better terms for PNG interests from the country’s mineral resources, and also bringing surging national debt under control.

While an improved resource take is a work in progress, expected to be finalised by a new resources regime in 2025 (the 50th anniversary of PNG’s independence), Treasurer Ian Ling-Stuckey has largely succeeded – with assistance of the International Monetary Fund (IMF) and more concessionary finance – in restructuring the country’s debt. Indeed, the country’s sovereign credit rating was upgraded from ‘negative’ to ‘stable’ during 2022 by both Standard and Poors and Moody’s partly due to this achievement.

Plan for growth

Since the elections, the Marape government has signalled a desire to diversify an economy still heavily reliant on mineral resources and raw commodity exports, by diverting more funds to enabling infrastructure, prioritising the informal economy (which supports the bulk of PNG’s population), and encouraging import replacement and value-adding.

The record K9.796 billion capital expenditure set out in the 2023 National Budget is the government’s down-payment on these reforms. Big-ticket items to be financed include the ongoing Connect PNG road construction program, and major upgrades of the country’s ports and airports.

‘In terms of equipment and infrastructure and everything else, I think people are very much ready. We’ve been waiting for this project to start for so many years.’

According to that Budget, PNG’s economy is expected to grow by 4.0 per cent in 2023. (The IMF’s and Asian Development Bank’s projections are slightly higher, at 5.1 per cent and 4.9 per cent respectively.) This projection doesn’t include the boost expected from Papua LNG’s early works but does include activity related to a reopened Porgera gold mine, which has been under care and maintenance since April 2020. At the time of writing, there is still no date for its reopening.

Brakes on growth

The life of PNG’s largest copper-gold mine, Ok Tedi, looks set to be extended out to 2033. Credit: OTML

One potential brake on business growth in 2023 is likely to be an ongoing shortage of foreign exchange (forex): the primary issue facing the business community in 2023, according to Port Moresby Chamber of Commerce and Industry President Rio Fiocco.

While improved export receipts have swollen the amount of forex held by the country’s Central Bank, companies are still having to wait extended periods to obtain the exchange they need, as Brett Hooker, Chief Executive of Westpac PNG, explains.

‘With higher inflation, especially with imports such as fuel, the general user needs more forex in the market,’ he tells Business Advantage PNG. ‘Whether that settles a little into 2023 remains to be seen, but obviously, 2024 is where we’re expecting some blue skies.’

‘One of the observations you could make about the PNG market is the gradual internationalisation of the economy here’

Forex shortages are not the only challenge faced by business. According to the 2023 PNG 100 CEO Survey – an established barometer of business confidence – unreliable utilities and telecommunications, security and law and order concerns, and a lack of government capacity, are just a few of the key challenges reported by PNG’s major companies.

While PNG’s underperforming electricity transmission system badly needs investment, there have been more promising developments in telecommunications, with two major new players entering the market in the past year: Australia’s Telstra, which acquired market leader Digicel, and Fiji’s Amalgamated Telecoms Holdings, which launched the Vodafone brand in PNG in 2022.

The investment triggered is set to improve both the reach and reliability of the country’s telecommunications networks, and has already put downward pressure on prices.

Mark Baker, at the end of his term as Managing Director of bank ANZ in PNG, detects a trend.

‘One of the observations you could make about the PNG market is the gradual internationalisation of the economy here, the presence of international brands,’ he says. ‘Even in the hospitality space, we now have Radissons and Marriotts starting to appear on the skyline.’

While inflation is expected to run at 5.7 per cent this year, there are some indications that imported inflation at least may have peaked.

‘The increase in supply chain costs has washed through,’ suggests Ed Weggemans, Managing Director of PNG’s largest brewer, SP Brewery. ‘This year, we see some of these global costs coming down.’

Set for the next wave?

For those who recall the busy construction phase of the country’s first gas project, PNG LNG, which peaked in 2012, the big question remains: is PNG ready for the expected surge from Papua LNG?

‘PNG is much more ready than the last time around,’ asserts Rupert Bray, Managing Director of the diversified Steamships Trading Company, which has interests in logistics, property and hospitality. ‘Whether it is in the hotel space, accommodation, offices, logistics, or just in the technical capacity, there is a lot more of it in-country now than there was before. And it’s also at a much higher level.’

‘In terms of equipment and infrastructure and everything else, I think people are very much ready. We’ve been waiting for this project to start for so many years,’ agrees Hulala Tokome, Country Director for Puma Energy and Vice-President of the Business Council of PNG.

Indeed, there are early signs that the next wave has already started to build, as companies start to gear up for the expected increase in business after a few tough years.

‘The pipeline of activity for us is as high as it’s been for the last couple of years,’ observes ANZ’s Mark Baker.

Fellow banker Greg Pawson, the CEO of Kina Bank, agrees: ‘We’ve seen quite a significant lift in activity. In particular businesses that were probably holding off making decisions over the 2022 election period are now making those decisions, which is encouraging.’

Warming up

Meanwhile, national airline Air Niugini is reporting its passenger numbers are now higher than in 2019, while employers and recruiters Business Advantage PNG spoke with are reporting a hotting up of the jobs market, as the ‘war for talent’ begins.

The property sector is also starting to pick up, with realtor Brian Hull of Century 21 noting a ‘considerable pickup in enquiries for both affordable rentals and purchases of homes, as well as for sensibly priced offices in the Waigani precinct.’

‘There are more and more expats coming into the country and there’s a bit more activity,’ observes Paul Sayer of superannuation fund Nambawan Super, which has an extensive property portfolio. ‘There will be more stock coming on and more people coming in.’

PNG’s equity markets have also bucked the global trend, returning positive growth of about seven per cent over 2022.

‘We’ve seen volume growth in the market as more investors engage with the country’s stockbrokers,’ says David Lawrence, Chairman of PNGX, the country’s stock exchange. ‘We‘re optimistic about the next 12 months.’

This story was first published in the 18th annual edition of Business Advantage PNG, Papua New Guinea’s premier business magazine. Access the digital magazine here.