Clarence Hoot, Acting Managing Director, Investment Promotion Authority (IPA) : Interview

Interview : Clarence Hoot

What regulatory reforms are being undertaken to make Papua New Guinea more attractive as an international investment destination?

CLARENCE HOOT: To encourage investment in PNG we are re-examining the National Investment Policy, which has remained unchanged since the 1990s. Subsequently, we will look at the Investment Promotion Act of 1992, which is essential for establishing a business environment for both existing and incoming companies.

We are also working on opening up the Port Moresby Stock Exchange (POMSoX), by undertaking both structural and regulatory reform. This is intended to make it easier for foreign and smaller companies to enter the capital market. The regulatory reform of the POMSoX is being facilitated by the three capital markets-related acts of 2015 that came into effect in December 2017.

The Securities Commission will also undergo restructuring, becoming an independent entity overseeing the affairs of the securities market. From a broader perspective, the government has announced plans to review some of the project agreements that have been made with the extractive industries; the lack of foreign currency is a big hurdle for the economy and we do not get enough out of some of the older deals. There is also a big push from the Ministry of Trade, Commerce and Industry to rehabilitate the plantation sector, or cooperative societies. This will be especially aimed at the agriculture and fisheries sectors.

What are the main challenges companies face when registering and starting operations in PNG?

HOOT: An online registration system has been in place since 2013, but the government has decided to continuously offer a parallel physical registration process. While it is more cost effective to register online, many areas of the country do not have proper internet connections. The online platform needs to be available around the clock, but system errors are a challenge due to continuous disruption of power supply. Therefore, the IPA and Asian Development Bank are working together to create a cloud system. Furthermore, physical registration can be a problem, as it is expensive for Papua New Guineans to travel and offices are not always close by. Therefore, provincial administrators must be trained to make the process more efficient by providing IPA services in the province. The issues surrounding the registration process highlight the challenges faced by small and medium-sized enterprises (SMEs) in PNG. While the government has a SME policy and master plan in place, there is often a mismatch between policies and reality. Certain requirements are often not applicable to a developing market like PNG, as many firms do not have the facilities to reach bigger markets nor access to credit due to high interest rates and insufficient equity or collateral. Furthermore, knowledge and awareness are a concern, as the SME business model is not common in PNG. Training campaigns can change this mindset by helping entrepreneurs with basic book keeping, complying with regulatory requirements, paying taxes and updating business entity records.

Which sectors have the greatest potential for expanding investment in non-extractive industries?

HOOT: We are one of the few economies that have implemented the World Trade Organisation’s structural tariff reduction programmes. PNG therefore remains an attractive destination for many types of investors. Furthermore, we are surrounded by large markets offering alternative growth opportunities, especially in agriculture. The country has the right climate and agricultural conditions to feed part of the fast growing population of the Asia-Pacific region. Another sector with potential is tourism, but we currently lack investment in this industry. It is important to realise that tourists do not only want a hotel, but also an inexpensive holiday, reliable infrastructure, health care services, easy transport and security. Therefore, the development in this sector requires a holistic approach.