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

Interview: Clarence Hoot

What steps are needed to make Papua New Guinea an attractive destination for investment?

CLARENCE HOOT: An important goal for PNG is to make it easier to do business in the country. To this end, there are a number of measures we need to take. The IPA has examined its business processes and developed an online system that can be thought of as a single-window approach to enhance them. Customs is developing a similar system for businesses, and a variety of other reforms are being implemented throughout the country as well. In early 2019 the Foreign Investment Regulatory Authority (FIRA) bill was introduced, which restricted foreign access to certain economic activities. The proposal faced considerable criticism and led to consultations between the public and private sectors. In response to this, the government compromised and agreed to amend sections of the Investment Promotion Act of 1992.

Another key topic in PNG is access to finance. There is an urgent need, especially for small and medium-sized enterprises (SMEs), to re-evaluate the financial system. SMEs go through the same process as large firms when they approach financial institutions, but this has to change. We also need to re-examine the movement of international visitors within the country. Currently, a business person can complete the visa application and payment process online before even arriving in the country, which is an important first step. However, after securing their visa, they must still request a work permit from the Department of Labour and Industrial Relations. So although progress has been made, more remains to be done.

How can the authorities ensure that SMEs will benefit from the PNG’s wealth?

HOOT: Part of the argument behind FIRA was to protect local SMEs from foreign investors. Advocates claimed that foreign investors were taking jobs away from local companies. Regardless of the bill’s merits, it was introduced discretely and without consulting the private sector or the IPA, which led to foreign access being barred in certain sectors. This could result in certain services disappearing if there is no local counterpart available to step in. There is nothing wrong with protecting local companies, but we should address the most urgent needs first. This is why consultation with the private sector is necessary. A wealth of research has been conducted on the current state of SMEs. For example, PNG does not traditionally have a business culture, something that is required for the modern market. We grow our harvest and then go to rest without considering the next day. We need to think about continuous supply when entering the international market. Therefore, our people need business training and access to forms of finance, like assistance with start-up capital. We are not against foreign investment, we just ask for the necessary support to compete on equal footing.

After having hosted APEC 2018, how do you think it will impact PNG’s economy in the long term?

HOOT: Critics may disagree, but we feel that hosting APEC 2018 was a blessing in disguise. After more than 20 years as an active member of APEC, PNG had the chance to organise the forum, which provided an opportunity to show the country to the rest of the world. It also allowed member economies to visit PNG and experience it for themselves. Discussions on the bilateral level were also very fruitful in terms of economic cooperation. For example, Russia is now seriously looking into setting up a representative office here, which would not be happening if we had not hosted APEC 2018. Furthermore, the outcome of the forum was promising for us. Countries such as Australia, the US, China, Japan and New Zealand announced several projects in support of PNG. Overall, it was a positive news story. As both a people and a country, we have placed ourselves on the map.