1 www.businessadvantagepng.com

Business Advantage

PAPUA NEW GUINEA2011 / 2012

B U S I N E S S A N D I N V E S T M E N T G U I D E

Your gateway to the Papua New Guinea economy

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ECONOMIC UPDATE

Our annual survey of business leaders in Papua New Guinea reveals

a country now embarking on the most exciting and transformational

period of economic activity in its history.

10 HUMAN RESOURCES How firms are dealing with PNG’s exacerbating skills

shortage.

12 PERSPECTIVES ON PAPUA NEW GUINEA Key businesses leaders give their views on the

opportunities in the Pacific’s largest economy.

18 DOING BUSINESS IN PNG PwC’s tax expert David Caradus on PNG’s financial and tax

system for business.

19 LEGAL CONSIDERATIONS Experienced PNG-based lawyer John Leahy flags the key

legal issues that confront businesses in PNG.

20 STOCK EXCHANGE UPDATE/PROFILES POMSOX, PNG’s stock exchange, has grown strongly over

the past five years. Plus, we detail two key organisations of interest to investors.

22 EARNING A SOCIAL LICENCE TO OPERATE Experienced PNG-based lawyer John Leahy flags the key

legal issues that confront businesses in PNG.

35 FINANCIAL SERVICES PNG’s financial institutions are developing increasingly

sophisticated ways of servicing the unbanked and business customers alike.

36 INFRASTRUCTURE & TRANSPORT As PNG grows, the development on its infrastructure

becomes ever more critical.

40 AGRIBUSINESS & TRADE We focus on opportunities in agricultural commodities,

while Austrade’s Kevan Dacey examine the PNG’s import requirements.

42 MANUFACTURING PNG’s booming domestic market is driving substantial new

investment in manufacturing.

43 FISHERIES Intense investment in onshore processing facilities is

turning PNG into a regional powerhouse.

44 FORESTRY PNG’s forestry sector is beginning its transition from logging

to producing processed products and plantation timber.

46 TOURISM DEVELOPMENT More visitor arrivals and significant new investment is

driving growth in PNG’s promising tourism sector.

47 WHO’S WHO IN PNG BUSINESS

48 USEFUL ONLINE RESOURCES ON PNG

49 BUSINESS TRAVEL GUIDE TO PORT MORESBY, PNG’S CAPITAL CITY

MINING AND PETROLEUM IN PNG: SPECIAL SECTION

PNG’s resources sector is busier than ever. We provide an update

on the major new mining and gas projects and explore the services

opportunities.

PNG’S ICT EVOLUTION

Deregulation of PNG’s telecommunications and IT sector is providing

new opportunities and encouraging some exciting innovation.

CONTENTS

THE CHANGING FACE OF INVESTMENT IN PNG

With PNG expected to grow faster than China in 2011, Business

Advantage examines just who is investing in PNG and in what

sectors, and asks where the best opportunities in the future.

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This publication is made possible through the support of the following organisations:

PNG Forest Authority

FOREWORD

Welcome to the sixth annual edition of Business Advantage

Papua New Guinea, the leading guide—both in print and

online—to business conditions and opportunities in Papua

New Guinea for executives around the globe.

While some countries continue to feel the after-effects of the global

financial crisis, Papua New Guinea’s economy has forged ahead. We

achieved strong GDP growth of 8% in 2010, and it is likely 2011 will go

close to matching the 5.74% growth average PNG has achieved since

2006, with a projected growth rate of 8.5%.

The reasons behind this impressive performance are several.

Undoubtedly, investment in PNG’s resources sector is contributing

significantly. The US$15 billion ExxonMobil-led PNG LNG project is now in

its construction stage and is generating a flurry of activities across the

economy. With further liquefied natural gas projects also planned, major

new gold and nickel mines opening and exploration activities in mining,

petroleum and gas surging, PNG’s resources sector has arguably never

been busier.

This in turn is having a flow-on effect in other sectors, most

especially building and construction, services and manufacturing. It is

particularly encouraging to see major investments being undertaken

in the latter sector, with several key manufacturers expanding their

operations and attracting significant new investors. Products that

display the ‘PNG Made’ logo are now commonplace.

Investment is also taking place in PNG’s recently deregulated

telecommunications sector, where competition is driving down

prices and leading to impressive innovation. The banking sector has

experienced a surge in growth reflecting the expanding investment

opportunities.

All this, and I am yet to mention the increased growth in three

sectors where PNG has arguably its greatest natural advantages:

agriculture, fisheries and forestry.

PNG continues to be a major producer of agricultural commodities

such as coffee, cocoa, palm oil and spices, with value-adding

increasing. Meanwhile, the northern coast of New Guinea is

transforming into a major fish processing centre for the whole Pacific

—a position that will be further cemented when the new Pacific Marine

Industrial Zone in Madang is completed. Also, PNG’s forestry sector is

now embarked on a concerted move towards downstream processing

and certification that will ensure its long-term sustainability. The housing

sector continues to grow, building a very robust domestic market for

quality timbers.

Finally, I would like to draw your attention to the emergence of a new

class of potential business partner in PNG—the indigenous landowner

companies. Funded in part by royalties from PNG’s resources projects,

landowner companies are increasingly active across sectors such as

construction, transportation and services. From modest beginnings,

they are now achieving levels of acumen and professionalism that make

them genuine potential partners for anyone looking to do business here.

The Investment Promotion Authority of Papua New Guinea (IPA) is

pleased to continue its partnership with Business Advantage for the

sixth time. We are responsible for facilitating foreign investment and

are your first port of call if you are looking to enter the Pacific’s fastest-

growing market. We look forward to assisting you.

Foreword by Ivan Pomaleu, OBEManaging DirectorInvestment Promotion Authority of Papua New Guinea

Business Advantage Papua New Guinea 2011/12 is published by Business Advantage International Pty Ltd, Level 27, Rialto South Tower, 525 Collins St, Melbourne, Victoria 3000, Australia, tel +61 3 9935 2977, fax +61 3 9935 2750. www.businessadvantage.co

This publication is available free online at www.businessadvantagepng.com. Additional printed copies can be purchased for AUD$35 (incl GST and postage) from the above address or by emailing info@businessadvantageinternational.com.

© Copyright 2011 Business Advantage International Pty Ltd

ISSN 1836-7895 (print)/1836-7909 (online)

Project Director: Robert Hamilton-Jones (rhj@businessadvantageinternational.com) Publisher: Andrew Wilkins (aw@businessadvantageinternational.com) Editorial: Jacqueline Bennett, Samantha Magick, Rod Myer, Harbant Gill Design: Michael Renga Cover images: PNG Tourism Promotion Authority, InterOil, PNGSDP, Anitua, Ramu Agri Industries

Business Advantage would like to thank all at the PNG Investment Promotion Authority (especially Ivan Pomaleu, Clarence Hoot and Beverly Puton Piawu) and Penny Burns for their assistance with this publication.

Produced in partnership in the Papua New Guinea Investment Promotion Authority.

Printed in Australia. Both printer and paper manufacturer for this publication are accredited to ISO14001, the internationally-recognised standard for environmental management. This publication is printed using vegetable inks and the stock is elemental chlorine free and manufactured using sustainable forestry practices.

About this publicationBusiness Advantage Papua New Guinea is produced annually to provide a guide to doing business in Papua New Guinea. It provides a reader-friendly overview of economic conditions, assesses business opportunities and imparts practical advice.

DISCLAIMER Business Advantage Papua New Guinea is a general guide to some potential business opportunities in Papua New Guinea and is not designed as a comprehensive survey. The opinions expressed herein are not necessarily those of the publisher and the publisher does not endorse any of the business or investment opportunities featured, nor does it accept any liability for any costs or losses related to dealings with entities mentioned in this publication. Readers are strongly advised to pursue their own due diligence and consult with investment advisors before making any investment decisions.

‘While some countries continue to feel the after-effects of the global financial crisis, Papua New Guinea’s economy has forged ahead.’

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The Independent Public Business Corporation, which oversees the financial and operational performance of Papua New Guinea’s State Owned Enterprises (SOEs), is engaging with strategic partners to overcome infrastructure constraints and underpin unprecedented levels of economic growth.

IPBC has forged strategic partnerships with the aim of undertaking major investments in essential national infrastructure for telecommunications, power generation and transmission, water and sewerage facilities and the nation’s extensive port network.

Key strategic financial partners include the Asian Development Bank and domestic corporations with significant investment funds such as the PNG Sustainable Program Development Company, and the nation’s two largest superannuation/pension funds – Nambawan Super and NASFUND.

The SOE investments will help transform the PNG economy and support PNG Government

efforts to improve the nation’s Human Development Indicators.

Ambitious plans that are proposed include:

• Twomajorhydroelectricprojects–the240MW Ramu-2 project and, in the longer term, the 1,800MW Wabo scheme on the Purari River in Gulf Province

• Developmentofafibreoptictelecommunications cable backbone network

• MajorportexpansionactivitiesinLae,PortMoresby and elsewhere

• Amajorupgradeofseweragetreatmentfacilities in the national capital, Port Moresby.

Strategic SOE investments will help sustain Papua New Guinea’s longest, uninterrupted period of economic growth that commenced in 2002.

STRATEGIC PARTNERS AIM FOR GREATER PROSPERITY

CONTACT

Independent Public Business Corporation (IPBC)Level4,PacificPlace-CnrMusgraveStreetandChampionParade

PO Box 320, Port Moresby, National Capital District, Papua New GuineaTelephone: (675) 321 2977 - Facsimile: (675) 321 2916 / 321 0192

Email : ipbc@ipbc.com.pg

www.ipbc.com.pg

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ECONOMIC UPDATE

No longer business as usualOur annual survey of business leaders in Papua New Guinea reveals it is embarking on the most exciting and transformational period of economic activity in its history, says Business Advantage's Andrew Wilkins.

Positioned strategically between the fast-

growing economies of Asia to its north

and west and Australia and the Pacific to

its south, Papua New Guinea (PNG) is the Pacific

region’s largest economy and most populous country.

Its geographic location (amid the Pacific’s rich

fishing grounds), considerable mineral wealth and favourable climate

and soils (ideal for growing a wide range of agricultural commodities),

have meant that PNG has long been considered a country with strong

potential. Now, finally, the country is starting to fulfil that potential.

Annus mirabilisThe year 2011 is already looking like one of the biggest years

economically in Papua New Guinea’s 36-year history as an independent

state. There is such strong activity across the economy that the Bank of

Papua New Guinea, the nation’s reserve bank, is projecting GDP growth

of unprecedented 9.5%, which compares favourably with World Bank

projections for 7.8% growth across the entire East Asia and Pacific

region (which includes China).

In his March 2011 Monetary Policy Statement, Bank of PNG Governor

Loi M Bakani attributed this growth to: ‘increased activity in the mineral

sector and a pick up in construction of the LNG project and its spill-over

effects to most sectors of the economy.’

LNG the catalystThe LNG project to which Bakani refers is the US$15 billion ExxonMobil-

led PNG LNG liquefied natural gas project—the largest single investment

ever made in PNG. Now in a construction phase which will end in

2014 when the first gas should be shipped to waiting customers

in Japan, China and Taiwan, the project is proving a catalyst for

increased economic activity and employment growth, especially in the

construction and services sectors.

It’s not the only show in town, however, as Zanie Theron, Partner at

Deloitte Touche Tohmatsu PNG points out:

‘It’s worth saying that at least the equivalent amount of money is

being invested in three new gold mines—Yandera (Marengo Mining),

Wafi-Golpu (Harmony/Newcrest) and Frieda River (Xstrata). And then

there’s the possible second major gas project from InterOil, worth about

US$7 billion.’

All this is bringing more businesses from all over the world to PNG.

‘The benefit of the LNG project is that it has generated excitement

about the country—investors are sitting up and taking notice. Hotels

have been close to 100% full, even turning people away. It’s been very

exciting,’ says Ivan Pomaleu, Managing Director of the PNG Investment

Promotion Authority, the PNG Government’s investment promotion and

business registration body. ‘Last year we had 350–400 new companies

register, this year it’s close to 500 companies … We’ve never been so

busy.’

Political and economic stabilityOne reason given for the sustained economic growth has been the

relative political and economic stability that PNG has enjoyed over the

past decade. When Papua New Guineans go the polls in 2012 to elect

PNG’s next government, it will be after two successive parliamentary

terms without change of government—a phenomenon without

precedent in PNG politics.

Such stability clearly enables businesses to plan their longer-term

investments within a regulatory environment that will be reasonably

‘By 2050, I honestly believe—subject to there being good governance and leadership—this could well be the richest country in the region after Australia in terms of per capita GDP’

Papua New Guinea's fast-growing capital, Port Moresby

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ECONOMIC UPDATE

What would you like to grow?

2011 marks 50 years for PwC in PNG. Throughout this time PwC has been proud to support PNG businesses grow, accumulating deep knowledge and experience of a diverse and challenging market. At PwC we provide industry-focused assurance, tax and advisory services to build public trust and enhance value for our clients and their stakeholders. We collaborate with our networks and share our thinking, experience and solutions to develop fresh perspectives and practical advice.

To discuss how you would like to grow your business and how we can support you in PNG, contact Jonathan Seeto , Managing Partner on +675 3211 500 or e-mail us at jonathan.seeto@pg.pwc.com.

www.pwc.com/pg

predictable. Continuity of Government has also helped with fiscal

management, as Syd Yates, Chief Executive Officer of financial services

firm Kina Securities notes:

‘We’ve got strong foreign reserves, we’ve got good liquidity in the

system, so things are okay. The biggest risk we have going forward is

inflation, which is only natural, and we need to put more focus on how

they keep that in tow. But as a risk generally, Papua New Guinea is

a lot better off than it was a few years ago and I think the risk is very

manageable going forward. The Government seems to be on the right

track.’

One of the keys to the astute management of PNG’s growth will

be the creation of a Sovereign Wealth Fund into which future LNG

revenues will be sequestered. This measure is expected to help PNG

avoid the dreaded ‘Dutch Disease’ that has plagued some other

developing countries with rich mineral resources. While the exact

nature of the fund is yet to be finalised, at this stage it looks as if it will

have three components: a strategic stabilisation fund, a future fund

and an infrastructure fund. These funds, likely to be managed by the

Bank of PNG, can then be deployed to support the country’s long-term

development plans in a way that minimises inflation.

Broadening the economic base‘Fiscally, PNG’s in good shape,’ notes Charles Andrews, the Asian

Development Bank’s Country Director for PNG. ‘However, it’s

automatically at risk because of its narrow industry base.’

With its resources projects demanding so much of both the private

sector and Government, there is a danger that other industry sectors

may not receive the attention they need.

This is acknowledged by PNG’s National Government, which has

made expansion of the country’s non-resources sectors—notably

agriculture, manufacturing, fisheries, forestry and tourism—the priority of

its two major national development documents, the Papua New Guinea

Development Strategic Plan 2010–2030 and the more general Vision 50.

In a nutshell, the ambitious Develop Strategic Plan aims to set out

‘how PNG can become a prosperous, middle income country by 2030’,

in imitation of other resource-rich countries which have made similar

development progress, such as Malaysia and Botswana. While some of

its growth targets have raised one or two eyebrows in business circles,

there’s no doubting the document as a statement of national intent.

Population 6.7 million (2009)

Capital Port Moresby

Surface area 463,000 sq km

People Melanesian, Papuan, Negrito, Micronesian, Polynesian

Time zone GMT +10 hrs

Business language English

Political status parliamentary democracy

Nominal GDP US$8.16 billion (2010)

GDP growth 8% (2010, source: Bank of PNG)

Inflation 7.2% (2010, source: Bank of PNG)

Currency PNG kina

Major industrial sectors mining, crude oil petroleum refining, copra crushing, palm oil, plywood and wood chip production, construction, fisheries, tourism

Exports oil, gold, copper ore, logs, palm oil, coffee, cocoa, seafood

Major export markets Australia, Japan, China

Imports machinery and transport equipment, manufactured goods, food, fuels, chemicals

Major import markets Australia, Singapore, China

World Bank Ease of 103 out of 183 countries Doing Business Ranking 2011:

PAPUA NEW GUINEA IN BRIEF

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ECONOMIC UPDATE

The plan also expresses a desire to encourage the development

of indigenously-owned businesses so that Papua New Guineans

themselves can fully participate in the country’s growth—a move

supported by the recently-formed PNG Indigenous Business Council.

One initiative already under way is the Industrial Centres Development

Corporation's establishment of regional business growth centres for

local businesses—the first being in Minj in Western Highlands Province.

These small centres will complement larger industrial centres in Lae and

Kokopo, and the planned Pacific Marine Industrial Zone in Madang.

Capacity constraintsBusiness people surveyed for this publication nominated several

challenges they faced in doing business in PNG. Increased demand for

accommodation and office space is driving rental costs higher in both

Port Moresby and Lae, although new properties coming onto the market

in the next few years may alleviate this somewhat. The challenge

of finding and retaining skilled workers in a tight job market was also

mentioned (see page 10 for more on PNG’s human resources challenge),

as was the need for further investment in education and training to build

a more employable workforce (the formal sector still employs less than

20% of workers). Meanwhile, security and law and order issues have

not disappeared—one reason why the security sector is one of PNG’s

largest employers.

Of course, all these challenges also reflect business opportunities—

perhaps none more so than the current situation with infrastructure. The

PNG Government’s 2011 supplementary budget released more money

for road building, while the country’s ports and airports are also being

upgraded and the telecommunications industry deregulated (see page

32). More power generation capacity is badly needed. While interim

attempts are being made to fund this, it is expected that a new public-

private partnership regime will soon be introduced to encourage private

involvement in this sector. While it is still on the drawing board, Origin

Energy and PNG Sustainable Development Program’s much-publicised

1800 megawatt Purari River hydroelectric project, which could see PNG

export electricity to neighbouring Australia, is indicative of the kind of

collaboration that could occur in future. (See page 36 for more on PNG’s

infrastructure.)

Long-term optimismRegardless of the concerns many express about the undeniable need

to invest more in infrastructure, Government capacity, education and

health, there is currently a palpable air of excitement among business

leaders that the country may finally be making the first steps to realising

its rich potential.

Vishnu Mohan, ANZ’s Chief Executive Officer for PNG & Pacific North

West Region, sums up the mood nicely:

‘By 2050, I honestly believe—subject to there being good

governance and leadership—this

could well be the richest country

in the region after Australia in

terms of per capita GDP. I think the

potential is enormous, given the

richness of the natural resources.’

Staff from Port Moresby’s Airways Hotel receive the award for World’s Best Airport Hotel at the 2010 World Travel Awards.

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INVESTMENT

Strategy to lure top talentBusiness Advantage finds out how firms are dealing with PNG’s exacerbating skills shortage.

‘A lot of people say that security is the biggest challenge to doing

business in PNG,’ says Ken Harvey, Managing Director of the LBJ Group

of Companies. ‘But it’s not—it’s skills.’

Indeed, most senior managers you talk to in PNG at present have a

story to tell about their human resources tribulations, whether it relates

to hiring and retaining, or soaring wages.

As if PNG’s sustained growth was not putting enough strain on

PNG’s sparse vocational training infrastructure, the enormous PNG LNG

project has over the past two years acted as a magnet for the brightest

and the best, impacting not just on the private sector but also on PNG’s

public service.

‘And the LNG project has hardly started yet,’ says PNG recruitment

veteran Scott Roberts, Managing Principal of Cadden Crowe, who

observes other sectors such as mining, finance and manufacturing are

also expanding significantly.

Global ratesAlthough rising wages pose a problem for employers, Julian Counsel, the

Country Manager of the UK-based international oil and gas recruitment

specialist, Air Energi, reasons that in many respects PNG is just catching

up with developed economies:

‘It’s just a case of globalisation finally reaching Papua New Guinea,

meaning that Papua New Guineans are finally getting the chance to

earn on an international scale.’

While firms such as Air Energi (formerly

Pacifica HR) and Orion are preferred

suppliers to the LNG project, Cadden

Crowe is focusing on PNG’s traditional

sectors.

‘Many well-established firms are hiring

more expats than they used to, and are

also looking for quality local staff as they

expand,’ says Roberts.

Work environmentSo what measures are companies taking to ensure they have the

manpower to remain productive? The first is a concerted effort

at employee retention, with larger firms providing more than just

remuneration. Of the companies Business Advantage quizzed, those

with the best retention rates attributed their success to an attractive

working environment. Other incentives gaining in popularity include

overseas travel for professional development.

Expat skillsBut with local resources stretched so thin, the number of expats

being employed in PNG has inevitably accelerated sharply, not just

from traditional source Australia but increasingly from the Indian

subcontinent and the Philippines. Interestingly, many of the new arrivals

Business Advantage met had previous professional experience in PNG.

Say Roberts: ‘many of the expats we’ve been bringing in recently have

been “grey hairs”. They have the skills set needed, previous experience

and a personal situation that makes it easier to return.’

1. Skills

Skills shortages are widespread in PNG, and likely to get worse

in the short to medium term. As one expat manager told us: ‘If

you have a trade in PNG, you are basically guaranteed a job.’

Larger firms are often obliged to source expats from overseas for

specialised or highly skilled roles. Leadership development of middle

to senior nationals is being used to close skills gaps.

‘The key with this development is to partner with a coaching

program to ensure behavioural change back in the workplace,’

advises Robert de Loryn of RdL Management Consultants.

2. Permits & visas

‘An employer who wishes to employ a non-citizen to work in

PNG must ensure the non-citizen has a work permit issued

by the Department of Labour and Industrial Relations and an

Employment Entry Permit/Visa issued by the PNG Immigration

and Citizen Service,’ advises David Caradus, a partner at

PricewaterhouseCoopers PNG. It can currently take up to six weeks

to obtain both the work permit and visa.

3. Accommodation

Rents can be astronomical and it is not only expats who are

affected; many salaried nationals struggle to find affordable housing.

‘Company-provided, -funded or partially-funded accommodation

is expected for non-citizens that are recruited externally to work in

PNG and today many nationals expect the same. It’s a real cost to

doing business in PNG,’ says Cadden Crowe’s Scott Roberts.

Further information: The PNG Investors’ Manual, published by the Port Moresby Chamber of Commerce and Industry (www.pomcci.com).

KEY HUMAN RESOURCES CONSIDERATIONS IN PNG

Cadden Crowe’s Scott Roberts A recent Australian education and training promotion in Port Moresby was well-attended.C

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‘Many well-established firms are hiring more expats than they used to, and are also looking for quality local staff as they expand.’

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INVESTMENTPNG Sustainable Development Program Ltd (PNGSDP) promotes diversified and balanced economic development throughout PNG, especially Western Province, providing for improved well-being and self-determination of local communities.

It acts as either a development or investment partner in a rapidly-expanding portfolio of projects spanning a range of industries, from agriculture, fisheries and forestry to

tourism, energy and infrastructure.

PNGSDP is actively seeking partners from Government, NGOs and the private sector to deliver development and commercial projects.

DEVELOPMENT

www.pngsdp.com

email: enquiries@pngsdp.com

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SEARCH & SELECTION SPECIALISTS

Cadden Crowe Pacifi c

Cadden Crowe is a professional Search and Recruitment Consultancy operating

within five key sectors of Mining, Oil & Gas, Engineering & Construction, Energy, and

Manufacturing with a specialisation focus.

Cadden Crowe has established offices in Sydney, Melbourne, Brisbane, Perth and

Port Moresby. In addition, we have alliance offices in Noumea and Jakarta and

international partners in Europe, Africa, Asia and the Americas. With these strong

local and international partnerships, Cadden Crowe is well placed to meet all of your

people requirements.

The following customer focused products are offered:

For all your local and expatriate personnel requirements, please contact:

Nic Clark in Brisbane +61 7 3003 0466 nclark@caddencrowe.com.au

George Griffin in Port Moresby +675 7656 0477 ggriffin@caddencrowe.com.au

• Advertised Search and Selection

• Psychological Assessment

• Database/Network Search

• Executive Search

• Market Mapping

• Management & Organisation

Development Consulting

• Bulk Recruitment

• Contracting

Sydney Melbourne Brisbane Perth Port Moresby

Perspectives on Papua New GuineaBusiness leaders provide their own take on opportunities in PNG’s economy.

‘We are doing deals now for customers who need

more equipment, more space and we’re continuing

to lend to viable propositions in the property sector.

By and large, a lot of lending is to people with existing

businesses needing more space or capacity for

their operations. It’s great to be a banker in a country

where the economy is strong and the vast majority of our customers

are doing extremely well. ‘

—Ashleigh Matheson, Managing Director, Westpac Bank PNG Ltd

‘PNG is a country that wants to be number one, it really does. There’s

a desire among the people who work there that they really want to

make anything happen. So you can have the greatest challenge but

you’ll always find people who are willing to roll up their sleeves, put their

shoulder to the wheel and just do it, and that’s not something you see

as much when you go across other markets in the Pacific. Sometimes

there is an element of “Well, it’s just too difficult.” Here, that’s not the

case. Here it happens. People make it happen and that’s hugely

important.’

—Stuart Kelly, Chief Executive Officer, Bemobile

‘PNG is poised to emerge from the low income group of developing

countries and become a lower-middle income country.

We’re yet to see the fallout of the extractive industry’s growth. All

the issues around labour shortage we’re seeing occur but, generally

speaking, nothing has been as big or as bad yet as people feared. We

definitely see the PNG Government’s development strategy as a positive

and we’re hoping to support them on that.

The IFC has invested US$200 million in PNG so far, helping

companies such as Digicel, PNG Microfinance, BSP and K K Kingston

transform, and we’re currently looking at opportunities in agriculture,

tourism and financial services.’

—Carolyn Blacklock, Country Coordinator—PNG, International Finance Corporation

‘The next few years in PNG will be very exciting—the

LNG project has only just started and is likely to very

lucrative for business. But businesses will need to

be disciplined and well-organised to grow.

PNG’s quite progressive in its legislation—it’s

easier to do business here than, say, Fiji, although

the lacked of skilled workforce is a major challenge.

One area to look at is infrastructure. The country is looking to spend

more money on transportation and power. While a standard portion of

this expenditure is aid-funded, public–private partnerships are likely

to play a stronger part—the telecommunications industry is the first

experiment and is now looking better for it.

While a lot of the influx of new businesses coming to PNG has

been in the resources sector, I see great opportunities in certain other

niche areas for small and medium sized businesses. Take pathology,

for example: at present all blood samples taken in PNG have to be sent

overseas for testing.

Other areas of opportunity would include technology services (there

is currently no secure data room in PNG) and retail. People in PNG are

getting better salaries and have therefore got more disposable income—

you can see they’re acquiring more luxury items.’

—Zanie Theron, Partner, Deloitte Touche Tohmatsu PNG

"There’s a lot of talk about law and order problems.

We see a lot of stories in the Australian press,

which are frowned upon here because some of

the stories play things up worse than they are.

They don’t show the good news stories, which

unfortunately for those offshore gives a slanted

view. We don’t have a law and order problem in

Papua New Guinea as such—the laws are quite good—it is the order

that is the problem, and the enforcing of it, and the police force and

judiciary is working towards that end now with Government support.'

—Wayne Dorgan, Managing Director, Pacific MMI Insurance

INVESTMENT

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INVESTMENT

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In July 2009, Papua New Guinea’s Parliament passed legislation to create two new provinces in the country by 2012: Hela Province (currently part of Southern Highlands Province) and Jiwika Province (currently part of Western Highlands). While the two areas are geographically remote, they host some of PNG's richest and most strategic gas, oil and gold reserves, including the Hides gas field which will supply the ExxonMobil-led PNG LNG Project.

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The Konedobu suburb in Port Moresby provides one of the clearest indications of increased economic activity in PNG. The location of just the Royal Papua Yacht Club and a lone supermarket five years ago, the foreshore now hosts apartments and office buildings, including the headquarters of two of PNG's major banks. Warehousing for the PNG LNG project is under construction in the foreground.

‘The economy continues to be strong. Ela Motors

has experienced 30% year-on-year growth and

has increased our market share. We’ve grown from

700 to 1000 employees too. Other companies that

know how to do business in PNG are experiencing

similar growth.

We’re continuing to invest in new facilities, spending significantly

across all our locations. A new showroom and service centre in Port

Moresby should be complete by November 2011 and we’re acquiring a

massive new distribution centre in Lae too.

I expect demand to peak and then drop off as the LNG project

reaches the end of its construction phase, but long-term foreign

investment will continue. I attended the PNG Mining and Petroleum

Investment in Sydney in December 2010 and was completely

mesmerised by the opportunities. There’s a great deal of optimism that

discoveries of resources will continue.

Given that, PNG’s scorecard over the next 10 years is very positive.’

— David Purcell, Chief Executive Officer, Ela Motors

14

The changing face of investment in PNG

‘We’re at the start of a very long term growth period—the outlook long-

term is extraordinary,’ says Rod Mitchell, the joint-CEO of PNG super

fund, NASFUND. With the construction phase of the US$15 billion PNG

LNG project only just moving into overdrive, the PNG economy is already

expected to grow at more than 9% in 2011.

The Exxon-led project appears set to have a profound and long-

lasting effect on the PNG economy. In investment terms, it is not only

the largest ever investment in PNG by some margin, but is also putting

PNG firmly on the map of the global investment community, showcasing

PNG’s vast natural resources and broadcasting a confident message

that PNG is open for business.

Flow-on benefitsApart from the investment itself, the project is also acting as a trigger for

other companies to follow in its slipstream, especially service providers,

as Managing Director for Westpac PNG Ashleigh Matheson reports:

‘We are seeing project managers, architects and engineering firms

looking to either establish a new business here or increase the capacity

of their businesses to service the growth.’

Some, such as UK-based firms Orion (recruitment) and G4S

(security), are entering PNG for the first time Others are increasing their

presence and the scope of their activities, such as global healthcare

services provider, International SOS. A preferred supplier to the PNG LNG

project, International SOS has been in PNG since 1994 but had just five

staff in the country at the end of 2008. By the end of 2011, it expects to

have 200, and recently opened a new clinic within the Airways Hotel

complex in Port Moresby.

Not just LNGThe PNG LNG project may be getting all the headlines, but it is by

no means the only string to the PNG economy’s bow. It is worth

remembering that the PNG economy grew at 6.7% in 2008, before the

PNG LNG deal was even signed.

Mining may have made the greatest contribution to the nation’s GDP

in 2008, but its fortunes have actually picked up significantly since then

with one mining commentator suggesting that PNG has ‘only begun to

unveil its mineral wealth’.

Syd Yates, CEO of leading investment firm the Kina Group sums up

the current state of play as follows:

‘If you’re in the mineral sector, PNG’s the place to be over the next

five years. You’ve got Hidden Valley, Wafu-Golpu, Frieda River, Ramu

Nickel, the possibility of the Bougainville copper mine opening up again.

Even under the sea there’s the Nautilus Minerals project.’ (Turn to page

28 for our special ‘Mining and Petroleum in PNG’ section).

Partnering to overcome challengesBut not all sectors are proving as attractive to foreign capital as

mining and petroleum. In some ways, the sustained boom is actually

constraining new foreign investors, as demand for business premises

and skills outstrips supply. Westpac’s Ashleigh Matheson explains:

‘If you want to start up a business here you’ve got to find

somewhere not only to work from, but also somewhere to live, and

renting in both circumstances at the present time is extremely

expensive. Then, there is the cost of security and the amount of time it

takes to get work permits. That said, for those wanting to do business

here; if they read the market right and deliver, the opportunities are here.’

Of course, one way of mitigating these challenges is to buy into an

existing business or form a joint venture. In 2009, a clutch of such deals

were done. Australian engineering firm Ausenco merged with leading

PNG firm Kramer Group to form KramerAusenco, while another specialist

recruiter from the UK, Air Energi, purchased Pacifica HR, forming Air Energi

Pacifica. Finally, the Clough Curtain Joint Venture was established: a

65/35 joint venture between the local subsidiary of major Australian

engineering firm Clough and the long-established Curtain Bros.

Local businesses drive growthIn fact, much of the recent economic growth has been financed by

existing locally-based businesses, both PNG- and foreign-owned, as

well as PNG’s two powerful superannuation funds, Nambawan Super

and NASFUND.

‘We’re recording strong growth in demand for our Advisory

Service’ says Jonathan Seeto, Managing Partner of PwC (formerly

PricewaterhouseCoopers), which celebrates its 50 year anniversary in

PNG during 2011. ‘This is not just from new entrants to PNG, but also local

firms who are transforming themselves to better service the country’s

growing middle market.’

For example, in the manufacturing sector long-established firms

such as K K Kingston, S P Brewery, Lae Biscuit Company, Coca-Cola

Amatil PNG and Paradise Foods have implemented major expansion

programs to accommodate sharply rising domestic demand.

With PNG expected to grow faster than China in 2011, Business Advantage examines just who is investing in PNG and in what sectors, and asks where the best opportunities lie in the future.

‘The PNG LNG project may be getting all the headlines, but it is by no means the only string to the PNG economy’s bow.’

K K Kingston founder Keith Kingston with Lars Thunell, Executive Vice President and CEO of the International Finance Corporation. The IFC, part of the World Bank, became a major investor in the PNG firm in 2010.

15

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INVESTMENT

A new breed of PNG landowner company is making an increasingly significant contribution to the local economy.

In areas of PNG that play host to major mining and petroleum

projects, landowner companies are typically created to ensure that

local communities share the benefits. Their activities can include

engaging with the operator to deliver local employment during

the life of the project, as well as investing dividends to provide a

livelihood post-project.

Perhaps the best-known example is NCS, one of 12 different

business units gathered under the umbrella of the Anitua

Group, owned by landowners on gold-rich Lihir Island. NCS has

established a profitable core business in catering and mining camp

management, and has now expanded into areas of construction

and property development. The activities of the Anitua Group itself

now employ around 1,500 people.

Not only is NCS creating value in their own right but, by establishing

a clientele ‘off-island’ (i.e. across PNG), they are ensuring they will

continue to operate even after the Lihir mine eventually closes. In

a similar vein, the IPI Group, owned by landowners in the Porgera

Mine area, has created diverse portfolio of businesses capable of

operating outside its own locality.

Finally, a major landmark in what the Asian Development

Bank’s PNG Country Director Charles Andrews terms ‘the

professionalisation of landowner companies’ was reached in

2010 when Trans Wonderland Ltd (TWL), representing gas-field

landowners in the Southern Highlands, won a USD$192 million

contract to provide transport services to the ExxonMobil-led PNG

LNG project, as part of a joint venture with international firm Agility

Logistics.

PNG LANDOWNERS DON THEIR ENTREPRENEURIAL CAPC

redi

t: A

nitu

a

16

INVESTMENT

Other sectors of interest> Retail. According to the Bank of PNG, this sector grew by around

30% in the 2009/10 financial year, yet still remains under-developed.

New developments in the capital such as Vision City Mega Mall

and Harbourside should provide the ideal setting for outlets that

cater to PNG’s emerging middle-class and rapidly-growing expat

community. For instance, in April 2011 PNG retail group City Pharmacy

Ltd announced that it would create a new cinema in Vision City with

Fijian partners.

> Services. PNG remains chronically under serviced in so many

areas. Health care and education are expected to be major growth

areas over the next decade. Furthermore, full deregulation of the

telecommunications sector is likely to open the door to providers of

niche services (see page 32).

> Agribusiness. NASFUND’s purchase of a major stake in diversified

agribusiness Mainland Holdings in late 2010 underlined the

potential for growth in this sector. Although land tenure often poses

a challenge (see page 19 for more on PNG’s land law), the ever-

expanding New Britain Palm Oil Ltd has demonstrated obstacles can

be overcome.

> Property development. Although opportunities surely remain in

the capital, a sustained construction boom coupled with sky-high

rents means caution is presently being advocated by dealmakers.

Other urban centres such as Lae and Madang are starting to attract

more attention however, with Nambawan Super CEO Leon Buskens

describing Lae as being ‘where Port Moresby was three years ago’ in

real estate terms.

PNG Sustainable Development Program (PNGSDP) is a unique organisation, even in global terms. Established in 2002, PNG’s largest fund uses royalties from the OK Tedi copper mine in PNG’s Western Province to develop long-term infrastructure, construction and resources projects that will benefit PNG—with particular emphasis on Western Province.

Part of its mandate is to minimise displacement after the mine

closes. From that time on, PNGSDP will deal exclusively with the

Western Province, with a fund that will be in place for the following

30 years.

Working exclusively with partners, its key projects have included

the construction and upgrade of roads, a project to process

the tailings from the Ok Tedi mine and the establishment of The

Star Mountain Institute. Major initiatives currently underway

in Western Province include the development of Daru’s port,

a rural electrification programme and the establishment of

telecommunications towers to enhance the region’s ability to

access mobile, internet and radio services.

By the end of 2010, PNGSDP had been involved in 80 projects

in Western Province and another 269 nationally. Cloudy Bay

Sustainable Forestry (profiled on page 45) is one of its subsidiaries.

PROFILE: PNG SUSTAINABLE DEVELOPMENT PROGRAM (PNGSDP)

17

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06

55

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INVESTMENT

PNG’s current economic upturn has involved a notable increase in foreign direct investment from Asia. Most prominently, the Ramu Nickel project represents China’s first major investment in PNG, but there has also been major investment in forestry, fisheries and retail.

Malaysia for one has a range of substantial interests in sectors

ranging from agribusiness and forestry to mining and IT services.

The best-known local Malaysian firm is R H Group, which

has interests in forestry, shipping, media, retail and property

development. In 2010, R H opened PNG’s first large-scale shopping

mall, the US$350 million Vision City in Port Moresby.

An influx of Asian investment and know-how, mostly from the

Philippines, has also transformed PNG’s fisheries sector in the past

decade, with new onshore processing facilities enabling PNG to

derive greater value from its abundant fish stocks (see page 43 for

more on PNG’s fisheries sector).

Like China, Japan’s primary interest in PNG is to source natural

resources. Nippon Oil Exploration holds a 4.7% stake in the PNG

LNG project and the two countries are currently negotiating a

bilateral investment agreement.

Looking at a map, PNG’s most obvious Asian business partner

is neighbouring Indonesia, with whom it shares an 820 km land

border. In fact, commercial links between the two have been limited,

but PNG’s recent growth spurt has finally attracted the interest of its

larger neighbour.

PNG LOOKS NORTH FOR INVESTORS

Malaysian investor R H Group’s Vision City shopping mall is a first for PNG.

18

Does a foreign company have to register in PNG?If a foreign company is ‘carrying

on business’ in PNG, it is required

to register as an overseas

company in PNG and obtain

certification carry on business in

PNG.

When is a foreign company required to register in PNG? A foreign company is required to

register as an overseas company within one month of commencing

to carry on business in PNG under the Companies Act. This includes

appointing a resident agent. The term ‘carrying on business’ is given an

extended meaning by the Companies Act but otherwise has its ordinary

meaning. It is noted that a foreign company that enters into a contract

for work to be done in PNG and undertakes work in PNG for a period of

more than 30 days would be regarded as carrying on business in PNG

for the purposes of the Companies Act.

When is a company required to be certified to carry on business in PNG?Companies with foreign shareholdings of 50% or more (held or

controlled by non-citizens of PNG) are required to be certified by the

Investment Promotion Authority (IPA) before they can carry on business

in PNG. The meaning of carrying on business for the purposes of the

Investment Promotion Act is substantially similar to the meaning of

carrying on business for the purposes of the Companies Act. It follows

that this requirement applies whether an overseas intends to carry on

business in PNG through a PNG incorporated company or through a

company incorporated outside PNG.

What are the other benefits of registering in PNG?Aside from mitigating the adverse consequences of not being duly

registered (eg fines) and ensuring compliance with the Acts above, there

are several other factors that will lead a company to register and obtain

certification to carry on business in PNG.

The commercial banks in Port Moresby will only allow a company

to open and operate bank accounts where it can demonstrate that it

is registered with the Companies Office and, where relevant, certified to

carry on business by the IPA. Similarly, only a company registered with

the Companies Office and, where relevant, certified to carry on business

in PNG by the IPA, can obtain work permits and entry visas for its non-

citizen employees.

Where an overseas company elects to undertake the work in PNG

itself it will be required to register for goods and services tax (GST)

purposes if it will make taxable supplies exceeding K100,000 in the

following twelve months. The Internal Revenue Commission (IRC) will not

register an overseas company for GST purposes unless it is provided

with a copy of the certificate of registration of the overseas company

under the Companies Act and, where required, a copy of the certificate

to carry on business under the Investment Promotion Act. Until it is

Doing business in Papua New Guinea

PWC’s David Caradus

David Caradus, a partner of PricewaterhouseCoopers, whose PNG practice has been in operation for nearly fifty years, provides answers to common questions about doing business in PNG.

formally registered in this way, the company will not be issued with the

GST registration number, and thus cannot issue valid tax invoices to

customers.

What are the corporate tax rates in PNG?The general corporate income tax rate is 30%. The rate of income

tax for non-resident companies, other than those engaged in mining,

petroleum or gas operations, remains at 48%. As discussed below,

some companies may be taxed as ‘foreign contractors’.

Where the company’s gross salary or wages exceed K200,000,

the company will also be liable to a training levy at the rate of 2%

(with the liability reduced by the costs incurred in training PNG citizen

employees).

How are foreign contractors taxed in PNG?Many foreign companies providing services in PNG will be subject to

taxation in PNG under the ‘foreign contractor’ provisions of the income

tax law.

As a general rule, the rate of tax applicable to income of a foreign

contractor is 12% of the gross contract income unless the foreign

contractor is granted permission to lodge an income tax return and be

assessed on an annual basis.

Where the foreign contractor provisions apply, the employees of the

foreign contractor will be liable to salary or wages tax in PNG. Where

gross salary or wages exceed K200,000 the foreign contractor will also

be liable to the aforementioned 2% training levy.

If the foreign contractor is resident in a country with which PNG has

a double taxation agreement such as Australia, Canada, China, Korea or

Singapore, PNG may be prevented from taxing the income or the rate of

income tax may be reduced.

The taxation of foreign contractors should not be confused with the

taxation of management or technical fees paid to a non-resident for

services rendered outside PNG. Broadly, management fee (withholding)

tax applies to management fees paid for services rendered outside PNG

and foreign contractor’s withholding tax is payable in respect of services

rendered within PNG. The rate of management fee (withholding) tax is

17% of the gross management fee unless reduced by the operation of a

double tax agreement.

David Caradus has over twenty years’ experience advising on taxation

and investment in PNG and is the author of 2010 PNG Tax Facts &

Figures and Papua New Guinea Resource Project Taxation: A Guide for

Operators.

INVESTMENT

‘A foreign company is required to register as an overseas company within one month of commencing to carry on business in PNG.'

19

INVESTMENT

Legal considerationsJohn Leahy outlines the legal matters business people need to bear in mind when doing business in PNG.

Investors in PNG from common

law countries will find the

legal system both familiar and

intriguing. It is familiar because it

is a Westminster system albeit

with its own characteristics, a

modern written constitution with

a large contingent of absolute and

qualified rights (that need to be

constantly borne in mind!) and a

common law of its own having been developed since Independence,

albeit with the common law and rules of equity of England (other than

that part relating to the royal prerogative) as its starting point and not

that of its colonial forebear, Australia.

Much legislation will have a familiar ring to it. The Companies Act

and the Goods and Services Tax Act have been tailored locally from the

New Zealand examples, the competition law bears a resemblance to the

original Australian Federal Trade Practices Act. And, of course, many of

the enactments that were in place at Independence and sourced from

various Australian state and federal laws at that time are still in force.

But there is much that is unique or at least unusual.

Laws with a PNG flavourThe highly sophisticated and recently enacted Information Technology

and Telecommunications Act is a home-grown product albeit with

substantial assistance on the details from consultants familiar with

the myriad of models in use worldwide. State agreements are used

particularly, although not exclusively, in the resource sectors to define

the fiscal and other terms upon which investments are to be made.

Fiscal stability legislation exists to ‘lock-in’ the tax rules for projects in the

resource sector, albeit with a cost in terms of the tax rate.

Land lawThe formalised land law builds on a base that has its roots in both

English and German legal traditions. The formal system co-exists with

the customary system that still applies to ‘unalienated’ land (that is to

say, some 90% of the land mass). Even mines and petroleum projects

are generally built on land that remains customary while subject to

protection afforded to the developer by the issue of a lease under the

Mining or Oil and Gas Acts, as the case may be.

Books have of course been written on the subject of customary land

law, but as a first step it helps to know that the customary landowner

cannot sell his or her land. That is the position in customary law and

remains the position under the relevant legislation. So, the land is

effectively held in perpetuity for future generations. Meanwhile, the

landowners have certain rights of usage of the land. To add to the

complexity, different groups may have different rights over the same

land. So in real sense different groups may each be landowners in

respect of the same land.

Against that background, elaborate mechanisms have been

developed to accommodate the interests of the traditional landowners.

Oil and gas projects, for example, require social mapping and landowner

identification studies to be undertaken at various stages from

exploration through development. The State has an option to acquire

equity in such projects and then effectively shares that equity with

the traditional landowners. Landowners in oil and gas projects are also

entitled to a royalty interest. Complementing these entitlements there

are statutory arrangements for the establishment of trusts and for

Incorporated Land Groups created under special legislation. Moreover,

a development agreement is required to share the benefits among the

various entitled persons.

Judicial systemSitting alongside the legislation and the underlying law is a fiercely

independent judicial system. Commercial interests can be asserted

knowing that the judges will seek to follow the common law position.

The law in PNG. Familiar? Yes. Intriguing? Yes. Full of traps for the

unwary? Definitely!

John Leahy is a Partner at Leahy Lewin Nutley Sullivan Lawyers in Port

Moresby (www.llns.com.pg) and President of the Papua New Guinea

Chamber of Commerce.

‘Books have of course been written on the subject of customary land law, but as a first step it helps to know that the customary landowner cannot sell his or her land.’

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INVESTMENT

Resources drive stock exchange growth

The largest of the Pacific’s two bourses, the Port Moresby Stock

Exchange (POMSOX), had a strong year in 2010, recording a

118% rise in its total market capitalisation, due primarily to the

listing of Newcrest Mining (also listed on the Australian and New York

stock exchanges) in September 2010, and also growth in the resources

sector and the economy generally.

A Pacific Islands Investment Summit will take place on 6 September

2011, in the week preceding the Rugby World Cup in New Zealand.

Subtitled 'Oceans of Opportunity', the event plans to showcase

bankable projects across the Pacific in sectors such as tourism,

agribusiness, infrastructure, natural resources and social enterprise.

The event will take place in Auckland, in a week that will also include

the Pacific Islands Forum's 40th Anniversary and Leaders Meeting.

Business Advantage International is a media partner of the event,

which is being run under the auspices of Pacific Islands Trade and

Invest.

Further information kate@transtasmanbusiness.co.nz

PACIFIC INVESTMENT SUMMIT TO PRECEDE RUGBY WORLD CUP

While about half the companies listed on POMSOX are dual-listed,

local stocks performed particularly strongly in 2010, growing by 9.8%.

‘As far as growth is concerned, the local exchange is right up there

with some of the major exchanges in the world,’ notes Syd Yates,

Chief Executive Officer of Kina Securities, one of PNG’s two licensed

stockbrokers (the other is BSP Capital).

POMSOX itself is currently undergoing a full review by consultants

KPMG aimed at simplifying and updating its business rules and

procedures and therefore making it easier to both trade and list on the

exchange.

‘The ultimate goal is to get to the stage were we have total electronic

settlement of trades at “T+1” (ie the day after the trade),’ says Michael

Ryan, General Manager Equities and Corporate at BSP Capital, and

POMSOX board member.

POMSOX’s rising market capitalisation, 2006–2010

Sou

rce:

PO

MS

OX

20

40

60

80

100

120

4000

5000

6000

7000

8000

2006 2007 2008 2009 2010

Billion Kina Kina Securities Index

2011Pacific Islands Investment Summit

Oceans of Opportunity

21

INVESTMENT

Key investment organisations in PNGTwo organisations worth knowing about if you’re looking to invest in Papua New Guinea.

Investment Promotion Authority (www.ipa.gov.pg)The IPA is the first point of contact for any potential investor considering

doing business in PNG. Not only is the IPA responsible for promoting

PNG as a business and investment destination, including the facilitation

of trade visits, but it is also the organisation with which foreign

companies must register if they wish to set up in PNG.

The IPA’s Managing Director Ivan Pomaleu advises Business

Advantage that the organisation completed a new three-year strategic

plan in 2010, designed to improve its response to the greatly increased

business interest in PNG from overseas. The implementation of the plan,

produced with the assistance of the International Finance Organisation,

has already seen the launch of a new information website and will soon

allow businesses to register online.

‘There’s a general acceptance that we are prepared to make

the necessary changes to facilitate foreign direct investment,’ says

Pomaleu. ‘We want to simplify Foreign Direct Investment.’

Independent Public Business Corporation (www.ipbc.com.pg)The Independent Public Business Corporation (IPBC) was set up in

2002 to hold the majority of state-owned commercial assets in trust and

to manage those assets prudently to improve commercial performance.

This includes major entities such as Telikom PNG, PNG Power, PNG

Ports Corporation, PNG Post, PNG Waterboard, Air Niugini, Motor Vehicle

Insurance Ltd (MVIL) and Eda Ranu.

Since then it has enjoyed considerable success in overseeing the

rehabilitation process of several of these organisations and sold 50% of

Telikom’s Bemobile subsidiary.

In 2008 the IPBC was appointed as the state nominee for the

Government’s 19.4% equity stake in the massive Liquefied Natural Gas

(LNG) consortium led by ExxonMobil, making IPBC the third-biggest

equity holder in the project consortium.

Its current priorities include assisting SOEs to increase their capacity

in order to provide a platform for PNG’s rapid economic growth. A range

of key infrastructure projects including water and sewerage treatment,

port redevelopment and power generation have been identified as

suitable for private sector involvement.

22

Earning a social licence to operate

There are few regions of the world where

the operating environment is as complex

and dynamic as it is in PNG. While most

operators appreciate the importance of maintaining

a social licence to operate, few engage with their

host communities and offer an extensive breadth of social services and

development opportunities.

A hands-on approachIn addition to extensive formal and informal engagement with its local

communities to monitor issues, Oil Search also espouses a hands-on

approach to addressing these issues. It is here where operators really

earn their social licence to operate.

It is one thing to carry out household surveys and assess the socio-

economic and political factors at play in a community, but it is another to

understand these factors and to address significant issues as they arise.

Facing up to local issuesMany operators make the mistake of assuming that dealing with local

issues is not an integral part of business, but addressing these issues

can have a significant impact not only on project longevity but also the

bottom line.

With this in mind, Oil Search’s commitment to sustainability

encompasses three aspects: an uncompromising focus on safety;

maintaining strong financial performance to ensure sustainable returns

for shareholders; and a strong focus on stakeholder engagement,

including employment of local landowners, a focus on community

relations from the village to the heart of the operations, and delivery

of effective health and development programs to ensure sustainable

livelihoods for communities.

Oil Search has dedicated Community Affairs and Community Health

teams delivering essential services in its project area communities. In

addition, the company maintains strong partnerships with two locally

active NGOs—the World Wildlife Fund (WWF) and the Community

Development Initiative (CDI)—that run programs in environmental

conservation and education respectively.

Public–private partnershipsBeing a Papua New Guinean company, Oil Search’s interests extend

well beyond the boundaries of its project licence areas. These include

engagement in public–private partnerships (PPPs) to increase the

scope of development activities.

The Millennium Development Goals enunciate the importance

of PPPs in achieving targets for poverty eradication, environmental

conservation, and socio-economic development. For many years,

PNG’s Tax Credit Scheme has enabled a portion of tax payments to be

diverted from general revenue to approved infrastructure developments.

This PPP model has been successful in delivering vital infrastructure in

rural communities, although much remains to be done.

Recognising the effectiveness of PPPs in accelerating socio-

economic development, the company recently entered into a long-

term partnership with the Global Fund (whose goal is to fight AIDS,

tuberculosis and malaria), serving as Principal Recipient in their current

round of grants for HIV/AIDS programs.

Oil Search’s community health programs have been recognised

by the World Health Organisation and other international authorities

for their practicality and success in addressing core health issues in

challenging, remote and disadvantaged communities.

In partnership with faith-based organisations and local and

provincial government health providers, the company’s Public Health

unit delivers services to communities that have long lacked access to

fundamental medical support. Oil Search is looking forward to extending

this model across PNG as part of its National Health Expansion Initiative,

and is establishing a Health Foundation in 2011.

Ensuring a long-term legacyThe scope for operators to leave a long-term legacy is extensive, never

more so than now with inexorable progress towards PNG’s first LNG

project and the opportunity to double GDP. The relevant legislation

provides a good platform for distributing benefits to local communities

in the form of royalties, development levies, equity and dividends, and

infrastructure.

In this era, where corporate social responsibility and philanthropy

are facilitated by greater public awareness and ethical investment

practices, operators have the opportunity to contribute to sustainable

development in their zones of operation. Oil Search intends to maintain

its social licence by promoting transparency in the distribution of

benefits, by continuing to engage with local communities, and by

supporting development initiatives to improve the country’s prosperity.

PNG veteran Peter Botten, Managing Director of Oil Search Limited, talks about the importance of engagement at a community level in Papua New Guinea.

INVESTMENT

23

Mining and Petroleum in PNG

Aerial view of the Hides gas conditioning plant under construction in PNG’s Southern Highlands. The plant will be part of the ExxonMobil-led PNG LNG Project

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24

GAS & PETROLEUM

Leading national growth

PNG is on the cusp of being remade socially and economically

as the massive infrastructure necessary to exploit the country’s

rich gas reserves are being put in place.

The ExxonMobil-led PNG LNG project, the first of at least three

potential developments, is now under construction and is likely to

see a massive $A16.5 billion ($US17.32 billion) spent before it reaches

completion, with a projected return of $A145.3 billion ($US152.5 billion)

over 30 years from 2014.

With its first LNG project under construction and other LNG discoveries showing potential, Papua New Guinea’s petroleum and gas sector is very much moving to the next level.

PNG LNG projectThe magnitude of the PNG LNG project is remarkable. Gas will be

extracted from the Hides and surrounding fields of the Southern

Highlands, where it will be treated then pumped through mountainous

terrain to a shore base at Kopi. Then, it will travel under sea to an LNG

production and export facility near Port Moresby. The pipeline, which is

now under construction, will have a total length of over 700 kilometres

and is expected to deliver nine trillion cubic feet of gas over its lifetime.

Fibreoptic communication lines along the pipeline are likely to be

connected into PNG’s planned national broadband network (see page

32), improving communications in isolated areas.

The project stakeholders are ExxonMobil (33.2%), Oil Search Ltd

(29%), the PNG Government’s National Petroleum Company (16.6%—

see box), Santos Ltd (13.5 %), Nippon Oil Exploration (4.7%), Mineral

Resources Development Company (representing PNG landowners,

2.8%) and the PNG Government’s Petromin (0.2%).

Work on the LNG processing and export plant 20 kilometres from

Port Moresby began in April 2011. Esso Highlands Ltd, the Exxon Mobil

subsidiary running the project, recently launched a training facility at

Part of the 700 km PNG LNG pipeline under construction in the Southern Highlands.

Port Moresby to train 5000 Papua New Guineans for the construction

phase of the project. Overall, the LNG project is expected to employ

12000 to 150000 people during construction, 30% of whom will be

Papua New Guineans.

Supply agreements have already been made with the Chinese

Petroleum Corporation in Taiwan, Osaka Gas Company Limited and the

Tokyo Electric Power Company Inc in Japan, and Unipec Asia Company

Limited, a subsidiary of China Petroleum and Chemical Corporation

(Sinopec).

Liquid Niugini GasThis is a joint venture between New York-listed InterOil and energy

investor Pacific LNG Operations Ltd and has partnerships in place with

Bechtel and ConcoPhillips for technical services in producing LNG.

Smaller in scope than the PNG LNG project, it has permission from

the national government to build a LNG plant expected to cost $US5

billion at Napa Napa near Port Moresby, where InterOil operates PNG’s

only oil refinery. It is projected to produce four million tonnes of LNG

annually from a single production train to be completed in 2015 with

another production train to follow nine months later.

Late in 2010, the consortium signed a $US472 million financing deal

with Mitsui and has recently estimated its Elke/Antelope gas fields to be

the largest reserve in Papua New Guinea at around 9 trillion cubic feet.

The presence of oil in the deposits gives the group immediate revenues

to help build the LNG trains.

Overall development costs for the project are expected to be $US7

billion and gas will be piped 350 kilometres to the LNG production site.

PNG’s oil and gas potential was highlighted by InterOil’s Chairman

and Chief Executive Officer Phil Mulacek at the 2010 Papua New Guinea

Mining and Petroleum Investment Conference.

‘We believed that there was one billion barrels of hydrocarbon

potential in PNG,’ Mulacek told the conference. ‘We were wrong. There is

much more than this.’

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‘We believed that there was one billion barrels of hydrocarbon potential in PNG … We were wrong. There is much more than this.’

25

GAS & PETROLEUM

The National Petroleum Company of PNG (NPCP) has been created to manage the PNG Government’s 16.56% stake in the PNG LNG project, but also has long-term aspirations.

As an active commercial partner in the PNG LNG project, NPCP is

responsible for ensuring that the State is adequately represented

in all aspects of the joint venture, ranging from social and

environmental to commercial considerations. In a sense, the stand-

alone entity needs to perform a delicate balancing act: on the one

hand, seeking to maximise the benefits to PNG, but on the other

ensuring that the project actually gets completed without undue

delays.

In the long term, however, the newly-formed organisation believes

that the experience it gains from playing a central role in the LNG

project will provide the perfect springboard for it to become the

engine of the future development of PNG’s hydrocarbon industry.

Such is the scale of the PNG LNG project that it provides a unique

opportunity for NPCP to build substantial internal capacity,

including a deep pool of industry specific skills (it is already the only

company in PNG with the capability to perform detailed geological

modelling). NPCP would then be in a position to take a more

proactive role in driving future hydrocarbon projects in PNG.

‘This capacity is likely to make us into an industry powerhouse

in future years,’ NPCP Chairman Karenga Kua told Business

Advantage. ‘This in turn will result in an acceleration and

optimisation of the development options for existing fields, as well

as the discovery of new resources.’

A STATE OIL COMPANY FOR PNG

Talisman EnergyCanada-based Talisman Energy is the driving force behind what could

develop into PNG’s third LNG project. Since August 2009, when Talisman

bought Rift Oil for $US171 million ($A162.3 million), it has put together a

portfolio of gas deposits and exploration leases it hopes to aggregate

into a major project. It now has interests in 12 development or exploration

blocks covering 3.6 million hectares.

Talisman drilled two onshore wells in 2010, which both found gas

and petroleum. In 2011, it plans to drill a development well and five more

exploration wells and engage in feasibility studies aimed at monetising

its gas aggregation strategy.

Talisman has partnership arrangements with New Guinea Energy

and Horizon Oil and has also acquired Papua Petroleum. The possibility

of using ‘floating LNG’ production facilities has been flagged for

Talisman’s projects.

The future of LNGWhile the PNG LNG project alone will deliver massive quantities of gas,

annual demand for gas on world markets is expected to grow by 1.8%

until 2030. In Asia, the growth figure will be 3.7%, so there’s plenty of

room in the market for other PNG producers.

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Peter Graham, Managing Director Esso Highlands Limited (second from left) at the official opening ceremony of the Port Moresby Construction Training Facility.

PNG’s Petroleum and Energy Minister, William Duma, told the

Papua New Guinea Mining and Petroleum Investment Conference last

December that the number of petroleum prospecting licences held

by the industry had jumped 33% in the last two years to a total of 78.

In 2010, the number of petroleum development licences jumped from

five to nine as projects moved towards the production stage. Active

explorers include Oil Search, Sasol and Eaglewood Energy.

26

PorgeraTabubil

Wabag

Kerema

Kumui Terminal

Kandrian

Edie Creek

Wafi

Hidden Valley/Hamata

Hoskins

Lorengau

Wewak

Vanimo

Popondetta

KetuAngore

Hides

Pnyang

Elevala Juha

Pukpuk 1Douglas

Kimu

GobeBwata

Elk 1 &4

Pandora

Elk 2

Antelope 1

Moran

Ramu

Yandera

Kainantu

Tolukuma

Laloki

Imwauna

Woodlark

Sinivit

Kieta

Solwara

Rabaul

Namatanai

Lihir

Simberi

Frieda

Ok Tedi

A U S T R A L I A

IRIA

N J

AY

A

CENTRAL

ORO

MILNE BAY

CHIMBU(SIMBU)

EASTERNHIGHLANDS

EAST NEW BRITAIN

EAST SEPIK

MADANG

ENGA

GULF

MANUS

MOROBE

NEW IRELAND

NORTHSOLOMONS

SOUTHERNHIGHLANDS

WESTERN PROVINCE

WESTERNHIGHLANDS

WEST NEW BRITAIN

WEST SEPIK(SANDAUN)

Bismarck Sea

Solomon Sea

Coral Sea

Gulf of Papua

Torres Strait

Port Moresby

Daru

Mt. Hagen

Alotau

Lae

Madang

Kavieng

Operating Mine

Mine Under Development

Possible Mine

Large Scale

Medium Scale

Small Scale

Oil Project

Gas Project

Possible Oil or Gas Project

Oil Export Pipeline

Proposed Gas Pipeline

Kutubu

LehiBarikewa

Mt. Kare

Uramu

Petroleum Projects

Mining Projects

S.E. Mananda

w w w. b u s i n e s s a d v a nta g e p n g . c o m

PAPUA NEW GUINEA'S MINING, OIL & GAS PROJECTS

Data © Copyright 2011, Papua New Guinea Chamber of Mines and Petroleum (www.pngchamberminpet.com.pg), used by kind permission Map © Copyright 2011, Business Advantage International Pty Ltd (www.businessadvantage.co)

27

PorgeraTabubil

Wabag

Kerema

Kumui Terminal

Kandrian

Edie Creek

Wafi

Hidden Valley/Hamata

Hoskins

Lorengau

Wewak

Vanimo

Popondetta

KetuAngore

Hides

Pnyang

Elevala Juha

Pukpuk 1Douglas

Kimu

GobeBwata

Elk 1 &4

Pandora

Elk 2

Antelope 1

Moran

Ramu

Yandera

Kainantu

Tolukuma

Laloki

Imwauna

Woodlark

Sinivit

Kieta

Solwara

Rabaul

Namatanai

Lihir

Simberi

Frieda

Ok Tedi

A U S T R A L I A

IRIA

N J

AY

A

CENTRAL

ORO

MILNE BAY

CHIMBU(SIMBU)

EASTERNHIGHLANDS

EAST NEW BRITAIN

EAST SEPIK

MADANG

ENGA

GULF

MANUS

MOROBE

NEW IRELAND

NORTHSOLOMONS

SOUTHERNHIGHLANDS

WESTERN PROVINCE

WESTERNHIGHLANDS

WEST NEW BRITAIN

WEST SEPIK(SANDAUN)

Bismarck Sea

Solomon Sea

Coral Sea

Gulf of Papua

Torres Strait

Port Moresby

Daru

Mt. Hagen

Alotau

Lae

Madang

Kavieng

Operating Mine

Mine Under Development

Possible Mine

Large Scale

Medium Scale

Small Scale

Oil Project

Gas Project

Possible Oil or Gas Project

Oil Export Pipeline

Proposed Gas Pipeline

Kutubu

LehiBarikewa

Mt. Kare

Uramu

Petroleum Projects

Mining Projects

S.E. Mananda

w w w. b u s i n e s s a d va nta ge p n g . c o m

MineralResourcesAuthority Website: www.mra.gov.pg

Email: info@mra.gov.pg

Data © Copyright 2011, Papua New Guinea Chamber of Mines and Petroleum (www.pngchamberminpet.com.pg), used by kind permission Map © Copyright 2011, Business Advantage International Pty Ltd (www.businessadvantage.co)

28

MINING UPDATE

PNG’s mining boom

The mining sector is on a strong growth path in PNG, with exciting

projects moving from development into production.

Last year the minerals and petroleum industry delivered

the PNG Government tax revenue of K1.08 billion (US$0.4 billion) and

dividends of K230 million (US$92 million). This year mining royalties to

provincial and local government and landowner groups are expected to

be in the order of K170 million (US$68 million).

With the copper price more than doubling in two years and

gold breaking through $US1400 an ounce, there is no shortage of

participants wanting to jump on the bandwagon. The number of

exploration tenements issued in PNG jumped from 119 in 2006 to 311 in

2010, and tenements under application more than doubled to 143 in 2010

from the year before. Overall, exploration spending has doubled since

2006 and stands at US$89 million.

Current minesThere are now nine active mining operations in Papua New Guinea:

> Ok Tedi (copper, Western Province)

> Porgera (gold, Enga Privince)

> Lihir (gold, New Ireland Province)

> Tolukuma (gold, Central Province)

> Kainantu (gold, Eastern Highlands Province)

> Simberi (gold, New Ireland Province)

> Sinivit (gold, East New Britain Province)

> Edie Creek (gold, Morobe Province)

> Hidden Valley (gold, silver, Morobe Province)

PNG basks in the glow of its rich reserves, which are driving a growth spurt in all sectors nationwide.

New developments in the sectorPNG’s latest gold mine is the Harmony Gold/Newcrest Mining Hidden

Valley mine in Morobe Province, which was commissioned towards the

end of 2010. The mine is expected to produce 250,000 ounces of gold

and 3.4 million ounces of silver annually for the next 14 years.

2010 also saw Newcrest’s US$10 billion friendly takeover of Lihir

Gold. The deal, worth around US$26 billion, has created the largest gold

producer in the Asia–Pacific region, with 10 projects in five countries.

Newcrest has boosted its support for the $US1.23 billion upgrade

commenced at Lihir in 2008. When completed at the end of 2011, gold

production is expected to rise to as much as 240,000 ounces a year.

In early 2011, Nautilus Minerals was finally granted a mining lease

on its pioneering Solwara I undersea deposit and hopes to have a

copper and gold mining operation in production by late 2013. The PNG

Government plans to take a stake through its Petromin company.

Chief executive Stephen Rogers tells Business Advantage the

company has managed to drill up to 50 metres below the seabed to test

the size of the deposit:

‘Because the ore body is very close to the seabed, far less

overburden will have to be moved than in a typical land mine. When the

deposit is exhausted, the ship mining operation will simply be moved to

another deposit. You can move a mining vessel very cheaply.’

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‘The last year has been amazing. There has been almost 100% growth in 12 months.’

29

MINING UPDATE

The Ramu nickel-cobalt project, which will allow PNG to break away

from its traditional reliance on gold and copper, is in its final development

stage, although it has recently been hindered by a legal dispute over

the proposed method of disposing of the mine’s tailings. The $US1.5

billion project in Madang Province, which has an ore resource of 143.2

million tonnes, is being led by the China Metallurgical Group Corporation

and represents the first major Chinese investment in the mining sector.

Fresh potentialSeveral other major projects are likely to be developed within the next

seven years. These include the Xstrata-led Frieda River in Sandaun

Province. Potentially one of the world’s largest copper and gold deposits,

a feasibility study is due early in 2012.

Marengo Mining’s Yandera copper-molybdenum-gold project in

Madang Province received a boost recently, with the company raising

reserve estimates 32% after proving work.

Potential at Newcrest and Harmony Gold’s Wafi-Golpu deposit

in Morobe Province is also on the rise. Work has shown it to contain

16 million ounces of gold and 4.8 million tonnes of copper, but the

companies believe further work may show the reserve to be double

this size. Feasibility studies at Wafi-Golpu could lead to a development

decision in 2014.

Bright futureOver the past two years there has been significant capital expenditure

at Barrick Gold’s Porgera mine in Enga Province, and technical studies

are being done at the massive Ok Tedi copper mine in Western Province

to extend its life beyond 2013. Plans to extend the life of the once

controversial mine would involve the adoption of a combined open cut/

underground operation and come following measures to remove sulphur

from mining waste.

Industry regulationMining in Papua New Guinea is regulated by the Mining Act of 1992 and

the Mining Safety Act and is administered by the Mineral Resources

Authority (MRA), a statutory body. The MRA’s activities are funded by

a 0.25% industry levy on existing mining operations. Its role includes

promoting exploration and development and providing exploration and

geological data.

The PNG Government launched a review of mining regulation in

2009, and calls for public input were made in June 2010. Mining Minister

John Pundari says the review encompasses all legislation and will

develop policy for off-shore developments along with standards for mine

closures and employment of mining workers. The review is scheduled to

be finished in May 2011.

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Expanding servicesThe boom in the minerals industry is creating a commensurate boom for

those who service the mining and petroleum sectors.

‘The last year has been amazing. There has been almost 100 per

cent growth in 12 months,’ says Andrew Cooper, General Manager of

equipment and services company UMW. ‘Turnover for 2010 will be close

to K300 million (US$120 million). It’s not bad when in 2005 it was K30

million (US$12 million).’

Cooper says the growth in 2010 came from supplying equipment to

existing projects and also the successful tender to supply construction

equipment for the pipeline section of the massive PNG LNG project.

Meanwhile, NCS, which started life as a landowner joint venture

providing catering services at the Lihir project, has grown into a national

catering and camp management operation with more than 1500

staff at more than 15 sites. NCS recently celebrated the opening of a

state-of-the-art kitchen and dining complex at Lihir and won a series of

new contracts on the massive PNG LNG project as part of a new joint

venture, The Alliance Group.

Other key players in the mining services sector include, Hastings

Deering, which has three branches in PNG and Orica Limited.

Airlines liftGiven PNG’s mountainous terrain, the airline industry is a vital partner in

development. Local flyer Hevilift just added two new 45-seat fixed wing

ATR 42-320 aircraft to its fleet.

Late in 2010, mining engineering group Golder Associates, which has

provided mining engineering and related services in the country for 40

years, launched its first PNG company. Golder’s PNG Managing Director,

Geoff Hurley, says the company would help meet growing demand,

create opportunities and increase business efficiency.

Xstrata's Frieda River gold project demonstrates clearly the challenges facing miners in Papua New Guinea's rugged environment.

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MINING UPDATE

PNG’s largest steel fabricator, Hornibrook NGI, provides of a wide range of products and services to the country’s mining and petroleum industry.

Hornibrook’s 6,400 square metre workshop in Lae has

manufactured processing tanks for Tolukuma, conveyors for

Porgera, pipe spooling for Kutubu, and what Managing Director Mal

Lewis calls ‘probably our biggest job: hard ore hoppers for Lihir.’ The

company also provides turnkey building services—right down to

the furniture—such as accommodation it is currently building for Oil

Search.

Lewis says Hornibrook has been involved in every mine project in

PNG since the 1990s.

‘If you look at our business we had initially, steel fabrication, we

used to have a fairly small building and construction entity because

we used to sell the frames for the buildings…[then] six years ago

suddenly everyone wanted to hire gear from us. Because we do it

well, that business started to grow.’

Its transport division provides trucks, tankers and trailers to the

sector, building them to the ‘tough, heavy duty’ standards required

to cope with PNG roads. Other elements of Hornibrook’s vertically-

integrated business model include bridge construction and labour

hire.

PNG superannuation fund NASFUND’s 2007 investment in the

company is opening up new opportunities, especially in property.

Hornibrook is developing a ‘satellite suburb’ outside Lae, which it

expects to generate retail and commercial development, supporting

Lae as the gateway to oil, gas and mining activity in the Highlands

region.

‘We started off six years ago with some shareholders’ loans and a

zero on the balance sheet and no assets, and now we’ve got in the

order of K100 million on the balance sheet,’ says Lewis. ‘There are

investment opportunities all over the place if you can do it right.’

CASE STUDY: HORNIBROOK NGI

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32

FEATURE

PNG’s ICT evolution

As most companies that do business there will tell you, while

it can be very rewarding, Papua New Guinea is a demanding

environment in which to do business. One of the reasons for

this is undoubtedly its infrastructure, which has struggled to keep pace

with the country’s needs in recent years.

In the past five years, however, one area of infrastructure in particular

has made significant progress—information and communications

technology (ICT).

From 2007, when Irish-owned Digicel aggressively entered the local

mobile market, the sector has experienced the benefits of increased

competition. Prices have fallen for mobile calls, reliability has improved

markedly and the mobile networks themselves have expanded to cover

over 75% of the country’s population—quite some feat in a country with

a population as widely distributed as PNG’s.

Some estimates suggest that more than 1.5 million Papua New

Guineans—perhaps 25% of the population—now have mobile phones,

compared to just 65,000 fixed line subscribers.

Opening up the sectorThe latest stage of the ICT reform process occurred in 2010, with the

passing of a new ICT Act, the creation of a new industry regulator

(NICTA—the National Information and Communication Technology

Authority) and the commencement of a new regulatory regime on 1

November 2010.

The new regime is designed to remove Telikom PNG’s remaining

monopolies in fixed line and broadband services and encourage greater

competition, as Paul Tevlone, Acting Chief Executive Officer at Telikom

PNG, tells Business Advantage:

‘The major change in the policy is that the retail market will be

deregulated and opened up, and the market itself will dictate pricing.’

John Mangos, Chief Executive Officer of Digicel (PNG) Limited,

explains what this means for Telikom’s competitors:

‘It effectively means that someone like Digicel will migrate our licence

from a mobile-only licence to looking at all telecommunication services.

It has created a broader, more level playing-field, not just for ourselves

but for anybody coming into the market.’

Information and communications technology (ICT) reform in PNG is not only delivering cheaper prices and stronger competition: it is also helping businesses devise a new generation of innovative services.

Digicel has already made its first move to broaden its offering by

acquiring specialist telecommunications systems integrator and internet

service provider Data Nets Limited, which has operations in PNG and Fiji.

Rising to the PNG challengeFor ICT companies, PNG presents several challenges for service

delivery.

‘From our standpoint logistics are an enormous challenge,’ notes

Stuart Kelly, Chief Executive Officer of Bemobile. ‘The cost of internal

travel is high, so if you’re sending people goods—in our case handsets

or cards—that is quite significant. Power is still a challenge, but it’s

getting a lot better and the remoteness and topography of the land are

also a challenge.’

Not that they can’t be overcome. In fact, the very nature of PNG’s

exacting environment has driven innovation.

‘If you throw in the technology, which is going in leaps and bounds, it

is the player who takes the initiative to look at new, innovative strategies

and ideas who will obviously have the advantage,’ asserts Telikom’s Paul

Tevlone.

The services initially deployed by the telcos themselves to keep

their own customer service operations cost-effective in such a

demanding environment—mobile credit and balance checking, for

example—are now being offered to external parties in a range of sectors.

Retail customers of state utility PNG Power, for instance, can

now pay for their electricity by mobile phone when their electricity

metre runs out in the middle of the night (all power in PNG is prepaid).

Members of the country’s main superannuation funds, NASFUND and

Namabawan Super, and of the Teachers Savings and Loan Society

credit union can now check their balances by SMS. Mobile banking

is one development currently under way, with the country’s largest

bank, BSP, expecting to launch a mobile ‘e-account’ in mid-2011, to

complement its rural banking initiative (see box on opposite page), and a

new internet banking service. Mobile technology could well deliver new

services in the insurance sector too.

Telecommunications companies' marketing activities in PNG involve regular forays into remoter communities.

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PNG-based Bank South Pacific’s (BSP) new rural banking initiative is a fine example of how better IT and telecommunications infrastructure is enabling innovation in product and services delivery in PNG.

The initiative, which is being rolled

out progressively through 2011,

is aimed at delivering banking

services to the ‘unbanked’ of

PNG’s rural areas through a

combination of wireless-enabled

branches and phone banking. It aims to create at least 200,000

new BSP customers over the next three years.

‘[The aim] is really to get the money out from under the mattress,’

says BSP’s Head of Rural Banking Paul Thornton, citing Bank of PNG

statistics that some K900 million in cash is in circulation around the

countryside, but only about K200 million of that is in banks. ‘Once

people have a bank account, you start building a financial history.

Banks like information and in the absence of any information it

is hard to make valid credit decisions. We think by placing these

branches in the districts, money will circulate within the local areas

and that will help develop small and micro-business opportunities

for people.’

The project has the financial support of the International Finance

Corporation, also an investor in BSP.

The branch network will be extended by a range of phone banking

services delivered via the network of telecommunications company

Digicel.

‘To provide all these services manually is not economical,’ observes

Ian Clyne, BSP’s Chief Executive Officer. ‘Modern technology is

enabling BSP to take it to the people.’

BANKING SERVICES REACH PNG’S RURAL POPULATION

Rising data usageSuch services are easy for the consumer to access using a basic

handset and cost-effective to deliver—critical factors in PNG’s operating

environment. All three telcos have business development teams

working hard with the business community to further proliferate mobile-

delivered services.

‘When you talk to corporate customers, they’re not talking voice

services anymore, they’re talking data services,’ says Paul Tevlone.

One measure of just how much Papua New Guineans have

embraced this new way of conducting their daily transactions is to

consider the dramatic rise in data usage.

‘We’ve doubled our data usage in the last three months and that’s

purely because it’s available to everyone,’ Bemobile’s Stuart Kelly told

Business Advantage in February 2011. My view of the internet in PNG is

that it’ll be successful through mobile phones.’

A national broadband networkNotwithstanding the popularity among consumers of handset-delivered

data services, business is crying out for faster, more reliable and

cheaper broadband internet.

The PNG Government has announced its intention to buy into the

high-speed fibreoptic cable network being created to support the

ExxonMobil-led PNG LNG gas project, creating in the process a national

broadband network. The Government’s US$60 million investment

through the Independent Public Business Corporation (which manages

PNG’s state-owned enterprises) is likely to see the PNG LNG network

integrated with existing broadband infrastructure run by Telikom PNG

and PNG Power, together with the laying of new fibreoptic cable.

‘The ability to piggy back on the PNG LNG project has provided this

country with an ideal opportunity to implement a national broadband

strategy at a substantially lower cost than would otherwise be possible,’

announced State Enterprises Minister Arthur Somare in December 2010.

If all goes according to plan, the new network could be delivering

high-speed internet services as early as the end of 2012.

FEATURE

BSP’s Ian Clyne holds a new breed of EFTPOS terminal which will be deployed by BSP on an exclusive basis across the Pacific.

Increased demand for IT servicesThe rise in demand for data services in PNG has been accompanied by

a parallel demand for greater reliability and quality in IT services, driven

in no small part by the major resource projects currently under way

in the country. Companies like Remington, Datec and Daltron are all IT

service providers with offerings that range from computer hardware

through to complex IT services and training.

‘There was a bit of a lag, but we started to see opportunities arising

from the [ExxonMobil-led] PNG LNG Project from the last quarter of 2010

onwards,’ says David Macindoe, Commercial Manager with Steamships

Trading Company, which owns Datec, also the country’s largest internet

service provider. ‘There are now expectations for serious service

delivery, with more systems analysts and systems engineers needed.

With IT services companies such as Australia’s MCR and Allcom

PNG entering the market in recent years, Macindoe is anticipating a

more competitive sector in future.

In addition to IT services, Remington also supplies satellite phone

technology—a essential service for mining companies working in remote

areas.

‘Mining companies need to be able to set up communications

wherever they are. Increasingly, we’re dealing with small companies in

isolated areas which are not serviced by Telikom,’ notes Ken Harvey,

Managing Director of the LBJ Group of Companies, which owns

Remington. Over the whole business, Harvey reports growth of between

15% and 25% per annum over the past three years.

‘As more people are pressing buttons, we’re doing better,’ he says

with a smile.

Open to all comersWhile one might characterise what is happening in PNG’s ICT sector as

an evolution rather than a revolution, there is no doubt that the market

is growing strongly, and is likely to continue to do so as PNG’s economy

expands.

‘The market’s open … more and more people are going to be looking

at PNG and asking “How do I get involved in the marketplace? What

can we deliver?”,’ says John Mangos. ‘I think you will see a lot more

people deciding to compete in the market.’

34

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FEATURE

Initially a wholly owned subsidiary of Telikom PNG, mobile phone operator Bemobile was put on a new footing in 2008 when half the company was acquired by Capital Way, a private sector consortium consisting of Hong-Kong-based private equity fund General Enterprise Management Services, telecommunications company Trilogy International Partners, and PNG investors NASFUND, Nambawan Super and PNG Sustainable Development Program Ltd capital.

While this level of private sector investment in a state-owned

enterprise was a first in PNG, the capital injection that came with

it was essential to enable Bemobile to compete with Digicel, the

Caribbean–based mobile phone company which entered the PNG

market in 2007 with all guns blazing and rapidly acquired market

share.

After a rebranding and the appointment of new management team

with a strong experience in developing markets, Bemobile is starting

to make some inroads.

‘We were always perceived as a cheap alternative, to be perfectly

honest,’ says Chief Executive Officer Stuart Kelly. ‘Over the last year

we’ve changed that dramatically. We’re now seen as the best value

offering and there’s a big difference between best value and being

cheap.’

Better handsets, more data services, better availability of top-up

cards in the marketplace and competitive pricing have all helped

Bemobile expands its customer base.

‘We’ve grown our active subscriber base by roughly 50% in the

last ten months and they’re pretty impressive numbers for anyone

working in a market like this,’ says Kelly.

Kelly adds that the company has also had particular success

offering closed user groups to business, where perhaps 500

employees can be provided with centrally-managed handsets on a

single bill and with free internal calls.

Bemobile is expanding outside PNG too. In late 2009, it was granted

the second mobile operator licence in the neighbouring Solomon

Islands and, after a slow start, is now the market leader there.

Finally, Kelly is bullish

about the newly

deregulated environment

in telecommunications:

‘The future long term plan

of this company is to

expand beyond traditional

mobile telephone services

and see what else we

can do.’

CASE STUDY: BEMOBILE

Bemobile's Stuart Kelly

35

FINANCIAL SERVICES

Expanding servicesOperators across PNG’s financial sector are making significant investments to deliver services to an expanding and increasingly sophisticated market.

According to Bank of PNG Governor Loi M Bakani, PNG’s financial

system ‘remains resilient, well capitalised with adequate levels of

liquidity, [a] low level of non-performing loans and is highly profitable.’

In 2010, total liquidity of the banking system increased by 1.4% to

K6618.3 million (US$2622 million), due mainly to draw downs in trust

account funds.

The Bank of PNG is now looking at the regulatory environment for

mobile phone banking, and has carried out a review of the national

payments system with a view to improving the timely clearing of

transactions and reducing costs and risks.

Investment and expansion PNG’s banking sector continues to be dominated by three large banks:

Bank South Pacific (BSP), Westpac and ANZ.

The locally-owned BSP is the country’s largest bank, reporting an

after tax profit of K283.15 million (US$112 million) for the financial year

2010.

‘Our business model is really looking at electronic channels,’ says

BSP Chief Executive Officer Ian Clyne, including investment in wireless

EFTPOS technology, and internet based products.

BSP is also investing in rural banking through BSP Rural, with the

aim of establishing 100 agencies by mid 2012 (see page 33), and

has developed a prototype ‘container’ branch—literally a branch in a

shipping container—which can be set up and moved relatively easily.

It also investing in new operational infrastructure, spending over K200

million (US$80.7 million) on a new Pacific Operations Centre, data centre

and executive offices.

Westpac PNG’s Managing Director Ashleigh Matheson says the

bank is looking to double its customers over the next three years,

primarily through electronic means. The bank is doubling its ATM

network in 2011 and is well down the path of launching ‘smart’ EFTPOS

machines.

ANZ’s Chief Executive Officer Papua New Guinea and Pacific North

West Vishnu Mohan says ANZ has a major competitive advantage as a

‘super-regional bank.’

‘We have a footprint of offices in 32 countries and territories across

the Asia–Pacific at this point in time, and it's still growing. We are able

to connect those customers with this part of the world. We are actively

selling that aspect of our business,’ he says.

Like its competitors, ANZ is running financial literacy programs (under

the moniker ‘Money Minded’) and investing in technology.

We’re also looking at ways of banking the unbanked using modern

technology,’ says Mohan.

Super funds continue to performPNG’s two major superannuation funds performed well in 2010, and are

now focused on consolidating their holdings.

Nambawan Super, had a portfolio return of 11% to its 124,000

members, and net profit of K263 million (US) in 2010.

Managing Director Leon Buskens says Nambawan Super is aiming

for more balance in its investment portfolio.

‘We’ve just got to really tightly manage our ability to monitor and

watch, and manage the opportunities and risk,’ Buskens told Business

Advantage.

PNG’s other large superfund, NASFUND active membership of

140,545 contributors were credited with 15% return following strong net

profit of K294 million ($US$119 million) in 2010.

Finance Several financial services companies operate in PNG, including Kina

Securities. Its investment fund, Kina Asset Management Ltd, generated

an investment gain of K7.4 million (US$ 7 million), representing a 17.25%

return in 2010.

Kina Securities’ Chief Executive Syd Yates says PNG’s financial

sector is ‘still really strong, probably because we’ve had good

supervision, but also because we haven’t been exposed to the financial

crisis like some of the other countries.’

Kina Securities has established its own risk management

department.

‘We treat that as an investment in the future,’ says Yates. ‘We’re pre-

empting that more and more people are going to come to PNG and we’re

going to have more and more investment. You’ve got to provide a certain

level of comfort to people especially coming from overseas.’

Insurance PNG’s insurance industry is facing a number of regulatory changes.

A Proceeds of Crimes Act, and Insurance Contracts Act—focused on

domestic-style insurances—are in train. Existing insurance laws may

also be changed to accommodate micro-insurance and to respond to

current economic conditions, online quoting and other technological

changes.

Wayne Dorgan, Managing Director of Pacific MMI, says the PNG

insurance market is growing.

‘Ten years ago, PNG was quite an isolated insurance market; PNG

today is a global insurance market. We have to buy reinsurance on a

global platform and part of the risk management that’s involved in the

insurance industry here is to spread the risk far and wide through the

accepted channels.’

Like others in the financial sector, Dorgan foresees some

opportunities for use of mobile applications in the insurance industry in

future, given the very high level of mobile phone penetration in PNG.

‘We’re pre-empting that more and more people are going to come to PNG and we’re going to have more and more investment.’

36

INFRASTRUCTURE & TRANSPORT

New investments to power economic growth

PNG’s sustained economic growth has placed increasing

demands on its roads, power and water supplies, ports and

aviation networks. Several projects are helping to address this

demand.

Major projects on the Asian Development Bank’s (ADB) books

include port construction in Lae, ongoing support for the Highlands

Highway, and the proposed Ramu II hydro-electricity project.

There is considerable activity in the power sector, with state entity

PNG Power joining local superannuation fund Nambawan Super to fund

investment in the Port Moresby electricity grid. A number of hydro-

electric projects are also planned.

PNG is well connected to the Asia–Pacific, and improvements

to ports through the ADB’s Tidal Basin project will bring tremendous

improvements to the country’s most important port in Lae, the centre

of export activity. PNG Ports is also investing in Lae and Port Moresby

ports and, to a lesser extent, in several of the 16 other ports it manages.

Asian Development Bank Country Director Charles Andrews says a

challenge in improving infrastructure is a lack of available contractors.

Papua New Guinea is charging ahead, particularly in the power sector, with the help of development banks and private investors, plus increased attention from the PNG Government.

For example, only one compliant bidder tendered for the ADB’s K20

million (US$7.8 million) Community Water Transport project to build 19

jetties in smaller ports.

‘It takes a bold decision to set up here. What will be the real litmus

test is how many tenders we receive for the Lae port project, which is a

straight engineering contract,’ Andrews says.

EnergyEnergy in PNG is provided by the state utility, PNG Power, although its

service is affected by problems particularly in Port Moresby and Lae.

Most businesses have their own power generators as backup, and PNG

Power chief executive Tony Koiri has said that power interruptions are

expected until 2014 because of funding shortfalls for maintenance and

upgrading work.

These problems have prompted the Independent Public Business

Corporation (IPBC) to negotiate a memorandum of understanding (MOU)

with Nambawan Super Ltd to fund system upgrades. Nambawan

Managing Director Leon Buskens says the MOU is a strategic attempt to

look at opportunities:

‘One is short term which is looking at an independent power

producer and aligning with a reputable provider, and, on the wholesale

side, to supply energy to PNG Power. It’s a win-win outcome.’

Andrews says power sector reforms are ‘going to be big’. The ADB

has approved its first loan for the Towns Electrification Project, which

involves small hydropower stations in six provincial towns. The ADB will

also support a Port Moresby grid development project that will improve

transmission and distribution. Andrews says the World Bank and Japan

International Cooperation Agency (JICA) are also interested in this

project.

Volumes through Port Moresby’s port have increased by 4.5% over the past year, according to PNG Ports’ Brian Riches.

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Power supply service connection to family houses in Western Province. Currently, only about 9% of PNG’s population has access to mains electricity.

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‘PNG’s busiest port, Lae, is undergoing a major expansion that should be completed by 2014.’

37

‘PNG Power has the opportunity to perform if opened up to public–

private partnerships,' says NASFUND's joint Chief Executive Officer, Rod

Mitchell.

Discussion about a planned liquefied natural gas-powered power

station as part of the LNG terminal for InterOil's LNG project is also

causing excitement in the power sector.

AviationThe ADB is implementing a 10-year US$640 million airport development

project, including expansion at Jacksons International Airport in Port

Moresby, new security systems at Kavieng, and improvements at

Wewak, Alotau, Kimbe and Mt Hagen. Landing safety system upgrades

are already complete under this program.

PNG has 20 major airports owned and managed by the National

Airports Corporation Limited. The country is serviced by four main

airlines: national carrier Air Niugini Limited (ANL), POMSoX-listed Airlines

PNG, Virgin Blue subsidiary Pacific Blue and Qantas Airways. ANL flies to

several Australian cities, Nadi, Tokyo, Honiara and Kuala Lumpur, and has

plans to increase its existing services to Singapore, Manila and Hong

Kong. It also has PNG’s most extensive domestic network.

ANL Chairman Sir James Tjoeng says the airline hopes to reach one

million passengers in 2011, and that the business has benefited from the

ExxonMobil LNG investment. ANL is upgrading its fleet, replacing F100s

with Dash 8 Q400s. It is also looking to increase its air freight business—

crucial to service the growth in PNG’s economy—out of Australia, the

US, China and Japan. In March 2011, ANL began a weekly airfreight

service from Cairns to Port Moresby using a 767 aircraft with capacity

for 15 tonnes of freight.

Tjoeng says competition in the aviation sector has been good:

‘It’s made us pick up our game a bit. It also benefits consumers—

there are more people travelling.’ He says the sector faces several

challenges, including the generally poor state of airstrips, inadequate

facilities at Jacksons International Airport, the cost of housing engineers

in transit and rising labour costs.

Airlines PNG also flies domestically, and to Australia via a codeshare

arrangement with Pacific Blue. The airline reported a 42% increase in

operating revenue to K211 million (US$82 million) in 2010 because of new

contracts with resource companies and increased domestic traveller

numbers.

Qantas operates a code share arrangement with ANL and also runs

12 weekly services from Cairns to Port Moresby. There are plans to

operate a service to and from Brisbane in competition with ANL.

Aside from the big players, smaller companies provide air charter

services for business, miners and tourists.

PortsPNG’s busiest port, Lae, is undergoing a major expansion that should be

completed by 2014.

The ADB says construction is expected to begin in Q4 of 2011.

Charles Andrews says project costs are already rising because of

supply-side constraints.

State-owned PNG Ports Corporation Limited manages PNG’s 16

declared ports. PNG Ports Chief Executive Officer Brian Riches says

their priority is ‘getting new equipment in and remodelling the two major

ports, to improve efficiency and productivity, and working with our

stakeholders to do that’.

PNG Ports is also looking to partner with resource developers ‘to

see how we can support them, give them value and obviously give the

ports, as an entity, value,’ Riches says (see box on page 38).

ShippingPNG is serviced by international shipping companies and smaller

operators working its busy coastal network.

These include Swire Shipping, which operates four vessels between

Australia, PNG and Solomon Islands. Consort Express Lines has 12 ports

of call including Townsville in Australia. Consort specialises in basic sea

freight and logistics support for the mining and petroleum sector. New

Zealand-based Sofrana operates between Australia, New Zealand, PNG

and other South Pacific Island destinations.

A newer entrant, Malaysian shipping company Hubline, has agreed

to set up a joint venture with the Gulf Provincial Government and two

Hong Kong-based investment firms to provide shipping and logistics

support, mobilisation works and procurement of materials related to

LNG and other resource-based projects in PNG Gulf Province. Hubline

INFRASTRUCTURE & TRANSPORT

Upgraded roads and wharves are crucial for PNG’s development.

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38

Most of Papua New Guinea’s ports should be profitable within two or three years, according to PNG Ports Chief Executive Officer Brian Riches.

Riches says port growth has been consistently between 3% and

14%. ‘Over the last year Lae port has been relatively stable, but

we’re gearing up for this to be the year that the LNG cargo and

other cargo going through Lae will increase. Port Moresby has been

above average by about 4.5% at least.’

PNG Ports is in the process of procuring gantry cranes for

managing the container lay down areas, and harbour cranes to

expedite workflow. One crane will be assigned to Port Moresby and

three to Lae. ‘We should increase productivity by at least 40% by

the cranes alone. [Currently] most of it is done by ships’ gear, so it’s

a massive change,’ says Riches.

Repairs and maintenance work worth K$17 million (US$6.6 million)

are ongoing in Port Moresby, and workflow improvements worth

K$20 million (US$7.8 million) each in Port Moresby and Lae. ‘On our

board for this year we’ve got about K$200 million (US$78.4 million)

[in expenditure],’ Riches says.

He says the spin-off effect of the LNG project has already been

very good. ‘We’re positioning ourselves as the port of choice—even

though there is competition out there—in terms of productivity and

attention to detail. We have a few little issues with organisations

in the supply chain, customs, quarantine and a few others but we

have a good relationship and we’re working on those issues.’

Riches says PNG Ports understands that to increase productivity, it

needs to invest in shore cranes. ‘In the process of doing that we are

rearranging our relationship with the stevedores, saying we all need

to focus on productivity.’

PNG PORTS HEADS FOR PROFITABILITY

INFRASTRUCTURE & TRANSPORT

was granted a domestic shipping licence in 2010, and operates three

container ships and four break bulk vessels in PNG. Its expansion plans

include investment in specialised tugboats and barges.

RoadsPapua New Guinea’s 27,000 km road network is a crucial element of the

country’s economy. The major artery is the 700km Highlands Highway,

which connects the provincial capitals of Lae, Madang, Goroka and

Mount Hagen, where gold, oil and gas and agricultural production are

centred.

The ADB funds the rebuilding of 100–120km of road on the Highlands

Highway annually. Charles Andrews says local contractors are

performing better on this project, and that ‘the professionalisation of

landowner companies is something to note’. He says while there is no

government funding for routine maintenance of PNG roads, there are

signs this is turning around.

In January 2011, PNG media reported Works Minister Sam Abal as

directing that a program be presented to seal all 9,000 km of national

roads. An estimated 36% of these roads are currently sealed.

'If we plan to seal 500 km each year though a phased program, we

are able to cover the entire national roads adequately in a short period

of time instead of spending billions of kina on upgrading and gravelling,'

Abal said.

The PNG Government is also negotiating with oil and gas developers

on the opening of five strategic road links: along the Highlands Highway

from Lae to Morobe and Wabang; the Gulf to Kikori road link; Banz-Ruti

to Madang; Bogia (Madang) to Angoram; and a New Britain Island

connection between East and West New Britain.

Nambawan Super’s Leon Buskens says there should be

consideration given to issuing bonds to fund infrastructure work such

as maintenance of the Highlands Highway.

‘There are precedents for deploying capital this way,’ he tells

Business Advantage.

WaterPNG Waterboard manages water supply and sewerage services on a

commercial basis. The Board operates 17 water and sewerage districts

throughout the country, serving just 300,000 urban dwellers or less

than 6% of PNG’s population. Full sewerage systems operate in Lae

and Mt Hagen and limited systems in other urban centres.

In Port Moresby, urban water authority Eda Ranu provides water

supply and sewerage services to some 250,000 residents.

In 2010, the Japanese Government signed an Overseas Development

Agreement (ODA) with the PNG Government for up to 8.261 billion yen

(US$97.5 million) for the Port Moresby Sewerage System Upgrading

Project. The project will see construction of a sewer facility to control the

outflow of untreated sewer water into the ocean.

Telecommunications and ICTTurn to page 32 for our feature on the evolution of PNG’s ICT sector,

which is now being deregulated.

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A new road in PNG's Southern Highlands.

PNG Ports' Brian Riches

39

We can promote your products and connect you with buyers in Australia, New Zealand, China and Japan.

We also provide business advice and technical expertise for Pacific Island exporters and tourism businesses.

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...let us help you sell them!

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40

AGRIBUSINESS & TRADE

Harnessing PNG’s natural advantages

Papua New Guinea has a natural advantage in agricultural

production. It has rich soil, a warm climate that includes

high seasonal rainfall, and a population that lives largely on

agricultural land and possesses a high level of farming expertise.

Agriculture is a major part of the economy, accounting for more than

25% of Papua New Guinea’s GDP and about 85% of PNG’s people are

engaged in food production at the subsistence level.

Low-intensity farming methods, and the absence of pesticides and

artificial fertilisers, present opportunities for PNG to position itself as a

leading organic producer. PNG is also developing its Fairtrade potential,

particularly in the coffee and cocoa sectors.

Oil palm, coffee and cocoa are the nation’s three most valuable cash

crops, together representing almost 80% of PNG’s total agricultural

export values. Other products include copra, spices, sugar and tea.

Livestock—especially beef, poultry and pigs—also plays a significant

role, particularly in the local market. The bulk of PNG’s exports are raw or

part-processed commodities, although there is an increased emphasis

on value-adding before export.

Key opportunitiesWith the exception of oil palm, plantation production of all cash crops

has declined over the past 30 years, although, as the authors of

the recent book Food and Agriculture in Papua New Guinea state,

production of export crops by villagers has increased. This speaks to

the potential of agriculture with improved management and investment.

This is where companies such as New Britain Palm Oil Limited

(NBPOL) have found success. Papua New Guinea's largest oil palm

producer has harnessed the nation’s natural agricultural advantage and

applied economies of scale. The oil palm plantation and milling operator

also exports unrefined produce to Europe but has taken the step of

building its own palm oil refinery in the United Kingdom—close to its

major European customers—to add value.

PNG’s agricultural commodities are finding their way across the world.

Major export marketsPNG coffee’s major markets are Europe and the US, with the larger

international coffee companies accounting for the bulk of green bean

exports. Several PNG coffee companies, such as Kongo Coffee and

Carpenter Estates, are exporting roasted beans to get higher prices.

PNG cocoa supplies around 2% of the global market and there is

potential to increase production significantly. Meanwhile, spices such

as vanilla, pepper and mace and are being processed and packaged for

sale internationally by companies such as Paradise Spices and Pacific

Spices.

Pacific Spices opened the first processing plant of its kind to produce

oil of vanilla and pure vanilla extract in 2010.

‘The potential is quite huge with the market we’re looking at now

and the new markets are opening to us,’ Pacific Spices’ Chief Executive

Officer Mickey Puritau tells Business Advantage.

About 10% of tea produced in PNG

is used locally, with the rest exported to

Russia, Germany, the United Kingdom, the

US and other markets.

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‘Low-intensity farming methods, and the absence of pesticides and artificial fertilisers, present opportunities for PNG to position itself as a leading organic producer’

The six-year US$46.3 million Word Bank-sponsored Productive Partnerships in Agriculture Project will aid coffee growers and other smallholders in Papua New Guinea over the coming six years.Credit: Pacific Islands Trade & Invest

Palm oil is the star of PNG's agribusiness sector

41

PNG ADMINISTRATIVE OFFICE Phone: (675) 308 2200 Fax: (675) 308 2269

PORT MORESBY SALES OFFICEPhone: (675) 308 2217 Fax: (675) 308 2275

KOKOPO SALES OFFICEPhone: (675) 982 9861 Fax: (675) 982 9860

LAE SALES OFFICEPhone: (675) 472 3555 Fax: (675) 472 7967

MT. HAGEN SALES OFFICEPhone: (675) 542 3994 Fax: (675) 542 3950

Manufacturer and Distributor of the following quality consumer brands.

For all your enquiries contact your respective Goodman Fielder Papua New Guinea regional office:

Austrade’s Trade Commissioner in Port Moresby, Kevan Dacey, outlines the opportunities to supply goods and services to Papua New Guinea’s growing economy.

It is an exciting time to be working in Papua

New Guinea. The largest components of the US$15 billion Exxon

Mobil LNG project project are rapidly taking shape at the LNG plant

site just outside Port Moresby, with other significant contracts

also proceeding in the Southern Highlands and Western Province

areas. The project continues to provide opportunities for Australian

companies, with an estimated US$3 billion worth of contracts

already won. Two further LNG projects, run by InterOil and Talisman

Energy, are likely to bring further business.

In the mining sector, the plans to upgrade production at existing

mines and planned new projects (see page 28) will also increase

opportunities for specialist companies.

This growth in the resource and mining sectors is causing

businesses to gear up to take advantage of the spill-over

opportunities in the road, water supply, power, telecommunications,

port and airport infrastructure required to support these projects.

The construction industry is extremely buoyant. Architects,

developers, local stockist merchants and contractors are evaluating

their traditional sources of supply and opportunities are available

to introduce new, innovative products into the construction

sector. This sector requires a hands-on approach to marketing

and a commitment from suppliers to study the market, meet with

specifiers and end users and commit to regular market visits.

With the rapid population increase due to the construction phase

of these major projects opportunities are emerging to supply a wide

range of food and beverages as local production does not have the

capacity to meet demand.

PNG is one of Australia’s largest aid recipients with AUD$457

million budgeted for 2010—around 12% of PNG’s overall revenue.

The aid program will focus on education and health, and roads

maintenance. Overseas companies can access this funding either

directly or by working with local companies.

There are also major opportunities in the education and training

sectors and within the IT sector as PNG rapidly develops.

PNG currently imports around A$2 billion per annum of Australian

goods and services: about 43% of its total imports. Given the close

ties between the two countries, and the fact that PNG standards

are written around Australian standards, importers are increasingly

looking to Australia for supply.

Further informationAustrade in Port Moresby can assist Australian companies to evaluate the market, develop a strategy to enter the market and undertake market visits in the most cost-effective manner. Contact the Australian Trade Commission in Port Moresby on tel +675 3259150/+61 2 6202 8341 or email kevan.dacey austrade.gov.au.

SELLING TO PNG

AGRIBUSINESS & TRADE

42

MANUFACTURING

The rush to meet soaring demand

PNG produces a wide range of products, from beer and biscuits

to industrial products and refined petroleum. These are aimed

largely at a domestic market that is growing so rapidly that

many local manufacturers are struggling to meet demand. Many

producers also cater to the business-to-business market, especially the

booming mining, petroleum and construction sectors.

PNG’s manufacturing sector employs around a quarter of the formal

workforce, while its contribution to GDP is estimated at between 6%

and 11.5%. Much of PNG’s manufacturing sector is centred around Lae

and, to lesser extent, Port Moresby.

Downstream processingGiven PNG’s wealth of natural resources, it is little surprise that

downstream processing plays an important role. Examples include the

loining and canning of fish, converting local timber into plywood, roasting

coffee and even gold-refining. Local producers are also increasingly

finding new markets, particularly in the neighbouring Solomon Islands

and other Pacific Islands, and also in Australia and New Zealand.

The PNG Government aims to significantly expand the scale

and scope of downstream processing by offering incentives and

concessions including export sales exemptions and wage subsidies.

The Manufacturers Council of PNG runs a ‘PNG Made’ campaign that

encourages PNG consumers to buy locally made products.

Growth spurtMany of PNG’s manufacturers are reporting robust growth and major

expansions. S P Brewery, which dominates the PNG beer market, is

close to completing a K94 million (US$37 million) expansion program,

while Coca-Cola Amatil is building its CO2 plant in Lae and a plastic

bottle production plant in Port Moresby for nearly K20 million (US$8

PNG’s booming domestic market is driving substantial new investment in manufacturing.

million). Paradise Foods, which produces snack food and noodles, has

aggressive plans to extend their wide product range.

‘We have experienced a growth rate of about 15% per annum

over the past five years. As a result, we are now bursting at the seams

and so have purchased 10 hectares of land to build a new production

and distribution centre,’ says Michael Kingston, General Manager

of manufacturing firm K K Kingston. When the company completes

its relocation to Kamkumung on the outskirts of Lae, it will become

neighbours with the Lae Biscuit Company, which inaugurated its K65

million (US$25 million) new facility in April 2010.

Blue-chip investorsThis wave of investment is being underwritten by an array of blue-chip

institutions. S P Brewery’s largest shareholder is multinational Asia

Pacific Breweries, while its largest local shareholder is one of PNG’s two

powerful superannuation funds, Nambawan Super, which also owns

80% of Paradise Foods. Meanwhile, major agribusiness company

Mainland Holdings has just sold a substantial stake to PNG’s other

superannuation company, NASFUND. K K Kingston’s growth is being

underpinned by significant investments it recently received from the

regional Kula Fund and the private sector arm of the World Bank, the IFC.

This kind of blue-chip international interest in PNG’s productive sectors

could scarcely have been imagined even a decade ago. It also implies a

widespread belief that strong growth will be maintained in the long term.

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‘This kind of blue-chip international interest in PNG’s productive sectors could scarcely have been imagined even a decade ago.’

Made in PNG magazine recently made its debut as a guide to the wide range of goods and food grown, processed and produced in Papua

New Guinea, as well as the people who produce them.

‘Made in PNG aims to raise awareness of PNG’s productive sectors among buyers and key decision-makers locally and around the world,’

says Murray Woo, Chairman of the Manufacturers Council of Papua New Guinea.

The publication is also available free online at www.madeinpng.com.

MAGAZINE GUIDE TO GOODS MADE IN PNG

Goodman Fielder bakes bread for the local PNG market.

Edited extract from Made in PNG 2011 (www.madeinpng.com).

43

FISHERIES

Great catch for investors

About 10% of the world’s tuna catch is caught in Papua New

Guinea’s 2.4 million square km exclusive economic zone. Frozen

and unprocessed tuna are mainly exported to the European

Union, Japan, Thailand, Philippines and other countries where there

are canneries. Canned and other processed tuna are exported to the

European Union (EU). PNG has an Economic Partnership Agreement

(EPA) with the EU that gives it tariff-free access to the EU trading zone.

‘The worldwide market for tuna is US$7 billion, and the EU as a block

is the largest buyer of tuna,’ notes Pete Celso, Chairman of the PNG

Fishing Industry Association. PNG hopes to ink an agreement similar to

the EPA with the United States.

PNG’s coastal fishing industry focuses on prawns, lobsters,

barramundi, beche-de-mer, trochus shells, pearl shell and green snail.

Some trout and carp farms are located in the Highlands region.

Growth in processingThe bulk of the tuna catch is still exported in raw or frozen form, due to

the lack of local processing facilities, although there is also a healthy

local market for tuna in PNG. There is capacity for more onshore

processing. Onshore tuna processing in Lae, Madang and, to a lesser

extent, Wewak has drawn increasing interest from foreign investors,

mostly from the Philippines, Taiwan and Thailand. The processing sector

is likely to be transformed by the Pacific Maritime Industrial Zone in

Madang on the northern coast of the country’s mainland.

In the zoneThe US$300 million Pacific Marine Industrial Zone, announced in June

2009, is set to be the flagship of PNG’s fisheries industry as well as

a major processing centre for fish caught in the Pacific region. The

215-hectare site will provide wharfing, berthing, processing and other

facilities and infrastructure to national and regional fishing operators.

Once the PNG Government develops infrastructure on the

site, operations will be undertaken by the private sector. Proposed

infrastructure includes auction halls, dry docks, an ice-making

plant, cool rooms and blast freezers, net repair facilities, fuel depots,

commercial buildings and residential facilities.

‘A lot of new players are coming in. There are vast opportunities to

expand and achieve scale and thereby minimise the cost of production,’

says Pete Celso, who is also the Managing Director of R D Tuna, a key

Intense investment in onshore processing facilities is turning PNG into a regional powerhouse.

player in the fisheries sector. Its canning facility is located in Madang.

Incentives for investorsIncentives being offered to investors in the fishing sector are currently

being revised under the PNG Government's proposed Economic Zone

law. While not finalised at the time of writing, these are likely to include

such measures as accelerated depreciation of plant, double deductions

for export market development costs and staff training, and tax holidays.

PNG’s Government is looking at privatisation opportunities in its

coastal fishing sector, including handling, processing and marketing of

fisheries products, craft construction, repairs and maintenance, engine

sales, ice and fishing equipment sales.

Key playersThe growth in PNG’s fisheries sector is the result of robust foreign

investment, particularly from Asia. Besides R D Tuna, a Philippines-

owned fishing and cannery operator, the major players include the

International Food Corporation, which has been making and distributing

Besta canned mackerel in PNG since 1992. Chief Executive Rosedean

Zaily Dzulkfli says IFC has embarked on an onshore tuna processing

project under its diversification program. Production began in October

2010 with 5% to be sold locally, and 95% exported overseas as tuna

loin.

There’s also the Frabelle Fishing Corporation, which is building a

canning operation in Lae that is set to be the largest in the southern

hemisphere. It will process a projected 350 metric tonnes per day and

employ 6000 people once it starts operations at the end of 2011.

South Pacific Seafood, a 75% PNG-owned/25% Philippines-owned

company, has announced plans to invest in fishing port facilities in

Central Province, West New Britain, Morobe, Milne Bay and Manus. Ailan

Seafood Ltd, a fish processing company based in Kavieng, New Ireland

Province, is a smaller player.

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‘Onshore tuna processing in Lae, Madang and, to a lesser extent, Wewak has drawn increasing interest from foreign investors.’

PNG’s onshore fish processing industry has expanded considerably in the past 10 years.

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FORESTRY

Log-in for new growthPapua New Guinea’s forestry sector is poised for expansion as it begins a gradual transition from export logging to producing processed products and plantation timber.

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Eighty-four per cent of PNG’s landmass is covered by forest,

and 5.6 million hectares are potentially production forests. The

nation’s more than 60 commercial timber species fall into three

broad categories: major hardwoods, commercial hardwoods and major

conifers. Among the most valuable hardwoods are kwila and rosewood.

PNG produces a range of forest products, including furniture,

plywood and prefabricated buildings, for domestic and export markets.

Processed products are exported to Australia, New Zealand and PNG’s

South Pacific neighbours. Veneer is mainly sold to China and South

Korea. Plantation products account for about 15% of exports.

For the time being, exports are primarily in the form of round logs. The

Bank of Papua New Guinea reports that 1.8 million cubic metres of logs

were exported in 2009, with an average export price of K212 (US$82)

per cubic metre. The average price has continued to rise since then, to

K263 (US$102) per cubic metre in the September quarter of 2010, driven

predominantly by demand from China.

Most of PNG’s log exports go to 11 Asian countries: 89% to China,

followed by Japan, Korea, India, the Philippines, Taiwan, Thailand and

Vietnam.

New policySince January 2010, government policy has dictated that all newly

approved forest projects must contain a strong element of downstream

processing. Producers already generate sawn timber, veneer sheets,

plywood and processed timber exports, but these sectors will receive

greater emphasis.

PNG Forest Authority (PNGFA) Managing Director Kanawi Pouru

says companies will have five or six years to make the transition.

‘We’re reviewing what support the Authority can offer,’ he says. ‘The

government has made it clear that institutions like the Timber Industry

Training College in Lae need to also recognise the government’s policy

shift and train people in all phases of processing, wood shedding,

treatment operators and so on. All this training is being done but may

need to increase in capacity to cope with the needs of the industry.

‘There is a lot of job creation now, and perhaps it now opens up

more opportunities for cottage industries that can process wood to

specifications.’

Expansion plansOpportunities for the expansion of PNG’s forest industry include the

rising domestic demand for timber and wood products driven by PNG’s

major new resources projects, establishing plantations, and forest

enhancement under climate change protocols.

With five major producers already certified or in the process of

becoming independently certified for legal origin and chain of custody,

new export opportunities should arise in markets requiring third party

verification. These include Australia, the US and European Union.

Leading playersMajor industry participation includes Cloudy Bay Sustainable Forestry

Ltd’s logging, sawmilling and timber sales in Port Moresby (see box);

Innovision (PNG) Ltd at Makarpa, Western Province; Open Bay Timber

Ltd’s export of logs and plantations in East New Britain; PNG Forest

Products Ltd’s sawmilling plywood, and manufacturing at Bulolo, Morobe;

Pac-Rim Hardwoods (PNG) Ltd’s sawmilling and timber exports in Port

Moresby; Rimbunan Hijau (PNG) Ltd’s export logging, downstream

processing and other interests PNG-wide; Stettin Bay Lumber Co. Ltd’s

export of logs, sawmilling and plantations in West New Britain Province;

and Turama Forest Industries Ltd’s log exports from the Gulf Province.

Rimbunan Hijau, a wholly owned subsidiary of Malaysian company

Rimbunan Hijau, is by far PNG’s most influential forestry player,

expanding from its inception as a small operator in 1989 to become the

country’s biggest exporter and manufacturer of timber products, with

interests in shipping, media, retail and property development. It employs

close to 7500 people across the country, the majority of them in its

forestry operations. The company has spent more than US$100 million

on infrastructure in rural areas since 1993. This includes roads, bridges,

community and education facilities and health facilities. Managing

Director James Lau says the company is also exploring opportunities in

timber plantations and carbon trading.

‘Government policy has dictated that all newly approved forest projects must contain a strong element of downstream processing.’

45

PNG Forest AuthorityThe Papua New Guinea Forest Authority promotes the responsible use of our country’s natural resources and environment for the collective benefit of all Papua New Guineans as well as the conservation and replenishing of these resources for the benefit of future generations.

Working for today, PLANNING FOR TOMORROW

www.forestry.gov.pg

Cloudy Bay Sustainable Forestry is paving the way for a new kind

of forestry industry in Papua New Guinea, one based on value-

adding to logs. The company holds the first 100% downstream

processing licence to be issued by the PNG Forest Authority

(PNGFA), and produces a range of value-added products.

While Cloudy Bay is the leader, this style of operation will be the

norm. Since January 2010, the PNG Government has required

that all newly approved forest projects are for processing-based

operations.

Cloudy Bay’s 148,900-hectare Forest Management Area Project lies

about 250 kilometres south-east of Port Moresby. Under the terms

of its permit, the company can harvest 60,000 cubic metres of logs

annually for its new saw mill in Bam. The timber is then sent to a

wood processing centre on the outskirts of Port Moresby.

Wood harvested by Cloudy Bay is milled, dressed, moulded, kiln-

dried and pressure-treated before being turned into a variety of

products including processed timber, exotic furniture, kitchen units,

pre-fabricated homes and offices.

Managing Director Mike Janssen says the company’s timber

framing and high-end joinery sections will drive its growth.

Under the company’s Project Development Agreement with the

PNGFA, it must deliver a range of infrastructure over 20 years,

including schools, health centres, churches, sports facilities,

bridges, roads and a police station. This investment will be worth

K48 million (US$18.6 million). The agreement also requires the

company to actively support the socio-economic development of

the local landowners, who number about 6000 in the concession

area.

Janssen believes community forestry, where landowners cultivate

and harvest their own trees, will also be an integral part of the

sector’s growth.

The company has recently undergone independent environmental

auditing aimed at acquiring Forest Stewardship Council (FSC)

certification. PNG’s major markets for processed forest products

increasingly require evidence of legal origin and chain of custody

certification for timber products.

‘We’re now working through the non-compliances and expect the

process to be complete by the end of 2011,’ says Janssen.

CLOUDY BAY LEADS THE NEW WAY

Cutting wood at Cloudy Bay Sustainable Forestry is a high-tech affair.

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FORESTRY

46

TOURISM DEVELOPMENT

A sector ripe for developmentMore visitor arrivals and significant new investment is driving growth in PNG’s promising tourism sector.

Papua New Guinea has a range of assets—a warm climate,

picturesque islands, unique flora and fauna, magnificent

mountain ranges and a rich Melanesian culture among them—

that make it ripe for development as a tourist destination. A number of

government and private sector initiatives are helping to boost the huge

potential of its as-yet-underdeveloped tourism industry.

While there are no major international resort operators currently in

PNG, the array of ‘soft adventure’ tourism options include birdwatching,

surfing, scuba diving, eco-tours and walking the famous Kokoda Trail,

which holds strong appeal for Australians (who represent 62% of PNG-

bound tourists). An increasing number of cruise ships also choose to

visit PNG.

Tourism promotionThe sector is supported by the active PNG Tourism Promotion Authority

(TPA), which promotes the country at international tourism industry

events, and is custodian of the country’s 10-year tourism master plan,

launched in 2007.

A major focus of the TPA has been to re-brand PNG as a unique

Pacific destination via a marketing campaign under the slogan, ‘A Million

Different Journeys’.

The tourism master-plan has also focused promotion on those

‘model provinces’ most suitable for tourism development: National

Capital District (Port Moresby), Morobe, Madang, East New Britain, New

Ireland, Milne Bay, Southern Highlands, Eastern Highlands, West New

Britain and Enga Provinces.

The PNG Government has put in place some attractive incentives

for the sector, including double income tax deductions, accelerated

depreciation, goods and services tax exemptions and infrastructure tax

credits.

Track record of growthEfforts to promote PNG as a tourism destination appear to be paying off.

After a 12% dip in 2009, attributable to the global financial crisis,

tourist traffic to PNG bounced back by 7% in 2010—part of the long-

term upward trend. Moreover, the TPA estimates that the tourism

industry contributed an estimated K1.4 billion (US$540 million) into PNG’s

GDP in 2010—almost 17% more than it did the year preceding.

Improved connections & facilitiesOne thing that has improved markedly in recent times has been the

increase in the frequency and range of air services to PNG, with

competition keeping a lid on prices. Virgin Blue subsidiary Pacific Blue

entered the PNG aviation market in 2008 via a codeshare arrangement

with local airline Airlines PNG. National carrier Air Niugini Limmited (ANL)

has responded to the competition and has added more services to its

schedule. In February 2011, ANL’s Chairman Sir James Tjoeng advised

Business Advantage that additional flights to Hong Kong, Singapore

and Manila were also awaiting regulatory approval. Australia’s Qantas

commenced flights from Cairns in mid-2010 and is expected to add

flights from Brisbane in the future.

Pleasant surprisesWhile the bulk of tourism accommodation in PNG is around the 3 to 3.5

star range, there are some pleasant surprises. PNG’s outstanding hotel,

Airways, was voted the World’s Leading Airport Hotel in the 2010 World

Travel Awards and is a genuine oasis of quality.

With more international business people coming to live and work

in PNG, growth in domestic tourism is also anticipated. In Madang

Province, soon to be home to the Pacific Marine Industrial Zone (PMIZ),

plans are being drawn up for the Madang Tourism Growth Centre, a

self-contained recreational resort complete with golf course adjacent to

the PMIZ. This project, currently being coordinated by the PNG Industrial

Centres Development Corporation, has already attracted expressions of

interest from international resort developers.

Better hotels, more roomsDriven by an undersupply of hotel rooms in the capital, Port Moresby,

major hotels such as Airways Hotel, Gateway Hotel and the Ela Beach

Hotel have recently completed large expansion projects, with the

Holiday Inn currently adding 200 rooms. Meanwhile, the CBD awaits

the completion of Steamships’ new flagship Grand Papua Hotel in

the second half of 2011 (see box), while a K200 million Korean-built

casino hotel is currently being built in Boroko, a joint venture with local

landowner companies. It is hoped that the increase in the number

of rooms will bring down room prices—which are currently high by

international standards—over the medium term.

With PNG in the grip of a resources and development boom, quality hotel rooms in its capital have been at a premium. Soon, visitors to Port Moresby will have a new five-star option, however, with Steamship Trading Company’s Grand Papua Hotel set to open in the central business district in October 2011.

The much-anticipated 20-storey hotel—

described by Steamships’ Corporate

Development Manager Darren Young as

‘one of the most prestigious developments in our 90-year history

in PNG’—will feature 156 suite rooms, an executive floor with a gym

and health spa, conference facilities for up to 600 delegates, a bar

and restaurant, and four levels of parking.

Young says that the hotel, built on the site of the old Papua Hotel

destroyed by fire in 1991, will have a ‘contemporary colonial’ feel.

Guest rooms will have a modular, ‘three-key’ design, enabling

reconfiguration at short notice.

‘We hope that the Grand Papua will really change people’s

experience of what a hotel can be, and enhance PNG’s image as a

destination for the tourist and business traveller,’ says Young.

NEW FIVE-STAR HOTEL FOR PORT MORESBY

Artist's impression of the new Grand Papua Hotel, opening in late 2011

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WHO’S WHO IN PNG

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This directory provides contact details for organisations featured in this edition, plus other key contacts.

AGRIBUSINESS/MANUFACTURINGCoca Cola Amatil PNG +675 472 1033

Dulux PNG +675 325 4555

Goodman Fielder International (PNG) +675 308 2200

www.goodmanfielder.com.au

KK Kingston +675 472 2745

www.kingston.com.pg

Lae Biscuit Company +675 475 9988

Laga Industries +675 475 7344

www.lagaindustries.com.pg

Mainland Holdings +675 472 3499

New Britain Palm Oil +675 985 2177

www.nbpol.com.pg

Paradise Foods Limited +675 325 0000

www.paradisefoods.com.pg

Ramu Agri Industries +675 474 3299

S P Brewery +675 302 8200

www.sp.com.pg

Trukai Industries Ltd +675 321 3530

www.trukai.com.pg

W R Carpenter Group +675 302 4200

www.carpenters.com.pg

BANKING, FINANCE & INSURANCEANZ +675 321 1079

www.anz.com/png

Bank of Papua New Guinea +675 322 7200

www.bankpng.gov.pg

BSP (Bank of South Pacific Limited) +675 321 1999

www.bsp.com.pg

BSP Capital Limited +675 321 4333

www.bspcapital.com.pg

Kina Group of Companies +675 308 3888

www.kina.com.pg

Nambawan Super Ltd +675 309 5200

www.nambawansuper.com.pg

National Superannuation Fund Limited (NASFUND) +675 324 1819

www.nasfund.com.pg

Pacific MMI Insurance +675 321 4077

www.pacificmmi.com

Port Moresby Stock Exchange Limited +675 320 1980

www.pomsox.com.pg

Westpac Bank PNG Limited +675 322 0870

www.westpac.com.pg

BUSINESS & GOVERNMENT ORGANISATIONSAsian Development Bank +675 321 0400

www.adb.org

Australian Trade Commission (Austrade) +675 325 9150

www.austrade.gov.au

Australia–Papua New Guinea Business Council +61 7 3348 5142

yourn@apngbc.org.au

www.apngbc.org.au

Business Council of PNG +675 320 0700

executive@bcpng.org.pg

www.bcpng.org.pg

Business & Professional Women’s Club of Port Moresby maila@gadens.com.pg

Independent Public Business Corporation (IPBC) +675 321 2977

www.ipbc.com.pg

Institute of National Affairs (INA) +675 321 1045

www.inapng.com

Industry-funded think-tank.

Investment Promotion Authority (IPA) +675 308 4444

www.ipa.gov.pg

Lae Chamber of Commerce & Industry +675 472 2340

www.lcci.org.pg

Manufacturers Council of PNG +675 321 7143

www.pngmade.com

Ministry of Commerce & Industry +675 327 7350

New Zealand Pacific Business Council www.nzpbc.co.nz

+64 9 270 3746

Pacific Islands Trade & Invest www.pacifictradeinvest.com

Sydney: +61 2 9290 2133

Auckland: +64 9 529 5165

Beijing: +86 10 6532 6622

Tokyo: +81 3 3268 8419

PNG Sustainable Development Program Ltd +675 320 3844

www.pngsdp.com

Port Moresby Chamber of Commerce & Industry (POMCCI) +675 321 3077

pomcci@global.net.pg

www.pomcci.org.pg

BUSINESS SERVICESAir Energi Pacifica +675 320 3095

www.airenergi.com

Cadden Crowe

+675 656 0477

www.caddencrowe.com.au Pacific-wide executive recruitment.

Coffey International Development +675 325 2031

www.coffey.com

Daltron +675 302 2200

www.daltron.com.pg

Data Nets +675 320 0633

www.datanets.com.pg

Datec +675-303-1222

www.datec.com.pg

Deloitte PNG +675 308 7000

www.deloitte.com/pg

Ela Motors +675 322 9500

www.elamotors.com.pg

International SOS +675 323 2033

www.internationalsos.com

Leahy Lewin Nutley Sullivan Lawyers + 675 320 3333

www.llns.com.pg

Media Partners +675 323 9160

www.mediapartners.com.pg

Advertising agency and event

organiser.

Moore Printing +675 321 000

www.moore.com.pg

PwC (PricewaterhouseCoopers) +675 321 1500

www.pwc.com/pg

RdL Management Consultants

+613 9756 7331/+675 715 73562www.rdlmanagementconsultants.com.au

48

Remington Technologies +675 312 3400 www.remington.com.pg

CONSTRUCTION & ENGINEERINGConstantinou Group PNG +675 323 2333 (c/o Lamana Hotel

Hornibrook NGI Ltd +675 472 3599 www.hornibrook.com.pg

FISHERIESFrabelle +675 472 7663 www.frabelle.com

RD Tuna Canners Limited +675 423 3259 www.rdtunacanners.com

FORESTRYPNG Forest Authority +675 327 7919 www.forestry.gov.pg

Cloudy Bay Sustainable Forestry +675 328 1189 www.cloudybay.com.pg

Rimbunan Hijau (R H) Group +675 325 7677 www.rhpng.com.pg

MINING & PETROLEUMAnitua Group +675 986 4633 www.anitua.com.pg

Barrick +675 322 4800 www.barrick.com

InterOil +675 309 9100 www.interoil.com

Marengo Mining Ltd +61 8 9429 0000 www.marengomining.com

Mineral Resources Authority (MRA) +675 321 3511 www.mra.gov.pg

National Petroleum Company of PNG +675 321 3680

Nautilus Minerals +675 321 1284 www.nautilusminerals.com

Newcrest Mining +675 321 7711 www.newcrest.com.au

Oil Search Limited +675 322 5599 www.oilsearch.com

Ok Tedi +675 548 3311 www.oktedi.com

Petromin PNG Holdings Ltd +675 325 2743 www.petrominpng.com.pg

PNG Chamber of Mines and Petroleum +675 321 2988 www.pngchamberminpet.com.pg

PNG LNG project/Exxon Mobil +675 322 2111 www.pnglng.com

Talisman Energy www.talisman-energy.com

UMW +675 325 5766 www.umw.com.pg

Xstrata Copper +617 3295 7500 www.xstrata.com

TOURISM/TRANSPORTAirlines PNG +675 325 2011 www.apng.com

Air Niugini +675 327 3444 www.airniugini.com.pg

Airways Hotel +675 324 5200 www.airways.com.pg

Steamships Trading Company Limited +675 322 0400 www.steamships.com.pg

Tourist Promotion Authority +675 320 0211 www.pngtourism.org.pg

UTILITIES/TELECOMMUNICATIONSbemobile +675 7630 2222 www.bemobile.com

Digicel www.digicelgroup.com

PNG Ports Ltd +675 308 4200 www.pngports.com.pg

PNG Power +675 324 3200 www.pngpower.com.pg

PNG Waterboard +675 323 5700 www.pngwater.com.pg

Telikom PNG +675 300 4000 www.telikompng.com.pg

WHO’S WHO IN PNG

www.ipa.gov.pg – PNG’s Investment Promotion Authority.

www.pacifictradeinvest.com – Pacific Islands Trade and Investment Commission’s trade and investment profiles, and regular updates on Pacific Island Countries, including PNG.

www.pomcci.org.pg – The PNG Chamber of Commerce and Industry. Information on networking, PNG business generally, useful links and POMCCI's training workshops.

www.businessadvantagepng.com – The online edition of this publication, plus other business resources for the Asia-Pacific region.

www.pngindustrynews.net – Online/email news service—subscription required for full access.

www.pacificbusinessonline.com – Regular news service for the South Pacific region, including PNG.

www.thenational.com.pg / www.postcourier.com.pg – PNG’s two daily newspapers, The National and The Post-Courier.

www.pngchamberminpet.com.pg – The PNG Chamber of Mines (see above) produces a number of useful publications including Profile magazine, which coincides with its major biennial conference.

Quarterly economic bulletins – Informative quarterly bulletins are produced by the Asian Development Bank (Pacific Monitor; www.adb.org), and the central bank of PNG (Quarterly Economic Bulletin; www.bankpng.gov.pg).

malumnalu.blogspot.com / www.png-gossip.com – Informal sources of information and news.

The PNG Investors’ Manual is a handbook for investing and doing business in Papua New Guinea.

Co-published by the Port Moresby Chamber of Commerce and Industry (POMCCI), the PNG Investment Promotion Authority and the Asian Development Bank, the guide is designed to provide an in-depth guide for new and existing investors.

Topics covered include PNG’s legal and tax system, profiles of PNG’s key economic sectors and information on living and working in PNG.

To obtain the printed manual, email bizcentre@pomcci.org.pg or view it online at www.pomcci.com.

USEFUL ONLINE RESOURCES FOR PAPUA NEW GUINEA

THE MANUAL FOR INVESTORS

49

Port Moresby harbour

Practical tips and advice for the business traveller.

ClimateWith the exception of the Highlands,

PNG has a warm tropical climate. The

wet season in Port Moresby is from

December to April.

CommunicationsInternet: Web access in Port Moresby

has improved immensely in recent years.

Although it remains costly, all the Port

Moresby hotels listed below now provide

a fast-speed internet service. In other

urban centres, you may still be relying

on dial-up. For those staying longer,

wireless internet, via a USB modem, is

now available.

Mobile: Roaming is possible in PNG

but it is costly. It is simple to buy a local

SIM card and pre-paid credit. Mobile

coverage has improved since the advent

of competition, call rates have fallen

sharply and reliability is improving.

Landlines: Service is inconsistent

outside Port Moresby and outages do

occur; rates for domestic calls are fairly

modest.

ElectricityThe current in PNG is 240V AC 50Hz

using Australian-style plugs.

Getting To PNGNational flag carrier Air Niugini has direct

flights between Port Moresby and

Australia (Brisbane, Cairns, Sydney),

Kuala Lumpur, Tokyo, the Solomon

Islands and an increasing number of

other destinations (www.airniugini.com.

pg).

Airlines PNG flies from Cairns (www.

apng.com) and operates a codeshare

with new entrant Virgin Blue on the

Brisbane route (www.virginblue.com.

au). Qantaslink commenced flights from

Cairns to Port Moresby in mid-2010

(www.qantas.com.au).

Getting around As a general rule in PNG, you need to

plan your travel carefully.

Taxis: Port Moresby has a new premium

taxi service, Ark (323 0998/7122 5522).

Other options are Red Dot (+675

311 3257) or Scarlet Taxis (+675 323

4266). At night, drivers with these two

services may be accompanied by a

security guard. There are no taxis in

PNG’s industrial hub of Lae, so make

arrangements with the company you

are visiting or with your hotel.

Car hire: Deal with one of the

international names and ask them to

provide a driver (around K400). With the

poor state of roads, especially in Lae,

4WDs/SUVs are recommended.

Airport transfers: For arrival/departure

in Port Moresby, any of the hotels listed

below will provide a complimentary

transfer.

Domestic Flights: Travelling within PNG

often means taking an internal flight (for

instance, you cannot drive between

Port Moresby and Lae). There are regular

services from Port Moresby to Lae. While

the price of domestic fares has fallen,

they are still on the high side. Air Niugini

now offers passengers the chance to

book online but make sure you print out

a copy of your receipt to show at the

check-in counter. Meanwhile, competitor

Airlines PNG has been beefing up

its domestic services. Aircraft and

helicopter charter services are available

for travel to remote locations.

HealthSerious medical conditions typically

require treatment outside the country.

Travellers should ensure they have

adequate health cover (the cost of

medical evacuation alone can reach

US$30,000), while foreign companies

operating in PNG should have a

comprehensive health plan in place.

There is a malaria risk in Port

Moresby although many expats

based there do not take anti-malaria

medication. If you are leaving urban

areas, however, you should seek

medical advice. In any case, bring

strong insect repellent and use liberally if

outdoors at night.

AustAsia Pacific Health Service

provides services ranging from pre-

employment medical checks and

executive check-ups to emergency

healthcare (www.webbpacific.com.au).

MoneyPNG’s currency is the Kina. ANZ and

Bank South Pacific have branches at

Port Moresby’s international airport.

ATMs are located around Port Moresby,

Lae and other urban centres.

SafetyWhile the situation is not as bad as

portrayed by some international media,

you should always take precautions,

especially at night.

Time zonePNG has a single time zone, 10 hours

ahead of UTC/GMT.

VisasAll foreign visitors to PNG require a visa,

and business travellers theoretically

require a business visa. These can be

obtained on arrival (K100 for one month,

K500 for one year) but you should

have a letter from your local ‘sponsor’ to

explain the purpose of your business.

Eating, drinking, socialising In Port MoresbyRestaurants (see also hotels below):

Asia Aromas: in the Steamships

arcade, CBD. A Port Moresby institution

serving excellent Thai and Chinese

food. Reservations recommended at

lunchtime.

Royal Papua Yacht Club: relaxed,

spacious and open to non-members.

Comfort food, draught beer and an

open-plan bar area showing sport on

large screens. If it’s too busy, try the

Aviat Club in nearby Konedobu.

In Waigani, Jepello is a favourite among

expats seeking Italian cuisine, while

Palazzo (at the Lamana Hotel) serves

excellent steaks, pizzas and Indian

cuisine. Ideal for a quick business lunch

(buffet option) or more formal dinner.

Cafés/snacks: The coffee shop at the

Crowne Plaza Hotel is a convenient

daytime option, as are the two cafes on

the ground floor of Deloitte Tower.

For more information, it is worth

keeping an eye on the Post-Courier

for any special events and the Port

Moresby: Gateway to Papua New

Guinea tourist magazine.

Supermarkets/shopping: Most

expats go to the comparatively well-

stocked Boroko Food World, Boroko.

SVS Foodland Harbour City (formerly

Andersons) is another option, located

just outside the CBD. The newly opened

Vision City shopping mall in Waigani is

BUSINESS TRAVEL GUIDE TO PORT MORESBY

50

PNG’s largest retail development and

contains a supermarket and specialty

shops, while a multiplex cinema is also

planned.

HotelsAirways Hotel

Named World Airport Hotel of the

Year in 2010, Airways is contained

within a large, secure compound next

to Jacksons International Airport, 15

minutes from ‘Town’. Elegant rooms

and a luxurious gym and racket club

combine with friendly, efficient service.

The complex also houses long-stay

apartments popular with expats. Among

an attractive selection of bars and

restaurants, the European-style Deli is

delightful while Bacchus offers PNG’s

best fine dining experience. Tel +675 324

5200, www.airways.com.pg.

Crowne Plaza

Upmarket rooms and suites in the heart

of the CBD. Decent gym, business

centre, undercover parking, thriving café

and Mediterranean restaurant. Tel +675

309 3329.

Holiday Inn

Located in the Government district of

Waigani. Large grounds with walking

track, in a tropical garden setting.

Outdoor restaurant dining and bar area,

business centre and gym.

Tel +675 303 2000.

Lamana Hotel

Also in Waigani, this modern hotel’s

facilities include the popular Palazzo

restaurant (see above), business centre,

conference facilities and the PNG’s most

trendy nightspot, the Gold Club.

Tel +675 323 2333.

Ela Beach Hotel and Whittaker

Apartments

On the fringe of the CDB, this hotel/

apartment complex has been renovated

by Coral Sea Hotels. Its main eatery is

popular at lunchtime.

Tel +675 321 2100.

Gateway Hotel

Another Coral Sea Hotel, this time

located next to the airport. Recent

renovations added a large conference

centre.

Tel + 675 327 8100

Lae International Hotel, Lae

Lae’s best hotel. Although the rooms

could do with renovations, the hotel has

a lot going for it, with a secure, central

location, pleasant grounds, cable TV and

several good dining options capped off

by good service.

Tel +675 472 2000, www.laehotel.com.

pg.

Other urban centres

For business-standard hotels in other

urban centres, try the Coral Sea Hotels

website at www.coralseahotels.com.pg.

Note also the Alotau International Hotel in

Milne Bay (www.alotauinternationalhotel.

com.pg) and the Gazelle International

Hotel in Kokopo.

Things to do around Port MoresbyBotanical Gardens, Waigani

This is worth a visit even if you have only

an hour to spare. Follow the boardwalk

trail though the jungle and see wild

orchids and displays of wildlife, including

the iconic tree kangaroo and cassowary.

Loloata Island Resort

A small resort in Bootless Bay, 20

km from Port Moresby. Offers diving,

snorkelling, fishing. Transfers provided. Tel

+675 325 8590, www.loloata.com.

Port Moresby Golf Club, Waigani

A round of this well-maintained course,

next to Parliament Haus, costs about

K100 and clubs can be hired.

Port Moresby Road Runners

A friendly group of expats and locals

set off from a different location each

Saturday afternoon (4.45pm). Check the

Friday press for details.

Port Moresby WAGS (Wednesday

Afternoon Gentleman’s/person’s

Sailing)

Anyone interested in a leisurely late

afternoon /sunset sail as a guest on a

yacht should assemble at the wet bar of

the Royal Papua Yacht Club by 5.30pm

on a Wednesday afternoon (snacks

and beverages not supplied). Sailing

experience not required, but numbers

are limited to participating boats.

BUSINESS TRAVEL GUIDE TO PORT MORESBY

51

www.airways.com.pg www.worldtravelawards.com.pg www.luxuryhotelawards.com

AIRWAYS HOTEL would like to thank all our guests, business associates and

travel agents for voting us to be:

LEADING AIRPORT HOTEL OF THE WORLD 2010World Travel Awards, November 2010, London

AUSTRALASIA’S LEADING AIRPORT HOTEL 2010World Travel Awards, October 2010, New Delhi

PNG’S LEADING HOTEL 2010World Travel Awards, October 2010, New Delhi

LUXURY AIRPORT HOTEL OF THE WORLD 2010Luxury Hotel Awards, September 2010, Bangkok

52Ministry of Commerce Industry & Labour. Level 4, ACC House, P.O. Box 862, Apia, SAMOA

YOUR FIRST POINT OF CALL TO DO BUSINESS HERE IN

PAPUA NEW GUINEA

Investment Promotion AuthorityPO Box 5053, Boroko 111,NCD, Papua New Guinea

Level 1, IPA HAUS, Munidubu Street(Corner of Lawes Rd & Champion Pde)Konedobu, Port Moresby

Phone: (675) 321 7311 or 321 3900Fax: (675) 320 2237

Email: ipa@ipa.gov.pgWebsite: www.ipa.gov.pg