Papua New Guinea debate: PNG takes bold step onto financial and economic map
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Papua New Guinea debate: PNG takes bold step onto financial and economic map

Last year was key in the development of one of Oceania’s more unexplored yet potential-rich economies. Its inaugural $500 million sovereign dollar bond caught light and its hosting of the APEC Summit was a hit. The country now needs investment to unlock myriad opportunities in agriculture, power, infrastructure, telecoms, financial services and tourism.


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• The country’s inaugural $500 million bond, printed in September 2018, put the country on the map for institutional investors, especially in North America

• Infrastructure is patchy, but the IFC and others are helping to build new highways and feeder roads

• Mining and resources still drive investment – but agriculture and tourism are key to job creation and long-term wealth

• ANZ is working to create bankable projects in sectors from food and beverages to resources, energy and infrastructure

• The country has geopolitical value, with Australia, the US, China and others, vying to pump capital into worthy projects

• When finalized, Papua New Guinea’s foreign investment law will give a boost to inward corporate and portfolio capital flows

Elliot Wilson, Euromoney Papua New Guinea’s economy is projected by the World Bank to expand 5% in 2019, powered by mining and natural resources. How hopeful are you about the country’s future?

MB, ANZ Let’s start with the country’s inaugural sovereign bond printed in September 2018, which raised $500 million. The timing was nice, prior to the APEC Summit, held in Port Moresby – and the size was impressive, given that the global financial community didn’t know PNG well. APEC was a well-covered event: for the first time ever, a wider regional and global investment and corporate audience got a chance to see the country in a new and positive light. That kind of visibility doesn’t happen often to frontier states.

Euromoney What surprised investors when they arrived in Port Moresby for the APEC Summit in November 2018?

WK, ANZ For a small country like us, it had a big impact. You can’t buy that kind of attention or engagement, or the interest we received from big corporates and investors, and from sovereigns including the US, China, Australia and Japan.

PB, INA They were positively impressed at the level of urban infrastructure. They found a good airport and hotels, roads, and an economy that is expanding, in mining and natural resources but also agriculture and tourism. The challenge will be to improve communication and infrastructure, to benefit better from the next resources boom, driven by existing and new projects like the Wafi-Golpu copper-gold mine and the LNG (liquefied natural gas) expansion, led by France’s Total, which will cost up to $13 billion and lead to a doubling of LNG exports. But it’s vital we do not see a significantly stronger currency – that would jeopardize the rest of the economy.

LB, BPNG The LNG project is starting to pay taxes and dividends, but the funds they pay into the tax coffers won’t start to peak until 2021 or 2022. That’s when the money will start to really flow into our new sovereign wealth fund (SWF). We will also see the Wafi-Golpu mine come online this year and other resources and mining agreements will be signed.

MB, ANZ There is a lot of talk about how east Asia will be the big new market for a wide range of PNG products, but actually our key trading partners are scattered all over the world. Most of our palm oil goes to UK and Europe – New Britain Palm Oil owns a refinery in Liverpool. Palm oil is such a sensitive crop on environmental and social grounds, and you’ve got to be able to show you can source your oil palm in a sustainable and traceable manner. PNG does that.

JV, IFC The key to agriculture will be focusing on larger firms partnering with smaller growers. The IFC and the World Bank have vital programmes. The former has worked with Tininga Limited, a Mount Hagen-based family firm. It’s an area where farmers have worked the land for thousands of years, but poor logistics and infrastructure holds them back. It worked with the company to train over 400 farmers who supply to Tininga and helped it develop a cold chain that transports produce by road and ship to Port Moresby in a fraction of the time.

PB, INA A key to PNG’s broader economic future will be the development of cash crops, notably coffee, grown in the highlands, cocoa and palm oil, grown in the lowlands, and a diversity of newer crops, including vanilla, fruit, vegetables, nuts, honey and mushrooms, for domestic consumption and export. Palm oil has a bad reputation in terms of its environmental and social impact, but it is mostly grown ethically here, by firms adhering to RSPO (roundtable on sustainable palm oil) standards.

MM, DT The challenge for government will be to push through reforms in the agricultural space to support large-scale enterprises. We need to mobilize the land first – it will take time to get those big plantations contributing to GDP. Most of the land in Papua New Guinea is customarily owned, which may be a challenge at first for investors and corporates.

JV, IFC I see fantastic potential in this country and I think APEC crystallized a lot of thinking. You saw the government communicate well and publicly about the LNG project, about Wafi-Golpu, about future energy projects. They stood up and showed the country in its best light. This is a land of opportunity.

You go up to the Sepik River or the Markham Valley and you see miles of the most beautiful arable land. These places were once bread baskets and they are set to be opened up again, and the government has been very progressive in its thinking. There is a real appetite and a real commitment to bring in investment.


WK, ANZ Papua New Guinea is poised to meet investment expectations. The business environment is improving, legislation is being written that will create surety and certainty for foreign investors and the government is stable. And we have adopted the UK system of judiciary based on common law.

Euromoney How is the IFC working to bring more finance into the agricultural sector?

JV, IFC Expanding agriculture is a key priority for the IFC’s work in Papua New Guinea, as agriculture is the biggest source of income for 80% of the population who live in rural areas. IFC has worked to improve access to finance in PNG, stepping in to bring in a new model. This is where multilaterals like us can help. It can be challenging, but we have benchmarks already in place.

We committed $180 million out of $300 million on a recent deal – supported by a risk share facility. And then at the end of the day losses of only $400,000 were claimed. This was a facility set up to promote SME lending by a commercial bank by subsidizing the first loss on loans made under the facility, which encourages banks to significantly expand lending to SMEs. It was an effective tool to increase lending.

I also point to the power sector. It’s absolutely critical to get the domestic power grid joined up and working properly – that will lead to a lot more inward foreign investment. It will give foreign investors the comfort they need.

MB, ANZ PNG’s future depends on enough bankable agricultural projects being created. It’s no accident we are discussing this sector, as only agriculture can broaden out the economy. The flip side of this story is about import substitution, because it will start to occur if agriculture really gets going. It will reduce foreign exchange pressures and have a positive impact on employment.

PB, INA There is an upcoming agricultural summit in Lae city, which will highlight a lot of recent innovations. You’ll see investors there, including the Wafi-Golpu project developers, who are supporting agricultural initiatives, in order to engage with and provide tangible benefits to the local community. PNG’s largest company, Oil Search, is investing in biofuels in the Markham Valley. And, of course, Papua New Guinea is very rich in energy – not for nothing is it often described as a mountain of gold floating in a sea of oil and gas. And beyond gas, you have huge renewable resources, most notably solar, hydro but also geothermal power.

Euromoney ANZ is selling its retail and small and medium-sized enterprise (SME) assets to Kina Bank and focusing on institutional and large corporate banking. Where are the big bankable projects for ANZ going forward?

MB, ANZ Our focus is sectors from food and beverage, to resources, energy and infrastructure. In energy, the big player is local electric firm PNG Power. In infrastructure, we’re working with the Asian Development Bank (ADB), the Australian government and others to build infrastructure across a range of projects. Then there are Sime Darby’s palm oil plantations in New Britain and bankable projects across food and beverage – from coffee to cocoa to cassava.

Where it gets challenging is in creating innovative structures around guarantees that get smaller financing off the ground. Mining and resources are well covered in that regard – the likes of the PNG LNG project is producing well above capacity. The issue is making projects bankable at the lower level, which will have a real and lasting impact on communities.


WK, ANZ The economy is very different from what it was when ANZ started business here. We are seeing the emergence of big corporates and investors that want to focus on what they can do best. Tourism and agriculture are incredibly important, as is communication, infrastructure, food and beverage, and oil and gas. We want to be there with government and with big investors and corporates, as the economy grows, every step of the way.

Euromoney How important is it to get investment channelled into the power sector?

JV, IFC The government is really stepping up on power. We’ve done a detailed long-term plan, supported by the ADB and the World Bank, and we are looking at how to address shorter-term power issues that could involve creating mini-grids across the country, powered by gas off-take or by hydro. The process will take 15 to 20 years to complete, but we are addressing the issues.

PB, INA The future has to be hydro. There is so much untapped potential in Papua New Guinea’s rivers, but solar is already lighting up remote villages and businesses; and as costs fall, the on-grid and off-grid use of solar power will spread. When the Institute of National Affairs runs surveys in business communities, adequate, affordable and reliable power is always identified as a major constraint.

That was a major development we saw at the 2018 APEC Summit, with the US, Australia, New Zealand and Japan committing to supporting power generation. The best way forward in such a large and geographically challenging country, is to localize power generation, utilizing solar and hydro and other local means.

Euromoney APEC also highlighted another fact: that the south Pacific has become geo-politicized again, for the first time in decades.

JP, LI For more than seven decades in fact. Critical partners, notably Australia, have neglected the region for some time and are now racing to offset the strategic advantage held by new partners like China. That came to a head at APEC, where we took ourselves out of our comfort zone by making a huge financial, nation-building commitment to PNG. We don’t usually think and act like that as a country, so that was a really big takeaway from APEC.

Euromoney When you say ‘we’, what do you mean?

JP, LI The Australian government but also New Zealand and the US. We wouldn’t have come together to make a multi-billion-dollar, nation-building commitment without APEC being in town, and without the need to compete against China for control of the region. Australia is building a new undersea cable connecting Australia with Papua New Guinea and the Solomon Islands.

The quality of the internet is very poor here and the cost of telecommunications is exorbitant, and the current cable that connects PNG to the outside world is 20 years old and over capacity, and could fall over at any minute. Australia stumped up most of the funding to deliver the new cable; we did it basically in order to stop China’s Huawei from building the cable and controlling critical communications connecting PNG with Australia.


WK, ANZ There is some nervousness about not understanding China well and about their expansionist agenda. The competition between China and the West and Australia is helpful as it creates an opportunity for PNG to bring in expertise and capital. But China has been here only recently and it has changed so many things literally overnight.

Euromoney Has the high cost of telecoms and a low mobile penetration rate helped or hindered the roll out of new financial services?

MB, ANZ Desktop internet banking is limited in penetration, partly due to cost and partly because most people now use mobile banking services. Technology is helping PNG to leapfrog the normal process of development, which isn’t different from other emerging markets.

PB, INA If we can slash the cost of doing business in PNG, aided by the new Australia-PNG fibre-optic cable, which is due for connection in late 2019, we can channel faster and more affordable services to the rest of the country, unlocking new opportunities. In particular, delivering digital education services direct to rural areas, where education standards are poor, will benefit the economy and society.

JP, LI And better digital communication will enable teachers to access their monthly pay in remote areas, increasing the efficiency of schooling. Some teachers walk two days in each direction just to cash their pay cheque, so that’s four days each month when they are not in the classroom.

LB, BPNG We recently launched our financial sector strategy plan. China UnionPay is already here and has joined forces with the banks, and we are looking to further expand and improve our national digital payments systems.

Euromoney Are IT and fintech areas where PNG can be doing better?

PB, INA The INA has been hosting a series of fairs on innovation and development in ICT (information and communications technology). Many younger Papua New Guineans are IT-savvy and are developing very practical apps. PNG has some good firms specializing in geo-spatial work through to high-altitude drones, which monitor everything from the state of rural infrastructure to the location of police vehicles.

JV, IFC We have seen real advances in banking in the area of know-your-customer (KYC), thanks to the national rollout of a digital framework using biometrics. What we do lack is a national e-commerce platform, meaning that few people can pay online and on the move – that needs to evolve quickly. We need better bandwidth and connectivity for people in rural areas. Moving more people onto mobile phones requires higher penetration of towers, and central to that is boosting tower penetration in rural areas, where connectivity is patchy.

LB, BPNG We are looking to promote e-products to enable more people to access financial services across the country. We will be launching a nationwide e-KYC network that will create a compliance framework for all financial institutions, including non-bank finance companies, and create an array of new products that can drive financial inclusion across PNG.

Euromoney Much has been said about the 2018 Foreign Investment Regulatory Authority (Fira) bill, and its 2019 amendment. How important is a comprehensive foreign investment law – and is this the law that PNG needs?

MB, ANZ What investors are looking for is certainty and stability. Clearly, Fira, as it was originally presented, created a lot of uncertainty. To be fair, one of the things I notice in my time in PNG is that government is accessible. If there is a genuine concern in the private sector, the government is willing to sit down and listen. There is real interaction between government departments and the private sector. And with Fira, the state genuinely wants to assuage both foreign investors and smaller local firms who fear being crowded out.

WK, ANZ The Fira law now being discussed has been re-thought as an investment promotion act and the provisions are nearly there. The idea of creating a foreign investment regulatory authority was thought up before weighing up the true pros and cons – which is why government is reconsidering it.

MB, ANZ If we get a good, working foreign investment law in place, the country’s potential is just extraordinary. PNG has really high-quality basic resources, whether we talk about coffee or cocoa, or the fact that a third of the world’s tuna stocks migrate through local waters. Some of the most highly prized tuna in Japan is flown direct to Tokyo on Air Niugini.

JV, IFC There is a quality of product here that is world-class. And it is held back by a lack of good infrastructure. Get that right and this market will really take off.

Euromoney What is the view of China from the shores of Papua New Guinea?

PB, INA For too long, we treated China’s engagement in the region as benign and natural, part of a big economy’s natural expansion and growth. China provides a major and growing market for PNG raw materials and some other products. But their level and manner of engagement is widely seen as overwhelming.

In recent years, governments and observers in PNG and the wider region have concluded that this is not normal, and that there is strategic as well as economic intent behind the use of China’s regional engagement, which has caused uncertainty and some disquiet. It has changed the dynamic of the region dramatically. It has awoken Australia and other regional partners and changed the focus of major players, including on defence and its strategic settings.

Euromoney How important is Australia’s financial re-commitment to PNG and the region? Canberra has announced $3 billion in new funding for projects, including $2 billion via a new financing facility for the Pacific, and an extra $1 billion via EFIC, its export financing agency.

MM, DT Australia’s decision to increase and expand its engagement with Papua New Guinea has been really important. Our relationship with Australia goes back a long way, so it is good to maintain and expand on that long-standing connection. PNG has got a long-standing relationship with Australia, but there are also many other new and strategic relationships that the country is looking to harness as well. If you look to where the growth is around the world, it is right here in Asia, so PNG needs to take advantage of its proximity and tap into the Asia market.


PB, INA And Japan – we shouldn’t leave them out of the mix. They’ve increased their level of engagement in both governmental institutional support, for example for natural resource oversight, but particularly with critical infrastructure, such as roads, bridges and sewage systems.

MB, ANZ And I think that one of the key moments in the country’s financial history took place last year with the country’s inaugural $500 million US dollar bond, which raised more than anticipated and which saw its tenor doubled from five years to 10 years, largely on the back of surging demand from institutional investors in North America.

Now that bond has been printed, you can start benchmarking and looking to build the onshore financial and capital markets. It was always going to be an important first step in broadening out the country’s financial base. We should congratulate the government for taking the decision to push ahead with printing the bond, as the sentiment toward emerging markets was at the time more than a little rocky. And we ended up with a heavily over-subscribed print that came in at the lower end of pricing.

LB, BPNG Regarding our 2018 US dollar bond – we got to the point where domestic debt levels were too high and domestic institutions were filled up with debt, and we said: ‘Enough’. So we went ahead with our inaugural sovereign bond. We thought it through sensibly. We went to [Export-Import Bank of China] and we printed a syndicated loan, which was managed by Credit Suisse. Our debt-to-GDP levels are still very low, at around 35%. But we were still in need of the funding.

When we went out to market the US dollar bond, investors took a good look at the profile of the resources and mining sectors and said: ‘This might not be an investment-grade market but it is a great place to buy a bond.’ So they put their money to work.

PB, INA An important issue is for the state to ensure that both itself, as well as provinces and landowners, are getting a fair share of the benefits from the resources sector. Because, in the last few years, the treasury has really found itself very short-changed both in tax and dividend revenue, despite PNG calling itself a resource-rich country with multiple major and smaller mining and hydrocarbon projects. The result entailed heavy borrowing to sustain both core government services and new initiatives, which pushed up debt levels.

Euromoney As the mining and resources sectors grow, eyes will turn to the rollout of a sovereign wealth fund. Tell me more about PNG’s plans there.

MB, ANZ There is a lot of interest in how the government goes about setting up its sovereign wealth fund. The legislation is already in place. We should very much follow the Norwegian model. Obviously, if you’re exporting a lot of hydrocarbons, you want to invest the money you earn well and wisely, so that your children and grandchildren can enjoy the benefits.

LB, BPNG The sovereign wealth fund is not operational yet, though the thinking is there. The organic law has been passed that allows the fund to be established. But we still need to assemble the board, the management and the SWF secretariat, to determine the investment activities of the fund and to write the subordinated laws.

We are talking to financial institutions about the fund, and the IMF and the World Bank have come to look at the structure of the secretariat. At the moment, the thinking is we will have a secretariat that will monitor investments. These will be overseen by fund managers including foreign institutions, and we will house the system that oversees compliance. It’s the same structure we use with management of our FX reserves.

Euromoney We’re nearly out of time. But before we go, what would your final message be to investors keen to put their money to work in Papua New Guinea?

MB, ANZ You need to look at the number of global blue-chip corporates that really believe in PNG’s future. The roll call of names that have invested over a 20- or 30-year horizon is impressive, including ExxonMobil, Total, Oil Search, Newcrest, Sime Darby, Heineken, Nestlé and Goodman Fielder.

PB, INA We need to be creating good job opportunities for the younger generation. That means approving major new resource projects, improving the education system, exploiting marine resources in a sustainable manner and getting real momentum in agriculture. It also means better infrastructure and more coordinated and complete communications and power grids.

Tourism has considerable potential. We can become, not a bulk-tourism destination but a high-end eco-destination, with diving, surfing, bush-walking, wildlife and adventure holidays. Bringing transport costs down and providing infrastructure and facilities will be necessary. There are some phenomenal eco-tourism lodges in this country, from Walindi to Kumul Lodge and Lake Murray, but still not nearly enough. It is an industry that has great potential.

And don’t forget huge potential in onshore information and communications technology. Papua New Guinea is far from being an ICT hub – but there is some serious digital talent here and some great app developers. That industry could really grow fast in years to come.


WK, ANZ Papua New Guinea is one of the last places in the world that is truly pristine and we are doing a lot to retain its natural state. From the highlands to the Milne Bay islands, there are so many beautiful places here. It is a real paradise. But it is also a very enterprising place that needs jobs, and we should be doing more to draw up environmental legislation that preserves the country’s natural beauty, while also creating jobs in areas like high-end eco-tourism.

MB, ANZ A better telecommunications network is critical to PNG’s development. That is the key to boosting financial inclusion, to bringing millions of people into the formal banking sector, and to boosting trade across every industry. And the development of a more accessible power grid, whether by unlocking national or more localized solutions – that will be a huge game-changer for Papua New Guinea, benefiting every corporate, from multinationals to small and medium-sized enterprises, to micro-traders. I’m very positive that the next 10 years will see PNG start to really realize its full potential.

MM, DT Papua New Guinea is rich in natural resources. It promotes a liberal investment environment, which welcomes foreign investment in all sectors. Many big global investors have invested here – and continue to invest. With the current developments taking place, you will start to see positive improvements in various economic and development indices compiled each year by the likes of the World Bank and the United Nations.

This is a key moment in our development. The 2018 APEC Summit and the successful launch last year of PNG’s inaugural US dollar bond marks a new beginning for PNG. And with better trade relations with key economies including China, the US and Australia, the future is bright for Papua New Guinea.

WK, ANZ The key is creating employment. We have a population that is growing and that means building infrastructure and encouraging the formation of jobs and services that keep the people happy and healthy. I am optimistic about the future. But it is all about how PNG itself creates its opportunities, builds its future, in the wake of last year’s APEC Summit.

LB, BPNG Because of last year’s inaugural US dollar bond and the 2018 APEC Summit, investors and corporates – people around the world – now know about Papua New Guinea. When the government wants to issue bonds, we know the appetite for our debt is there.

Debate participants

Lady Winifred Kamit (WK)  Lady Winifred Kamit (WK) is chairman of ANZ Papua New Guinea. Kamit was appointed the first independent chair of ANZ Papua New Guinea in February 2017. She is currently a senior partner at Dentons PNG, with expertise in corporate and property law, and has also sat on the board of the Public Services Commission.
160x186Paul Barker (PB)  Paul Barker (PB) has been executive director at the Papua New Guinea Institute of National Affairs (INA) in Port Moresby since 2006. Before joining the INA, he was an expert in rural development at the European Commission in the Solomon Islands and principal adviser to the PNG prime minister on renewable resources.
Loi Bakani (LB)  Loi Bakani (LB) has been governor of the Bank of Papua New Guinea since 2009, having previously been deputy governor in charge of policy and regulation. He has overseen the expansion of new services, including microfinance, and has been an outspoken advocate of greater financial inclusion and financial literacy. 
John Vivian (JV)  John Vivian (JV) is resident representative at the IFC in Papua New Guinea. He is an acknowledged expert in the private-sector arm of the World Bank at promoting renewable energy, financial inclusion and sustainable infrastructure. 
Mark Baker (MB)  Mark Baker (MB) has been managing director and chief executive of ANZ Papua New Guinea since July 2012. Before that he had overall responsibility for ANZ’s corporate banking activities in Queensland, Australia. Baker previously held senior roles with HSBC in Saudi Arabia, Hong Kong, India and Bahrain.  
Manu Momo (MM)  Manu Momo (MM) is deputy secretary in charge of economic policy at the department of treasury. He has over 25 years’ experience at the PNG treasury and advises the government on a wide range of economic, taxation, debt management and public investment matters. 
Jonathan Pryke (JP)   Jonathan Pryke (JP) a director at the Lowy Institute’s Pacific Islands Program. Pryke was a research officer at the Development Policy Centre at the Australian National University and a co-convener of the Australasian Aid Conference. He focuses on economic development in the Pacific Islands region and on the role of aid, development and the private sector in Oceania. 

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