Papua New Guinea
Papua New Guinea is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 24 June 2016
The FATF welcomes Papua New Guinea’s significant progress in improving its AML/CFT regime and notes that Papua New Guinea has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2014. Papua New Guinea is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Papua New Guinea will work with the APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Papua New Guinea was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Papua New Guinea was deemed Compliant for 2 and Largely Compliant for 6 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Papua New Guinea was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 28
World Governance Indicator – Control of Corruption 17
Papua New Guinea (PNG) is richly endowed with natural resources, but exploitation has been hampered by rugged terrain, land tenure issues, and the high cost of developing infrastructure. The economy has a small formal sector, focused mainly on the export of those natural resources, and an informal sector, employing the majority of the population. Agriculture provides a subsistence livelihood for 85% of the people. The global financial crisis had little impact because of continued foreign demand for PNG's commodities.
Mineral deposits, including copper, gold, and oil, account for nearly two-thirds of export earnings. Natural gas reserves amount to an estimated 155 billion cubic meters. A consortium led by a major American oil company is constructing a liquefied natural gas (LNG) production facility that began exporting in April 2014. As the largest investment project in the country's history, it has the potential to double GDP in the near-term and triple Papua New Guinea's export revenue. An American-owned firm also opened PNG's first oil refinery in 2004 and is building a second LNG production facility. The government faces the challenge of ensuring transparency and accountability for revenues flowing from this and other large LNG projects. In 2011 and 2012, the National Parliament passed legislation that created an offshore Sovereign Wealth Fund to manage government surpluses from mineral, oil, and natural gas projects. In recent years, the government has opened up markets in telecommunications and air transport, making both more affordable to the people.
Numerous challenges still face the government of Peter O'NEILL, including providing physical security for foreign investors, regaining investor confidence, restoring integrity to state institutions, promoting economic efficiency by privatizing moribund state institutions, and maintaining good relations with Australia, its former colonial ruler. Other socio-cultural challenges could upend the economy including chronic law and order and land tenure issues.
Agriculture - products:
coffee, cocoa, copra, palm kernels, tea, sugar, rubber, sweet potatoes, fruit, vegetables, vanilla; poultry, pork; shellfish
copra crushing, palm oil processing, plywood production, wood chip production; mining (gold, silver, copper); crude oil and petroleum products; construction, tourism
Exports - commodities:
oil, gold, copper ore, logs, palm oil, coffee, cocoa, crayfish, prawns
Exports - partners:
Japan 17.4%, Australia 15.9%, China 12.1% (2015)
Imports - commodities:
machinery and transport equipment, manufactured goods, food, fuels, chemicals
Imports - partners:
Australia 25.9%, China 20%, Singapore 12.6%, Malaysia 7.2%, US 4.2%, Indonesia 4.1%, South Korea 4% (2015)
Investment Climate - US State Department
Papua New Guinea (PNG) is located in the southwestern Pacific Ocean. The Government of Papua New Guinea (GPNG) welcomes foreign investment and appears to have a liberal investment approach, but in practice this may be more complex. PNG is rich in natural resources such as gold, oil, gas, copper, silver, timber, and fisheries. The GPNG has placed a higher priority on the downstream processing of these resources in order to drive sustainable economic growth.
Large investments have been limited to the mining and petroleum sectors. Most notable investments have been ExxonMobil’s USD 19 billion liquefied natural gas project as well as developments in the area of communications, construction, and real estate. These investments have supported employment growth, but also evidenced a shortage of skilled labor. Tourism is seen by the GPNG as a sector with huge untapped potential. While there is preference towards foreign investment proposals to develop renewable resources, there have been few large-scale projects.
Over the last few years, the GPNG has taken several steps to create additional opportunities for business owners. Nevertheless certain measures to exclude foreign investment from certain key sectors have created uncertainty. The GPNG recently expropriated Ok Tedi Mining Limited and stated that the purpose behind this move was to remove foreign leadership and ensure that assets were directly benefiting the country. In 2013, the GPNG implemented a series of new policies, a test on foreign companies’ activities to determine their commitment to activities of national interest, and carved out additional sectors which have been reserved exclusively for nationals.
GPNG has recently hosted and been awarded several high-profile events including the Pacific Games (July 2015), the Pacific Islands Forum Leaders’ Meeting (September 2015), the African, Caribbean, and Pacific Group of States Meeting (June 2016), the FIFA Women’s Under-20 World Cup (November 2016), and the Asia Pacific Economic Cooperation (APEC) Leaders’ Summit (November 2018). Due to the infrastructure needs in PNG, preparations for each event have been significant business opportunities for contractors and vendors.
There have been discussions to establish a sovereign wealth fund, but this appears to be on hold until they have been able to restructure the revenue management stream for their state-owned enterprises (SOEs) in key sectors.
GPNG has taken steps towards increasing transparency in the management of their natural resources. In 2016, GPNG has submitted its first report to the Extractive Industries Transparency Initiative. This initiative is a global standard to promote open and accountable management by strengthening government and company systems. GPNG’s report was greeted as a welcome first step, though the difficulty of obtaining accurate and timely information made the report less thorough.
Some of the challenges to investment include weak enforcement of contracts, inconsistent government policies, corruption, crime, inadequate infrastructure, lack of access to constant utilities, underdeveloped private markets, and extremely high commodity and telecommunications costs. Equally challenging has been the ongoing political instability.
U.S. companies have shared concerns about the GPNG procurement process, stating cases where competition has been narrowly tailored in order to limit participants –resulting in U.S. companies being unable to compete.
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