INVESTMENT CONSIDERATIONS

GOVERNMENT POLICY

Papua New Guinea has a liberal investment policy regime that encourages and welcomes foreign direct investment. The Government of Papua New Guinea has recently developed a long tenn National Investment Policy, which builds on the considerable progress the Government has made to curtail regulatory and administrative requirements.

The National Investment Policy aims to provide the transparency, equal treatment and consistency required by foreign companies, to enable them to make medium term strategic decisions to invest in Papua New Guinea. As part of its strategy to implement the policy, the Government is reviewing the investment incentives and establishing a One-Stop-Shop (OSS) facility for investment in the Investment Promotion Authority (IPA). The first phase of the OSS facility is the establishment of a Business Licensing and Information System (BLIS) which will be completed by end of 2001.

RESTRICTIONS ON FOREIGN INVESTMENT

Certain business activities are restricted to citizen and national enterprises. However, this list is currently under review and some have been phased out while others will be phased out pending the review and gradually in a given time frame. A list of Reserved Activities can be obtained from the Investment Promotion Authority (IPA).

TRANSFER OF CAPITAL AND PROFITS

Foreign investors are allowed to remit earnings overseas, repatriate capital and remit amounts necessary to meet payments of:

• principal, interest and service charges;
• similar liabilities on foreign loans;and
• the costs of other foreign obligations approved by the State

There are no restrictions on the convertibility of currencies for the overseas transfer of funds, although any daily transaction of US$35,000 or more requires clearance from the Internal Revenue Commission (IRC) for taxation purposes.

TAXATION

PNG's Tax Regime has been reviewed in 2000 and several changes have been made to corporate and personal income tax. The Mining and Petroleum Sectors have been granted a reduction in corporate taxes while low-income earners have been exempted from paying direct tax. The rates for company tax are as follows: :

Double Taxation Treaties
Papua New Guinea has existing double taxation treaties with the UK, Australia, Canada, Singapore, Malaysia, the People's Republic of China, South Korea, Germany, Indonesia and Fiji.

INVESTMENT PROTECTION

The Investment Promotion Act guarantees that the property of a foreign investor will not be nationalised or expropriated; except in accordance with the law, for a public purpose (defined by law). In such cases compensation will be paid.

The IPA administers the Investment Promotion Act in respect of the Multilateral Investment Guarantee Agency (MIGA) and the International Center for Settlement of Investment Disputes. The Investment Disputes Convention Act seeks to encourage greater flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors. Papua New Guinea recognises this Convention under the Investment Promotion Act.

The fundamental strength of PNG is the independence of the three branches of the Westminster model of Government in the Executive, Legislative and the Judiciary. The Judiciary is the key strength, which allows for recourse of action by individuals, organisations and businesses, which is headed by the Chief Justice.

INVESTMENT INCENTIVES

Most of the incentives take the form of exemptions from company income tax or deferment of income tax liabilities. However, there are some incentives that are not related to company income tax. These include a wage subsidy provision, which is a straight subsidy rather than a tax incentive.

• the Rural Development Incentive; and
• the East New Britain and Bougainville incentive.

• The double deduction for export market development costs;
• The double deduction for staff training; and
• Primary Products Investment Scheme.

CONTACTS FOR FURTHER INFORMATION