Overseas Investment in Papua New Guinea

A shortage of local capital has led to reliance on overseas investment. Overseas investors have been most attracted to mining, petroleum and timber projects. Since Independence in 1975 the policy of national governments has been to encourage overseas investment but retain a share, usually 20 percent, in major resource exploitation projects. Demands by the PNG government for a greater share than that originally agreed upon have caused friction with overseas investors and in some cases failure to proceed with projects or the closure of existing projects. A substantial increase in investment in the mining and petroleum sector led to an increase in gross fixed capital formation from 19 percent of GDP in 1987 to 23 percent of GDP in 1992. Overseas investment is controlled through the Investment Promotion Authority. Some investors have been discouraged by high infrastructure and labor costs and law and order problems.

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