““Papua New GuineaPapua New GuineaYour Investment Destination”Your Investment Destination”

a presentation a presentation by by

H.E. Mr. Peter C L EafeareH.E. Mr. Peter C L EafeareHigh CommissionerHigh Commissioner

Papua New Guinea High CommissionPapua New Guinea High CommissionSuva, Suva,

Republic of Fiji IslandsRepublic of Fiji Islandsat the at the

PIPSO Business Forum 2010PIPSO Business Forum 201088thth December 2010 December 2010

Sofitel Fiji Resort & Spa,Sofitel Fiji Resort & Spa,Denarau IslandsDenarau Islands

FijiFiji

Presentation OutlinePresentation Outline

1.1. Country FactsCountry Facts

2.2. Economy Economy 2.12.1 Major Economic SectorsMajor Economic Sectors2.22.2 Economic Performance Economic Performance 2.32.3 Economic OutlookEconomic Outlook

3.3. Trade RegimeTrade Regime3.13.1 Trade Relations Trade Relations 3.23.2 Trade PerformanceTrade Performance

4.4. Investment RegimeInvestment Regime4.14.1 Top 10 investing countriesTop 10 investing countries4.24.2 Investment IncentiveInvestment Incentive4.34.3 Tax RegimeTax Regime

5.5. Investment Potential & OpportunitiesInvestment Potential & Opportunities5.15.1 Available ProjectsAvailable Projects

6.6. Investment RequirementsInvestment Requirements 7.7. Contact Contact

2. Country Facts2. Country FactsOfficial nameOfficial name Papua New Guinea (PNG)Papua New Guinea (PNG)

Form of GovernmentForm of Government Democratic, (109 Members of Democratic, (109 Members of Parliament)Parliament)

Head of StateHead of State Governor General (Queens Governor General (Queens Representative)Representative)

Head of GovernmentHead of Government Prime MinisterPrime Minister

CapitalCapital Port MoresbyPort Moresby

Business LanguageBusiness Language EnglishEnglish

Monetary UnitMonetary Unit 1 Kina (K) = 100 toea (t), K1.00 = US$ 1 Kina (K) = 100 toea (t), K1.00 = US$ 0.36350.3635

Population (Year 2000 Population (Year 2000 census)census)

Approx. 5.2 millionApprox. 5.2 million

ReligionReligion Dominantly Christianity but practice Dominantly Christianity but practice freedom of religionfreedom of religion

Land AreaLand Area 463,000 square kilometers463,000 square kilometers

Exclusive Economic Zone Exclusive Economic Zone (EEZ)(EEZ)

3.2 million square kilometers3.2 million square kilometers

Number of Offshore Number of Offshore IslandsIslands

600600

CharacteristicsCharacteristics high mountain ranges, deep valleys & high mountain ranges, deep valleys & swift rivers in the interior, and open swift rivers in the interior, and open plain, tropical forests and swamp inlets plain, tropical forests and swamp inlets in the coastal regions and 600 islands.in the coastal regions and 600 islands.

2. PNG 2. PNG EconomyEconomy

The PNG Economy is distinctively The PNG Economy is distinctively Dualistic:Dualistic:

(i)(i) An Export-oriented, capital intensive An Export-oriented, capital intensive mineral sector; andmineral sector; and

(ii)(ii) A semi-subsistence sector that provides A semi-subsistence sector that provides livelihood for 85% of the population.livelihood for 85% of the population.

2.1 Major Economic 2.1 Major Economic SectorsSectors

AgricultureAgriculture ForestryForestry FisheriesFisheries Mining & PetroleumMining & Petroleum ManufacturingManufacturing Retail & WholesaleRetail & Wholesale Building & ConstructionBuilding & Construction Banking & FinanceBanking & Finance Transport & Telecommunication Transport & Telecommunication

2.2 Economic 2.2 Economic PerformancePerformance The country has enjoyed strong economic growth benefiting The country has enjoyed strong economic growth benefiting

from half a decade of favorable global economic conditions from half a decade of favorable global economic conditions with strong and sustained world growth, benign inflation and with strong and sustained world growth, benign inflation and surging commodity prices,.surging commodity prices,.

In 2008, PNG GDP grew at 7.2%, substantially above worlds In 2008, PNG GDP grew at 7.2%, substantially above worlds

average growth rate of 4%. average growth rate of 4%.

Growth has been broad based, driven in particular by the Growth has been broad based, driven in particular by the non-mining sectors ( Non-Mining GDP Growth was 7.9%), non-mining sectors ( Non-Mining GDP Growth was 7.9%), especially communication, construction and retail sectors. especially communication, construction and retail sectors.

Inflation was around 10.6%, significantly due to the increase Inflation was around 10.6%, significantly due to the increase

in oil price that was experienced globally recently, in oil price that was experienced globally recently,

Foreign Exchange Reserves at end of December 2008 was Foreign Exchange Reserves at end of December 2008 was K5.3 Billion, sufficient for about 7.5 months of total import K5.3 Billion, sufficient for about 7.5 months of total import cover and 10.8 months of non-mineral import cover. ( see cover and 10.8 months of non-mineral import cover. ( see next slide on Key Economic Indicators)next slide on Key Economic Indicators)

Principle Economic Principle Economic IndicatorsIndicators

2.3 Economic 2.3 Economic Outlook Outlook

>> Global Financial Crisis has led to severe Global Financial Crisis has led to severe deterioration in global economy with recession deterioration in global economy with recession expected in advanced economies and a expected in advanced economies and a significant slow down in developing countries significant slow down in developing countries including PNG.including PNG.

The crisis has translated into sharply lower The crisis has translated into sharply lower commodity prices which will have an impact on commodity prices which will have an impact on PNG’s economic and fiscal outlook going PNG’s economic and fiscal outlook going forward.forward.

Economic Growth (GDP) for 2009 is forecasted Economic Growth (GDP) for 2009 is forecasted

at 6.6% while Non-mining growth is forecasted at 6.6% while Non-mining growth is forecasted at 5.6 % which indicate a significant drop in at 5.6 % which indicate a significant drop in growth from 2008.growth from 2008.

(See next slides for Projection)(See next slides for Projection)

Trend and Projection for GDP Growth, Mining & Non-Mining Trend and Projection for GDP Growth, Mining & Non-Mining Sector 1995-2013Sector 1995-2013

3. Trade 3. Trade RegimeRegime

PNG is dependent on international trade.PNG is dependent on international trade. It pursues “Everything But Arms” (EBA) Trade It pursues “Everything But Arms” (EBA) Trade

policy which promotes fair trade with its policy which promotes fair trade with its trading partners. trading partners.

PNG undertook Tariff Reform Program since PNG undertook Tariff Reform Program since 1999. All import tariffs are currently zero 1999. All import tariffs are currently zero subject to 10% GST. subject to 10% GST.

However, few goods produced in PNG and However, few goods produced in PNG and those that PNG can produce are subject to those that PNG can produce are subject to gradual tariff reduction program under three gradual tariff reduction program under three main categories (see next slide).main categories (see next slide).

Tariff Reform Program Tariff Reform Program Reduction Schedule.Reduction Schedule.

3.1 Trade 3.1 Trade Relation Relation

PNG has bilateral, regional and PNG has bilateral, regional and multilateral trade agreements:multilateral trade agreements:

I.I. GATT & GATS under WTO: market access GATT & GATS under WTO: market access

of goods and services on a non-of goods and services on a non-discriminatory basis;discriminatory basis;

II.II. ACP-EU EPA: entry of goods into EU ACP-EU EPA: entry of goods into EU market on a non-reciprocal basis;market on a non-reciprocal basis;

III.III. PICTA - 14 Pacific ACP countries Free PICTA - 14 Pacific ACP countries Free Trade Agreement;Trade Agreement;

IV.IV. GSP, duty free entry of goods into certain GSP, duty free entry of goods into certain markets of developed countries, markets of developed countries, including US and Japan;including US and Japan;

……trade relation continues…trade relation continues…

V.V. MSG: Free Trade Region;MSG: Free Trade Region;VI.VI. SPARTECA, allows PNG products to enter SPARTECA, allows PNG products to enter

NZ and Australia duty free subject to NZ and Australia duty free subject to ‘Rules of Origin’ Regulation; and‘Rules of Origin’ Regulation; and

VII.VII. PACTRA, BTA with Australia provides PACTRA, BTA with Australia provides certain PNG products to enter Australia certain PNG products to enter Australia duty free and unrestrictedly.duty free and unrestrictedly.

These agreements basically provide These agreements basically provide market access for goods into foreign market access for goods into foreign markets of member countries.markets of member countries.

3.2 Trade Performance 3.2 Trade Performance

0

500

1000

1500

2000

2500

3000

3500

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Agricultural & otherexports

Forest Products

Marine Products

Mineral

K’ million, f.o.b

EXPORTS BY COMMODITY GROUPS in 2007

Source: Bank of PNG, QEB Dec 2007

Trade Performance Trade Performance cont’d…cont’d…

17601780180018201840186018801900192019401960

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Total Imports

Total Quarterly Imports in 2007

K’ million

Source: Bank of PNG, QEB Dec 2007

Export Value Export Value US$4.14 BillionUS$4.14 Billion

Import Value Import Value US$2.24 BillionUS$2.24 Billion

BOT (Surplus) BOT (Surplus) US$1.92 BillionUS$1.92 Billion

Balance of Trade: Dec 2007Balance of Trade: Dec 2007

Source: Bank of PNG, QEB Dec 2007

PNG’s Export Destination & PNG’s Export Destination & ValueValue

Country 2004 ( K’ Million)

2005 (K’Million

2006 (K’Million)

2007 (K’Million)

Australia 3, 745.9 4, 383.7 5, 183.4 5, 593.8

China 400.2 371.9 466.6 466.4

Germany 686.3 736.6 569.4 1, 150.0

Great Britain 301.1 188.2 180.4 231.4

Japan 900.5 1, 148.2 1, 822.7 2, 343.4

Philippines 351.5 533.2 1, 231.3 1, 068.8

Singapore 187.2 106.8 76.4 216.6

South Korea 504.9 754.0 562.2 352.6

United States 181.2 146.2 135.5 214.0

Total 8, 417.1 10, 147.5 12, 731.5 13, 858.1Source: BPNG Statistics

PNG’s Import Origin and PNG’s Import Origin and ValueValue

Country 2004 ( K’Million)

2005 ( K’Million)

2006 (K’Million)

2007 (K’Million)

Australia 2, 590.7 2, 112.7 2, 071.5 3, 290.9

China 150.6 93.9 133.1 235.2

New Zealand 154.5 233.8 171.4 216.2

Malaysia 78.5 80.4 129.4 156.0

Great Britain 33.3 20.9 45.4 29.0

Japan 206.3 181.6 303.0 327.4

Hong Kong 35.2 54.7 65.3 96.0

Singapore 279.1 299.6 1, 162.9 1,139.1

Indonesia 69.7 71.4 74.1 99.8

United States 380.2 650.6 1, 272.6 1, 516.9

Total 4, 683.1 4, 712.2 6,064.0 7, 776.0

Source: BPNG Statistics

4. Investment Regime4. Investment Regime PNG aspires for an investment regime that PNG aspires for an investment regime that

is transparent and compatible with is transparent and compatible with international best practice which is international best practice which is conducive for Foreign Investment.conducive for Foreign Investment.

PNG promotes a liberal investment PNG promotes a liberal investment environment, which welcomes Foreign environment, which welcomes Foreign Investment in any sector. Investment in any sector.

PNG is continuously embarking on creating PNG is continuously embarking on creating a conducive environment by undertaking a conducive environment by undertaking major reforms.major reforms.

Current investment condition is also Current investment condition is also comparable as any conducive investment comparable as any conducive investment environment in the world.environment in the world.

4.1 Top Ten Investing 4.1 Top Ten Investing Countries (K’million)Countries (K’million)

Country 1997 1998 1999 2000 2001 2002

2003

2004

2005

2006

2007

Total

Malaysia 577 3, 347

1, 679 410 446 335 925 3, 054

1. 848

4, 187

5, 552

22, 360

Australia 2411 1179 1418 1466 859 548 1164

380

253 978 865 11, 521

China 791 1155 993 568 380 127 351 583

514 447 337 6, 243

South Korea 497 314 713 482 380 151 100 52 167 1569

1386

5, 811

United Kingdom 80 189 1308 2030 2 4 151 29 124 42 24 3, 983

Philippines 116 238 170 38 116 228 446 202

54 59 121 1, 788

Taiwan 0 15 14 8 0 0 1, 213

91 0 15 11 1, 367

New Zealand 0 176 182 226 73 94 387 49 29 29 62 1, 307

Singapore 57 46 499 45 41 16 143 326

61 25 6 1, 265

United States 551 159 2 0 88 1 6 82 0 146 6 1, 041

61, 340.00Source: IPA Certification

Foreign Investment in Major Foreign Investment in Major Sectors ( K’Million)Sectors ( K’Million)

Sector 1997-2007

Petroleum 2, 557.4

Manufacturing 1, 475.6

Forestry 1, 336.00

Agriculture 1, 322.7

Mining & Quarrying 878.3

Transport, Storage, Communication

856.6

Financial Intermediation 554.3Source: IPA Certification

4.2 Investment 4.2 Investment Incentives Incentives

There are fiscal incentives as well as non-fiscal There are fiscal incentives as well as non-fiscal incentives. incentives.

There are sector specific incentives as well as There are sector specific incentives as well as general incentives. general incentives.

There are 16 different tax (fiscal) incentives.There are 16 different tax (fiscal) incentives.

List of incentives can be obtained from PNG’s List of incentives can be obtained from PNG’s Information Desk. Information Desk.

Fiscal incentivesFiscal incentives

Double Deduction for Export Market Double Deduction for Export Market Development CostsDevelopment Costs

Rural Development IncentiveRural Development Incentive Export Income ExemptionExport Income Exemption Staff Training Double DeductionStaff Training Double Deduction Initial year accelerated depreciation Initial year accelerated depreciation

provision (amongst others)provision (amongst others)

Non-Fiscal Non-Fiscal IncentivesIncentives

Government provides industrial Government provides industrial infrastructure facilities for investors infrastructure facilities for investors who want to go into light industries who want to go into light industries activities through development of activities through development of Industrial Centers (Malahang & Industrial Centers (Malahang & Ulaveo) Ulaveo)

Also, Industrial Parks are created for Also, Industrial Parks are created for cluster activities (Konebada Petroleum cluster activities (Konebada Petroleum Park & Madang Marine Parks) Park & Madang Marine Parks)

4.3 Tax Regime4.3 Tax Regime

Rate of Company TaxesRate of Company Taxes

Types of CompaniesTypes of Companies Tax Rate (%)Tax Rate (%)Resident Companies Non-Mining & Resident Companies Non-Mining & Petroleum Companies Petroleum Companies

3030

Non-Residents, including those engaged in Non-Residents, including those engaged in Mining OperationsMining Operations

4848

Resident Mining CompaniesResident Mining Companies

Special Mining Lease & Mining LeaseSpecial Mining Lease & Mining Lease 3030

Petroleum CompaniesPetroleum Companies

(i) Resident & Non-Resident(i) Resident & Non-Resident

(ii) New Petroleum Project(ii) New Petroleum Project5050

45/30(incentive 45/30(incentive rate)rate)

Gas CompaniesGas Companies

Resident & Non-Resident Resident & Non-Resident 3030

5.0 Investment Potential & 5.0 Investment Potential & OpportunitiesOpportunities

Agriculture and its sub-sectors-coffee, tea & spices, copra, Agriculture and its sub-sectors-coffee, tea & spices, copra, cocoa, Oil Palm, Rice, Copra Oil, Rubber and tropical fruitscocoa, Oil Palm, Rice, Copra Oil, Rubber and tropical fruits

Fisheries-PNG has the largest EEZ (3.2 million Square km) Fisheries-PNG has the largest EEZ (3.2 million Square km) in the South Pacific.in the South Pacific.

Forestry-with 36 million hectares of enclosed forest of Forestry-with 36 million hectares of enclosed forest of which 15 million hectares of high quality tropical hardwoodswhich 15 million hectares of high quality tropical hardwoods

Services sector-including banking and finance, Services sector-including banking and finance, telecommunication and tourismtelecommunication and tourism

Mining & Petroleum-extensive reserves of natural gas and Mining & Petroleum-extensive reserves of natural gas and oil and copper and goldoil and copper and gold

Infrastructure SectorInfrastructure Sector

5.1 Available Projects 5.1 Available Projects

We are currently promoting several projects in the following sectors. We are currently promoting several projects in the following sectors. (i)(i) Agro-Forestry (Oil Palm Land)Agro-Forestry (Oil Palm Land)(ii)(ii) Forestry (Logging)Forestry (Logging)(iii)(iii) Mining (Gold Mine & Lime Stone)Mining (Gold Mine & Lime Stone)(iv)(iv) FisheriesFisheries(v)(v) Agriculture (Cocoa Export & Coffee)Agriculture (Cocoa Export & Coffee) Project Profiles are available on request to the Investment promotion Project Profiles are available on request to the Investment promotion

Authority. Authority.

Private sector representatives also have projects and are here to discuss Private sector representatives also have projects and are here to discuss also. also.

We are willing to meet and talk with you all.We are willing to meet and talk with you all.

PNG LNG Project PNG LNG Project OpportunitiesOpportunities

There are specific opportunities There are specific opportunities available in the development of the available in the development of the multi-billion dollar PNG LNG Project.multi-billion dollar PNG LNG Project.

Look at the website: Look at the website: www.pnglng.com

6.6. Investment Investment RequirementsRequirementsA foreign company wishing to invest in A foreign company wishing to invest in

PNG needs to:PNG needs to: Register the company with the IPA.Register the company with the IPA. Certify the foreign company with the IPA.Certify the foreign company with the IPA. Obtain respective licenses and permits Obtain respective licenses and permits

with other sector responsible Authorities.with other sector responsible Authorities. Apply for Work Permit.Apply for Work Permit. Apply for Working Visa.Apply for Working Visa. Register for a tax file. Register for a tax file.

The IPA is able to assist the Foreign The IPA is able to assist the Foreign Investor to meet these requirements.Investor to meet these requirements.

7. 7. SummarySummary

Papua New Guinea welcomes new Papua New Guinea welcomes new investments into the country.investments into the country.

There are enormous opportunities in almost There are enormous opportunities in almost all the sectors for consideration.all the sectors for consideration.

Major legislative and Policy Reforms have Major legislative and Policy Reforms have been effected to make the investment been effected to make the investment environment conducive for foreign environment conducive for foreign investment in Papua New Guinea.investment in Papua New Guinea.

Tax incentives are provided to Investors and Tax incentives are provided to Investors and we believe it to be reasonable assistance. we believe it to be reasonable assistance.

Institutions of State like the Investment Institutions of State like the Investment Promotion Authority stands ready to assist Promotion Authority stands ready to assist should you consider investing in Papua New should you consider investing in Papua New Guinea.Guinea.

THANK YOUTHANK YOU

Visit the Visit the Investment Promotion Investment Promotion AuthorityAuthority

at:at: www.ipa.gov.pg or or

e-mail: e-mail: biepd@ipa.gov.pgbiepd@ipa.gov.pg