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Companies pass judgement: things are worsening in PNG

Port Moresby waterfront
The Port Moresby waterfront looking east

KEITH JACKSON

Being Heard: The 2017 Survey of Businesses in Papua New Guinea by Paul Holden with Paul Barker and Steven Goie, Institute of National Affairs Discussion Paper 105, Port Moresby, April 2018. Download the report here

NOOSA – The overarching message in a fine piece of research of 287 companies by PNG’s Institute of National Affairs is that the business environment in PNG is deteriorating,

“PNG remains a challenging country in which to do business,” the Being Heard report concludes, and the shopping list for improvement it offers is long.

The report says the biggest change since the previous survey in 2012 concern the problems flowing from an overvalued kina and lack of foreign currency availability, which are cited as damaging investment and growth and as a major impediment to business operations.

Corruption is becoming an increasing challenge with two-thirds of firms reporting they make “irregular payments” to government officials and more than 60% saying they are affected in some way by corruption in dealing with public officials, Less than 20% say they report solicitation of bribes to police or other relevant agencies.

“The extent of corruption reported by businesses appears to be widespread,” says the report. “While the greatest number of respondents indicated that the problems lay in either Lands or Customs/Finance/Tax institutions…. most respondents indicated that there were multiple institutions where irregular payments were necessary.”

Of as much concern is the finding that business confidence in the judiciary has declined substantially over the past 15 years. In 2002, 78% of businesses had some level of confidence in the judiciary; by last year this had decreased to 60%, with only 20% being “highly confident” in the judiciary.

The law and order situation in PNG is such that security of personnel and property is a large burden on business, amounting to 10% of operating costs. Two-thirds of respondents also say it has a negative impact on investment decisions.

“If there is one constant from the four business surveys over the past 15 years,” the report says, “it is the adverse impact of security and crime on the business environment.”

Other major issues identified are weaknesses in government - business relationships, poor government services (roads, bridges and electricity seen as particular problems), lack of stable government policy and concerns about political stability, although fewer firms report being affected by this.

In summary, when asked about key areas for reform, the 187 businesses list, in order of priority, corruption, law and order, infrastructure, foreign exchange and company tax.

This is a daunting agenda facing the PNG government and, when business was asked to pass judgement on it in this survey, it concluded things are getting worse.

Comments

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Gideon Yowa

Expenses involved in security is one of the major cost drivers in both government and private sectors.

Every registered commercial activity in PNG has to engage security guards to protect itself from all the dangers that the business is exposed to.

Security guards not only protect the business from external threats but also from within the employees.

Port Moresby City is a place where almost half of the population is engaged (formally or informally) to watch over the other half and that clearly indicates how much money and resources is spent on security alone.

Government institutions also engage security for the same reasons. Security firms are contracted to protect every single one of the state institutions like general hospitals, government buildings, universities and colleges.

The expenses in security will continue to increase with increasing population, increasing unemployment, and increasing law and order issues.

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