Papua New Guinea - Foreign investment

The bulk of foreign investment is in the mining and petroleum sector. Statistic on foreign equity holdings for 1995 show that Australia was the largest investor with K 1,446 million, followed by the United Kingdom with K 160 million and the United States with K 91 million. Overall, foreign equity holdings fell from 55% of GDP in 1990 to 33% in 1994, primarily due to the completion of major mining and petroleum projects. In 1995, developers RTZ and Niugini Mining were awarded a lease for the $800 million Lihir gold project raising foreign equity holdings to 37% of GDP.

The Investment Promotion Authority (IPA), established in 1992, facilitates and certifies foreign investment. Corruption, civil unrest, and bureaucratic delays, however, frustrate the process. A number of free trade zones are in the early stages of development.

Foreign investment in Papua New Guinea took on an air of international intrigue when it was revealed that in early 1997 Prime Minister Julius Chan had entered into a $46 million contract with Sandline Incorporated, a mercenary military organization, to retake Bougainville Island and in particular the copper mining complex there that had been occupied by separatists since 1989. Money behind the contract was traced to the British-Australia mining company, RTZ-CRA. The army prevented the use of the mercenaries. Chan lost his parliamentary seat in the 1997 elections, and a peace agreement was signed with the Bougainville Revolutionary Army (BRA) in 1998.

Foreign direct investment (FDI) was only $87.6 million in 1997 and $109.6 million in 1998. FDI nearly tripled in 1999, however, to $296.5 million, before falling back to $130.7 million in 2000. FDI in 2002 was $178.7 million.

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