Tuesday, October 06, 2009

Papua New Guinea is not 'investor-friendly'

Papua New Guinea is not “investor-friendly” and continues to have significant barriers to the functioning of a free market, according to the reputable Bertelsmann Transformation Index 2008.

Last year, the BTI compared the performance of 125 countries aspiring to achieve full democracy and a market economy, and PNG fared very poorly in its report card, which is now freely available on the internet (http://www.bertelsmann-transformation-index.de/).

The BTI is a global ranking of transition processes in which the state of democracy and market economic systems as well as the quality of political management in 125 transformation and developing countries are evaluated.

The BTI is a joint project of the Bertelsmann Stiftung and the Centre for Applied Policy Research at Munich University in Germany.

“On paper, the institutional ‘hardware’ for a competitive market-based economy is mostly in place,” it said.

Papua New Guinea has made some progress in restructuring its financial sector, including making the central bank more independent and establishing an independent commission on competition modeled on Australia’s Competition and Consumer Commission.

“In practice, there are significant barriers to the functioning of a free market.

“High establishment costs, breakdowns in law and order, the high cost of banking, bureaucratic red tape and political corruption remain major barriers to market entry.

“Despite its public pronouncements, the country is not foreign investor-friendly.

“A maze of regulations and paperwork must be navigated before a foreign enterprise can start operations in Papua New Guinea.

“The Investment Promotions Authority (IPA), supposedly a ‘one stop’ centre for foreign businessmen, is often sarcastically referred to as the ‘Investment Prevention Authority’.

“The persistence of corrupt political leaders, combined with an incompetent and corrupt bureaucracy, often means that only businesses willing to pay ‘facilitation money’ can win a significant advantage over competitors.

“Commissions of inquiry have found numerous instances of public contracts being awarded to companies or individuals who have bribed officials.

“Large and well-established companies have a significant advantage over newcomers.

“In recent years, the trend is for major companies to buy their smaller competitors and create an even stronger market position.

“Among top businessmen, there is a lot of direct and indirect cross-ownership of businesses.

“Inadequate corporate governance is the norm rather than the exception.”


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