Government should do more to improve ease of doing business in PNG

Written by Associate Professor Eugene Ezebilo, PNG National Research Institute Deputy Director for Research Associate Professor Eugene Ezebilo, PNG National Research Institute Deputy Director for Research

Papua New Guinea (PNG) has vast natural resources that can be harnessed to trigger broad-based sustainable economic growth and improve human development. However, PNG has not been able to realise its full potential because there are several regulatory factors often restrict investments in the country. This has the potential to restrict doing business in PNG difficult, which can reduce the volume of goods and services produced in the country, reduce government revenue and lower employment opportunities for the workforce. If the intention of the Government of PNG (GoPNG) is for the country to realise its full potential, it is necessary to provide conducive environment that promotes ease of doing business especially in terms of removing bureaucratic roadblocks at all levels of governance. All the complex procedures created by institutions should be simplified. Over the years, PNG has performed poorly in the “Ease of Doing Business” index world rankings.

What is Ease of Doing Business index?

“Ease of Doing Business” index ranks economies according to how conducive the regulations in a country is to business operations. This is based on the idea that economic activities require good rules and regulations that are efficient, accessible to all business persons and simple to implement. Ease of Doing Business index consist of the following indicators:

  • Starting a business
  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Pay taxes
  • Trading across borders
  • Enforcing contract
  • Resolving insolvency

According to the World Bank Ease of Doing Business ranking of 190 economies, in 2019 PNG ranked 120 out of 190 and ranked 108 in 2018. The country had its worst ranking in 2014 (141) and the best ranking in 2008 when it ranked 89

In terms of PNG’s performance on each Ease of Doing Business indicators for 2019, the country did well in: Getting credit where PNG Ranked 48 out of 190 economies.

The worst indicators in terms of ranking are the following:

  • Enforcing contract in which PNG ranked 172 out of 190 economies
  • Resolving insolvency; and starting a business, which PNG ranked 144 and 142 positions.

In terms of Ease of Doing Business scores for 2019, the following indicators were the best:

  • Getting credit had a score of 70 percent out of 100.
  • Starting a business had a score of 80 out of 100.

Indicators where PNG scored poorly include the following:

  • Enforcing contract had a score of 36.2 out of 100.
  • Resolving insolvency had a score of 36.2 out of 100.

Strategy to promote Ease of Doing Business in PNG

If the intention of GoPNG is to improve the current situation in the country, it should consider the following:

  • All contracts that have been awarded by government should be implemented according to agreements reached in an effective and efficient manner.
  • All impediments associated with starting a business should be removed. Procedures for registering businesses should be simplified.
  • Public sector corruptions should be addressed because it is one of the most important factors the affect ease of doing business. For instance, according to Transparency International Corruption Perception Index, PNG ranks 142 out of 180 economies in 2020 while it ranked 137 in 2019. This indicates that the incidence of corruption in PNG is getting out of hand.
  • Provide social trunk infrastructure such as piped-borne water, good road networks, electricity and sewerage where they are lacking and conduct regular maintenance works on the existing infrastructure.
  • The issue associated with providing secure property rights to customary land should be addressed by promoting Voluntary Customary Land Registration System.
  • Conduct evaluation of all policies and laws associated with doing business in PNG with the aim of identifying and reviewing policies and laws that contribute to bureaucracy.

 

This article was first published in the Post-Courier’s 31 March 2021 edition and on its website’s commentaries and features page.