Country risk in PNG is high. PNG has an OECD country credit grade of 6 and speculative grade sovereign debt ratings from two ratings agencies. These ratings underline PNG’s vulnerability to business, financial and economic setbacks.
PNG ranks poorly on the World Bank’s ease of doing business gauge—which measures regulation and red tape relevant to a domestic small to mid-sized firm—108 out of 190 economies. Enforcing contracts, trading across borders and dealing with construction permits are very difficult; but getting credit and electricity are considerably easier.
Risk of expropriation in PNG is moderate. This aligns with the poor scores around contract enforceability in the ease of doing business survey and the weak rule of law scores in the governance indicators. This makes it harder for investors to settle investment disputes.
PNG also scores poorly on the World Bank’s governance gauges, severely so for corruption and rule of law. PNG has over 800 languages and a population organised in small, fragmented social groups which can create political gridlock. Not surprisingly political risk is moderate to high.