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 shocks.
PNG ranks a lowly 120th out of 190 economies on the World Bank’s ease of doing business. Enforcing contracts, resolving insolvency and starting a business are particularly difficult relative to other Pacific Island countries. On the positive side, access to credit and obtaining protections for investors are somewhat easier compared to regional peers.
PNG scores poorly on the World Bank’s governance gauges, including significant constraints in respect of the rule of law, government effectiveness and control of corruption. Such constraints can hurt business confidence, impede economic development, undermine policy formation and implementation and hinder social cohesion.
Risk of expropriation in PNG is moderate. This aligns with the low 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.
Political risk is moderate to high. Political risk reflects the potential for leadership challenges to inhibit progress of resource developments that leads to weaker outcomes for GDP growth, government finances and foreign exchange liquidity. Prime Minister James Marape will not face a potential leadership challenge until November 2020, as votes of no confidence cannot take place within 18 months of a Prime Minister’s appointment.