Economist hails O’Neill’s call to strengthen arbitration rules

By PETER ESILA
AN international economist says Prime Minister Peter O’Neill’s call to accede to the New York Convention is good news for opening Papua New Guinea to more investors.
Prof Jordi Paniagua, of the University of Valencia, Spain, said countries like PNG could significantly increase foreign direct investment (FDI) by strengthening arbitration regimes.
“Since 2003, there is an increasing number of companies which have invested in PNG,” he said.
“Today, we have approximately US$20 billion (K67.4bil) foreign direct investment in PNG and around 12,000 jobs directly created by these foreign companies, so that is sizeable.
“PNG is really open to foreign investment, and as PNG prime minister said, it is not only in capital investment, it is also jobs.”
Paniagua said the largest share of investments was in extractive industries like oil and natural gas.
This is followed by more individual sectors like business services, food and tobacco, metals and financial services.
“The largest investment partner in PNG is naturally Australia because they are very close, not only geographically but historically,” Paniagua said.
“The rest of the players are China, Korea, India.
“You can also see South Africa, USA, Netherlands, Great Britain.
“Why are these countries crossing half of the world to come here?
“First is because these countries are big countries. Second is that these are all the countries that have a common law: Germany, Canada, USA, India, Australia, Singapore, Fiji.”
Paniagua said a country’s economic size, distance from PNG, and most importantly PNG’s ability to change its contractual environment were reasons for trade and FDI. “Contracts are not complete when we have differences in the legal system,” he said.
“PNG can increase contractual environment by increasing the quality of arbitration.
“I am really happy that PNG is going to rectify the New York Convention.
“Countries that have a better arbitration quality receive more investment across nearly every single sector, and they will invite more investors.
“Commercial disputes happen any time.
“Arbitration provides an effective and predictable dispute settlement mechanism which is flexible, confidential and final.”