High costs affecting investors

By DALE LUMA
PAPUA New Guinea is failing to attract domestic and foreign investors due to high and uncompetitive costs, Institute of National Affairs (INA) executive director Paul Barker says.
“The country is faced with high transport costs, costly and unreliable utilities, high risks from changing policies, inefficient public administration, weak tenure security (making it hard also to secure credit) and corruption,” Barker told The National.
“The underlying opportunities are great but getting the Government out of the way of impeding business and investment and even trying to run everything itself, but focusing on its own core functions, is a prerequisite.”
Commenting on the country’s debt level, Barker said undue dependence on loans was unsustainable.
“It partly defers the responsibility for revenue raising to the future, including the next generation, but also adds to debt servicing costs, which take away funds from priority public expenditure to pay the interest and charges,” he said.
“Borrowing has a role, particularly during downturns in the economic cycle or for some major expenditure which will provide a valued return and increased the overall economy.
“But it can easily get out of hand, and be used for ill-targeted and unproductive expenditure and wasteful status projects. Debt levels grew worldwide during the pandemic when economic activity was restrained and governments had to perform a range of interim support roles.
“There were various infrastructure loans, like from the ADB and others, but most of the loans during this period were for budget support, to make up for the shortfall of revenue because of the economic downturn, including low commodity prices and decline in world trade and demand.
“So it paid to help sustain core activities, such as education and health services, but also the public sector.
“Most loans came with some conditions related to performance delivery, but the good aspect was that most of the international loans were provided at very concessional rates, near to zero for an extended term, replacing higher cost international and some local commercial borrowings.
“However, a fair bit of domestic and higher interest domestic borrowing also occurred,” Barker added.