Papua New Guinea

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Petroleum, copper, gold, and other minerals made up 32 percent of gross domestic product in 2010, with oil and gas accounting for 23 percent of government revenues. Papua New Guinea's estimated 8 trillion cubic feet of natural gas reserves have the potential to dramatically increase national income, and gas exports are expected to begin in 2014. The country's mining industry has a troubled history, with decades of poor management leading to severe environmental damage and social upheaval. The RGI assesses the mining sector.

Papua New Guinea's Performance on the Resource Governance Index

Papua New Guinea received a "weak" score of 43, ranking 39th out of 58 countries, a reflection of critical gaps in government oversight across most aspects of the extractive sector.

(out of 58)
(out of 100)
39 Composite Score 43
31 Institutional & Legal Setting 59
Freedom of information law 0
Comprehensive sector legislation 100
EITI participation 33
Independent licensing process 100
Environmental and social impact assessments required 50
Clarity in revenue collection 50
Comprehensive public sector balance 100
SOC financial reports required 100
Fund rules defined in law N/A
Subnational transfer rules defined in law 0
44 Reporting Practices 34
Licensing process 33
Contracts 33
Environmental and social impact assessments 33
Exploration data 0
Production volumes 0
Production value 44
Primary sources of revenue 33
Secondary sources of revenue 22
Subsidies 0
Operating company names 0
Comprehensive SOC reports 100
SOC production data 43
SOC revenue data 67
SOC quasi fiscal activities 83
SOC board of directors 50
Fund rules N/A
Comprehensive fund reports N/A
Subnational transfer rules 0
Comprehensive subnational transfer reports 67
Subnational reporting of transfers 0
36 Safeguards & Quality Controls 50
Checks on licensing process 11
Checks on budgetary process 67
Quality of government reports 42
Government disclosure of conflicts of interest 100
Quality of SOC reports 50
SOC reports audited 100
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 0
Quality of fund reports N/A
Fund reports audited N/A
Government follows fund rules N/A
Checks on fund spending N/A
Fund disclosure of conflicts of interest N/A
Quality of subnational transfer reports 33
Government follows subnational transfer rules 0
28 Enabling Environment 38
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 13
Open Budget (IBP Index) 73
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 58
Government effectiveness (WGI) 26
Rule of law (WGI) 18
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional and Legal Setting (Rank: 31st/58, Score: 59/100) learn more

While Papua New Guinea has detailed mining legislation, it lacks clear revenue collection mechanisms, leading to a "partial" score of 59.

Papua New Guinea's legal framework includes clear principles and specific requirements that govern the mining industry. The Mineral Resources Authority represents the state's interests and acts as a regulator; it is subject to reporting and auditing requirements. The minister of mining grants licenses to companies on a first-come, first-served basis in exchange for royalties and taxes.

The Mineral Resources Authority collects royalties and the Internal Revenue Commission collects taxes; some revenues appear to bypass the treasury and are not reported to parliament. Environmental impact assessments are required prior to granting mineral rights but are rarely published. There is no effective freedom of information law. The government has expressed interest in implementing the Extractive Industries Transparency Initiative, but is not yet a signatory.

Reporting Practices (Rank: 44th/58, Score: 34/100) learn more

With a lack of official data on most aspects of the extractive industries, Papua New Guinea received a "failing" score of 34.

The 1992 Mining Act requires that limited information about the licensing process be disseminated publicly, but mining contracts are not published and the details of negotiations are not disclosed. Neither the Mineral Resources Authority nor the Internal Revenue Commission publishes information on resource revenues. The central bank provides information on prices, the value of resource exports, and production stream values; the Treasury Department publishes some information on dividends.

Safeguards and Quality Controls (Rank: 36th/58, Score: 50/100) learn more

Papua New Guinea's "partial" score of 50 reflects limited government checks on the licensing process and revenue collection system, but also accounts for substantial audit requirements for state-owned companies.

The legislature does not review contracts or play a significant oversight role. Licensing decisions are discretionary, with the minister of mining often participating in contract negotiations. However, government officials involved in regulating the extractive sector must report their financial interests.

The Auditor General's Office reviews resource revenues and publishes annual reports. The findings are presented to Parliament, but its Public Accounts Committee does not actively scrutinize revenues.

Enabling Environment (Rank: 28th/58, Score: 38/100) learn more

Papua New Guinea's "failing" score of 38 is due in part to especially poor performance on measurements of corruption control and the rule of law.

State-Owned Companies (Rank: 14th/45, Score: 69/100) learn more

Petromin is one of several state-owned extractive companies. It manages the government's equity in mineral and petroleum projects and is fairly transparent; it publishes annual reports with information on reserves, estimates of investment in exploration, production costs, the names of subsidiaries, information on quasi-fiscal activities, royalties, special taxes, dividends, and license fees. Petromin is subject to annual audits by an independent external auditor.

Natural Resource Funds learn more

Papua New Guinea is in the process of creating a sovereign wealth fund to receive revenues from several massive natural gas projects that are underway. The fund will also manage government surpluses from mineral exports. Though the details are still unclear, the fund is expected to begin operations in the next few years.

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