The Investment Promotion Act 1992 is the law a foreign business must satisfy before it may carry on business in Papua New Guinea. It replaced the National Investment and Development Act (Chapter 120).
Section 1 — the purposes of the Act
(a) to promote and facilitate investment in the country by citizens and foreign investors;
(b) to provide for the grant of a certificate to a foreign enterprise;
(c) to define the activities open to a foreign investor;
(d) to provide for a register of foreign investment opportunities;
(e) to promote investments which will materially benefit the country and its people;
(ea) to monitor the impact of investment and the activities of enterprises;
(f) to establish the Investment Promotion Authority.
Section 1(e) lists what a beneficial investment looks like. An investment qualifies if it does any one of these, or any combination:
- Contributes to economic growth;
- Creates employment;
- Utilises domestic resources, particularly renewable resources;
- Assists in skills acquisition;
- Increases the volume and value of exports;
- Develops remote areas of the country;
- Facilitates increased ownership of investment by citizens;
- Promotes import replacement;
- Or effects any combination of them.
These are not decorative. Section 28(4)(b) requires the Authority to review the merits of an application to ascertain whether the proposed activity is likely to achieve all or any of the purposes of this Act — and section 28(4A)(b) makes it a ground of refusal if it is not.
How the Act is arranged
| Part | Sections | Subject |
|---|---|---|
| I | 1–4 | Purposes, constitutional compliance, definitions, binding the State |
| II–III | 5–24 | The Authority, its Board, the Managing Director, staff and funds |
| IV | 25A–36 | Certification of foreign enterprises, exemptions, reserved activities, the register, changes of ownership, cancellation and suspension |
| IVA | 36A–36G | Certification to participate in a national enterprise |
| V | 37–39 | Investment guarantees, MIGA and ICSID |
| VI | 40 | Appeal to the Minister |
| VII | 41–44B | Offences, void contracts, information, confidentiality |
| VIII | 46–57 | Repeal of the National Investment and Development Act and transitional provisions |
The core rule
A foreign enterprise that carries on business in Papua New Guinea without a certificate commits an offence under section 41(1)(a):
A fine not exceeding K100,000, with a default penalty of K10,000 for each day the offence continues.
And the offence is committed not only by the enterprise but by an officer or owner (however described) of it.
Worse, section 41A allows a court to declare unlawful and void a contract entered into by a foreign enterprise that held no certificate at the time.
The Act and the Companies Act 1997
A foreign company doing business in Papua New Guinea generally needs both:
- Registration as an overseas company under the Companies Act 1997 — see whether a foreign company must register and what an overseas company must do; and
- An IPA certificate under Part IV of the Investment Promotion Act.
They serve different purposes. Companies Act registration puts the company on the public register and imposes reporting duties. The IPA certificate authorises the activity the enterprise may carry on, and where.
Note that the Investment Promotion Act still uses definitions drawn from the Companies Act (Chapter 146) — the predecessor of the Companies Act 1997 — for corporation, officer, subsidiary and holding company. Those expressions are now found in the 1997 Act.
Both the Authority and the Registrar of Companies operate under the Investment Promotion Authority as an administrative body.
Who needs to read this
- Any foreign business proposing to operate here, whether by branch, subsidiary, joint venture or contract.
- Any Papua New Guinean company with foreign shareholders — the definitions of citizen and national enterprise turn on ownership and control.
- Any national enterprise selling an interest to a foreign investor — Part IVA requires a certificate before the interest is acquired, and section 41(1A) penalises the seller.
- Any enterprise whose ownership changes — section 32 requires a fresh application within 14 days in defined circumstances.
Sources
- Investment Promotion Act 1992 — ss 1–5, 27–41B
- Companies Act 1997
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.