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Papua New Guinea | 17 January 2024

Enhanced foreign direct investment can drive economic growth and development—PSDI

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SYDNEY, AUSTRALIA (17 January 2024)—Foreign direct investment (FDI) can be a powerful driver of economic growth and human capital development. A strategic approach and targeted reforms can support Pacific countries to attract, retain, and assess FDI effectively, according to a comprehensive study of the FDI frameworks in five Pacific countries, published today by the Asian Development Bank’s Pacific Private Sector Development Initiative (PSDI).

Investment For Growth: A Review of Foreign Direct Investment Frameworks in the Pacific examines the existing FDI frameworks in Papua New Guinea (PNG), Samoa, Solomon Islands, Tonga, and Vanuatu, alongside the challenges these countries face in attracting and utilizing FDI to achieve their national development goals.

“As countries in the Pacific seek ways to boost economic growth, reduce poverty, and move forward after COVID-19, FDI can be a vital part of government policy toolkits,” says report author Michael Mullins. “FDI can help Pacific countries overcome common barriers like limited access to capital and technology, and skills gaps in the private sector, while helping unlock business opportunities and create jobs.”

The report looks at Pacific FDI frameworks and policies across five key categories:

  • FDI entry examines the initial process and regulations for foreign investors to establish investments in the study countries, including FDI screening and restrictions.
  • Investment guarantees and obligations assesses the legal protections and obligations for foreign investors, including issues such as repatriation of capital and profits, and dispute settlement mechanisms.
  • Foreign investor residence reviews the policies and regulations related to residence and work permits for foreign investors and their representatives.
  • FDI monitoring and reporting evaluates the systems in place for monitoring and reporting FDI activities, including compliance and enforcement.
  • Investment promotion analyzes the strategies and activities undertaken by the study countries to attract foreign investment.

“The report is not looking to steer countries in any particular direction when it comes to determining the investment mix right for their economies,” says report co-author and PSDI Private Sector Development Analyst, Jarrod Harrington. “However, for countries that are looking to increase their foreign investment, the study offers a foundation for policymakers to assess their FDI frameworks against common, benchmarked standards and make decisions that support their strategic priorities.” 

“The report also encourages Pacific countries to compare their FDI frameworks to each other, since they often experience similar challenges and successes. While no single country stands out as a major performer across all aspects of FDI covered in the report, in some areas there are standout country examples which can serve as a model for other countries looking to improve in that area.”

PSDI is an Asian Development Bank (ADB) technical assistance program in partnership with the governments of Australia and New Zealand. It supports ADB’s 14 Pacific DMCs to improve the enabling environment for business and to achieve inclusive, private sector-led economic growth, including through reforms designed to enhance the enabling environment for investment.