Institute of National Affairs

Institute of National Affairs Independent Public Policy Think Tank in Papua New Guinea

NCD's apparent war against informal sellers in informal markets across the National Capital is liable to fuel a surge i...
24/08/2026

NCD's apparent war against informal sellers in informal markets across the National Capital is liable to fuel a surge in petty crime, as economically marginal households desperately seek to feed their families in this expednsive city, especially over the next months with staple foods becoming more inaccessible and costly during the current El Nino/drought....
If NCD dislikes informal markets, as being untidy or prone to buai spitting, then they need to provide many more formalised and accessible local market facilities, rather than allowing so much of the city's public space go to more, often unneeded, commercial development, often by outside interests, in some cases even being granted tax subsisdies and other exemptions.... NCD (and Lae) have already become centres with very low levels of public parks, while the prevalent informal markets/trading that dominate Asian cities and provide a large slice of total employment and incomes) and forced out here..
NCD has very odd notions of how a city should develop. Most cities across the world evolved, at least partly, from informal settlements that are progressively formalised, but some PNG cities and towns seem unduly controlled by those with control of the real estate market, often have gained such opportunities through misuse of power and influence, eg with allocations exempted from Land Board hearings, soemtimes bogus Land Board hearings, and securing large development leases, which are then converted to Business and Agriculture leases, without having complied with teh requirements of the Development Lease.

INA POLICY BRIEFRight-Sizing Papua New Guinea's Public SectorEffective service delivery, real accountability, and an ena...
23/08/2026

INA POLICY BRIEF
Right-Sizing Papua New Guinea's Public Sector
Effective service delivery, real accountability, and an enabling environment for business and investment and SME-led job creation
August 2026
Executive Summary
Papua New Guinea's public sector has grown less through deliberate design than through accumulation. Successive governments have responded to genuine service-delivery failures by creating new authorities, agencies and boards rather than fixing or empowering the institutions already mandated to do the job. The result is a state architecture with overlapping mandates, diffused accountability, rising recurrent costs, and a regulatory footprint that is harder for citizens, and harder still for small and medium enterprises (SMEs), to navigate. This brief argues for a disciplined “right-sizing” agenda: consolidating and strengthening core institutions, requiring rigorous functional and cost-benefit justification before any new body is created, and clearing the duplicative licensing and compliance burden that discourages the business investment PNG needs to generate jobs. Right-sizing is not about a smaller state for its own sake, or even necessarily a smaller state at all — it is about a state that does fewer things, more clearly, more accountably, and better, and is more supportive and less of an impediment to genuine and constructive business and investment.
1. A Pattern of Institutional Proliferation
PNG's tendency to answer weak implementation with new institutions is not new. Public administration scholarship on PNG's post-independence reform experience has long observed that restructuring exercises repeatedly reshuffled departments and statutory bodies without addressing the underlying organisational dysfunctions — leaving basic bureaucratic problems intact while adding leadership turnover and institutional insecurity on top. Sometimes such reforms have been constructive, or partly effective, but then not sustained, but have often failing to remove the superseded institutions, which often continue to operate alongside.
That pattern persists., including at the political level, with the rolling out of additional Ministries, to the point where PNG has amongst the highest number of Cabinet Ministers, certainly per head of population. In 2025 and 2026, for example, with a spate of new agricultural authorities having been initiated, each acquiring powers or expanded powers as well as responsibilities, in some cases replacing existing entities (such as boards, agencies or corporations), and in other cases superseding or duplicating functions of the national Department of Agriculture and Livestock or provincial divisions. This contributes to an increasingly confusing institutional architecture for agriculture, where extension had been decentralised just after independence, but has seen three additional Ministers added in 2022, (in contrast to the 1970s and 1980s, when one Minister was responsible for primary industry, covering agriculture, forests and fisheries). It may be noted that all these institutions are dealing with farmers, who use their land for multiple agricultural, forestry and other purposes, according to conditions, labour availability, including market conditions, yet now face a barrage of separate authorities, each with mandates and targets, trying to direct, cajole or control them and those undertaking agricultural trade and processing. Some level of specialism is valuable, to be able to address specific technical issues, but the focus has shifted away from understanding the farmers’ needs and providing relevant support, to oversight and control, and even state intervention and ownership, in some cases undermining farmers’ motivation and impeding investment and sector development and livelihoods. Perhaps the worst examples are the planned oil palm authority, replacing the oil Palm Industry Corporation, which had been assigned limited (smallholder extension) responsibilities for good purpose, with the new authority risking undermining sector development in the one agriculture industry which has been consistently more successful over recent years, as a result, partly, of having only limited state intervention; that said, there are areas where stronger oil palm industry standards should be applied, notably over land and forest grabbing and poor standards applied, entailing certain enterprises, particularly coming out of the logging industry, but constraining land grabbing and raising standards doesn’t seem to be the focus of the new authority.
Examples abound across the sectors, with overlaps in town and physical planning, land and urban authorities, transport and civil aviation, energy, natural resource and climate management, with the frustrations highlighted, for example, in 2025 with MVIL and the Road Transport Authority duplicating various functions and requiring road users to queue in some cases for days to repeat the same registration and insurance tasks. This was one of the first examples of duplication which the Reset@50 task force was able to help address in 2025, when it highlighted the need for rationalisation.
The 2025 launch of the National Monitoring and Coordination Authority (NMCA) is instructive precisely because it was designed with good intentions: to ensure “every Kina” allocated through the Budget is tracked to where it is spent, and to correct fragmented oversight and weak coordination across government. Independent commentary has raised the concern this brief highlights — PNG already had a planning, coordination and evaluation framework built around the Department of National Planning and Monitoring, sector agencies and provincial administrations, and the associated legislation. Establishing new authority whose functions substantially overlap with that framework risks adding cost and complexity without a demonstrated efficiency gain, while fragmenting the reporting lines that accountability depends on. However, in this case, by separating M & E s from the planning function may prove constructive, but only so long as there’s an effective loop back, to enable evaluation to influence policy and planning revision.
The same dynamic appears in the district-level architecture, where District Development Authorities established in 2014 sit alongside, rather than inside, provincial administrations and Local-Level Governments, and in the state-owned enterprise sector, where portfolio and trustee responsibility for entities such as PNG Power, Kumul Agriculture and Kumul Minerals Holdings have been reassigned across ministries in successive restructures — a sign that ownership, policy and regulatory functions are not yet settled into stable, accountable lines. The Kumul Resource companies, which acquire the state’s equity entitlement in resource projects, pose separate concerns, being neither a stabilisation or endowment fund, as per a sovereign wealth fund, operating under strict operating guidelines, but comprising of both semi-commercial operations and operating ostensibly parallel budgets to the State, lacking strict operating and reporting rules, and essentially withholding revenue required by the state, while expending upon activities that may be inconsistent with agreed national priorities as set out in the national or sectoral development strategies.
2. Why Duplication Undermines Both Service Delivery and Accountability
2.1 It multiplies fixed costs without multiplying capacity
Every new authority requires its own leadership, corporate services, ICT systems, office premises and governance structure. In a fiscal environment where health, education, infrastructure and law-and-order agencies remain under-resourced, each additional statutory body is a claim on the same finite pool of skilled personnel and recurrent budget — often bidding public servants away from the frontline agencies right-sizing is meant to strengthen.
2.2 It fragments, rather than sharpens, accountability
When two or more bodies hold overlapping mandates, failure becomes easy to explain and hard to attribute. Citizens and Parliament cannot hold a single institution to account for an outcome that several agencies claim partial responsibility for. Genuine accountability requires that one body clearly own one function — duplication is the enemy of that clarity, however well-intentioned each individual body's establishment was. This is particularly the case in PNG, where many government institutions are hard-pressed to be able to ensure compliance, where the rules are in many cases unclear or impractical and the penalties outdated and don’t provide a significant disincentive, and where those disinclined to adhere to them either ignore them, or too often have a cosy arrangement with a political or bureaucratic leader to by-pass the rules or penalties. The principle of adherence to the rule of law is fundamental to a functioning society, but too many under-resourced institutions, outdated or duplicative rules and loopholes, and a significant number of both officials and businesses/individuals ready to bypass the rules, either by intent or desperation, undermines accountability, service delivery and performance.
2.3 It slows implementation rather than speeding it up
New coordinating bodies frequently need to build relationships, data-sharing arrangements and reporting protocols with the very agencies whose work they are meant to oversee. That start-up period is itself a delay in delivery, and if the new body's authority is contested or unclear relative to an existing department, coordination costs can rise rather than fall.
2.4 It raises the compliance burden on business and SMEs
The same proliferation that affects government-to-government coordination affects government-to-business interaction. Firms — particularly small, thinly capitalised SMEs without in-house compliance capacity — face licensing, registration and reporting requirements spread across national regulators, professional and industry bodies, and provincial or district authorities. Analysis of SME conditions in PNG has long identified the cost and complexity of formal start-up requirements as a driver of informality: firms simply avoid registering rather than navigate the process, forfeiting the tax base, credit access and legal protection that formalisation would bring them. Investment climate reporting has separately identified regulatory uncertainty and constrained government capacity, alongside corruption, as recurring constraints on doing business in PNG, with small enterprises disproportionately affected.
3. Illustrative Cases
Body / mechanism Stated purpose Duplication or overlap risk
National Monitoring and Coordination Authority (NMCA), gazetted Nov 2025 Whole-of-government performance monitoring, coordination and results reporting on public expenditure Overlapped functions long held by the Department of National Planning and Monitoring, the National Economic and Fiscal Commission, DIRD and sector departments; commentary in The National warned it risks “expanding bureaucracy without improving efficiency or service delivery” and fragmenting accountability rather than strengthening it, less there is effective rationalisation of those other institutions and functions
District Development Authorities (DDAs), established 2014 Channel constituency development funds and coordinate district-level service delivery Sit alongside provincial administrations and Local-Level Governments with overlapping planning and expenditure roles, reinforcing MPs’ direct control over funds that would otherwise flow through provincial budget and accountability systems. While DDAs, using major DSIP funding, are meant to follow processes entailing ward planning to district plans, this has been widely by-passed, and expenditure is often focused on local activities in districts, handouts of plant and equipment in the final period of a parliamentary cycle, or a few major and often over-priced projects, inconsistent with provincial plans, and often unsustained from one 5 year term to the next
State-owned enterprise holding and sector entities (e.g., Kumul group companies) Commercial management of state assets in petroleum, minerals, agriculture and other sectors Portfolio and trustee responsibilities have been repeatedly reshuffled across ministries (e.g., PNG Power, Kumul Agriculture, Kumul Minerals Holdings in 2026 restructures), reflecting unclear, shifting lines of ownership, policy and regulatory oversight. The Kumul resource companies, which hitherto had clear reporting and revenue channels to government, notably through Treasury, now have a single shareholder, and deficient planning and reporting arrangements, over investments, revenue transfers to the state, and expenditure into parallel budgets, even with Kumul Petroleum reportedly expending USD 100 million on basic groundwork for a multi-story tower block in the Port Moresby CBD, of questionable utility, and with essentially nothing to show for it, while the state was crying out for revenue for priority public goods.
Business licensing and registration (IPA, sector regulators, provincial and district permits) Protect standards, revenue collection and reserved-sector policy for PNG businesses Multiple licensing touchpoints across national regulators, professional bodies and subnational governments raise the time and cost of formalising a small business, even as the IPA’s Online Registry System has simplified national company registration
Sources: The National (“Governance risks of proposed authority”, “Chief secretary outlines need for NMCA”); Department of Prime Minister and NEC statements on the NMCA and 2026 SOE portfolio restructure; PNG National Research Institute, Discussion Paper 146 (SME policy priority areas); US Department of State Investment Climate Statements on Papua New Guinea.
4. Principles for a Right-Sizing Agenda
4.1 A functional review before any new body is created
• Require a mandatory mapping exercise, before Cabinet consideration, showing which existing department or authority already holds each proposed function, and why strengthening that body's or bodies’ budget, staffing or legal powers cannot achieve the same objective.
• Publish this mapping alongside the enabling legislation or NEC decision, so Parliament and the public can scrutinise the duplication risk before, not after, establishment.
4.2 Sunset clauses and mandatory review
• New authorities, task forces and coordinating bodies should carry statutory sunset or review dates — for example, a mandatory five-year functional review with a default lapse unless renewed — so that institutions created for a specific problem do not become permanent by default and when a new institution is indeed established the body that it may have effectively replaced is removed, or merged.
4.3 Consolidation of overlapping bodies and the powers that they hold and apply
• Undertake a whole-of-government audit of statutory authorities, boards and commissions with overlapping monitoring, coordination, licensing or regulatory functions, and bring forward a consolidation schedule rather than treating each body's abolition or merger as a one-off political decision.
• Where coordination is genuinely the gap, prefer strengthening the mandate, data systems and enforcement powers of an existing central agency — such as the Department of National Planning and Monitoring — over creating a parallel authority.
• A major focus should be upon ensuring public institutions are clear in their role, either as regulatory bodies and/or service delivery entities, and they are enabled to perform effectively. There is a tendency within the PNG public sector to seek powers, where often powers are not required, or even should be avoided. In many cases public service delivery bodies should refocus upon just that; focusing on quality and accountable customer service delivery, whether in health services or agricultural extension. Granting powers to such service providers, for example to direct farmers to produce a crop or product of the bureaucrats’ choice, or to cajole mothers attending health facilities, is inappropriate, when the aim should be to offer a quality service and to appeal to the public to avail themselves of that service.
4.4 A single point of entry for business and SME compliance
• Extend the Investment Promotion Authority's Online Registry System model — which has already simplified national company registration — into a genuine one-stop platform covering the sector licences, provincial permits and professional registrations an SME most commonly needs, with statutory turnaround times.
• Task one lead agency with harmonising licensing requirements across national regulators and subnational governments, rather than leaving SMEs to reconcile inconsistent requirements themselves.
4.5 Clear, stable lines of state-owned enterprise ownership
• Fix ministerial and trustee responsibility for each state-owned enterprise in legislation or a public ownership policy, rather than by administrative reassignment, so that accountability for commercial performance does not shift with each government restructure. Review whether state equity is even the most appropriate route, as opposed to leaving private entrepreneurs to take the risks, secure capital and invest, with the State focusing upon its core functions, including revenue collection, regulatory standards, from ensuring competition, to health, labour and environmental standards, and safeguarding engagement and approvals of customary landowners etc.
4.6 Tie new institutions to measurable delivery outcomes
• Any new body should be justified, and subsequently assessed, against specific, measurable service-delivery indicators — not process indicators such as reports produced or meetings held — so that its contribution beyond existing institutions can be verified rather than assumed.
5. Conclusion
PNG's development challenges — in health, education, infrastructure and law and order — are challenges of implementation as much as of policy design. Adding institutions, and constantly to role out new, and often duplicative or inappropriate rules, is an understandable political response to visible failure, but the evidence from PNG's own reform history, and from recent examples such as the various agricultural authorities, District Development Authorities and the shifting management of state-owned enterprises, is that duplication or burgeoning numbers of under-resourced institutions rarely fixes implementation and often makes accountability harder. A right-sized public sector — with fewer entities, and less overlapping bodies, clearer single-agency ownership of each function, and a simplified compliance environment for business and the public — is more likely to deliver the services citizens need and the confidence investors, including PNG's own SMEs, require to invest, grow the economy and create jobs. Reform should be measured not by the number of new Ministries and authorities announced, but by the clarity of accountability and the speed and reliability with which existing institutions deliver, and ease with which credible business and investment progress (which safeguarding against non-compliant businesses) and the accessibility of good services for the public.

Why the State Should Avoid Acquiring Equity in Domestic Commercial EnterprisesA Policy Paper on Conflicts of Interest, F...
18/08/2026

Why the State Should Avoid Acquiring Equity in Domestic Commercial Enterprises
A Policy Paper on Conflicts of Interest, Fiscal Opportunity Cost, and the Case for Regulatory Restraint
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1. Introduction
Across resource-rich developing economies, and particularly in Papua New Guinea, the State is regularly presented with the option — sometimes framed as an entitlement, sometimes as a strategic imperative — of taking direct equity stakes in commercial enterprises operating within its own jurisdiction. This is most visible in the extractive sector, where the Mining Act and the Oil and Gas Act give the State a legal entitlement to acquire equity of up to 22.5% in oil and gas projects and 30% in mining projects. It is also visible more broadly through the Kumul group of state-owned enterprises (SOEs), which today spans electricity, water, transport, telecommunications, mining, petroleum, and agriculture, and through episodes such as the 2019 nationalisation of Ok Tedi Mining and the 2023 acquisition of a majority stake in the Porgera mine.
This paper sets out the case for a more cautious default position: that the State should generally avoid acquiring equity in domestic commercial enterprises, especially where doing so creates a conflict with its social and environmental regulatory responsibilities, and where the capital and institutional attention required could instead be directed to more pressing public expenditure priorities. This is not an argument against a state role in the economy altogether — regulation, taxation, service delivery and infrastructure provision remain core functions of government — but an argument that direct ownership of commercial risk is usually the wrong instrument for achieving public purposes, and frequently undermines them. This has proven to be the case particularly where for the past thirty years or more it has proven increasingly hard for state actors to restrain from making untoward appointments to the boards or management of State entities, including important public utility companies (e.g. wantoks or political supporters), contributing to poor performance of complex organisations, or when serious potential environmental ramifications may result from projects, such as the proposed Frieda river copper/gold mine, or the Central cement project, using traditional coal/clinker based technology with high emissions, where stronger social and environmental safeguards may be waived to promote better commercial returns, or private benefits.
The paper proceeds in four parts: the structural conflict of interest between the State as owner and the State as regulator; the fiscal and opportunity-cost case against equity acquisition; the PNG-specific evidence on how this has played out; and a discussion of alternative instruments through which the State can capture the benefits it seeks from equity participation without its costs.
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2. The Structural Conflict: Referee and Player Cannot Be the Same Actor
2.1 The core problem
When government holds shares in a commercial enterprise, it occupies two roles simultaneously: shareholder, seeking a commercial return, and regulator, responsible for enforcing labour standards, environmental protection, tax compliance, consumer safety and competition rules against that same enterprise. The academic and policy literature treats this as a well-established structural problem rather than a hypothetical risk. As one analysis of SOE governance put it, state-owned enterprises face conflicts of interest that stem from government's dual role as owner, operator and businessman on one hand, and as protector of the public interest and regulator on the other; besides pursuing profit maximisation, SOEs often carry social mandates, while government's regulatory function requires it to enforce the very labour and environmental standards its own enterprise must meet — goals that are difficult to reconcile in a single institutional actor.
This is not merely a developing-country phenomenon. Historical experience in the United States, where state governments were shareholders in banks, railroads and canals in the eighteenth and early nineteenth centuries, documented a recurring pattern: states became reluctant to charter competing enterprises in industries where they already held stock, for fear that new competition would erode the value of their own investment. The same logic applies today to environmental and social regulation: a government that has committed public capital, prestige and often political capital to a resource project has a material interest in that project succeeding financially, which sits uneasily against its duty to impose costly compliance obligations, order production stoppages, or level substantial penalties when the project breaches environmental or safety standards.
2.2 Why formal separation is hard to sustain in practice
The standard technical response — recommended by bodies such as the OECD and the World Bank — is to separate the ownership function from the regulatory function institutionally, housing them in different agencies with different reporting lines. This is sound in principle, and has been applied over recent years in PNG by separating the former regulatory powers of PNG Power Ltd and placing them into the new National Energy Authority, which also inherits policy functions from the former Department of Petroleum and Energy. We’ve also seen in PNG the separation of policy from regulatory functions as with the Mineral Resources Authority (MRA) from policy functions, retained under a Department, until these have lately been remerged. The separation of the motor vehicle licensing and insurance functions, also occurred, but merely added layers of timely bureaucratic tasks on the more customers. In practice, however, such multiple objectives and institutions can prove difficult to sustain where:
• The same executive (Cabinet or National Executive Council) ultimately appoints both the regulator's leadership and the SOE's board, and approves both bodies' budgets;
• The state entity is financially significant relative to the regulator's own resources, creating asymmetries of technical capacity and lobbying power;
• Ministers responsible for the commercial performance of state entities are also, directly or indirectly, responsible for the regulatory agencies overseeing them; and
• The enterprise in question is large enough, or where its monopoly over the provision of a utility so great, that its financial or operational distress would itself become a matter of national economic concern, giving the state further incentive to go easy on enforcement.
Where a country's institutions are still consolidating — as is the case with many of PNG's regulatory bodies — the theoretical separation of ownership and regulatory functions is harder to make credible, and the conflict of interest is correspondingly more acute rather than less. This has proven to be the case on multiple occasions in the past, including when, for example, the competition and consumer affairs watchdog was seen to be jeopardising the prospects of the State-owned telecommunication corporations, and found itself losing much of its regulatory authority to another more compliant regulatory entity, which has subsequently safeguarded the state corporations, notably the wholesale internet provider, many would say at the consumers’ expense.
2.3 Consequences for environmental and social regulation specifically
Environmental and social regulation, is where this conflict bites hardest, arguably along with competition/ anti-trust or market regulation, because the costs of enforcement (mine closures, remediation orders, compensation to displaced or affected communities, restrictions on operations) are immediate and quantifiable, while the benefits are diffuse and long-term. A state that is also a part-owner of the enterprise being regulated has a direct financial stake in minimising those enforcement costs — precisely the moment at which citizens and downstream communities most need a regulator acting purely in the public interest. This dynamic is a documented risk in the extractive sector generally, where the state's equity position in projects can complicate its ability to act as an impartial arbiter between commercial operators and the communities and environment affected by their operations.
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3. The Fiscal Case: Opportunity Cost and Contingent Liability
3.1 Equity acquisition competes directly with other public priorities
Every kina committed to acquiring or maintaining equity in a commercial enterprise is a kina — or, more often, a kina of borrowing capacity — not available for health, education, food security, or basic infrastructure. This is not an abstract trade-off in the PNG context. A 2026 World Bank Public Finance Review found that PNG's resource revenues have averaged just 1.9% of GDP between 2013 and 2024 despite production nearly doubling over that period, and identified improving how public funds are spent and substantially increasing investment in health, education and social protection as central to converting resource wealth into human capital. The same review notes that a child born in PNG today is expected to achieve only 42% of their potential lifetime productivity — a direct consequence of underinvestment in the basic services equity acquisition competes against. Independent reporting has separately noted deficient, and in some cases continuing deterioration in health and education standards, transport infrastructure and living conditions even as the state has continued financing commitments tied to major resource projects. Major surveys, such as the 2023 Rural Household, Agriculture and Nutrition Survey of 2023 (IFPRI) and the Demographic and Health Survey of 2016, as well as more discreet surveys, e.g. by Save the Children (SCF), have shown sustained high rates of child malnutrition, particularly unacceptable in a relatively resource rich country such as PNG.
3.2 Equity acquisition is frequently debt-financed, which converts an opportunity cost into a contingent liability
The distinction between spending money the State already has and borrowing to acquire equity matters enormously, because the latter creates a liability that must be serviced regardless of the underlying project's performance. PNG's own experience illustrates this well. The State's initial 19.4% stake in the PNG LNG project was financed through roughly US$16 billion in project debt (including interest), raised in the late 2000s; although exports began in 2014, repayments continued for more than a decade, meaning that for the majority of the project's operating life to date, cash flowed to debt service before it flowed to the State as shareholder. Separately, a A$1.3 billion loan from a Swiss investment bank to fund the State's equity share in a stakeholder in that same project became the subject of a Royal Commission of inquiry — a stark illustration of how debt-financed equity acquisition can generate financial and governance costs that dwarf the dividends eventually received. As PNG now prepares its mandated 22.5% equity entitlement in the Papua LNG project, Kumul Petroleum's own leadership has acknowledged that this will again require assembling substantial finance during a four-to-five-year construction period — a multi-year claim on fiscal capacity and management attention before any return is realised, in a country already running material fiscal deficits. Even where the State does not specifically borrow for equity acquisition, which becomes possible from 2027, when ostensibly the government will achieve a balanced budget (after 15 years of deficit financing), utilising public funds for this purpose when the state already has a debt level of 50% of GDP, and where debt servicing costs already eat up a large slice of total expenditure, would entail major opportunity costs.
3.3 Equity returns are back-loaded, uncertain, and exposed to risks the State cannot control
Even where equity acquisition is not directly debt-financed, it ties up public capital and institutional capacity for years before any dividend materialises, and dividends remain conditional on world commodity prices, project ex*****on, and operator decisions the State does not control. Analysis of the Papua LNG project has highlighted a wide range of financing and commercial risks facing equity partners, risks that a government primarily responsible for service delivery is poorly placed to bear relative to a specialist commercial or institutional investor with a diversified portfolio. Money spent on human resource development, including maternal health services, basic education, or food security programmes delivers measurable social returns on a much shorter and more certain timeframe and lower risk than an equity stake whose payoff depends on decades of stable commodity prices and project ex*****on. In the end, the State, particularly in PNG has not proven to date to be a good commercial investor, and has been a particularly poor operator for the most part. HR, law and justice and basic infrastructure investment has proven around the world to be a fundamental basis for sustainable economic as well as social development, and is a core function of the State. Even there the state has not proven very competent over the years in PNG, owing to multiplication of institutions, poor management, coordination and expenditure control and weak prioritisation and deficient funding, partly as a result of poor data, oversight and governance (including corruption). However, unlike business, which can be largely better performed by the private sector (albeit with appropriate state regulatory oversight), these functions of delivering public goods and services can only (for the most part) be delivered by the state, at national or local levels, and therefore require adequate commitment, including improved performance, adequate funding and oversight.
3.4 SOE governance costs are recurring, not one-off
Beyond acquisition costs, the State's existing portfolio of Kumul companies illustrates a further layer of ongoing cost: despite reforms in 2015 intended to grant SOEs greater autonomy and accountability, government retains significant control over their operations, and the entities have been assessed as lacking transparency, robust financial reporting, and a strong legal framework. Maintaining oversight of a large SOE portfolio consumes scarce administrative and technical capacity that could otherwise be directed to core public service delivery and regulatory functions.
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4. The PNG Pattern: Policy Has Oscillated, and the Costs Have Been Real
PNG's own recent history offers a useful natural experiment. Initial state equity in mining projects was offloaded in the early 2000s as part of a privatisation drive, coinciding with a decade of stronger private-sector investment. From 2007, policy shifted back toward greater state equity, culminating in heavy borrowing to increase the State's stake in the Papua LNG project, the 2019 nationalisation of Ok Tedi Mining, and the 2023 acquisition of a majority stake in Porgera. Each of these episodes has been accompanied by significant financing complexity, and in the case of Ok Tedi and Porgera, disruption to operations and subsequent project negotiations elsewhere in the sector. This oscillation is itself instructive: it suggests that the case for state equity has rested less on a settled assessment of its net benefits than on the political attractiveness of visible ownership stakes, particularly around election cycles and moments of resource nationalism — precisely the kind of decision-making the fiscal and institutional risks above suggest should be resisted.
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5. What the State Should Do Instead
None of the above implies the State should be a passive bystander to commercial activity or forgo the benefits of resource extraction. It implies that ownership is usually the wrong tool for capturing those benefits. In the case of minerals, oil and gas the resource already belongs to the State, so there’s no need even to acquire an equity stake, as opposed to agriculture, forestry, fisheries or land, where the resources belong for the most part to the customary landowners, or at least where the state has more restrained regulatory, including revenue collecting, opportunities, More effective and lower-risk instruments include:
• Taxation and royalties. Well-designed resource tax regimes (including windfall or rent-based taxes) allow the State to capture a share of project value without bearing commercial or operational risk, and without compromising its position as an impartial regulator.
• Strong, independent regulation. Environmental, labour, and safety standards enforced by an agency with no financial stake in the regulated entity's performance are more credible and more likely to be applied consistently.
• Targeted public expenditure. Directing resource revenue toward health, education, law and justice, food security and rural infrastructure — as recommended by the World Bank's 2026 Public Finance Review — delivers more certain and faster social returns than equity positions whose payoff is deferred, uncertain, and exposed to commodity-price cycles.
• Sovereign wealth or stabilisation funds, where genuine fiscal surpluses exist, offer a way to save and invest resource revenue with professional, arm's-length management, insulated from both political pressure and the ownership–regulation conflict; so long as high levels of governance, investment, management and draw down principles are adhered to, notably high standards under the Santiago Principles for such funds..
• Where equity participation is unavoidable (for example, where it is a pre-existing statutory entitlement), it should be ring-fenced from general government finances, managed by professionally governed entities operating at arm's length from ministers, financed from genuine surpluses rather than new borrowing, and subject to transparent public reporting — reducing, even if not eliminating, the conflicts and fiscal risks described above.
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6. Conclusion
Direct state equity in domestic commercial enterprises sits at the intersection of two serious problems. First, it places the State in the structurally awkward position of being both the commercial beneficiary of an enterprise's success and the regulator responsible for holding that enterprise to environmental and social account — a conflict that formal separation of functions rarely resolves in practice, particularly where institutions are still maturing. Second, it commits scarce public capital and borrowing capacity to commercial risk with uncertain, back-loaded returns, at the direct expense of public expenditure priorities — health, education, food security, and infrastructure — that deliver more certain and immediate benefit to citizens. Papua New Guinea's own experience with PNG LNG, Ok Tedi, Porgera and the forthcoming Papua LNG equity commitment illustrates both problems concretely: substantial debt burdens, governance controversy, and opportunity costs measured against a population where nearly half of young children are stunted and primary school completion rates remain as low as 33% in some regions. The more defensible default for the State is to capture value through taxation, royalties and independent regulation, to spend resource revenue directly on human capital and services, and to treat equity acquisition as an exception requiring a high justificatory burden — not a routine instrument of economic policy.

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