2021 Index of Economic Freedom

Papua New Guinea

OVERALL SCORE58.9
WORLD RANK103
Rule of Law

Property Rights46.1

Judicial Effectiveness50.8

Government Integrity32.7

Government Size

Tax Burden71.5

Government Spending88.0

Fiscal Health82.0

Regulatory Efficiency

Business Freedom57.4

Labor Freedom70.2

Monetary Freedom72.1

Open Markets

Trade Freedom80.4

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 8.8 million
  • GDP (PPP):
    • $34.6 billion
    • 5.0% growth
    • 4.3% 5-year compound annual growth
    • $4,569 per capita
  • Unemployment:
    • 2.5%
  • Inflation (CPI):
    • 3.8%
  • FDI Inflow:
    • $334.0 million

Papua New Guinea’s economic freedom score is 58.9, making its economy the 103rd freest in the 2021 Index. Its overall score has increased by 0.5 point because of improvements in fiscal health and other factors. Papua New Guinea is ranked 19th among 40 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

The economy of Papua New Guinea remains in the mostly unfree category where it has been since Index grading of the country resumed in 2009. Major obstacles to greater economic freedom include the country’s very limited levels of investment freedom and financial freedom, along with chronic corruption, weak protection of property rights, and an inadequate judicial system.

IMPACT OF COVID-19: As of December 1, 2020, seven deaths had been attributed to the pandemic in Papua New Guinea, and the economy was forecast to contract by 3.3 percent for the year.

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Background

Formerly administered by Australia, Papua New Guinea became an independent parliamentary democracy in 1975. Its more than 8 million people speak over 840 different languages. After a vote of no confidence, Prime Minister Peter O’Neill was replaced by James Marape of the Pangu party in 2019. Papua New Guinea is richly endowed with natural resources, and its economy’s small formal sector is focused on exports of such commodities as gold, copper, oil, and natural gas. The vast majority of the population lives below the poverty line and works informally in subsistence agriculture. In 2019, the Autonomous Region of Bougainville voted for independence from Papua New Guinea in a nonbinding referendum.

Rule of LawView Methodology

Property Rights 46.1 Create a Graph using this measurement

Judicial Effectiveness 50.8 Create a Graph using this measurement

Government Integrity 32.7 Create a Graph using this measurement

Property rights are generally respected, but acquisition and disposition of property are subject to substantial delays. More than 80 percent of the land is “customarily owned” and lacks title. The judiciary is independent but very slow. Courts are underfunded and short-staffed. Because of bureaucracy, limited financial and human capacity, and lack of political will, pervasive corruption and nepotism often go unpunished.

Government SizeView Methodology

The top individual income tax rate is 42 percent, and the top corporate tax rate is 30 percent. The overall tax burden equals 13.6 percent of total domestic income. Government spending has amounted to 20.0 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.1 percent of GDP. Public debt is equivalent to 38.4 percent of GDP.

Regulatory EfficiencyView Methodology

Business freedom in Papua New Guinea has declined for two years in a row. The recovery rate in bankruptcy proceedings has dropped. Labor regulations are not restrictive. Heavily subsidized state-owned enterprises provide substandard services for power, water, banking, telecommunications, air travel, and seaports.

Open MarketsView Methodology

Papua New Guinea has five preferential trade agreements in force. The trade-weighted average tariff rate is 2.3 percent, but numerous nontariff barriers undercut trade flows. Foreign investors may not own land, and investment in several other sectors is restricted. Financial intermediation varies across the country, and a large portion of the population remains unconnected to the banking system.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.70.3
2New Zealand83.9-0.2
3Australia82.4-0.2
4Taiwan78.61.5
5Malaysia74.4-0.3
6Japan74.10.8
7South Korea740.0
8Kazakhstan71.11.5
9Thailand69.70.3
10Indonesia66.9-0.3
11Brunei Darussalam66.60.0
12Philippines64.1-0.4
13Kyrgyz Republic63.70.8
14Mongolia62.46.5
15Fiji62.2-1.2
16Samoa61.9-0.2
17Vietnam61.72.9
18Vanuatu60.5-0.2
19Papua New Guinea58.90.5
20China58.4-1.1
21Uzbekistan58.31.1
22Bhutan58.3-3.8
23Tonga57.5-1.3
24Cambodia57.30.0
25Bangladesh 56.50.1
26India56.50.0
27Solomon Islands56.53.6
28Sri Lanka55.7-1.7
29Tajikistan55.23.0
30Burma55.21.2
31Maldives55.2-1.3
32Laos53.9-1.6
33Afghanistan53-1.7
34Pakistan51.7-3.1
35Nepal50.7-3.5
36Micronesia50.4-1.6
37Turkmenistan47.40.9
38Timor-Leste44.7-1.2
39Kiribati44.4-0.8
40North Korea5.21.0
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