2018 Index of Economic Freedom

Papua New Guinea

overall score55.7
world rank127
Rule of Law

Property Rights38.0

Government Integrity33.1

Judicial Effectiveness55.1

Government Size

Government Spending82.0

Tax Burden71.1

Fiscal Health51.9

Regulatory Efficiency

Business Freedom60.6

Labor Freedom66.7

Monetary Freedom68.8

Open Markets

Trade Freedom85.9

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 7.9 million
  • GDP (PPP):
    • $28.0 billion
    • 9.0% growth
    • 5.5% 5-year compound annual growth
    • $3,541 per capita
  • Unemployment:
    • 2.5%
  • Inflation (CPI):
    • 6.9%
  • FDI Inflow:
    • $-39.6 million
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Papua New Guinea’s economic freedom score is 55.7, making its economy the 127th freest in the 2018 Index. Its overall score has increased by 4.8 points, with significant improvements in the fiscal health and government spending indicators far outpacing declines in monetary freedom and labor freedom. Papua New Guinea is ranked 28th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

Exploitation of Papua New Guinea’s extensive natural resource wealth is hindered by daunting topography, property rights issues, and a lack of adequate infrastructure. The government intrudes in many aspects of the economy through state ownership and regulation, not only raising the costs of conducting entrepreneurial activity, but also discouraging broader-based development of the private sector. The private business environment is also held back by an inefficient legal system and the lack of institutionalized open-market policies.



Formerly administered by Australia, Papua New Guinea became an independent parliamentary democracy in 1975. Its nearly 7.5 million people speak over 840 different languages. Elections held in July 2017 were marred by violence and other electoral problems. The leader of the People’s National Congress, Peter O’Neill, was sworn in for a second term as prime minister in August 2017, but concessions to his coalition partners forced by the PNC’s slimmer parliamentary majority could make it harder to implement policy. The country is richly endowed with natural resources, and the economy’s small formal sector is focused on exports of commodities such as gold, copper, oil, and natural gas. The vast majority of the population works informally in subsistence agriculture.

Rule of LawView Methodology

Property Rights 38.0 Create a Graph using this measurement

Government Integrity 33.1 Create a Graph using this measurement

Judicial Effectiveness 55.1 Create a Graph using this measurement

Protection of property rights is weak, and there are substantial delays in the government’s issuance of long-term leases and in other legal processes related to the acquisition and disposition of property. The judiciary is independent, but the judicial framework is poorly resourced and underdeveloped. Pervasive corruption and nepotism in connection with large-scale foreign investment windfalls are serious problems.

Government SizeView Methodology

The top individual income tax rate is 42 percent, and the top corporate tax rate is 30 percent. Other taxes include value-added and excise taxes. The overall tax burden equals 15.1 percent of total domestic income. Over the past three years, government spending has amounted to 24.5 percent of total output (GDP), and budget deficits have averaged 5.4 percent of GDP. Public debt is equivalent to 33.5 percent of GDP.

Regulatory EfficiencyView Methodology

In 2016, Papua New Guinea reduced the time required to start a business by streamlining the business registration process. It also adopted a new law that strengthens access to credit. There is a severe shortage of skilled labor. Child labor and trafficking in persons remain areas of concern. Heavily subsidized state-owned enterprises provide substandard services for power, water, banking, telecommunications, air travel, and seaports.

Open MarketsView Methodology

Papua New Guinea’s average applied tariff rate is 2.0 percent. Nontariff barriers impede some trade. The government screens new investment, and the regulatory system acts as a barrier to foreign investment. The availability of financial services is inconsistent throughout the economy, and much of the population remains underserved by the formal banking sector.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.4
3New Zealand84.20.5
6Malaysia 74.50.7
7South Korea73.8-0.5
12Thailand 67.10.9
16Brunei Darussalam64.2-5.6
18Kyrgyz Republic 62.81.7
25Sri Lanka57.80.4
26Solomon Islands57.52.5
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
31Pakistan 54.41.6
43North Korea5.80.9
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