Businesses in Papua New Guinea (PNG) now have access to deeper and more diversified capital markets under a landmark reform which is expected to generate benefits for the broader economy.
The Securities Commission (Wholesale Corporate Bonds) Order 2023, endorsed by the PNG Ministry for International Trade and Investment (MITI), has expanded the bond market in PNG by providing a regulatory framework that enables funds to be raised through the issuance of wholesale corporate bonds.
This important reform provides access to alternative sources of funding that can help businesses grow with the potential for funds raised to help generate economic activity and jobs. The simplified process also ensures transparency before and after bonds are issued to limit risks to investors.
"Corporate bonds are important components of an active capital market and critical to the national development agenda as they open up a range of benefits for issuers, investors, and participants in the wider economy," said Richard Maru, PNG's Minister for International Trade and Investment. "This ranges from diversification of funding within the economy to investment diversification which includes better meeting the needs of institutional investors."
IFC, a member of the World Bank Group, with the support of the governments of Australia and New Zealand, worked closely with the Securities Commission of Papua New Guinea (SCPNG) and the Papua New Guinea National Stock Exchange (PNGX) to develop the regulatory orders under the Capital Market Act 2015 and related market rules that paved the way for the launch of a wholesale corporate bond market. This work followed a 2018 study by IFC into PNG's corporate bond market which found there were legal and regulatory gaps that needed to be addressed.
"Having a wholesale corporate bond market will make PNG's financial sector more competitive because it will allow companies to have access to an alternative financing instrument to raise funds," said Markus Scheuermaier, IFC Resident Representative to Papua New Guinea. "Moreover, investors are also able to diversify investments to reduce both their capital risks and the volatility of returns by investing in corporate bonds."
"Australia is pleased to support the IFC-PNG Partnership for the broader development of PNG capital markets. We are excited about the opportunities that will come from the new Securities Commission (Wholesale Corporate) Order 2023," said Jon Philp, Australian High Commissioner to Papua New Guinea. "The Australian Government is committed to supporting PNG to develop pathways to economic growth. We see further development of capital markets as critical to strengthening private sector growth and PNG's long-term economic prosperity."
Consultations were held with potential issuers, investors, intermediaries, and other market practitioners as part of the work to develop the new regulations and rules.
"We are really pleased to see the development of a wholesale corporate bond market in Papua New Guinea. This market will add an important new financing option for local businesses and is a significant step forward in building competitive and diversified financial services," said Peter Zwart, New Zealand High Commissioner to Papua New Guinea. "An effective and transparent financial sector is key to the ability of the private sector to invest in and grow the businesses opportunities and jobs Papua New Guinea needs."
The Papua New Guinea Government has been a strong advocate of the need to develop the nation's financial market. This reform will support the Ministry for International Trade and Investment's broad reform agenda of diversification of the PNG economy by providing potential investors an alternative financial instrument to mobilize private sector financing.
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
Papua New Guinea Partnership
IFC's work in Papua New Guinea (PNG) is supported by the governments of Australia and New Zealand under the PNG Partnership, to unlock private sector investment, promote sustainable economic growth and boost shared prosperity in PNG.
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