Impact of Foreign Direct Investment on Economic Growth in PNG: A Review

Abstract: Foreign Direct Investment (FDI) is essential for driving economic growth in Papua New Guinea (PNG), a country abundant in natural resources but facing developmental challenges. This literature review highlights the positive effects of FDI, such as increased capital inflow that supports local businesses, creates jobs, and enhances productivity. FDI also contributes to infrastructure improvements, including roads and telecommunications, which are crucial for trade and the quality of life. However, significant challenges persist, including regulatory weaknesses creating an uncertain business environment, corruption undermining investor confidence, and environmental concerns, particularly in mining and agriculture. Furthermore, the uneven distribution of FDI benefits can lead to social tensions. In response, the PNG government is implementing measures to enhance the investment climate, such as reforming regulatory frameworks, increasing transparency to reduce corruption, and ensuring that local communities benefit from resource development. By tackling these issues, the government aims to foster a more conducive environment for FDI and promote sustainable economic growth. Keywords: Foreign Direct Investment, Economic Growth, Papua New Guinea, GDP