Papua New Guinea Businesses Suffer High Costs from Crime and Violence
15 August 2014
New World Bank Report Assesses Impact of Crime and Violence on PNG businesses
PORT MORESBY: A World Bank Group report released today says that eight in ten businesses in Papua New Guinea suffer
substantial losses and security costs as a result of high rates of crime and violence, slowing business expansion and
hampering the country’s economic development.
More than 80 percent of 135 companies surveyed said their business decisions are negatively influenced by the country’s
law and order situation, with crime significantly increasing the cost of doing business.
The expense of avoiding criminal damage limits firms’ ability to grow, deters start-ups, and imposes significant
long-term social costs on the country.
“Crime in Papua New Guinea constrains businesses and threatens to put the brakes on the economy,” said Carolyn
Blacklock, Resident Representative in Papua New Guinea for IFC, the member of the World Bank Group that focuses on
private sector development in emerging markets. “Local firms not only struggle to be competitive as they seek to manage
crime, but they also pass on these costs to consumers via higher prices, less choice, and the absence of new products
and services. This is bad not just for business, but the economy as a whole.”
The World Bank Group report, entitled “The Cost of Crime and Violence to Businesses,” draws on a survey and interviews
conducted with the local business community, and is the first study in the country to comprehensively assess the impact
of crime and violence on local enterprise.
The report finds that security in particular represents a significant and growing expense for businesses.
84 percent of the country’s firms pay for security hardware, such as installing specialized gates and security alarms,
which is 30 percent higher than the average in the East Asia and Pacific region. Hiring private security consumes on
average five percent of firms’ annual operating costs.
Companies are also suffering direct losses averaging K89,000 ($33,000) per year from stolen property and about K71,000
($26,000) annually to petty theft by employees. 38.5 percent of companies reported closing their businesses early each
day to avoid becoming victims of crime, resulting in losses of income estimated at an average of K93,000 ($34,000) per
“Everybody in PNG is losing money and time to crime,” said Alys Willman, World Bank Social Development Specialist and
co-author of the report. “While the report assesses direct losses from crime and violence, we can never calculate the
investment foregone, the expansions to new products and areas that never happened, the number of businesses that never
opened their doors, or the jobs that were never created because the costs of security were too high. These costs are all
passed on to consumers – and everybody suffers.”
Businesses are also worried about broader social costs, the report found. High levels of crime and violence create fear,
which constrains the movements of staff and customers and stigmatizes the young, who are often seen to be perpetrators
of violence and crime. Domestic violence, in particular, intrudes into the workplace, contributing to absenteeism and
affecting morale and productivity of staff. Official police data, and data from Government-led victimization surveys,
suggests that crime has stabilized in the country over the last decade, though there are significant disparities across
There is evidence however that violent crime may be increasing as a proportion of overall crime, especially in
recognized ‘hotspots’ such as the Western Highlands, Madang, Lae and the National Capital District. In Lae, incidence of
violent crime more than doubled in 2010 compared with 2008.
The World Bank report is part of its wider Research and Dialogue Series on the socioeconomic costs and drivers of crime
and violence in Papua New Guinea. Carried out at the request of the PNG government, the report draws on an extensive
review of existing data, a survey of 135 businesses conducted by the PNG Institute of National Affairs, in-depth
interviews with business owners, and consultations with businesses and employees carried out from 2012 to 2014.
•67 percent of businesses that took part in the survey said crime was a major constraint on their business, a higher
rate than in El Salvador (51 percent), Venezuela (60 percent) and Democratic Republic of Congo (63 percent).
•81 percent of businesses reported that their decisions to further invest in or expand their operations were affected by
the country’s poor law and order situation; only 3 percent said that their decisions were not affected at all.
•84 percent of companies said they pay for security in the form of security personnel or hardware. This is significantly
higher than the average of 52 percent for the East Asia and Pacific region.
•More than twothirds of businesses use private security services, which costs an average of 5 percent of their annual
operating costs. About 30 percent of firms said that hiring private security accounts for at least 10 percent of their
•Businesses reported losing an average of K89,000 ($33,000) per year to stolen property and K71,000 ($26,000) to petty
theft by employees. 38.5 percent reported closing early to avoid victimization, which cost an average of K93,000
($34,000) per year in lost earnings.