The Government of Papua New Guinea incorporated the concept of Special Economic Zones (SEZs) into its overall economic development strategy and, in 2008, asked IFC for assistance in developing the legislative framework that would allow SEZs to be established in the country.  As part of its Advisory Services, IFC approved the project in April 2009.  In the earlier stages of the project, IFC’s plans included assisting with the site selection of the Pacific Marine Industrial Zone (PMIZ) in Madang Province and looking at implementing guidelines for SEZs.  However, the government took the lead in selecting the site and IFC’s involvement was no longer required.  Since then IFC has drafted a legal model that provides a general framework for the development and operation of SEZs and has submitted the model legislation to the Department of Commerce and Industry for consideration.

In July 2011, the CAO received a complaint from a local NGO and elected representatives on behalf of several villages in Madang Province. The complaint raises concerns about the impact of the PMIZ – meant to be the first SEZ to be established by the Government of Papua New Guinea – on local populations and the environment.  The complainants are particularly concerned about the lack of local consultation with landowners in the area, the lack of environmental planning, and the implications of the SEZ for fish populations, reefs and lagoons, as well as wider environmental and social impacts of an industrial zone in that area.

The CAO found the complaint eligible for further assessment in July 2011. A CAO team travelled to the field in September and October 2011 and February 2012 to discuss the issues with the parties and other key stakeholders. As a result, the government and the complainants have agreed to undertake a dispute resolution process to address the issues in the complaint with CAO's assistance. This is captured in CAO's Assessment Report which was released in February 2012.

In October 2012, a multi-stakeholder meeting was convened, bringing parties together to discuss options for addressing issues raised in the complaint. The result of these meetings was a Memorandum of Understanding signed by all parties, including government representatives. An action plan was also agreed-upon as part of the memorandum. The signed MoU and the joint government communiqué that resulted from these meetings are both available through the link below.

During CAO’s monitoring of the agreement implementation, community members and Madang Provincial Government expressed concern that the Ministry of Commerce and Industry was not following through on the agreed actions. Despite multiple inquiries and requests for meetings, CAO was unable to obtain a response from the Ministry of Commerce and Industry. Therefore, CAO was unable to continue with the dispute resolution process and its monitoring role. One agreed item that was implemented was the establishment of the Environmental Office in Madang which will act as a monitoring agent on environmental concerns.

As the agreements were not fully implemented, the case was transferred CAO Compliance on July 31, 2014 in line with CAO’s Operational Guidelines.