Food processing using local materials has the potential to create employment and income-generating opportunities for smallholder farmers and rural communities. In Papua New Guinea (PNG), the food manufacturing sector is small, and is dominated by a small number of foreign companies using primarily imported ingredients. To address these issues, the “Development of a food processing and preservation industry” was identified by the PNG government as one of the priority programs for agricultural development in the National Agricultural Development Plan. The objective of this study was to assess the challenges and opportunities for developing a locally owned food processing sector in PNG using sweetpotato as a test case. The research involved an extensive literature review of sweetpotato processing research and development activities in PNG, as well as in China and Africa where such research and development activities have been the most extensive. Results showed that, given the current environment, promoting sweetpotato processing into commercially viable enterprises will be challenging. However, if the PNG government is determined to develop a food processing industry, sweetpotato processing can be used as a pilot both to build research and development capacity for food processing and to investigate whether and how an efficient food processing industry can be developed.