Papua New Guinea's Prime Minister James Marape says he wants Australia to stop Paladin's contract for security work on Manus Island immediately.

Key points: James Marape said PNG "will not tolerate" foreign firms doing security work in the country

James Marape said PNG "will not tolerate" foreign firms doing security work in the country PNG wants to see a local company to take over the Paladin contract on Manus Island

PNG wants to see a local company to take over the Paladin contract on Manus Island The awarding of the contract to Paladin is currently being investigated by the auditor-general

Mr Marape addressed PNG's Parliament on the issue, in the first sitting day since he was elected.

The company's $423 million contract for work with refugees and non-refugees on the island comes up for renewal at the end of the month.

Mr Marape said PNG "will not tolerate" foreign companies undertaking work such as security in the country, which he said could be done by local firms.

"We don't intend for foreign contractors to operate here in business like security — it is a business that local companies can be engaged in and I ask the Australian Government to stop this contract forthwith," he said.

He said that "as far as the PNG Government is concerned" the contract should be terminated.

PNG wrote to the Home Affairs Department earlier month about ending the contract.

Home Affairs Minister Peter Dutton had previously said it was "likely" the contract would be continued.

The awarding of a government contract to Paladin Group is currently being investigated by Australia's auditor-general, though the Home Affairs Department has defended the controversial arrangement.

Asylum seekers have been living on Manus Island for nearly six years. ( Supplied )

The relatively unknown company are with its Singapore arm.

Home Affairs secretary Michael Pezzullo told a Senate hearing in February that the PNG Government was planning to take over responsibility for the services in October 2017, but in July that year decided it could not proceed because it was in caretaker mode ahead of its election.

PNG says local companies now have the capacity and expertise to provide security services on Manus Island and would like to see a transparent tender process introduced.

Asylum seekers who had been trying to reach Australia were first sent to PNG for offshore processing nearly six years ago.

They have been living in accommodation centres in the local community, which are guarded, since the detention centre was closed in late 2017.

Mr Dutton's office has been contacted for comment.