There are more candidates trying to bribe voters than ever before.
There are 4700 polling stations - 1700 of which are so remote they are only accessible by air. Voting was due to end on July 6 but is still underway in a country where corruption and bribery are common.
"Papua New Guinea's 2012 elections have seen some progress and some setbacks in the country's efforts to strengthen its democracy," said the Commonwealth Observer Group in its interim statement.
"Up to this point, some of the benchmarks for democratic processes have been met, but several serious concerns need to be addressed for the future."
It highlighted the rise in "money politics" including "widespread reported attempts by candidates to bribe voters directly, on a scale far greater than ever before".
The group, led by former Vanuatu prime minister Edward Natapei, also noted "an unfortunate level of disorganisation and inconsistency in aspects of election management".
"We were also concerned by reports of intimidation of voters by candidates and their supporters at certain polling locations," it added.
"The group is also aware of some attempts to disrupt the election in particular locations, including by hijacking or destroying ballot boxes."
Sporadic incidents of violence have been reported and the observers urged Papua New Guineans to allow the polls to be completed in a peaceful and lawful way.
Papua New Guinea was thrown into turmoil last year after the Supreme Court ruled that Prime Minister Peter O'Neill's election by fellow MPs last August was illegal and former premier Sir Michael Somare should be reinstated.
The decision triggered a crisis which, at its height, saw the nation with two prime ministers, two governors-general and two police chiefs.
There are 4.6 million people registered to vote and 3428 candidates are vying for just 109 parliamentary seats, with no single political party likely to win enough seats to form a government on its own.
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