Papua New Guinea's Prime Minister, Peter O'Neill says hosting the Australian-run immigration detention centre had damaged his country's reputation.
“Yes, it has done a lot more damage to PNG than anything else,” he said during an address to the National Press Club in Canberra.
He said PNG communities have been accused of many things, but noted that Manus Islanders were among the loveliest people in the world.
“In terms of the refugee safety, they are being well looked after,” he said.
Extended interview: Peter O'Neill discusses Manus Island
“Most of them are engaging very well with the communities in Manus.”
Mr O’Neill has signalled he hopes to see the closure of the immigration detention centre on Manus Island, but the timing was up to Australia.
“At some stage of course we need to close the centre, these people cannot remain in Manus forever,” he said.
“We need to make a determination where they should go and take a firm decision on it.”
Extended interview: Peter O'Neill discusses trade
PNG's Supreme Court will hear a constitutional challenge to the detention centre in April in a case that involves 600 asylum seekers.
Mr O'Neill said his government would wait for the legal process to take its course.
"You always plan for a worst possible scenario," he told AAP.
Mr O'Neill attended bilateral talks with Prime Minister Malcolm Turnbull on Thursday afternoon.
A delegation of Australian and PNG ministers including immigration ministers had official talks on Thursday morning.
Extended interview: Peter O'Neill discusses safety for women
An agreement to house refugees in PNG was struck between Mr O’Neill and the former Australian Prime Minister Kevin Rudd in 2013, ahead of the federal election.
It was a major campaign issue for the former Labor government after thousands of asylum seekers arrived on Australian shores by boat in the preceding years.
Greens Senator Sarah Hanson-Young said the Australian government urgently needed an "exit strategy".
"Clearly Prime Minister O'Neill is sick of his country being used by the Liberal government in this way and it's time to shut the Manus Island camp down," she said in a statement.
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More than 900 people remain in the detention centre.
Half of those have been found to be refugees but so far only six have actually settled in the community.
Mr O’Neill denied allegations of corruption levelled against him after it was allegedly found millions of dollars in government funds had gone missing during his time as Finance Minister.
- with AAP
