PNG opts to keep sovereign funds onshore
09 December 2010
BY DONALD HOOK
Papua New Guinea’s Treasurer, Peter O’Neill, says PNG is looking at establishing its sovereign wealth funds onshore, rather than overseas as originally planned.
The funds are to be the main mechanism to ensure the windfall revenues from PNG’s mining and gas boom are saved for future generations, and that the money that is spent immediately is not lost to corruption or mismanagement.
The change of heart comes after a visit to PNG by the chairman of Australia’s Future Fund, David Murray.
Mr Murray is a former chief executive of the Commonwealth Bank and has strong credentials in corporate governance.
Treasurer O’Neill says Mr Murray’s advice was very valuable.
Source: Radio Australia
We have successfully taken Nasfund away from politicians' itchy fingers and we can with this one too. We can’t keep shying away from our own experiences. Let’s learn from our bad experiences and reform our systems like we did with Nasfund and make them work properly.
US deputy ambassador to PNG, Paul Berg, gave a very relevant speech during the 10th Ethics Symposium at the Divine Word University in September in which he said the history of American corruption is also the history of American reforms. Why can we not make our history of corruption become our history of reforms too?
I’d like to think that it can be done.
Posted by: David Kitchnoge | 13 December 2010 at 07:57 AM
Does anybody know just how much is presently in this Sovereign Wealth Fund, or is likely to be apportioned out of revenues forthcoming.?
And, with the continuing decline in the values of most currencies, would it not be better to invest in some of that good old gold that most financial conservatives argue for as a desirable safe haven?
Posted by: Robin Lillicrapp | 11 December 2010 at 04:13 PM
Reg - I am with you. As the head of Oil Search in PNG said at the mining conference this week: where has all the money gone? Billions paid from this one company alone, yet no services on the ground for PNG people.
Posted by: Alex Harris | 11 December 2010 at 10:47 AM
Keeping anything onshore here will still be too close to the pollies sticky fingers as what has happened with all those 1,000 trust accounts.
The government has proven many times that 'Big Brother' can't be trusted.
Posted by: Reginald Renagi | 10 December 2010 at 01:48 PM
This is a very good idea and in PNG's long-term long interest.
Channel the funds into an International Investment Fund set up right here at home. It will spur the job growth in the financial and investment related industry (and job creation in the knowledge based service industry).
Other resource rich countries do this very well. We can take a cue from them and do this for ourselves. Of course with a neutral investment group managing this right here in PNG.
Posted by: Corney K Alone | 10 December 2010 at 10:40 AM
The funds will be held offshore in hard currency with the onshore entity merely managing its investment and disbursement decisions. Something similar to the PNGSDP operational model.
I don't get how such an arrangement will limit our ability to hedge currencies, when the need arises.
Posted by: David Kitchnoge | 10 December 2010 at 09:50 AM
Not a good idea to bring the Sovereign Wealth Fund onshore.
This will now limit its scope of suitable financial hedging strategies that would apply if the fund was domiciled offshore but overseen by an onshore management entity.
Posted by: Reginald Renagi | 10 December 2010 at 08:21 AM
I wouldn't bring the funds onshore because part of the idea of creating a Sovereign Wealth Fund (SWF) is to try and control a rapid appreciation of the kina such that our exporters would see their incomes in kina terms dwindle without a corresponding decrease in their kina fixed costs.
Such a scenario could prove catastrophic for the long term sustenance of our national economy. So, apart from SWF being a saving for the future, it is also a mechanism to try to protect our exporters in sectors other than mining and petroleum.
But we should try and create a model similar to PNGSDP, where the funds are held offshore but are managed by an onshore entity.
We need the entity onshore so that Papua New Guineans can see it, feel it and hopefully scrutinise its activities. The governance mechanisms around this entity must be well thought out and water tight.
The board must be completely independent of the government with its members drawn from a wide sector of the community including overseas experts.
There must be no government representation on the board and the draw-down of funds from this entity should strictly be through a detailed budgetary support request from Treasury.
The board must have the absolute discretion to reject any or all of Treasury’s request with detailed explanations of their reasons.
Full details of Treasury’s funding request and the subsequent response from this entity’s board must be published in the papers and also be carried in Treasury’s and the entity’s websites and be available for public scrutiny.
Posted by: David Kitchnoge | 09 December 2010 at 04:07 PM