Awareness on off-shore fund conducted in island provinces

By ABIGAIL APINA
THE Sovereign Wealth Fund regional forum has begun as a team of senior officials from government departments visited Kokopo, East New Britain, on Monday to start discussions on it with provincial governments and the public.
The sovereign wealth fund (SWF) is made up of the Stabilisation Fund and the Development Fund.
The 2011 budget approved in November 2010 provided for the establishment of the fund and its key design elements.
Since February, the government has been developing the fund framework and its legislations, which will be presented in the forums for public consumption before it will be introduced to the parliament.
The Stabilisation Fund is designed to manage the impact of fluctuating mineral and petroleum public revenues on the economy by promoting and supporting macroeconomic stability.
The Development Fund will provide definite and ongoing funding for economic and social development in accordance with the development plans of the government.
A brief report by the government team said the mineral boom in the first half of the 1990s associated with production from the Misima, Por­gera, Kutubu, Tolukuma and Ok Tedi projects increased mineral export earnings and caused the exchange rate, incomes and consumption to rise.
This caused increase in local prices of food, fuel and other products and made the country earn less for exports such as coffee, copra, and palm oil.
The report said the sovereign wealth fund could help reduce these local effects by ensuring that something similar did not occur as a result of increasing mining and petroleum revenue.
It is understood that previous funds such as the Mineral Resource Stabilisation Fund (MRSF) and the trust fund were invested onshore rather than offshore.
It meant only low domestic interest was earned and it did not protect the country’s exports.
An economic benefit of the SWF is that interest earned from local investments will grow the assets of the funds and help pay for government spending and investment.
The report said the fund would better be integrated into the budget to manage government spending and the economy.
The fund will be governed by an Organic Law to allow for close monitoring of the funds and to prevent the drawdown rules from being changed regularly limiting exposure of the PNG Sovereign Wealth Fund to misuse and corruption.
Similar forums will be held in centres in other regions such as Alotau, Mt Hagen and Lae.