Striving to transform economy

THE government of resource-rich Papua New Guinea (PNG) is striving to launch a Sovereign Wealth Fund (SWF) this year to help propel the nation’s economic growth in the 21st Century.
Unlike previous disappointing performances of trust funds in PNG, the internationally-recognised Santiago Principles on best practices for managing SWFs will be embraced by the national government.
PNG is also expected to then join the International Forum of Sovereign Wealth Funds.
Deputy Prime Minister and Treasurer Charles Abel had revealed that the SWF board is expected to be set up by this year.
He also revealed that the target was for the SWF to grow beyond US$1 billion (K3.38 billion) to enable PNG to participate in international investments.
Agriculture, long being the economic backbone of PNG for PNG, and mineral explorations and projects (liquefied natural gas, gold, copper, rare earth elements, nickel, cobalt, chromium, molybdenum, iron and platinum) are expected to contribute immensely to the growth of the country’s maiden SWF.
Some 85 per cent of PNG’s eight million people are still dependent on agriculture and is therefore natural that the Department of Agriculture and Livestock (DAL) will be stressed to launch initiatives toward transforming agri-industries into highly competitive emerging ventures that attract both domestic and foreign investors.
The key produces are coffee, coconut, oil palm, tea, rubber, spice, livestock, fresh foods (sweet potato, taro, and banana) and grains (rice, corn, sorghum).
The Mineral Resources Authority (MRA) is expected to take the dominant role in driving exports via special projects, like the US$13 billion (K43 billion) Papua LNG Project, to boost the SWF.
In short, the initiatives are aimed at transforming PNG into an emerging economy or market (EM) to attract foreign investors.
It is, therefore, significant to look at what the rest of the world look for in EM recognition.
Last Thursday, Malaysia’s The Star reported that Moody’s Investors Service has launched its global Emerging Markets (EM) Liquidity Stress Index (LSI).
The rating agency said the index measures the percentage of high-yield companies in EMs with the weakest Speculative Grade Liquidity score of SGL-4, as a proportion of EM high-yield corporate family ratings.
Laura Acres, a Moody’s managing director, said the inaugural global EM LSI score was weak at 20.3 per cent and above the long-term average of 18.9 per cent, with the long-term average based on LSI scores between Jan 2017 and March 2019.
“Nevertheless, the score has fallen for three consecutive months; representing a slight improvement in liquidity across EMs globally,” she said.
“The score of 20 per cent balances the weak liquidity seen in the EM Asia Pacific LSI of 39.1 per cent, with the stronger liquidity in the EM Emerging Europe LSI of 2.9 per cent and EM Latin America LSI at 8.5 per cent.” A Moody’s vice-president and senior credit officer Annalisa
Di Chiara pointed out the EM Asia Pacific LSI had consistently been the weakest sub-indicator “and as the largest component of the EM LSI, it dictates trends for the indicator”.
“Despite the slight improvement in the EM Asia Pacific LSI to 39.1 per cent in March 2019 from 40.6 per cent at December 2018, the global EM LSI remains elevated at 20.3 per cent,” Di Chiara said.
Moody’s points out that the improvement in 2019 reflects a high level of debt issuance in China.
Proceeds from Q1 issuance were largely used to refinance existing debt, improving liquidity scores in Asia Pacific.
The global EM LSI included 311 companies from 39 countries at March 31.
The indicator for Asia Pacific is the largest with 133 companies, followed by Latin America with 94 companies, Emerging Europe with 69 and Africa and the Middle East with 15.
The EM LSI is part of Moody’s comprehensive and focused research on EM which kicked off last year with the publication of the EM Chartbook.
EMs are increasingly forming a larger part of the investment space and Moody’s has endeavoured to provide investors with comparative ratings data across key EM regions and groupings such as Brazil, Russia, India, China and South Africa (BRICS), and Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS), as well as across key industries.