Tuesday, October 4, 2011

PNG SWF in final stages, says Polye

Source: The National - Monday 03rd October, 2011
By BOSORINA ROBBY


FINANCE Minister Don Polye has announced the government is finalising the legislation framework of the Papua New Guinea Sovereign Wealth Fund (SWF).
Speaking at the Business Council of PNG’s breakfast last Friday at the Crowne Plaza Hotel, Polye said the legislation would become an organic law and not an ordinary act of parliament.
It should be tabled in Parliament during next month’s budget session.
The aim of the SWF is to manage the historic wild fluctuations in mineral and petroleum revenues to underpin the long-term social and economic development in the country.
Polye said contrary to earlier expectations, new moneys available to the people of PNG as a whole would be modest.
For instance tax receipts would be only 5% of the total tax receipts and dividends may add another 2%.
Yet the sheer economic size of the project means that there would be major macroeconomic pressures which must be managed, he said.
That made it all the more important for the establishment of the SWF, he said.
Polye said the proposal was that the PNG SWF would be “onshore managed, offshore invested and onshore spent”.
“The key role is to manage the massive fluctuations in our minerals revenues, which have moved from only 3% to 20% of non-mineral GDP,” he said.
Polye said these massive fluctuations of the past had led to instability, which had hurt businesses.
He said one of the key features of the PNG SWF was that the State would retain full ownership and control over its assets, which would be fully integrated into the budget and fiscal framework.
“This is to ensure that all revenues (including dividends) from the PNG LNG project as well as from other mineral and petroleum projects and the timing of all expenditures could be most effectively used to advance PNG’s social and economic development,” he said.
Polye said the SWF would provide an enhanced opportunity for the government to build capacity and capability in the country.
“We need to develop our intellectual capital, our technical expertise and skills, our entrepreneurial strengths and corporate abilities.
“We will develop ourselves to run and operate with a corporate or private sector mindset but on democratic principles,” he said.
He said past experiences in new resource sectors and earlier commodity booms indicated that PNG had not successfully translated these revenues into improved socio-economic indicators and sustained development outcomes to the extent that might be expected.
Polye said the problem over the years had not been the shortage of funds but rather the public sector’s poor ability to deliver credible project plans that had seen funds languish rather than put to effective use.
Polye said a public information, education and awareness programme would be undertaken across the country to foster understanding of the SWF

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