Papua New Guinea’s SWF lacks transparency

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Papua New Guinea’s SWF lacks transparency

PORT MORESBY: Transparency mechanisms built into the country’s Sovereign Wealth Fund (SWF) will enable an effective functioning fund, Papua New Guinea Extractive Industries Transparency Initiative spokesman Lucas Alkan says.

“We welcome the initial injection of K5.6 million into the SWF, making it operational more than five years after the enactment of its legislation.

“However, we raise concern over the lack of transparency around the operational and structural setup of the fund,” he added.

The news break was reported by The National:

Wealth fund lacks transparency: EITI

November 21, 2022The NationalMain Stories

TRANSPARENCY mechanisms built into the country’s Sovereign Wealth Fund (SWF) will enable an effective functioning fund, says Papua New Guinea Extractive Industries Transparency Initiative.
“We welcome the initial injection of K5.6 million into the SWF, making it operational more than five years after the enactment of its legislation,” the initiative said.
“However, we raise concern over the lack of transparency around the operational and structural setup of the fund.”
EITI secretariat spokesman Lucas Alkan said: “While we commend the operationalisation of the SWF, the status quo raises transparency questions that need to be answered.
“The initiative, which has been implementing the global best practice standard on transparency around revenues generated from the resources sectors, views that international best practice standard is built into the fund’s operations for better governance of the SWF derived from the Santiago Principles.
“One of the key objectives for SWF under the Santiago Principles underpins a transparent and sound governance structure that provides for adequate operational controls, risks management and accountability – we strongly encourage that this objective be fully met.
“SWFs are regarded as important players in the international monetary system and for PNG to have one requires due diligence in ensuring the fund stands out well in the international monetary system.
“Consistent with the Santiago Principles, the PNG SWF must bear economic and financial benefits for PNG and the international financial system.”
While commenting on the Government’s effort to operationalise the SWF, Alkan said the Government needed to conclude its pending dividend policy review and address the current parallel arrangements through the Kumul entities that have been empowered through their respective boards as to how much windfall revenues from the extractive sector could be paid to the Treasury or the SWF.
He said to ensure the SWF operates on a strong financial footing to perform what it was set up to do, it needs to have access to all the windfalls that come out from extractive sector.
“The opportunity cost of parking such funds in entities of State that are playing duplicate functions will not help in using such windfalls to pay down current high levels of public debt,” he said.

Santiago principles made of 24 concepts, practices

November 21, 2022The NationalNational

THE Santiago Principles consist of 24 generally accepted principles and practices voluntarily endorsed by the International Forum of Sovereign Wealth Funds (IFSWF) members.
The IFSWF states that the Santiago principles promote transparency, good governance, accountability and prudent investment practices while encouraging a more open dialogue and deeper understanding of SWF activities.
Drafted by the international working group of SWFs and welcomed by the International Monetary Fund’s (IMF) international monetary financial committee in 2008, the objectives of the Santiago Principles are to:

• HELP maintain a stable global financial system and free flow of capital and investment;
• COMPLY with all applicable regulatory and disclosure requirements in the countries in which SWFs invest;
• ENSURE that SWFs invest on the basis of economic and financial risk and return-related considerations; and,
• ENSURE that SWFs have in place a transparent and sound governance structure that provides adequate operational controls, risk management and accountability.

The Santiago principles demonstrate that SWFs invest in economically and financially oriented entities in both their domestic markets and globally.
By doing so, SWFs contribute to the stability of the global financial system, reduce protectionist pressures and help maintain an open and stable investment climate.
The knowledge-sharing activities of the IFSWF also serve as a tool for continued improvement and innovation for all our members.

Put in place SWF’s organisational structure, says TIPNG

November 21, 2022The NationalNational

TRANSPARENCY International says the Papua New Guinea Sovereign Wealth Fund (SWF) organisational structure should be put in place before any funds are deposited.
TIPNG chairman Peter Aitsi, in response to the Government maiden deposit of K5.6 million into the PNG SWF, said without a functional operating framework in place, we will not have required transparency of the use of funds. And as a result, no accountability for those managing these funds.
“The purpose of the SWF is to receive the large inflows from the States mining and petroleum revenues,” he said.
“The use of the SWF is to cushion PNG’s economy from ‘Dutch Disease’.”
Last week, Institute of National Affairs executive director Paul Barker called on the Government to clarify the functions of the SWF and the formula to be applied for its administration.
Prime Minister James Marape, when making the announcement on Nov 10, said this was a historic day for Papua New Guineans and for our generations to come.
“The Government is setting aside seeds to sustain our children and our children’s children,”” he said.