The Association of Superannuation Funds of Papua New Guinea (ASFPNG) supports a call by the Institute of National Affairs (INA) for the Government to clarify the functions of Papua New Guineas Sovereign Wealth Fund and the formula to be applied for its administration and for independent fund management to be in place upholding the Santiago principles.
ASFPNG President Ian Tarutia said since the Organic Law on the Sovereign Wealth Fund 2015 was enacted, successive governments have not put in place the mechanism and operational requirements of the fund through a relevant Act of Parliament to compliment the Organic Law.
In supporting the media statement by INA Director Paul Barker yesterday, Mr. Tarutia said it was encouraging to note that the Marape Government had allocated K5.6 million to the SWF, which was 7 per cent of the K80m consolidated revenue paid by the State-Owned Kumul Consolidated Holdings.
“However, whilst ASFPNG welcomes the Government’s move to kick-start the SWF with an initial deposit of K5.6 million, we are somewhat concerned that there is no mechanism in place to administer and operate the fund.
“It is vitally important that the Government establish the board, and secretariate structure that will administer and operate the SWF according to global best practices. This will also ensure the funds are fully secured from political interference and abuse.
“We understand the Organic Law on the Sovereign Wealth Fund 2015 requires 50 per cent of mining and petroleum tax revenues and 75 per cent of dividends returned to Government to be deposited into the stabilisation fund. In each fiscal year, a portion of these funds can be used as revenue, based on a legislated formula. The savings fund also has its own requirements for deposit and one would have appreciated compliance with the law in calculating the deposits into either the stabilisation fund or the savings fund”
The ASFPNG notes that the relevant Act of Parliament envisaged to make further provisions of the different aspects of the Organic Law on the Sovereign Wealth Fund remains to be enacted since 2015. Herein may lie the reason why so many questions arise concerning the implementation of the objectives of the Organic Law on Sovereign Wealth Fund in Papua New Guinea.
The ASFPNG is also concerned that the appointment process of the Board as stipulated in the Organic Law of 2015 includes politicians including the Prime Minister and the Leader of the Opposition.
This is a red flag and this provision should be removed to avoid political manipulation in the appointment process. NPF is a case in point for Papua New Guineans not to repeat its mistakes.
In concluding, Mr. Tarutia added that it was timely to get the SWF off the ground coinciding with the windfall of K3.8 billion in oil and gas corporate taxes, including equity distributions to the state from the record revenue this year as a result of the current cycle of higher world energy prices.
“Establishing the SWF now would ensure it is ready in time to capitalise on anticipated resource revenue rises this decade. Even if the 2022 windfall isn’t sustained, setting up the fund’s structures and starting to deposit and withdraw funds would still be worthwhile.”