Australia and PNG Bond Over SWF

Ashby Monk

Relations between Australia and Papua New Guinea have been ‘on again off again’ over the past decade (for reasons that I find downright bizarre). Still, given that PNG is Australia’s nearest neighbor, the two countries have worked hard to stay close (which was made easier when Howard was ousted by Rudd). Encouragingly, the two countries have been getting on quite well over the past few years. And, interestingly, it seems PNG’s planned SWF has offered policymakers in both countries a new opportunity to rekindle their close relationship.

As you are no doubt aware, Australia has sponsored an SWF — the Future Fund – since 2006. And when it set up the fund, the government made a commitment to international best practices in design and governance. For example, the Future Fund has managed to tame political interests in such a way that it balances the interests of future generations against short-term necessitates. In short, certain aspects of the Future Fund’s design could be usefully applied to PNG’s new fund, which is why the two countries have been talking so much lately.

This is what Australia’s Foreign Minister Stephen Smith had to say about this cooperation in a recent interview:

“…the LNG project does provide the opportunity for PNG to transform itself economically. So we’ve been working very closely with PNG, giving them all of our assistance and expertise in terms of establishing sovereign wealth funds to enable the revenue stream off the project to go into a sovereign wealth fund to be there effectively for a long term enduring benefit…I’ve had a lot of meetings with my PNG counterparts. The last couple of meetings I’ve had in Melbourne and in PNG itself have been in my view two of the most productive meetings that Australia and PNG have had, because there’s a very clear focus on getting the liquefied natural gas arrangements right. Of course it’s a matter for PNG and the sovereign government of PNG, but we’re rendering every assistance, and then doing better on our development assistance program.”

One point bears flagging from the above passage: ‘…the best meeting that Melbourne and PNG have had.’ That’s a strong statement. Clearly, setting up a new SWF has been a catalyst for productive cooperation between the two countries. More broadly, this is something we are increasingly seeing among and between other SWFs and their sponsors throughout the world.

This gets me thinking about when I decided to focus my research on SWFs back in 2007. At the time, I didn’t give much thought to the idea that SWFs could become mechanisms to facilitate inter-state cooperation or augment international relations (I guess, if I’m honest, I kind of had the opposite view). But inter-state cooperation and collaboration via SWFs is happening so much these days, it really merits our attention. In fact, I think there’s probably a nice research paper in there somewhere. And for your case study, you need look no further than Australia and PNG.

4 Responses to “Australia and PNG Bond Over SWF”


  1. 1 htomfields August 23, 2010 at 5:05 pm

    The small-scale LNG plant allows localized peak- shaving to occur – balancing the availability of natural gas during high and low periods of demand. It also makes it possible for communities without access to natural gas pipelines to install local distribution systems and have them supplied with stored LNG.

    http://www.inl.gov/research/lng-plant-technology/


  1. 1 Deep Thoughts by Hillary Clinton « Oxford SWF Project Trackback on November 3, 2010 at 8:19 pm
  2. 2 Australia’s SWF Debate Mark II « Oxford SWF Project Trackback on December 1, 2010 at 10:28 am
  3. 3 Number of New SWFs is Staggering « Oxford SWF Project Trackback on December 3, 2010 at 9:58 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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