Deep Thoughts by Hillary Clinton

Ashby Monk

US Secretary of State Hillary Clinton stopped off in Papua New Guinea on her way from here (I’m still in Malaysia) to New Zealand yesterday. While she was in PNG, she had some wise words on the potential dangers of resource wealth and (!) the valuable role of a SWF therein:

“Thanks to your abundant natural resources, Papua New Guinea has the opportunity not only to be more developed and provide more benefits for your people, but to become a strong regional leader and a model for reducing poverty and spurring development.

But as you and I discussed, in order to achieve that, there will have to be a commitment to good governance and accountability and transparency, and you’re taking steps to plan to do just that. The planning for a sovereign wealth fund is a very important commitment.

…There is a phrase, “resource curse.” Countries with abundant natural resources like oil and gas or gold or minerals, if they’re not handled right, can actually end up making a country poorer instead of richer. I will not name names, but there are countries in the world that started with the same hopes as Papua New Guinea with all of the excitement that I know is in this country because of the resources that were discovered, but they weren’t handled right. So 20, 30, 40 years later, people have actually gotten poorer. And I know that will not happen here because the people and the government of this country will do it in the right way.

…We want to help you write and implement the institutions and regulations that will make it possible to manage these new revenues wisely. Our Departments of Interior and Treasury are already working with the respective cabinet ministries here to work to see how the United States can be of help.” (emphasis added)

While Clinton won’t ‘name names’, I think PNG will freely admit that they are one of the frontier economies that has struggled to manage resource wealth. They even have had failed attempts at setting up SWFs in the past, such as the Mineral Resource Stabilization Fund, which was set up in the 1970s and eventually exhausted. Anyway, PNG has some big hurdles to overcome, but I’m optimistic about its chances. With some assistance from the US and Australia (and I hear Norway) where it is warranted (and welcomed), PNG can overcome the resource curse.

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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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