PNG Unveils Draft SWF Law

Ashby Monk

Papua New Guinea has finally published a draft law for its new sovereign fund: “The Organic Law on the Sovereign Wealth Fund“. Here are some of the key points to take away:

  • PNG will be setting up both a stabilization fund and a development fund.
  • The stabilization fund seems fairly straightforward, while the development fund looks and sounds like a savings fund but it comes with spending and draw-down rules associated with development objectives.
  • The investment mandate will be set by the Minister.
  • The Board will set the investment strategies.
  • A new Secretariat and Executive Officer be responsible for carrying out the Board’s directions.
  • All the assets in both funds will be invested exclusively in foreign assets.
  • The Board will be made up of six private sector members and an ex-officio member of the Treasury.
  • Board members will have to have…’…substantial experience or expertise and professional credibility and significant standing in at least one of the following fields: 1) Investing in financial assets; 2) the management of investments in financial assets; and 3) corporate governance.’
  • The Board member must also be “a person of integrity, independence of mind and good reputation.”
  • Board members cannot be political candidates or members of government (at any level).
  • The ex-officio member of the Board will be placed on leave from their government jobs while on the Board.

I won’t go into too much detail on all of these points because this is just a draft law and a lot can change. But I will say that the document looks pretty good. When it comes to developing countries — especially one that already had an ‘awkward‘ experience with a SWF —  many are often concerned that the investment process will be politicized and corrupted. On this one point, the PNG law seems to be quite solid. The procedures to appoint someone to the Board are really quite sensible. So we’ll have to wait and see of this sensibility makes it in to the final document.

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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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