Sovereign wealth fund advances

PAPUA New Guinea’s Treasury Department has unveiled a draft law to establish a sovereign wealth fund to manage future government revenues from the ExxonMobil-led PNG LNG project.
Sovereign wealth fund advances Sovereign wealth fund advances Sovereign wealth fund advances Sovereign wealth fund advances Sovereign wealth fund advances

Vast revenues are expected from the PNG government's 16.6% stake of the $US15 billion PNG LNG project once it starts exports in 2014, and promoters of the sovereign wealth fund approach believe it will help PNG avoid the symptoms of Dutch Disease, also known as the "resource curse".

Detailed in the thirteen-page Organic Law on the Sovereign Wealth Fund proposal, the guidelines for determining the investment strategies include that they must not be used for purchasing PNG government debt, or for domestic investment or lending.

The sovereign wealth fund will have two parts, a stabilisation fund and a development fund.

The stated purposed of the stabilisation fund is to "manage the impact of fluctuation mineral and petroleum revenues on the PNG economy and on the national budget".

The development fund is designed to provide "definite and ongoing" funding for economic and social development in PNG.

Norway's sovereign wealth fund is one of the strongest examples of how this approach can effectively manage resource revenues over a long term.

On the other end of the spectrum, sizeable assets of Libya's sovereign wealth fund were frozen overseas this year, although there are signs that some of this wealth will be poured back into the country following the recent demise of the Gaddafi government.

PNG LNG is scheduled to start producing from 2014 and is expected to deliver more than 9 trillion cubic feet of gas over its 30-year life and more than 200 million barrels of associated liquids.

Please click on the PDF document to the right of the screen under related links and downloads to view the draft law.

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