Project Case Study
Review of the Legislation establishing the Sovereign Wealth Fund in Papua New Guinea
Analysing the proposed 2014 law to establish a Sovereign Wealth Fund in Papua New Guinea
Papua New Guinea, a resource dependent country, is applying measures to ensure that the wealth gained from the exploitation of its resources is carefully managed.
There is compelling rational and renewed momentum – after 40 years of unsuccessful attempts – to establish a Sovereign Wealth Fund, with the objective of stabilising and saving government revenues.
In 2012, the government passed the Organic Law on a Sovereign Wealth Fund, but has since proposed a 2014 Law to repeal and replace the 2012 Organic Law.
As a result of our recognised experience supporting governments to manage resource revenues, Adam Smith International was asked in late 2014 to undertake an analysis of the proposed 2014 law to establish a Sovereign Wealth Fund in Papua New Guinea, and specifically to examine its anticipated structure and objectives.
This work, still ongoing, is part of the Australian National University Research Partnership with the National Research Institute in Papua New Guinea.
The analysis specifically seeks to:
- highlight the key features of the proposed Sovereign Wealth Fund, its structure and operational mechanisms;
- compare and contrast the 2014 legislation with the 2012 Organic Law on the Sovereign Wealth Fund;
- analyse how money flows in and out of the proposed funds:
- including highlighting how the funds may impact on Papua New Guinea’s existing fiscal framework, including the budget and consolidated revenue;
- outlining how the funds will work in practice, and providing an assessment of the likely size of the funds based on current Papua New Guinea’s Government revenue forecasts.
The analysis will inform ongoing discussion on Papua New Guinea’s Sovereign Wealth Fund and bring the government a step closer to managing the negative effects that volatility of the sector has on government revenues and on the broader economy. The Sovereign Wealth Fund will also support the drive for transparency and accountability in the sector given its requirement for ongoing reporting of receipts from Papua New Guinea’s mining and petroleum assets.
This ongoing work expands upon Adam Smith International’s mid-2014 analysis of the Papua New Guinea Sovereign Wealth Fund, published in October 2014 as the National Research Institute Issues Paper: “An analysis of the Papua New Guinea Sovereign Wealth Fund’s process of formulation and progress towards establishment”.