Interview: Richard Borysiewicz
In what ways can capital markets play a larger role in enhancing the broader economy?
RICHARD BORYSIEWICZ: Capital markets can provide investment funds in the form of debt or equity. This country sits on enormous potential, and capital markets provide the mechanism in which money can find opportunity. Key objectives should also be to provide employment, foster prosperity in the country, to grow the middle class and create wealth for the people.
Capital markets as they exist now are a long way off from achieving this goal, but there is nothing wrong with having a long-term plan. If one takes Singapore or Dubai as an example, they did not just crop up overnight. It took a vision and a tenacious attitude to get there, and that is exactly what Papua New Guinea needs now – an ambitious vision.
Do you see privatisation as the answer to the state-owned enterprise (SOE) problem?
BORYSIEWICZ: It really depends on the SOE. We need to first prioritise what is important for a government to own, and what is less important. For example, a government does not need to own an airline – it is often done to meet nationalistic purposes rather than run as a salient business. It would be more strategic in a situation like this to partner with another international airline that would provide scale and give access to routes and passengers. If any privatisation does happen, it should not be used solely to generate overnight capital, but rather as a strategic decision that provides a multiplier effect throughout the country.
What do you see as the key to attracting more investment capital into PNG?
BORYSIEWICZ: PNG is not in the position to regulate itself into prosperity. Here, the regulations are the stick and incentives the carrot, but the end goal is to see more activity on the stock exchange overall. Insufficient volume, liquidity and little or no overseas investors are the main problems on the stock exchange right now. To address these challenges, we need to take a step back and fundamentally change the structure of the market. As amazing as it is, people around the world are largely unaware of PNG. When large international institutional investors look for emerging markets to put their money into, we are often not on their radar. Other countries like Mongolia and Nigeria are much higher priorities. So, the carrot and stick for the domestic market is not the answer if there is not even sufficient capital here to begin with.
The answer is to get PNG on the map and get international money interested in investing here. Overseas investors on the market can fix the volumes and the liquidity issues that PNG is facing. Frontier market funds are naturally positioned to take on risk and get returns in emerging markets.
Another big problem for these investors is that there is no global custodian that covers the market in PNG. There is a lack of big-name, financial services companies, like State Street or JP Morgan, to hold on to assets. Without a custodian, business rules for major international investors preclude them from getting involved in a market like this. Despite this, relative to other frontier markets, PNG is actually very stable and well-positioned for investments.
In addition, located just south of PNG is Australia, which is the 13th largest economy and the fifth largest pensions market in the world. Worth more than $2trn, it outweighs the actual GDP of Australia and is money that is always looking for investment opportunities. There is a real potential here for PNG to get serious with Australian institutional investors, who are looking for uncorrelated investments in everything from infrastructure to joint ventures in SOEs.
PNG needs money, but our relationship with Australia, the US and China can provide a vehicle for investment for alternative assets. The money needs a home, PNG just needs a way to open its doors to it.
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