Interview: Ian Tarutia
How would you assess the current performance of the superannuation industry?
IAN TARUTIA: I believe that the superannuation industry in Papua New Guinea (PNG) is thriving in terms of profitability, membership growth and client servicing.
Having said that, the industry is mature enough for the various players to become more proactively engaged in improving performance. It would be possible to make a difference in some critical areas of the domestic economy such as health and housing, provided that we work hand in hand with the government.
Indeed, many of our members are pertinently asking why they should grow their retirement funds when they are still sleeping in settlements. This issue could be addressed by investment in housing, but for that to succeed we would require the government to deliver on basic infrastructure, including land, water, roads and electricity. If these expenses are left up to us when a project is being developed, we would have no choice but to pass it on to the consumers and the concept of affordable housing would lose its meaning in the process.
What kind of legislation should be introduced to expand the reach of the superannuation industry?
TARUTIA: Providing universal coverage is the way to go for PNG. Under the existing law only companies with a minimum of 15 employees automatically become part of the superannuation scheme. This cut-off point means a sizeable chunk of the population remains excluded from any real social security network. Considering that this law was introduced in the 1980s, when the number of employees exemplified the success of a business, it needs a revision as the economic landscape has changed dramatically since then.
With the help of technology, self-employed people today can often become successful entrepreneurs and it seems logical to me that they should also be part of the superannuation net. At the moment only 500,000 people are active participants in PNG, out of a total population of over 7m, clearly a small percentage compared to the rest of the region where as much as 70-80% of the population pays superannuation. One may argue that Fiji, Vanuatu and the Solomon Islands have a small population when compared to PNG, but the real reason for their higher rates of penetration is because their laws provide for universal coverage. I do not see why PNG should be any different from that.
To what extent could voluntary superannuation schemes address the problem?
TARUTIA: We have introduced Eda Supa, a voluntary superannuation scheme for people who are self-employed, run small businesses or work in a small establishment with fewer than 15 employees. The scheme has attracted some 24,000 people over three years and it is evidence that anyone who is earning some form of income would potentially want to save in a superannuation environment.
Having said that, I do not see the voluntary scheme as a substitute for universal coverage. Indeed, our regulator is currently establishing a task force to review the existing superannuation legislation. Taking mobile phone penetration as a point of reference, around 4m people in PNG own a handset, which shows that they are earning some sort of income. By introducing universal coverage, we will be able to attain the same range of coverage over a shorter period of time.
Does the size of the PNG market justify several players currently offering superannuation products?
TARUTIA: The superannuation industry remains too small in PNG to warrant the inclusion of multiple funds. Provided that all relevant regulations are formulated soundly and enforced properly, it makes more sense for one institution to provide services to a large bulk of the population. In an economy of scale, industry requires a larger balance sheet to be more competitive, so making the right investments forms only one part of a flourishing business. As a result, we should be functioning as catalysts for larger endeavours in the social sphere.
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