Interview: Ian Tarutia
What is the optimum balance between Papua New Guinea and overseas investments for superannuation funds in 2020-21?
IAN TARUTIA: The best strategy for superannuation funds in the short term would be a defensive posture and an inclination towards holding a very liquid portfolio in cash. This will be essential because we will need to pay unemployed members who lost their jobs as a direct and indirect consequence of the Covid-19 pandemic. Moreover, investment opportunities offshore through 2022 will be limited. As such, the focus will be on opportunities within PNG.
Indeed, superannuation funds such as nasfund can help the economy as a whole, and investments that support the health of our citizens will be among the most important. PNG has much to gain by investing in medical infrastructure to help address public health issues. Moreover, we need more housing developments for members and workers alike.
In what ways can reform improve capital flows?
TARUTIA: It is important that government policy regarding resource development by multinational corporations be clearly spelled out, and it must also be consistently applied. This will give greater confidence to resource developers, as it will enable them to better understand the rules of engagement. Only after regulations are laid out in such a way will multinational corporations bring in investment and hard currency to the benefit of the economy.
How could government, employers and funds collaborate to boost superannuation membership?
TARUTIA: To increase membership we need to amend the current legislation – namely, the Superannuation General Provisions Act. At present there is stipulation that mandates that any employer with 15 or more employees must contribute towards an approved superannuation fund. To maximise membership, I would suggest this be amended to universal coverage, making compulsory that anyone working, earning regular income and paying taxes should contribute to superannuation funds.
Furthermore, there is scope to use digital technology to increase membership, as well as improve the operation of funds. For example, technology can enable members to quickly access their balances. This would enhance the appeal of superannuation funds to potential members.
Which sector is the most profitable for capital investment in the medium to long term, and what can be done to fulfil this sector’s potential?
TARUTIA: There are several untapped sectors that offer significant potential for return on investment. Agriculture is among those with the most promise. Greater levels of investment in the sector would have wide benefits, key among them boosting national food security. This issue has been paramount in economies worldwide during the Covid-19 pandemic as supply chains broke down. A related benefit would be to aid import substitution, which would help create a more favourable trade balance. To help realise the full potential in agriculture, policy reforms could include import tariffs to protect local producers and manufacturers, as well as help lower the country’s import bill.
Another sector with considerable promise is tourism, as the country boasts an array of destinations and unique offerings. On a policy level, major tax incentives would encourage an expansion of the tourism sector through investment in infrastructure. Amendments to regulations on pricing and statutory fees could also be of benefit. Taken together, these changes could help lower the cost of domestic travel, which is relatively expensive at present. Encouraging growth in this area could also help the economy recover from the impact of the pandemic.
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