Sovereign Wealth Fund

Te-Mana-o-te-Raurau-Moni-

Puapinga

Public Consultation

Iriri-kapua na te katoatoa

Monday, 2nd September, 6pm.

Monite ra 2 o Tepetema ora 6 i

te aiai.

Agenda – Tumu manako

The Agenda for Tonight – tumu tapura no teia aiai

• Explain what a Sovereign Wealth Fund (SWF) is. Akamarama no runga i Te-Mana-o-te-Raurau-Moni Puapinga (TMRMP)

• How Legislation should be framed for the SWF. Ka akapeea e te aka kena anga i te ture ei kaveinga no TMRMP

• How funds from the SWF should be Used. Ka akapeea te tamanako anga no te akapou anga o teia TMRMP.

• Who should manage the fund and report. Koai te ka tau i te akatere e te akakitekite mai i te turanga o teia raurau-moni.

What is a Sovereign Wealth Fund (SWF)? Eaa teia Raurau-Moni-

Puapinga

• A sovereign wealth fund is a special savings account for the Crown. Ko teia raurau moni puapinga, e tuanga moni akaputuputu teia ki roto i te raurau-nui a te katoatoa.

• All the money raised from national seabed mining activities to be deposited, saved and utilised to benefit both current and future generations. Te moni te ka rauka mai na roto i te puapinga o te kerukeru anga i to tatou taua-moana, ka akaputuia te reira, e ka ta angaanga ia ei meitaki no te uki a teia ra, e pera te uki apopo e to te tuatau ki mua atu.

What countries in the Pacific have a SWF? Koai te au patireia i roto i te Moana-Nui-a-Kiva e tarau anga Raurau Moni Puapinga ta ratou?

• Kiribati Revenue Equalization Reserve Fund

– manage phosphate mining revenue (Est 1956) worth around AUD660 million/NZD760 million.

Te Tuanga-akaputuputu Raurau-Moni-Nui o Kiripati

- 1956 moni puaping o te ko kuano ku tau i te NZ$760 mirioni

• Timor-Leste Petroleum Fund - Timo-iti-i te Opunga Te-Raurau-Moni-Inu : 2005 tamanako anga tei rauka no te moni puapinga o te inu – NZ$16.5 pirioni.

– manage petroleum revenue (Est 2005) worth around USD13 billion/NZD16.5 billIon

What countries in the Pacific have a SWF? Koai te au patireia i roto i te Moana-Nui-a-Kiva e tarau anga Raurau Moni Puapinga ta ratou?

• PNG Mineral Resource Stabilization Fund Te Raurau Moni Oneone-papa o Papua-etene.

– manage copper mining revenue (Est 1974) closed in 1999 the final balance used to reduce the country’s ballooning debt. 1974-1999 na roto i te akatere anga i te moni puapinga o te onekapa , kua riro ia ei akaiti i te kaiou anga a te patireia.

• Nauru Phosphate Royalties Trust – manage phosphate revenue (Est 1968) proceeds

exhausted. Te-Raurau-Moni-Kuano a Nauru – 1968 kua pou te raurau moni puapinga akaputu o te kuano

SWF Internationally Te-Mana-o-te-Raurau-Moni-Puapinga o teia nei Ao

katoa.

Current successful models internationally include: Te au akatere anga matutu o teia nei Ao tei ki te ia

• Australia – Future Fund ($88.7bn)

• Norway – Petroleum Fund ($737.2bn)

• Trinidad and Tobago ($4.7bn)

• NZ ($17.8bn)

Policy Objective’s – Te au tumu tukuanga

What is the point of having an SWF? Eaa te tumu i anoano ia ei tetai raurau moni puapinga?

• Transfer a mineral asset into a financial asset. Te urianga o te apinga tumu ki te vaito o tona moni okoanga

• Permanently protect government revenues resulting from seabed mineral mining. Kia tinamou te paruruanga i te Raurau-Moni-Nui a te Kavamani na roto i te au puapinga kerukeru anga i to tatou taua moana.

• Stabilise the national Budget from large fluctuations in revenues from mineral mining. Kia matutu te Raurau-Moni-Akapouanga ki kore e tupu mai tetai tu kaui kitea kore ia te ka na roto mai i te kerukeru anga i to tatou taua moana.

• Enhance returns on reserves. Kia turu ia kia metaki atu te paruru no te tuatau onge ki mua.

Legislation - Te Ture

• A special law is needed to establish the rules as to how this money should be managed.

Ka anoano ia kia atui ia tetai ture takake ei tango no te ateretere anga i teia raurau moni puapinga

• The current MFEM Act is not sufficient to cover off the special requirements of an SWF. Te ture nui a te tuanga o Te-Raurau-Moni-Nui a te Kavamani, kare te reira e oonu ana i te apai atu kia atui atu i teia tuanga vaerua o teia Raurau-Moni-Pupinga

How to legislate the SWF? Akapeea i te anga’anga i teia ture o raurau moni

puapinga?

Options to legislate the SWF is to: Iki anga manako no te anga atu i te ture o teia raurau moni kimi puapinga;

1. Standard Legislation (simple majority) Ture rotopu

2. The use of a supermajority constraint on spending resources from the fund. Te arai anga a te urupu no runga i te moni akapouanga

3. Amend the constitution to create a mandate for a fund to be permanently held together with implementing legislation, or Akatano i te ture metua kia tinamou kia noo kapiti ia te raurau moni e te akapouanga kia okotai raua i raro ake i te ture nui., me kare ra

Options for the drawdown of funds tetai ravenga ikiiki no te kiriti ki vao

tetai moni mei roto mai i te raurau

There are two options for the SWF. E rua ravenga no te kiriti mei roto mai i te raurau

• Use the fund for short-term gain (benefits only current generations) e akapou moni e tuatau poto – e tai rau-uki-tuatau e ora ra.

• Use the fund as an ongoing long-term source of finance (benefits future generations) e akapou moni e tuatau roa – e meitaki no te rau uki ki te tuatau i a muri mai.

Options – Tetai au iki’iki anga

Five different options for Drawing Down. E rima tu iki’iki anga no te kiriti moni 1. Transfer a Fixed Annual Amount – tarau atu i tetai tutaki anga

tinamou 2. Transfer half the annual return of the fund - tarau atu i tetai tutaki

anga iti apa-o-te-mataiti mei roto I te rauraru 3. Transfer increasing amounts below full return – tarau atu i te tutaki

anga kia maata, e ki raro ake i te tutaki anga maata o te mataiti mei roto I te raurau

4. Transfer the full return of the Fund – tarau atu i te katoa anga o te rauraru

5. Transfer based on a mixed approach – tarau atu i te papa no roto i tetai atuitui anga

Options for the drawdown of funds Option 1 – Fixed Annual Transfer –

Iki anga no te kiriti moni 1. Tarau anga tinamou mataiti

This option is based on a fixed annual payment that is drawn down annually. Tutaki anga tinamou i te au rau mataiti

• Does not allow for increased benefits/no increasing fund payments. Kare e rauka i te akamaata atu me kore i te akaiti mai i tetai tutaki anga

Options for the drawdown of funds Option 2 – One Half return on investments - Ikianga no te kiriti moni

Ikianga 2 - tarau atu i tetai tutaki anga iti apa-o-te-mataiti mei roto i te rauraru

This option allows for the transfer of one half of the return on investments. Teia iki anga ka tarau atu te katoa anga o te apa mataiti te moni tei akaputu ki roto i te raurau.

• This option grows the funds balance whilst having the ability to spend some funds. Teia iki anga ka uanga mai te moni no atu e, te kiriti ia nei teia o te tuaanga moni no tetai au angaanga.

Options for the drawdown of funds Option 3 – Increasing amount to the budget

Iki anga 3 kia uanga te raurau moni anganaga

This option provides for a growing spend or transfer to the budget, but below the level of the proceeds of the fund. Teia iki anga ka omai te tupu anga ta angaanga me kore te tarau anga, mari ra ka topa te reira ki raro ake i te moni e rauka mai nei ki roto i te raurau.

• However requires continuous adjustments/amendments. This can lead to the fund being vulnerable due to the political involvement that may occur. Ka anoano ia kia aere utu rai te au akatanotano anga matutu tau kia kore e topa ki roto i tetai poiri te ka tupu mai na roto i te taue maro poritiki anga.

Options for the drawdown of funds Option 4 – All interest earnings transferred to budget Iki anga 4 – kia tarau ia atu te moni tei uanga ki roto i

te raurau-moni.angaanga This option means all interest earnings from the fund will go towards the budget. Te aite anga o teia ikianga, ka tuku ia atu te moni tei uanga mai na roto i te raurau moni kimi puapinga ki roto i te raurau moni angaanga.

• The approach maximizes spending within the constraint of preserving the balance of the fund. Te ara no te ta angaanga atu i teia moni kua aka kena ia kia aka roa ia te toenga o te moni i roto i te raurau.

• This option does not allow the fund to grow once mining has stopped since all interest will be transferred to the budget. Kare teia iki anga e aka uanga i te raurau moni me oti the kerukeru anga i te taua moana. No te mea kua kiriti ia te moni uanga e kua tuku ia ki roto I te raurau moni angaanga.

• Real value of the fund will decrease beyond that point. Te turanga o te moni i roto i te raurau kua topa te reira ki raro roa.

Options for the drawdown of funds Option 5 – Mixed Approach

Iki anga 5 – Te Ara tarape

Transfers to the budget would be set at a certain amount per annum until the return on investment exceeds that amount. Transfers would equal investment returns once returns exceed the set amount. Te tarau anga i te raurau moni angaanga kua aka noo ia ki te turanga tau kia rauka mai te meitaki maata o te uanga o te raurau moni. Te tarau anga ka aiteite te reira ki te moni e rauka mai nei te meitaki na roto i te katoa anga o te raurau moni puapinga.

• Suggestion to amend the approach and take less than all the interest earnings e.g. 50% so the fund can still continue to grow. Tamanako anga kia akatuke ia te ara, e kia apai iti ua e 50% te moni tei uanga mai. Ireira ka tupu uatu rai te moni uanga o te raurau moni puapinga.

Weighing of Options Vaito anga i te au Iki anga

Options – Au iki anga

Protects from interference

Provides certainty in annual payment

Increasing Annual Payment before maturity

Fund Grows after maturity

Increasing payment after maturity

1. Fixed Annual Return – a a a

2. One half return on investment a a a a

3. Increasing Amount to Budget a a a (a)

4. All interest earnings transferred a a

5. Mixed Approach - a (a) a

Annual Payment of Fund Tutaki anga o te au Rau Mataiti

Options Iki anga

Payment After 10 Yrs (millions)

Payment After 20 Yrs (millions)

Payment After 40 Yrs (millions)

Payment After 60 Yrs (millions)

1. Fixed Annual Return 4.0 4.0 4.0 4.0

2. One half return on investment 0.8 12.2 44.6 66.3

3. Increasing Amount to Budget 2.0 4.0 8.0 16.0

4. All interest earnings transferred 1.5 22.2 64.0 64.0

5. Mixed Approach 2.0 21.5 63.2 63.2

Level of the Fund Te papa anga o te raurau moni

Options – Au iki anga

Level After 10 Yrs (Billions)

Level After 20 Yrs (Billions)

Level After 40 Yrs (Billions)

Level After 60 Yrs (Billions)

1. Fixed Annual Return 0.0 0.6 3.0 6.4

2. One half return on investment 0.0 0.6 2.3 3.4

3. Increasing Amount to Budget 0.0 0.6 3.0 6.1

4. All interest earnings transferred 0.0 0.6 1.6 1.6

5. Mixed Approach 0.0 0.5 1.6 1.6

Investment Options Iki anga kia Uanga

MFEM recommend that the Fund’s principal should be invested in international financial assets - Te tamanako nei Te-Raurau-Moni-Nui o te Kavamani kia kou ia teia Raurau-Moni-Puapinga ei Atu-Apinga ki roto i te taokotai anga Raurau-Moni o teia nei Ao katoatoa. Teia te au tumu anga;

• to avoid distorting the local economy. I kopae atu i te akara anga aveave papu kore o to tatou turanga kimi puapinga

• in a diversified portfolio of financial instruments that protects the fund principal over the long term with minimal risk. Ei tarai anga ke, e korero no te moni kia paruru is te Atu o te raurau moni puapinga no tetai tuatau roa tikai mate iti o te manamana ta te ka tupu a po ake.

Who should be responsible for the management

of the fund? Ko ai tikiai te tiaki meitaki no te akateretere anga i te raurau moni puapinga?

There should be an Oversight Board – What skills are needed? Ei kupu-akara-matatio tetai ka anoanoia kia iki ia – Eaa te peu karape ka anoano ia no ratou?

•Legal - Akiaki anga kaveinga

•Politician – Karape i te ueue vaerua tangata

•Financial/economic – Rapa kimi puapinga e te tukatau katoa i te akakitekite ui te turanga o te raurau moni

•Technical expert – e Taunga tarai enua

•Investment Management – e karape no te akaputpu atu

Transparency – Te Ata kia Tupu

The fund’s financial performance should be transparent, including: fund operations, asset holdings, and decision-making.

How? Akapeea?

• By publicising Quarterly financial statements and annual reports. Akakitekite anga tuatau no tei oti i te rave, e eaa i tei tupu

• Publishing minutes of the oversight board meetings. Tetai tata anga a te pupu akaramatatio

Points for discussion

• What is a SWF? Eaa Te Mana o te Raurau Moni Puapinga? • How can we protect the fund for future generations? Ka aka peea tatou i te

paruru anga i teia raurau moni puapinga no te anau e te uki apopo? • How can we ensure transparency of the fund transactions? Ka akapeea

tatou kia tiama te ata o te au angaanga tei akapou ia te moni mei roto mai i tei rauraumoni puapinga?

• Who is in charge of the funds? Ko ai te Atu-akatere irinaki mou no teia raurau moni puapinga?

• What legislation will govern the fund? Eaa te tango papu tei ariki ia no te akatere I teia raurau moni, kia tika e kia tiratiratu teia raurau moni puapinga?

• Who will the oversight board consist of? Ko ai ma tei ariki ia kia akarakara matatio atu i teia raurau moni? Eaa to ratou tarai anga?

• What are the options available to transfer funds to the national budget. Eaa tetai atu iki anga no te tarau atu kia kapiti ia teia raurau moni puapinga ki roto i te Raurau-Moni –Angaanga a te Patireia?

Uianga me kore tetai manako keke atu?

Questions or views?