fill lead to stock exchange

[?]vestment Corp. activities fill lead to stock exchange

Not all Island administrations believe that government investment corporations, such as the one not long established in Papua New Guinea, are the answer to investment problems. Do they, for example, really involve local people in participation or are they merely looked on locally as another arm of Treasury? PIM invited Mr. E. S. Owens to explain the aims of, and progress made with, the PNG Investment Corporation.

By E. S. OWENS, Chairman of the Investment Corporation of Papua New Guinea.

fhe Investment Corporation of )ua New Guinea was established 1971 as an independent legal entity h its own board of directors and nagement. The board of directors isists of 10 members, six of whom white, four are black. The deputy tirman is a Tolai, Mr Paulias tane, from the Gazelle Peninsula. 2 others are representatives of the erent districts of Papua New inea. Since the first board meeting February it has accumulated d assets of approximately 56.2 lion and earned a net profit in ess of $lOO,OOO. As well it has an iressive list of companies operating PNG currently seeking participa i. fhe corporation’s role is to acquire lificant interests in profitable or entially profitable overseas com lies operating in PNG and to in ve local people as individual share ders in its investments, fhe corporation has demonstrated that it can put together an •active portfolio of shares in sub itial and profitable companies, pile doubt as to the reaction of sting companies to the placing of lificant holdings in the hands of government agency—the corpora i. A doubt which in the event ved groundless; in fact the con t has been welcomed because a nber of companies have for long hed to admit local people as share ders. fo meet its second commitment the poration is now actively planning the involvement of the local >ple as individual shareholders. It’s hallenging task when it is remem ed that the population of 2.5 lion is spread over a half-million lare miles of difficult country, aks some 700 dialects and approxi tely 40 per cent, are still engaged subsistence agriculture.

Nevertheless, the people have made

it clear to the Administration through their representatives in the House of Assembly that they want rapid de velopment in their standard of living.

The need for investment in roads, hospitals, schools and industries is apparent. But there has been a great basic problem of bridging the gap between the desire for investment on the one hand and their limited capacity to generate savings on the other.

It was in an effort to solve this problem that the Australian Govern ment set up the investment corpora tion.

The House of Assembly has stated that it sees as essential a continuing sizeable flow of private capital into PNG together with technical know how and the managerial skills which follow. Without this capital inflow, it is clear PNG will not be able to develop its social and economic stan dards at the pace which its people want.

Both the first and second Houses of Assembly are on record as wel coming overseas capital and guaran teeing it against expropriation or discriminatory treatment. These decla rations have done much to maintain and strengthen the confidence of overseas investors in PNG.

In assessing propositions put to it, the board of the corporation con siders the following main criteria: • Is it a substantial company? • Is it a viable operation supported by history and/or projections? • Is it a significant or potentially significant employer of local labour? • Will it assist in developing PNG on a sound and balanced basis? • Will it provide employment and training opportunities for local people? • Will it involve maximum pro cessing of products in PNG? • Will it involve the provision of

Investment Trusts

maximum common user facilities such as roads, ports, etc? > Will it assist the country’s balance of payments through development of exports or re placement of imports? ► Is a worthwhile shareholding ranging from, say, 10 per cent, to 50 per cent, available to the corporation? • Can the corporation nominate a member for the board of direc tors?

Based on the foregoing criteria the operation holds shares in the fol ding companies: ANG Holdings Ltd., total assets $5.5 million—2o per cent equity capable of being increased to 26 per cent.

Burns Philp (New Guinea) Ltd., total assets $3O million—l2J per cent, equity capable of being in creased to 26 per cent.

Bougainville Copper Ltd., 1,000,000 shares of $1 each.

Commonwealth New Guinea Timbers, total assets $7 million— -35 per cent, equity.

Watkins Property Investments Ltd., total assets $700,000—45 per cent, of equity.

Money on deposit—ssoo,ooo.

These investments have been lanced by capital funds of $2.2 illion and the balance by borrow gB.

While the corporation will continue add to its investments, the main eoccupation now is the setting up a series of investment trusts. Each ist will be designed to appeal to fferent cross sections of the corn unity. Some will be general in Jure, in that they will hold shares more than one investment, while hers will have appeal because of e local nature of a single invest ;nt.

The first prospectus or invitation to /est in a corporation sponsored ist is expected to be ready in the st quarter of 1973. By that time e corporation must have established sound streamlined administration pable of processing accurately, eedily and at low cost the paper )rk involved in keeping track of ausands of small and inexperienced areholders.

It must have established a market r dealing in scrip of the trusts by pans of a daily advertised buy back ice for each trust and have pro led a network of offices through t PNG where scrip can be ex anged for cash and vice versa.

The current phase of the corpora l’s activities will be most demand

ing because public confidence is at stake. There will be no room for mistakes; planning must be meticu lous and patience and understanding will be at a premium during the introduction of this new form of saving and investment, which will in fact be the first step towards estab lishment of a stock exchange in PNG.

The corporation must succeed in this phase because without the in volvement of people in business enter prises there can be no understanding of the benefits which can flow from the partnership of capital, manage ment and labour.

The corporation is very conscious of the importance of its role in busi ness education and with this in mind is having a shortened form of its annual report printed in Motu and Pidgin. As well, copies of the full report will be sent to the University of Papua and New Guinea and schools so that young people will have the opportunity to know first hand the part played by various companies and industries in the de velopment of the country. This report can be the means of opening up new vistas for education and employment as the wide range of business under takings and opportunities in PNG are brought to the notice of students and others seeking to improve them selves.

In simple terms the corporation has a threefold task: • To be a responsible shareholder; • To encourage and make possible individual shareholding in its investments; and • To be a vehicle for business and management education.

The extent to which it is able to perform these roles will influence the rate of progress and development of PNG itself.

Tourism Looks Bright.—

Pacific Area Travel Association’s executive vice-president F. Marvin Plake anticipates that the 12 months from July will be another excellent year for tourism in the Pacific. In a letter to members he says: “Almost every destination area of the Pacific, and of the world, is up solidly from a year ago. There is no reason to imagine that this trend will diminish.

When reports are received from some area which indicates that tourism there is down, a brief investigation almost always shows that it is because of a temporary over-capacity of facilities. I say “temporary” because it has become obvious that even a severe overbuilding of hotels, for example, will correct itself within two or three years.”

Basic wage rise in

Port Moresby

The PNG Minimum Wages Board nquky (see p. 55) resulted in a lecision handed down September 19 0 raise the minimum pay for urban workers in Port Moresby from $8 to 1 11.50 forthwith, with a further rise »f $2.30 to come one year later. )omestic and agricultural workers re not included in the order, but it > expected that the decision will ventually affect them and all other workers throughout Papua New luinea.

Five trade unions had claimed the 'age should rise $l2 to $2O a week, ut the board apparently felt that a 2 per cent, rise was all the economy ould be called upon to bear at resent.

'tauru consolidates

rade link

The success which President ammer Deßoburt of Nauru had in jptember in gaining a foothold in ie US Trust Territory for the Nauru acific Line will mean more oppor mities for two-way trade between ie North and South Pacific.

Nauru’s active shipping line has len servicing Majuro, in the Mar lalls, from Melbourne and wanted to hend its operations to various ports the Trust Territory besides Majuro.

But at two meetings between the auruans, Micronesian Government presentatives and Transpac officials Majuro in August and September,

Transpac, which holds an exclusive franchise to TT ports, made it clear that “the present economic situation” in the TT precluded Nauru entering any other port than Majuro.

President Deßoburt was able to stress the advantages for Micronesia of a link south, with the result that both sides will meet again in six months to discuss progress generally and to consider extending the agree ment to another port in Western Micronesia.

Said a joint statement made at the September meeting, “It is the con fident hope of the parties to the agreement that the new arrangement will provide the people of Micronesia access to the markets of Australia, New Zealand and the islands of the Pacific for the purchase and sale of commodities, with regular delivery at reasonable rates.”

Toke-over bid

tor PNG brewery

Incorporated in Papua New Guinea on August 1 with an authorised capital of $4,500,000, San Miguel (PNG) Limited is making a take over bid for Territory United Brewery Limited with an offer to TUB share holders of one 50c share in San Miguel for three 50c TUB shares.

The offer is conditional on ac ceptances representing at least 76 per cent, of TUB’s issued capital. If the take-over succeeds, TUB, which has been ailing over the last 12 months, will be managed by Neptunia Corporation Limited, of Hong Kong, itself a subsidiary of the Manila

based San Miguel, and by Swan Brewery, of Melbourne, each of which has agreed to make cash sub scriptions of $312,000 for 625,000 shares in San Miguel.

Neptunia and Swan have also agreed to make available a further $812,000 each as a loan secured by second debentures over San Miguel’s assets. The loans, for five years, can be converted during the loan period into San Miguel shares at par.

Directors of San Miguel (PNG) Ltd include Mr B. C. Goodsell, managing director of Burns Philp (NG) Ltd, Mr Clifford Jackson, a well-known Port Moresby business man and three top executives from Swan Brewery.

San Miguel’s incorporation in PNGi was made with the object of staging: the TUB take-over.

Business briefs

• The Reserve Bank expected! returns from rural production ini PNG for 1971/72 to be down on the; previous year, the June statistical! bulletin revealed. Coffee prices have: been better, but manufacturing was restrained. Building activity was? similar, but improvement in both was? expected. Retail prices increased 8.41 per cent, in the 12 months to March,, 1972. Government spending was upc 7.2 per cent, at $144.6 m. Tax) revenue was up and loan raising had! been highly successful.

O The Solomon Islands Investment!

Company, has been floated in the Solomons by Naviti Investments Ltd of Fiji, and is offering 250,000 shares of $1 for public subscription. The first! venture of the new company is a halt share in Mendana Hotels, purchased from Guadalcanal Plains Ltd fon $200,000. Work has already begun: on a four-stage programme of en larging the hotel to 106 rooms.; Diversification of the company’s port folio, with Solomon Islanders taking a bigger share of economic develop ment, is an aim.

O Two new food factories are planned for the GEIC, a biscuit fac-: tory to be built on Betio by the newly-registered Tarawa Biscuit Com-i pany, and a bakery and shop which! will be opened on Bairiki, opposite the wharfs by the Bairiki Bakery Trading Company. The biscuit conn pany hopes to be able to export to the Marshalls and Nauru and is ex: perimenting with coconut meal to see if it can be used as an ingredient. An oven for the bakery costing $1,500 is being shipped from Australia.