Investing in

Business And Finance

Advertising Feature

Investing in P-N-Guinea

The Investment Corporation of Papua New Guinea is a statutory body established by an Act of Parliament in 1971.

Under the terms of the Act, the objec tive of the corporation is to provide for Papua New Guinea equity in enterprises operating in the country in cases where: • a significant degree of local equity might not otherwise be readily achieved; • it is considered to be in the long-term national interest; and • the enterprise is operating, or will operate, profitably.

In keeping with the PNG govern ment’s emphasis on self-reliance, the Corporation says, it has been entirely self financing since 1975. Starting with grants totalling K 5.5 million, the corporation now holds assets of over K 34 million.

The Corporation’s Act gives it power to engage in a wide range of commercial activities in the furtherance of its object.

But the corporation has no power of com pulsory acquisition of equality in an enterprise.

In fulfilling its object, the Corporation performs two principal functions, namely purchasing shares in enterprises operating in PNG and holding these shares for even tual sale to eligible PNG interests.

Under the provision of the Investment Corporation Act, eligible individuals and groups include; • a citizen, whether by automat ic right or by naturalisation; • the national government or a statutory body; • a provincial government, provincial development corporation or local government council; • a society registered under the Co-operative Societies Act; and

• any other group or body (cor porate or incorporate) recommended by the Investment Corporation group and approved by the minister of finance.

For Papua New Guinea groups wish ing to expand an existing business, estab lish a new business or take over a foreign owhed business, the Corporation will: • advise on financing; • underwrite share issue; and • subscribe for capital.

For foreign investors wishing to pro vide for local equity participation in exist ing enterprises, the Corporation will: • underwrite the share issue;

• acquire significant minority

shareholding; and • provide local board represen tation.

Within a policy framework laid down by the minister of finance and approved by the national executive council, the Corporation is administered by a board of directors, of eight to 12.

Day-today administration is provided by a management group comprising seven senior executives of the Corporation, each with specific responsibilities on a func tional basis. The Corporation’s invest ment policy is based on both financial and social considerations. Specifically, it seeks equity investments in business activities which are consistent with the

development objectives and policies of

the government of PNG.

Guidance is drawn from the: • National Development Strategy; • National Investment Programmes; and • National Budget Priorities Schedule.

However, the Corporation says it only considers purchasing equity in business

activities which, on the basis of proper analysis and investigation, are deemed

technically feasible and financially

viable.

Generally, the Corporation negotiates

directly for 20 to 30 per cent of equity in a company and seeks the board’s repre sentation. It also purchases shares listed on the Australian Stock Exchange, but only in cases where the company is regis tered in Papua New Guinea.

Sale of shares to eligible Papua New Guinean individuals and groups is achieved in two ways: • indirectly, through the sale of units in the Investment Corporation Fund; and • by direct sale of shares through

private treaty.

The Investment Corporation Fund is a unit trust administered by the Corporation, under the terms of a Management Declaration (Trust Deed).

Simply stated, the Fund operates in the following manner; • eligible groups and individuals buy units in the Fund; • the Fund uses their money to buy beneficial interests in the Corporation’s property and equity hold ings; and • returns generated through this method are divided amongst the unit holders after deducting the running costs of the Fund.

There are now over 26,000 unit hold ers comprising individuals, small groups and large associations and institutions representing tens of thousands of Papua New Guineans.

Over the past five years, the fund has paid an average dividend yield of about eight per cent. In addition, there has been an annual increase in the value of the Fund units of about nine per cent in the same period. As at year end 1996, the Corporation’s net asset was K 23 million (unaudited) while the Fund’s net assets stood at K 63 million (unaudited).

Both organisations hold equity inter ests in over 30 businesses in Papua New Guinea. These include BPT (PNG) Ltd, Associated Mills Ltd, Rothmans of Pall Mall (PNG) Pty Ltd, Trukai Industries Pty Ltd, Travelodge PNG Ltd, BOC Gases (PNG) Pty Ltd, llimo Poultry Products Pty Ltd, Boral Gas (PNG) Pty Ltd. ■