By Reginald Renagi

It is time our country needs to have a vibrant financial market for obvious reasons. 

PNG must now start opening up its financial markets as part of an interactive government-business initiated broad-based industry reforms process. 

Let’s now look at both offshore and onshore investment options.  Let’s not have foreigners now tell us we can’t do it here.

If they tell us that, we just go somewhere else and get ourselves independent advice from credible sources.

But first what’s the big deal with offshore options?

Concerns on this issue in the media recently is good.  The public wants to know more about the benefits of an offshore stabilization fund. 

It may not be flawed as many people would like to think.  There are certain benefits involved.  However, for obvious reasons, it is vitally important for us to be ever vigilant.

Let us also be more aware of offshore market conditions. We do not want to rush in without first assessing the market. 

The government must carefully do its own due diligence here.  State financial advisors must not simply believe everything overseas financial institutions may tell us.

It must thoroughly investigate, analyze and confirm the source giving us the information required. 

They are: banks and finance companies (domestic/offshore), foreign interests, local business syndicates, or special interest groups, etc) giving us this information is also applying the same effective strategies themselves.

We need to know the information is truly genuine and from reliable financial advisory service sources.

While there’s many benefits to placing funds (whether public, private or individual investors) in offshore funds (companies, trusts and investments), we need to know whether the information given to us is absolutely correct.  A lot can also be incorrect.

A common perception too is that offshore investments are expensive and may not be viable, especially for the average person. But offshore investing can also be a viable alternative choice.  Here’s why:

Firstly, it’s vitally important that the offshore company is correctly structured to gain substantial tax benefits. 

Secondly, investments can be easily accessed offshore.  Domestic constraints may not permit substantial investing due to a narrow-base market.

Thirdly, offshore banks or companies may not suffer current domestic restrictions.  Many offshore investing avenues can yield from 25 per cent to several 100 per cent a year. 

Fourthly, there exist inherent constraints in government regulations regarding foreign prospectuses to the public.  But can be sent to “foreign” companies.

Fifthly, people set up offshore financial structures (company) to manage investment funds for asset protection, privacy and confidentiality. 

Last but not least, as far as International tax planning goes; offshore investing gives one the advantageous use of foreign jurisdictions.  For example, tax rules for reduction of tax liability.

There’s also nothing wrong in keeping the money in our Central Bank.  But other inherent technical constraints may take time to review. 

Generally, offshore investing is a good strategy to diversify our investment range. 

So apart from domestic investments, it’s always a safe investment practice to park some of our surpluses in good international funds management jurisdictions. 

PNG’s money is then reinvested in several other high-yielding financial instruments. 

This maximizes upon good high investment rate of returns many International financial institutions, and investment banks offer to international clients.

While it’s also not too difficult setting up a Foreign Investment Fund with surplus proceeds from our LNG in PNG, diversifying in an offshore investment opportunity can be a good investment practice. 

Hence, we are simply not “putting all our eggs in the one investment basket”.  

We can also use several prudent hedging strategies here. 

Once done, we then use creative financing strategies to first, borrow first offshore; and then secondly, loan to smaller Pacific Island countries earning revenue for our financial market. 

This offers many benefits.  It allows us the required flexibility to diversify our own financial markets. 

At the same time, this further hedges against risks of providing offshore loans to our smaller near neighbors.

This is a preferred future option as this onshore facility allows PNG to re-lend at lower, but competitive interests rates.    

It is also good investment strategy to use the banks to leverage favourable interest rates, than use our own money.

In addition, I also see one further great benefit for our people in future.

I am now calling on the government to now create PNG’s futures market base within the next five years.

PNG can now set up its very own Commodities Futures and Options (CFOE) Exchange. 

Once set up, we then gradually and systematically build up a diversified range of investment opportunities here. 

This alone will directly stimulate domestic financial markets to greatly enhance a broad-based public investment activity. 

A PNG’s futures commodities exchange can annually add a variety of new financial instruments for daily trading activity by the general public.

A futures market and exchange here allows us (institutional, banks/finance companies, private and small-time individual investors) to do regular investment trading activity in PNG than overseas as now.

Today, we can create wealth within the country by the public trading futures contracts on common commodities like: coffee, cocoa, copra, oil palm, PNG crude oil, sugar, orange juice, pork bellies, foreign currencies, financial indexes, to mention just a few. 

This new, diversified and active exchange can also dual-list here other commodities commonly traded on overseas (regional) futures (and options) exchanges. 

The direct benefits of a local bourse (exchange) are:  greatly enhanced trading flexibility, increased volume, lower risk hedging factors and high leverage returns for investors; among others.

Let the government now also lower onshore bank lending interest rates to around 2 and 2.5 per cent.  This will immediately allow a greater majority of our people to be fully involved in creating personal wealth for their families through increase small business entrepreneur activity.

In the process, this fundamental financial reform activity will directly stimulate and grow our economy.

More diversified investment/ business opportunities, and benefits can be realized by our people only if the PNG government starts thinking creatively outside the traditional and unimaginative investment mindset, we have been subjected to for many years.

The government must now give Papua New Guineans better investment choices today, and not think about this in another 36 years.

It is time the government gets more innovative by creating a vibrant financial market in future.

This must be one key fundamental PNG’s wealth creation strategy in the next five years. 

We can no longer wait and watch only foreigners acquire wealth at our expense.  PNG and its people are now ready to create wealth for themselves.

But is the government ready?