The case for a sovereign fund: a cultural perspective

By: Kumbit Aivi

Behind September 16, 1975, December 8, 2009 has no doubt gone down as a significant date in the short modern history of our country. The months leading up to December 2009 were some of the most exciting times I’ve ever had in my life. After a long and frustrating wait and a number of false starts along the way, our LNG project was finally coming to fruition.

The excitement brought so much hope and optimism among Papua New Guineans that the economic gods had finally heard our cries. Well not exactly. Had the demon not emerged from the abyss and tempted us to steal and plunder from ourselves over the last three decades, we probably wouldn’t have been that much excited about this project. But that’s another matter. As it is now, our LNG project presents us the best possible hope of turning things around for the better.

But our excitement must be grounded in reality. And an independent study of the economic impacts of this project by Acil Tasman has contributed considerably in setting us on the right footing. As well as modelling and discussing the vast positive impacts this project is set to have on our government’s finances and, thus, enhancing its ability to deliver on its mandate, the report also cautions us to be wary of the potential economic shocks that could lead us to destruction in the long term, if appropriate actions are not taken to address the downside risks.

The phenomenon of Dutch Disease, or the so called ‘resource curse’, has been central to the sounding of warning bells and has fortunately been readily recognised as an important issue that needs addressing as part of our strategy in capitalising fully from the project. We have quickly embraced the argument that it is the flip side of the coin of economic promises that our LNG project brings with it. Discussions on this topic last year led to our leaders from both the public and private sectors calling for the establishment of a sovereign fund to cushion any possible shocks to our economy. I supported this call last year in this column and agreed that there are compelling economic arguments going for the idea of creating such a fund. But I think this idea should also be considered in light of some of our age old cultural practices and the conflicting understanding of the notion of wealth in the two distinct cultural settings that we find ourselves in.

I have been a keen follower of our development agenda thus far and have concluded that some of the reasons for our lack of progress owe their roots in the differences in the understanding, protection and furthering of wealth in our adopted western culture against the backdrop of our traditional Melanesian culture. Since the idea of a sovereign fund is essentially about the protection of wealth in the modern western sense, we need to first understand how wealth is defined and protected in our own cultural settings so as to enhance our chances of effectively accumulating, protecting and deploying our cash wealth for the optimum benefit of all our people.

So in order to understand the cultural reasons for why we need to open up a sovereign fund account and save some of our excess cash for future use, we need to go back to our roots and seek answers to the question of where our values lie for the simple reason that the notion of wealth is inherently linked to our values. What is it that a typical traditional Papua New Guinean society values the most? Any Papua New Guinean, or Melanesian for that matter, will tell you without even thinking that land is. Not unlike the westerners, we too have a keen understanding of how land gives rise to wealth. Land, therefore, is the most priced possession in our society. Behind land sits our traditional symbols of wealth such as pigs and gardens. And they are followed closely by kinship, our social security. We can go on and analyse each one of them and name every other thing that gives rise to our traditional value systems and, not surprisingly, cash is never one of those.

Because cash was never an element of our traditional value systems, most Papua New Guineans view it in a very different light than people from other cultures, particularly the westerners. The individualistic westerner views cash as an important commodity that can determine the level of one’s happiness and security. But a more communalist Papua New Guinean does not necessarily see it that way. We see cash as an interesting here-today-gone-tomorrow craze that can buy us some of the things some of the times but not all of the things all of the times.

Stories abound in our country about serious and sometimes fatal confrontations among our people on matters such as land, pigs, gardens, tribal relations and so on. Without trying to advocate the acceptance of some of the barbaric acts that arise out of trying to defend wealth as we understand it in our traditional settings, I would like to point out that most of such actions are actually a strong indication of where our value systems lie. People are willing to put their lives on the line for what they truly value and hold near and dear to them.

Likewise, we hear about seemingly massive compensation claims by our people for whatever it may be and think them unreasonable. But are they really that unreasonable? How do you put a monetary value on a garden patch, for instance, when there are such extremely different value propositions about the same thing in the minds of a typical Papua New Guinean who thinks food, survival & security and a typical westerner who thinks cash? On the same vein, how do you get a typical Papua New Guinean to think about cash in the same way he does land, pigs, gardens and rivers? The difficulty with getting a savings culture going among our people in the cash economy today can reasonably be traced to an absence of such a culture in our traditional settings. We need not save anything in our villages because of a strong presence of our social security found in our kinship. We give in our good days and take in our bad days. Ours has been a beautiful give-and-take culture, essentially a barter economy.

So why is it important to know our own tradition value systems and our notion of wealth? Because I believe it explains, to some extent, our failure over the years in enforcing our accountability mechanisms that are supposed to protect and promote the modern cash economy. Until very recently, cash has never been part of our value systems and so no one sees it important enough to go to the trouble of protecting it from abuse and misuse. To this day, cash as a measure of wealth is an abstract subject that is poorly understood by the majority of our people who live mostly off their land and natural environments during much of the year in rural settings.

Therefore, unless we get a sizeable number of Papua New Guineans to value and appreciate cash as a source of wealth, we will continue to struggle to effectively hold those who control our national purse accountable. And unless our law enforcing agencies start applying our laws without fear or favour, I predict that the wastage and pilferage of our collective cash wealth will continue unabated for sometime yet. For cultural reasons, we are quite handicapped in invoking people power to cause things to be done properly to guard our cash economy.

Such a scenario only adds more weight to the case for the set up of a sovereign fund to lock away our excess cash earnings until such time when Papua New Guineans appreciate its value and begin to fully embrace it as wealth. This should inevitably lead to better scrutiny of how our cash economy is managed for optimum national gains. Until this happens, we are better off keeping any surplus cash at a safe distance from corrupt and unscrupulous hands.

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One thought on “The case for a sovereign fund: a cultural perspective

  1. I think it’s timely for PNG to start thinking in the line of establishing a Sovereign Wealth Fund (SWF) in light of the looming LNG project with the millions of kina that will be floating around. Kumbit, good critical discussion on the cultural perspective. I think it essentially boils down to our value systems and ethics. The economic success of resource rich countries also requires intangible factors like the right attitude, values and culture to spur growth and not necessarily an abundance of resources.

    I thought it would also be useful to give some background on SWFs
    http://en.wikipedia.org/wiki/Sovereign_wealth_fund

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