Case study: nation-building with superannuation


With confidence restored in Papua New Guinea’s superannuation sector, POSF Ltd, one of PNG’s two major superannuation companies, is proactively engaged in nation-building.

The ‘wantok’ system of relationships in Papua New Guinea is not only complex but is an integral part of social existence. In essence, one salary-earner may have financial obligations to as many as 10 family or clan members. Add to this the fact that only 15% of workers in PNG participate in the formal economy, and that they retire at 55, and it’s clear that superannuation is expected to play a major role in maintaining Papua New Guineans’ livelihood and welfare.

The Public Officers Superannuation Fund Ltd has more than 80,000 members, mainly public servants. Since major reforms were introduced to PNG’s superannuation industry in 2002, POSF has transformed itself, according to Managing Director Leon Buskens. The organisation had to change its work culture and work ethics, address capacity-building issues, put in new corporate governance practices, and ‘define clearly our direction.’

According to Buskens, members’ funds ‘are better protected now than in the past and we’re building better value for our members’ retirement … we see ourselves as a major domestic vehicle for mobilising domestic savings. The challenge for us now is to plough that back into nation-building.’

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POSF’s financial performance is certainly impressive. Its assets in 2000 were worth K600 million (US$204 million). Six years later, that figure had risen to K1.5 billion (US$510 million). At the same time, it has been able to offer members interest of around 18% per annum over the past three years. The double-digit returns look set to continue into 2007. ‘Of course, we’ve been helped by the macroeconomic conditions,’ admits Buskens. ‘We have been cautioning our members that the results are not sustainable in the longer term.’

POSF’s investment strategy is revised annually. ‘There are numerous investment and business opportunities onshore waiting to be explored,’ says Buskens, who is a supporter of the privatisation of state public utilities. ‘We have overwhelming evidence on how to unlock value, improve efficiency and improve corporate governance in the privatisation model used for the PNG Banking Corporation [now Bank of South Pacific].’ POSF is also a large investor in the tourism and hotel sector.

Moving forward, POSF is starting to expand its superannuation offering into the private sector. Thirty companies now have employees contributing to the fund. Buskens believes that expanding the superannuation net is one way for PNG to reap the long-term benefits of the current boom. At the time of writing, POSF was planning a major rebranding in May 2007, to better reflect its claim to be the ‘nambawan super fund in PNG.’

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