Pacific Islands Should Capitalise on Commonwealth Investment Fund

Secretary-General Don McKinnon (centre) at the launch of the US$20 million Kula II Fund

Sir Michael, who is the new chair of the Pacific Islands Forum, said the Kula II Fund is aimed at investments in the agriculture, fisheries, transportation, mining and services industries, as well as other commercial sectors in the more remote territories of the Pacific islands. 

"Kula II will target a lower investment size with the view to injecting capital into smaller Pacific island countries, and we must take advantage of this and encourage our respective private sectors to explore and actively pursue prospects for further investments and trade opportunities." 

The Prime Minister said the physical geography of the Pacific region, which faces challenges in communications and transport, has been the biggest constraint to foreign investment. But technical assistance provided by donor agencies, has helped countries such as Papua New Guinea to overcome these problems. 

Sir Michael acknowledged the Commonwealth Secretariat's technical assistance in the feasibility study for the US$17 million Kula I Fund, launched in 1997, and Kula II this year that was undertaken by Aureos Capital Partners with financial assistance from NZAID and AusAid. He noted that the positive response to Kula I and II from both Commonwealth and non-Commonwealth investors augurs well for commercial activities in the Pacific islands. 

Kula I shareholders such as the Asian Development Bank, the European Investment Bank, CDC Group and local pension funds from Fiji Islands and Papua New Guinea have committed funds for investment in Kula II.

Robert Binyon, chairman of Aureos Capital in Asia, said the Kula II Fund will be able to target smaller businesses. The investment capital for each enterprise has been reduced to $100,000 or lower, depending on the nature of the business. 

"I hope Kula II will have a much broader impact in the economies in the region than we were able to achieve with Kula I. The $20 million fund size may well be exceeded. I hope we'll get $22 or $23 million of investment from different sources for this fund. We're in active negotiations with a number of pension funds in the region which I hope will also join us," said Mr Binyon. 

Commonwealth Secretary-General Don McKinnon said the Kula II Fund is complementary to the Pacific Plan, which is aimed at strengthening regional co-operation and integration to promote peace, prosperity and progress. He stressed the importance of deepening partnerships in the region through technical assistance to help fulfil the aspirations of the Pacific islanders. 

"We can see real benefits coming through to the peoples of the Pacific through co-operation. We want to see more economic growth, sustainable development, good governance and greater security in the region," said the Secretary-General. "The development needs of small island states know no boundaries; even if countries have good governing mechanisms, receive aid and have economic prospects, the need for investment is still important. Investment reflects confidence and creates success. Nothing succeeds like success."

Key Links:

• US$20 Million Commonwealth Investment Fund for Pacific Islands
• Economic Affairs