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Commonwealth Secretariat press release

US$20 Million Commonwealth Investment Fund for Pacific Islands

24 October 2005

A US$20 million investment fund for the Pacific Islands targeted at small and medium enterprises will be launched at the Pacific Leaders Forum in Port Moresby, Papua New Guinea, on Thursday, 27 October 2005.

Commonwealth Secretary-General Don McKinnon and the Prime Minister of Papua New Guinea, Sir Michael Somare will officiate at the launch of the Kula II Fund in the presence of other leaders from the Pacific region and potential investors.

The Fund, which is the second for the Pacific, is under the umbrella of the Commonwealth Private Investment Initiative (CPII), which has established private investment funds in the four regions of the Commonwealth to support and promote commercially viable private enterprises. To date, CPII has raised over US$400 million globally from investment agencies, development banks and private investors. The Kula funds are managed by Aureos Capital.

The Kula II Fund is a successor to the US$17 million Kula I set up in 1997, which is now in its final divestment phase. The new fund's committed capital of US$20 million will cover the Pacific Islands more broadly than Kula I as its investment threshold has been lowered to cater to investments in small and medium enterprises (SMEs) in the more remote territories. The difficulty with such coverage is the cost associated with identifying suitable smaller businesses and in monitoring and adding value to investments. This problem has been overcome through technical assistance funding by some donors in the region. The Commonwealth Secretariat provided support during the feasibility and pre-establishment phases of the Kula funds. This co-operative effort has unlocked investment capital from major private and public institutional investors.

Like its predecessor, Kula II is aimed at the agriculture, fisheries, transportation, mining and services industries, as well as other promising sectors of commerce. The fund has won the support of shareholders of Kula I, which include the Asian Development Bank, CDC Group, the European Investment Bank and some local pension funds from Fiji Islands and Papua New Guinea.

Commonwealth Secretary-General Don McKinnon said the Kula funds will make a significant contribution to the development of the Pacific islands. These small island developing states are particularly disadvantaged in accessing international capital markets at reasonable cost to mobilise resources to modernise their economies.

The Secretary-General said: "Increased investment is vital for the economic future of small island developing states and Kula II offers small - medium sized businesses access to funds and ultimately markets previously out of their reach. With the investment threshold lowered, I am confident that this new fund will be as successful as the last. The number of investors inside and out of the Commonwealth is testimony to its success as a positive fund worthy of investment."

Note to Editors:

The Kula Fund was established for the Pacific region in August 1997 with total committed capital of US$16.9 million. The Fund has completed its investment programme, investing a total of US$11.4 million in eight businesses, of which four remain. Kula is now in divestment mode and has returned US$9.87 million, representing 59.1 percent of capital, to its investors. Investments have been spread across a variety of sectors, including agro-processing, fishing and fish-processing, warehouse retailing, mining-related services, printing, palm oil production, and aviation charter services. Kula I is on course to make a small net positive profit in US dollar terms despite the adverse political and macroeconomic environment in investee countries.

For more information, contact Geraldine Goh, Communications Adviser, Commonwealth Secretariat, at +44 (0) 77 30900020 or E-mail: g.goh@commonwealth.int.

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