PACIFIC ISLANDS FORUM SECRETARIAT 18TH FORUM ECONOMIC MINISTERS MEETING (FEMM) Honiara, Solomon Islands 2014 FEMM Seminar: Establishing and Managing Trust Funds 9 July 2014 Opening Remarks by Tuiloma Neroni Slade Secretary General Pacific Islands Forum Secretariat Honourable Ministers and Heads of Delegations to the 2014 FEMM Members of the Diplomatic Corps Fellow CROP Heads and Representatives of Multilateral Banks and International Organisations Distinguished Delegates As the Moderator of this FEMM Seminar, may I extend a warm welcome to you all to this event on a topical issue for many Forum Island Countries (FICs), on the subject of Establishing and Managing Trust Funds. Allow me, on your behalf, to express our deep appreciation and gratitude to the distinguished presenters for this FEMM seminar, which include representatives from Forum member countries and the World Bank Group, who have kindly accepted our invitation to speak. 1 2. As you will hear in this Seminar, Trust Funds (or Sovereign Wealth Funds) are not new to the Pacific. A number of Forum Island Countries have long experience in establishing and managing Trust Funds. However, the purposes of these trust funds have varied across sub-regions and countries in the Pacific. For instance, the Northern Pacific countries operate Trust Funds from US grant support through the Compact arrangement, in anticipation of government operations post-2023. Kiribati and Tuvalu have trust funds to ensure inter-generational equity and manage the returns from its current economic resources for future use. There are also emerging special purpose Trust Funds in the Pacific: for climate change recently set up by Tonga; and the upcoming Sovereign Wealth Fund in Papua New Guinea to manage the influx of revenues from its LNG project. 3. Trust Funds create both opportunities and challenges for a country to transform resources whether they be from abundance of natural resources or donor funds, into well-managed financial assets and ultimately to tangible development which improves the welfare of their people. Since the Trust Fund resources must take care of the needs of the current generation as well as for future generations, inter-temporal smoothing of revenue and consumption, or investment, moves to the center stage of macroeconomic policies when it comes to managing the Trust Funds. Governance of Trust Funds is crucial 4. For any Trust Fund to operate efficiently and to contribute optimally to a country’s development, both in the short and long term, the Trust Fund must be established under strong and effective governance mechanisms, based on internationally agreed principles and consistent with best practices. In this context, the Santiago Principles for Sovereign Wealth Funds are an example of key best practices in managing funds. Without appropriate ring-fencing of Trust Funds through strong prudential financial practices, risk management, institutional governance and accountability mechanisms, erosion of these financial resources could be at risk. Bad practices in managing such funds can have far-reaching impact on government finances and wealth distribution across generations. I will not delve into these issues further as our distinguished presenters will share their expertise in setting up and managing Trust Funds but suffice to say that well-functioning and well-managed Trust Funds, based on strong governance frameworks, are essential to translate resources into sustainable development financing options for current and future generations. 2 7. This FEMM Seminar will highlight these important issues surrounding the management of Trust Funds. It will also provide a platform for Economic Ministers to share and discuss their experiences including best practices for establishing and managing Trust Funds. 8. With these few remarks, let me now introduce to you the distinguished speakers of the 2014 FEMM Seminar on Trust Funds, and briefly highlight what their presentations will be on. Introduction of Keynote Speakers (1) Ms. Ekaterina Gratcheva, World Bank Group Ms. Ekaterina Gratcheva has over 12 years of experience in investment management. Since joining the World Bank Treasury in 1998, Ms Gratcheva has worked extensively in strategic asset allocation and investment policies, portfolio risk and performance management, quantitative investment strategies, and innovative finance for development. As the Lead Financial Officer at the World Bank Treasury, Ms. Gratcheva has been actively involved in client engagements with central banks, ministries of finance, and other public financial and development institutions in numerous countries, including Egypt, Indonesia, Poland, Russia, South Korea, Tanzania, and Ukraine. This afternoon, Ms Gratcheva will speak about Lessons in Managing Sovereign Assets in the Pacific. (2) Honourable Dr. ‘Aisake Eke, Minister for Finance and National Planning, Tonga Hon Dr. ‘Aisake Eke is the Minister for Finance and National Planning of the Kingdom of Tonga. He has a distinguished career spanning nearly 30 years in Tonga’s public service, and currently as a Member of Parliament. Hon. Dr. Eke started his career as an accountant and rose through the ranks to Permanent Secretary for Finance from 1994 to 2010. From 2002 to 2004, the Hon Dr Eke was the Senior Adviser to the Executive Director for the South East Asia Office at the World Bank. He has also held senior positions as the Director of the National Reserve Bank of Tonga from 2008-2010; Chairman for the Board of Directors of the Tonga Development Bank from 2006-2010 and Board Director for Westpac Bank in Tonga. The Hon. Dr 3 Eke holds a Doctorate of Business Administration and Master of Business Administration from Australia. This afternoon, Hon. Dr ‘Aisake Eke will speak about Tonga’s experience with its Climate Change Trust Fund, one of the new (special purpose) Trust Funds in the Pacific. (3) Hon. Evelyn Adolph, Federated States of Micronesia Hon. Evelyn Adolph is the Director of the Office of Statistics, Budget and Economic Management, Overseas Development Assistance, and Compact Management (SBOC) in the Federated States of Micronesia National Government. She earned a Bachelor of Arts Degree in Economics from Chaminade University in 1996 and her Masters in Economic Management from Columbia University in New York City in 1999. Hon. Adolph’s public service career includes several important roles including: serving as an economist for the FSM National Government and Project Manager for the FSM-Wide Tax Reform. She serves as a member of the President’s cabinet and is also one of the two FSM representatives on the Joint Economic Management Committee (JEMCO) since 2007, and on the Compact Trust Fund for the People of the FSM. Hon. Adolph’s presentation at this Seminar will be on FSM’s Perspective of Challenges in Management of Trust Funds (4) Mr. Richard Neves, Cook Islands Mr. Richard Neves is the Financial Secretary of the Cook Islands Ministry of Finance and Economic Management. He is also the acting chair of the Cook Islands National Superannuation Fund, and a board member of the Bank of the Cook Islands. Prior to working in the Cook Islands, Mr. Neves has had extensive experience in public financial management across several jurisdictions including in Australia, and in Timor-Leste as an adviser in the Timor-Leste Ministry of Planning and Finance. Mr Neves was heavily involved in the development, establishment and operation of the Timor-Leste Petroleum Fund and is now working on the Cook Islands Fund. Today Mr Neves will share his experience with Trust Funds broadly and specifically on the Cook Islands Fund. 4