A PLAN is in the pipeline to establish a Melanesian Spearhead Group Investment Bank (MSGIB) to look after infrastructure projects in the MSG countries.
And it may start with a net capital of $2.4billion which could be directed from superannuation funds in Papua New Guinea, Fiji, Vanuatu and the Solomon Islands.
University of the South Pacific’s Lekima Nalaukai, who has done an analysis on the bank, said the idea of establishing an MSGIB would assist MSG countries provide the needed funding for development and also to invest funds into revenue generating activities to support developments.
He said they had decided that the funding opportunities should be directed to infrastructure development.
Mr Nalaukai said it had then been suggested that pension funds in the member countries take the lead in supplying the start-up capital needed for the MSGIB, however, this does not limit the MSGIB to source funds from alternative sources.
“Currently, pension funds in MSG countries, although highly liquid have very limited opportunities to be used as investments in high return or bankable projects and are often constrained by investing abroad due to overseas exchange control restrictions imposed by central banks,” he said.
He said further work was needed on accessing new sources of funds and memberships.
He added it was necessary that members decide where the MSGIB be located. The MSG Secretariat is in Port Vila, Vanuatu and the paper is of the view that only one office be established in one of the member countries with staff members recruited from member countries.
The challenges and opportunities facing the establishment of an MSGIB, he said, was better discussed around a generally identifiable risk framework namely market, competitive, technology and operational risks, financial, people, legal and regulatory and systemic risks.
He added these general risk areas needed to be carefully identified and assessed and strategies developed to mitigate their impact in a cost effective manner.
However, Mr Nalaukai said all these measured against a $4b gap in the infrastructure in this part of the region and something needed to be done.
