It is my pleasure to present the Pacific Balanced Fund (PBF) Audited Financial Statements for 2019. This was another difficult year for government and business in Papua New Guinea, and I am pleased to report to members that your Fund once again achieved modest growth in the face of many challenges.
2019 saw a rebound in the mining and resources industries which helped drive stronger economic growth in PNG. It had been a year of change and of some turmoil, accompanied by signs of growing confidence that the country was on the path to establishing greater balance in the sharing of benefits from resource-based projects and diversification of the economy by prioritizing growth in non-resource sectors, small and medium-sized businesses and the informal economy.
It was encouraging to see Treasury statistics showing a recovery and indicating that the non-resource sector picked up from virtually zero growth in the period 2015 to 2017 to around 3% growth in 2018 and 2019. While the economy struggled in 2018, it had been projected to grow by 5% in 2019, according to both Treasury estimates and the IMF, largely driven by recovery in mining and in oil and gas operations, in the latter as infrastructure damaged by the 2018 earthquake was repaired and production at major projects resumed. Unfortunately, 2019 was another year of challenges with the fiscal deficit growing to 4.9% of GDP, well above the original target of 2.3%. This naturally impacted on the timeliness of government payments to the business sector and to superannuation funds.
The National Government signed a widely welcomed gas agreement with Total, ExxonMobil and Oil Search in April, relating to the proposed development of the US$13 billion Papua LNG Project, based on gas reserves in the Gulf Province. Once final engineering design is complete and final investment decisions achieved, this major project will be a boost to many sectors of the economy in, we earnestly hope, the very near future. This bodes well for the financial health of PBF with its portfolio of investments in businesses which can be expected to experience growth resulting from this large project.
In another encouraging development in late 2019 the Government introduced a new program, “Connect PNG”, to advance the long-held intention to improve the country’s road, port and telecommunication connectivity. This gives additional hope to industries in which PBF has held long-term investments and bolsters the expectation that PBF Unit Holders will see the value of their investment continue to grow.
Compared to the difficulties of the preceding year, 2019 saw PBF continuing to recover from past issues that had been dogging it and reporting a small increase in the total asset value of the Fund from K557 million in 2018 to K566 million in 2019. Naturally we would have preferred to have been able to report stronger growth but, knowing what a challenging year it was to many companies, we are still pleased that we are able to report modest growth and the ongoing protection of the Fund’s future.
I am pleased to also be able to assure you that this, long delayed annual report, will be followed in quick succession with the published audited financial statements for 2020 and 2021. This is possible because we have finally been able to overcome a number of legal irregularities that had been affecting the Fund and the work of our auditors since 2017. In overcoming challenges, protecting the Fund and carefully planning its investment choices we have provided a much stronger base from which to grow and look forward to continuing to report on this.