Pacific Islands Forum
Kula Foundation Optimism
Phase II Targets Smaller Pacific Economies
When the $20 million investment fund, Kula Fund 2 was launched during the Pacific Islands Forum in Port Moresby in October, it was with an appeal from PNG Prime Minister Sir Michael Somare that the region's governments encourage their private sectors to access the facility.
Kula II is a successor to the US$17 million Kula Fund I set up in 1997.
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Kula I invested US$11.4 million in eight businesses in Papua New Guinea, Solomon Islands and Fiji, of which four remain. It is now in divesting mode and has returned US$9.8 million, representing 59.1 percent of capital to its investors
Aureos Capital manages the Kula Fund and Chairman Robert Binyon says the new phase includes two main changes, to widen the number of countries the fund invests in and to deal in smaller transactions.
"We will have a series of smaller offices in small economies," Binyon says, adding that they will be looking to chambers of commerce, business leaders and governments to advise on possible investment opportunities in those countries.
Binyon says they are "very anxious" to move away from the same international investors" and will be looking to regional investors such as pension and trust funds to participate in Kula 2. "There are pockets of money in the region and they need to diversify (their investments)."
He says the required rates of return have been lowered to 8 percent as "they were too high" under Kula I.
Binyon says Kula I operated in "extraordinarily difficult circumstances" and "if we're looking a more benign political environment (during Kula II), we're quite optimistic."
He cites as the "two great successes" of Kula I, Fijian furniture manufacturer, Pacific Green which has "built a business out of almost nothing, listed on the stock exchange in Fiji and is looking to expand to regions elsewhere in the region" and NiuPrint in Solomon Islands as a business that builds local skills.
He says of the ill-fated and controversial CDC oil palm plantation project in Solomon Islands, "that was the absolute nadir of our confidence in the region (however) I would be more confident today that this sort of thing is unlikely to happen."
Kula 2 is aimed at agriculture, fisheries, transportation, mining and service industries, as well as other commercial sectors.
