Revenue Management

As required by the Seabed Minerals Act 2009, a new national Sovereign Wealth Fund (SWF) is being established, to capture the revenues associated with seabed mining activities for present and future generations of Cook Islanders.

The draft SWF Regulations have been consulted on by MFEM and the final SWF Regulations will require Cabinet approval and an Order of the Queen's Representative.

MFEM, in conjunction with the Seabed Minerals Authority, have sought expert financial advice from the International Monetary Fund (IMF), and various other sources, on important design features and requirements for the new national Sovereign Wealth Fund (SWF).

The IMF Report presented detailed findings and made several recommendations which were submitted by MFEM to Cabinet and were approved.

Recommendations for establishing Sovereign Wealth Fund for the Cook Islands are:
  • That legislation should be structured in the most rigorous manner possible to protect the long-term stability for the fund and to avoid short- term diversion of fund resources
  • That clear and consistent principles be established for allocating revenues to the fund and for spending from the fund, all government revenues resulting from seabed mineral mining should be deposited in the fund.
  • Spending from the fund be adjusted depending upon the size of the fund. Initially annual appropriations of a fixed amount, could be appropriated for investment expenditures. Once the fund balances begin to grow to a more significant size, appropriations should be limited to the return on investment, or some portion of the return on investment.
  • The Fund’s principal should be invested in international financial assets to avoid distorting the local economy, in a diversified portfolio of financial instruments that protects the fund principal over the long term with minimal risk.
  • The Minister of Finance and Economic Management should be responsible for the overall management of the fund on behalf of the people of the Cook Islands, supported by an oversight board.
  • All transactions of the fund and the fund’s financial performance should be transparent, including: fund operations, asset holdings, and decision-making. Revenues and spending of the fund should be controlled through the budget.
  • The fund should be subject to annual review be the National Audit Office and subject to periodic independent audit. Finally, the Parliament should provide oversight through review of reporting, operation and performance of the fund.
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