In pursuit of lasting development

TO pursue sustainable development is to seek poverty alleviation that is lasting, with benefits that persist across not just decades, but generations, says John Wylie, managing director of the Papua New Guinea Sustainable Development Program Ltd (PNGSDP).

For the non-profit company charged with managing a US$1.6 billion fund for the benefit of the people of Papua New Guinea (PNG), this means two things.

First, a clear focus on four areas of development work - health, education, jobs creation via agribusinesses, and infrastructure - and second, the sharpened approach of an "impact investor".

"There is growing recognition around the world that the old models in development are just not working. There is a need for new approaches," Mr Wylie notes.

Impact investment - private sector investments that aim to generate both financial returns and measurable social or environmental impact - has grown into a market of US$715 billion in assets under management in 2020, the Global Impact Investing Network estimates.

That growth has led to more rigorous methods of measuring social impact, which Mr Wylie - who spent years in strategy consulting and private equity before taking on his present "busy retirement" role at PNGSDP - appreciates.

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He joined PNGSDP in 2016 at the invitation of the late Merkere Morauta, a former PNG prime minister who was then the chairman of PNGSDP.

But Mr Wylie's own affinity with PNG goes further back - he and his wife lived in PNG in their 20s, when he worked as an assistant secretary in the PNG Department of Finance.

Rocky history

By the time My Wylie got on board, PNGSDP had been on quite a roller-coaster ride.

The company was founded in 2001 after lengthy negotiations between the PNG state and global mining giant BHP. What was then BHP Billiton had intended to shut down the Ok Tedi gold and copper mine in PNG's Western Province after a tailings dam failure wreaked severe environmental damage, but the PNG government wanted to keep it running as it was a key source of tax revenue.

In return for release from environmental liabilities, BHP agreed to give its 52 per cent stake in Ok Tedi Mining to PNGSDP, registered as a company limited by guarantee in Singapore rather than in PNG itself for reasons of corporate governance.

PNGSDP was to invest two-thirds of its Ok Tedi dividends into a long-term fund for the people of the Western Province after the mine's closure, and spend the remaining third on development projects across PNG.

Thanks to the resource boom and Ok Tedi's resulting profitability, the company's long-term fund hit US$1.4 billion by 2012 and PNGSDP had become one of PNG's top aid donors.

In 2013, however, the PNG government controversially passed laws to nationalise both Ok Tedi and PNGSDP - a shock move seen by some as an act of expropriation.

The PNG government then sued to wrest control of PNGSDP and reverse changes PNGSDP made to its corporate governance framework in 2012 and 2013, diluting the state's control.

PNGSDP, represented by Dentons Rodyk, successfully defended itself against the PNG government's claims for control in the Singapore Court of Appeal in 2016, the Singapore High Court in 2019 and the Court of Appeal again in 2020.

As recently as January this year, the High Court struck out claims for control of PNGSDP's assets brought against the company, purportedly on behalf of 147,000 residents of PNG.

The series of legal challenges were a long and "expensive distraction" to PNGSDP's core work, but Mr Wylie says putting up a strong fight was necessary to safeguard the independence of the long-term fund.

Active involvement

Once the steady stream of income from Ok Tedi dividends was cut off, however, transformation was sparked off at PNGSDP.

First, there was greater urgency to grow the long-term fund and make each dollar count.

Moves to learn from the endowment funds of Ivy League universities and seek professional investment advice helped PNGSDP rebalance its portfolio's asset allocations. When Mr Wylie joined PNGSDP, the long-term fund's annual average return on investment was 1.4 per cent. Last year, it reported a return of 12.1 per cent.

By positioning the company as an "impact investor", Mr Wylie aimed to take the commercial disciplines he was so familiar with in his earlier private sector work and redeploy them for social outcomes rather than profitability.

"We are not a donor, we never merely give NGOs money. We seek to implement our projects together with our partners... We stay actively involved to make sure it does what we hope for. And, if it veers off course, we reserve the right to intervene and knock it into shape," Mr Wylie points out.

For its focus areas of health and education, PNGSDP seeks long-term projects. "Ours are not five-year initiatives. We are looking at 20 years, maybe longer, for change to be embedded," he says.

Programmes include aerial health patrols that fly into remote communities to deliver primary health care and working with partners to provide remote rural health centres with modern satellite communications technology.

"The conventional wisdom in development is that one mustn't run parallel systems - the government should do what the government ought to. But we do run parallel systems, with the caveat that we manage them efficiently and effectively, with measurable outcomes," says Mr Wylie.

There is also extensive consultation with stakeholders, and coordination with the Western Province's government's own five-year development plan. Its education plans, for instance, include a teaching training and health worker training facility, and an e-learning trial to support teachers and students in remote communities which could in future be rolled out across the province and even across PNG.

"Our ultimate clients are the people of Papua New Guinea," Mr Wylie says.

But short-term needs aren't ignored. PNG was not spared as the world battled the Covid-19 pandemic. In fact, a sharp surge in Covid-19 cases in recent weeks has strained PNG's fragile health system to breaking point.

Covid-19 response

PNGSDP has supported the country's Covid-19 response by delivering PPE (personal protective equipment) to health workers, providing health training and creating the triage centre at the Balimo hospital.

It is also gearing up to run vaccination programmes once it has a reliable supply of vaccines. Its aerial health patrol teams would be able to reach remote communities the government might not be able to, Mr Wylie says. "I'm really proud of what we've done in the past year. Many NGOs closed shop, especially those operating in remote areas. We've just kept on going."

In the area of enabling infrastructure, Mr Wylie sees PNGSDP as a "catalytic investor" whose funding kickstarts programmes that might otherwise seem unviable. "Our financial strength allows us to structure deals to make them more attractive for our business partners. They will have to have skin in the game, but we can manage the risks and returns they are exposed to."

Examples include the refurbishment and maintenance of rural airstrips across the Western Province, upgrading of the province's telecommunications network, clean water solutions and a major rebuilding of the power system in Daru, Western Province's capital city.

But of PNGSDP's four focus areas, the real growth potential lies in "creating livelihoods in the cash economy" via agribusinesses. It is an area Mr Wylie is passionate about, having founded a vertically integrated agribusiness himself and spent several years in Mozambique as a director of AgDevCo, facilitating large-scale agribusiness ventures.

One partnership already underway will eventually employ 250 workers and support 500 smallholders in producing and processing black pepper and vanilla for export. It is structured to provide smallholders with extensive farm management training, as well as pooled distribution and marketing resources.

"In the future, we could have nucleus estates in different crops - cocoa, palm oil. As long as we can find suitable partners, companies with expertise in that particular agribusiness, this can be replicated to benefit more and more smallholders," Mr Wylie explains.

Talent - key to internal sustainability

Today, PNGSDP's initiatives are run by a lean core team of 15 - only five of whom are expatriates. The rest are locals, working out of its Port Moresby, Daru and Balimo offices. Ninety per cent of the team are talented women in their 30s, according to Mr Wylie.

There is also a medical team of 30 health professionals - health is the only area PNGSDP does not outsource operations for. Just three of this team are foreigners.

Mr Wylie says: "We are leading from behind. We mentor, we coach, we introduce commercial disciplines previously alien to some of these talented young Papua New Guineans who are joining us from the public service, or from NGOs."

Putting together that strong team of locals is a source of pride for Mr Wylie.

One of his key goals when he joined was to attract talent and plan for succession. "We want to build an organisation, a culture that is internally sustainable as well," he adds.

And these upcoming Papua New Guinean leaders, he believes, will ensure that PNGSDP's mission of sustainable development can providing lasting benefit to future generations of PNG.

Dentons Rodyk, together with its overseas Dentons offices, has supported PNG Sustainable Development Program Ltd ("PNGSDP") in the pursuit of its mission to deliver and develop programmes that benefit the people of Papua New Guinea. With offices across the globe, Dentons is well-placed as the world's largest law firm to provide the legal infrastructure, expertise and breadth of talent needed to support businesses in their commercial and humanitarian efforts, wherever they may be. Dentons Rodyk guided PNGSDP through innumerable challenges, and is privileged to have the opportunity to help PNGSDP achieve its aims. Dentons Rodyk successfully represented PNGSDP in Singapore litigation, helping secure the company's protected fund of about US$1.6 billion and sharing the hope that millions of lives may be transformed for a better tomorrow.