Commonwealth Secretariat
PRESS RELEASE
26 October 2005
US$20 MILLION COMMONWEALTH INVESTMENT FUND FOR PACIFIC ISLANDS
A US$20 million investment fund for the Pacific Islands targeted at small and medium enterprises will be launched at the
Pacific Leaders Forum in Port Moresby, Papua New Guinea, on Thursday, 27 October 2005 at 12.30 pm at the Crowne Plaza
Hotel.
Commonwealth Secretary-General Don McKinnon and the Prime Minister of Papua New Guinea, Sir Michael Somare will
officiate at the launch of the Kula II Fund in the presence of other leaders from the Pacific region and potential
investors.
The Fund, which is the second for the Pacific, is under the umbrella of the Commonwealth Private Investment Initiative
(CPII), which has established private investment funds in the four regions of the Commonwealth to support and promote
commercially viable private enterprises. To date, CPII has raised over US$400 million globally from investment agencies,
development banks and private investors. The Kula funds are managed by Aureos Capital. Robert Binyon, who chairs several
Aureos Asia funds, will be present at the Kula II launch.
The Kula II Fund is a successor to the US$17 million Kula I set up in 1997, which is now in its final divestment phase.
Kula II’s committed capital of US$20 million will cover the Pacific Islands more broadly than Kula I as its investment
threshold has been lowered to cater to investments in small and medium enterprises (SMEs) in the more remote
territories. The difficulty with such coverage is the cost associated with identifying suitable smaller businesses and
in monitoring and adding value to investments. This problem has been overcome through technical assistance funding by
some donors in the region. Commonwealth Secretariat provided support during the feasibility and pre-establishment phases
of the Kula funds. This co-operative effort has unlocked investment capital from major private and public institutional
investors.
Like its predecessor, Kula II is aimed at the agriculture, fisheries, transportation, mining and services industries, as
well as other promising sectors of commerce. Kula II has once again won the support of the shareholders of Kula 1, which
include the Asian Development Bank, CDC Group, the European Investment Bank and some local pension funds from Fiji
Islands and Papua New Guinea.
Commonwealth Secretary-General Don McKinnon said the Kula funds will make a significant contribution to the development
of the Pacific islands. These small island developing states are particularly disadvantaged in accessing international
capital markets at reasonable cost to mobilise resources to modernise their economies.
The Secretary-General said: “I am very pleased with the creation of a new venture capital intermediary to provide risk
capital that focuses on the smaller islands in the Pacific, which have faced difficulty in attracting investment
although some businesses in these jurisdictions have good commercial prospects. I am confident of the business
opportunities in the larger, as well as the smaller islands which have not drawn enough private sector interest despite
their potential. The participation of a range of Commonwealth and non-Commonwealth investors is a testimony to the
attractive prospects for both the Kula I and II funds.”
Note to Editors: The Kula Fund was established for the Pacific region in August 1997 with total committed capital of
$16.9 million. The Fund has completed its investment programme, investing a total of $11.4 million in eight businesses,
of which four remain. Kula is now in divestment mode and has returned $9.87 million, representing 59.1 percent of
capital, to its investors. Investments have been spread across a variety of sectors, including agro-processing, fishing
and fish-processing, warehouse retailing, mining-related services, printing, palm oil production, and aviation charter
services. Kula is on course to make a small net positive profit in US dollar terms despite the adverse political and
macroeconomic environment in investee countries.