because of the highly specialized nature of investing in equities, most sovereign funds outsource part of the management of their resources to specialized external managers. these external managers are given specific mandates, with specific targets or benchmarks and their fees are tied to returns in excess of the benchmark. i should note that since the hsf act has been approved, much has been achieved : • as you may know, the hsf board has been appointed. • the board has approved the strategic asset allocation. • the central bank is in the process of selecting the external managers, a process that we expect to complete in the next few months. • the first audited annual report of the hsf has been prepared and has been submitted to parliament ; the central bank has also prepared quarterly reports that are sent to the hsf board. • pending the appointment of the external managers, the hsf board has approved a transitional investment plan that ’ s currently being implemented by the central bank. • for the record, the current fund balance is us $ 1. 996 million. from 2002 to the present, the fund has increased by us $ 1, 500 million, roughly us $ 250 million a year. this represents about 12 per cent of average annual energy tax collections. ( i note, that this is the figure even though the government has always deposited more than required by the formula. ) • at the current rate of deposit, and assuming no withdrawals and a real rate of return of 4 per cent, the total fund balance would rise to a mere us $ 11. 3 billion in the next fifteen ( 15 ) years. • one can argue that a more robust accumulation will be necessary to fulfill the fund ’ s original objective over the long term. " back of the envelope " calculations suggest that it will take an average annual deposit of about us $ 800 million, ( or about 20 per cent of projected annual energy tax collections ) to reach a balance of around us $ 25 billion by 2023 ( i. e. after 15 years ). of course the increase in savings has as its counterpart, expenditure curtailment. is there a role for the population in the administration of the hsf? the answer is without doubt yes. without doubt, public understanding of the importance of the hsf and public buy - in to the programme are critical to the success of the hsf. and the hsf board intends to adopt an active communications strategy. for example, the public should be convinced of the

bis central bankers ’ speeches ( i ) the government succeeds in the implementation of the needed fiscal stimulus, including the reduction in arrears to contractors ; ( ii ) the central bank increases its intervention in the foreign exchange market as needed ; ( iii ) the business sector operates with the needed trust and confidence, avoiding the tendency to warehouse foreign exchange ; ( iv ) the banks accept the need for a larger reduction in interest rates and banking spreads ; and ( v ) where all the parties contribute to easing the industrial relations climate and generally helping to restore confidence. this is a tall order, but absolutely necessary. achieving medium term growth and stability presents even greater challenges, but the immediate reactivation in economic activity will boost confidence and provide the breathing space for this greater challenge. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches