An economist says improving the management of sovereign trust funds in the Pacific can help countries avoid a growing reliance on aid from China.
Sovereign funds are often the largest single asset owner in the Pacific, collectively representing billions of dollars across the region.
Aaron Drew from the New Zealand Institute of Economic Research said processes for the funds should be built on and alongside governance in the Pacific.
"They have been set up ultimately as a mechanism to foster greater levels of self reliance and independence and thereby redice the reliance on foreign aid and capital with strings attached from foreign governments like China, so yeah, I think they're potentially very important," he said.
Mr Drew said the funds should be opened up to more high risk investment to improve payoffs.
Last year, he produced a report on improving the performance of sovereign funds in the Pacific for the New Zealand Institute for Pacific Research.
It found fund boards in Tokelau and Tuvalu, which manage around $US60 million and $US142 million respectively, were lacking investment expertise and processes for renewing their membership to full capacity.
These, and other small island states, were also being held back by limited investment strategies like bank term deposits, the report found.
Recently, Tokelau has started reviewing the purpose of its trust fund, which may result in a diversifying of investments.
Board members and executive staff should be provided with better training and more support staff should be recruited to assist with the management of funds, said Mr Drew.
He said cases of local investment going wrong in the Pacific due to poor governance had hampered the potential of funds to go further.
"We think it is really important that funds do embark on this track - that their eyes are wide open and they do have these support structures and capabilities in place."
