How will PNG’s and the Pacific’s economy fare in 2013?


Business Advantage PNG spoke with the region’s three most senior bankers to get their thoughts on the year ahead.

Credit: Swire Shipping

Credit: Swire Shipping

‘There will be some slowness in the year ahead based on global economic factors, but on the whole I’m reasonably positive,’ says ANZ’s CEO Pacific, Vishnu Mohan (pictured below). ‘I think the good news for the Pacific is that our trade is mainly within the [Asia-Pacific] region.’

While Australia and New Zealand will remain the Pacific’s dominant trading partners, Mohan notes that China’s influence will inevitably increase, with regional investment by the Asian giant growing at 25% per annum over the past five years. Indeed, as ANZ’s Chief Economist for Asia-Pacific Paul Gruenwald has previously observed, the Pacific is now a net exporter to China thanks to its resources sector, having exported USD 1.2 billion in 2011, which is up 10% from 2010.

Westpac's Greg Pawson

Westpac’s Greg Pawson

Papua New Guinea
‘The Pacific as a whole is already being affected by the global economy but PNG continues to defy trends and is performing strongly,’ says Westpac’s Pacific General Manager, Greg Pawson (pictured below). Although he expects the Pacific’s largest economy will slow somewhat over the next two or three years, he remains optimistic:

‘A lot of people think PNG will slow down a lot as the PNG LNG project construction phase comes to end, but I think there are sufficient other major resources projects in the pipeline for us to remain confident.’ Also helping to sustain high growth is the remarkable expansion of the banking system itself.

At the end of 2012, PNG’s largest bank, BSP, passed one million active bank accounts for the first time, part of the banking industry’s push towards greater financial inclusion across the region.

‘Four years ago, when I came here, we had about 550,000 accounts, of which 100,000 were inactive,’ Ian Clyne (pictured  right), BSP’s Chief Executive Officer tells Business Advantage PNG.

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‘The biggest issues in the Pacific are the things we can’t control.’

BSP is using tablet technology to deliver banking services to some of the most remote regions in the country.

‘This technology enables us to open new accounts within five minutes wherever there is mobile phone coverage,’ says Clyne. The solution was recognised as the best bank-led mobile money program in the 2012 Connected World Mobile Money Awards.

BSP's Ian Clyne

BSP’s Ian Clyne

All three banks are also increasing their activities in Fiji, which is projecting growth of between two and three per cent in the coming year.

BSP has continued to invest since its 2009 acquisition of the National Bank of Fiji and Colonial Fiji Life Insurance Limited, introducing new core systems for its bank and life insurance businesses, opening premium banking facilities and expanding both its ATM and EFTPOS network (over 1000 merchants in Fiji now carry BSP’s EFTPOS facilities).

‘Fiji’s an exceptionally competitive market from a lending perspective,’ says BSP’s Ian Clyne, who suggests it may be over-serviced (France’s Bred Bank entered the Fiji market in 2012).

Fiji has been a regional services hub for ANZ for some years but at the end of 2012 the bank decided to officially base its Pacific region head office there, with Vishnu Mohan at the helm.

‘We wanted to bring our Pacific regional headquarters and therefore decision making closer to our customers in the region. Fiji was considered the most logical location for the position largely because of the skill sets we have here,’ says Mohan.

While he observes that there had not been lot of new investment in Fiji recently, Westpac’s Greg Pawson considers Fiji has a big opportunity to become the advanced regional hub for business.

‘Interestingly, Fiji’s Government is possibly the most business-savvy in the region, in terms of trying to stimulate growth through policy,’ he notes.

ANZ's Vishnu Mohan

ANZ’s Vishnu Mohan

Solomon Islands
Meanwhile, the region’s true ‘shining star’, according to Greg Pawson, is the Solomon Islands, PNG’s Melanesian neighbour:

‘There’s a significant opportunity to really capitalise on their mining and resources prospects. They had a good year last year.’

‘Gold production in the Solomons is clearly helping the country,’ observes ANZ’s Mohan.

‘The Solomon Islands has proved an excellent investment for BSP since our 2007 acquisition of the National Bank of the Solomon Islands,’ concurs Ian Clyne.

Tourism-dependent economies
With mineral production in countries such as PNG and the Solomons driving the bulk of the region’s 4.2% projected growth for 2013, those countries without mineral wealth to exploit will again be looking to tourism.

‘We are seeing some upturn in tourism activities in Vanuatu and Fiji and to a lesser extent the Cook Islands and Tonga,’ observes Vishnu Mohan. ‘Vanuatu is expecting 130 or 140 cruise ships in 2013, which is lucrative.’

Meanwhile, Samoa, hit hard by Cyclone Evan in December 2012, will take time to recover, with reconstruction likely to cost AUD$125 million.

‘The biggest issues in the Pacific are the things we can’t control,’ laments Mohan.