What’s around the corner for the Pacific economy?


The Pacific’s increasing integration with Asia, elections in Fiji and more leadership from Papua New Guinea are just some of the factors likely to shape the region over the coming year, according to the region’s three top bankers. In exclusive interviews with all three, Business Advantage PNG canvasses their thoughts on the year ahead.

Coconut palms in Tonga

Coconut palms in Tonga

‘There’s no doubt Australia and New Zealand will continue to be a dominant trading partner for the Pacific countries, but China will continue emerge as a very significant trading partner and investor in the Pacific region,’ ANZ’s Chief Executive Officer for the Pacific, Vishnu Mohan, tells Business Advantage PNG.

‘If you look at Chinese investment in the Pacific in the last five years, it has grown by 25% every year.’

Westpac's Greg Pawson

Westpac’s Greg Pawson

‘Westpac and ANZ have got a Renminbi licence, so we can actually trade the Chinese currency,’ notes Westpac Pacific’s General Manager Greg Pawson, who also notes trade flows between Singapore and PNG has increased something like 5000% over the last five years.

‘Probably our top fifteen customers in PNG are now headquartered out of Singapore, so there’s been quite a shift in this sort of move of PNG and Fiji businesses into Asia.’

Papua New Guinea

All three bankers—Westpac’s Pawson, ANZ’s Mohan and BSP’s Chief Executive Officer Robin Fleming—agree the PNG economy is transitioning from the impact of construction to the production phase of the PNG LNG project.

‘We’re still seeing a reasonable degree of optimism around the economic growth prospects for PNG and investment flows,’ says Pawson. ‘The economy has slowed, but it’s still going to out-perform most Western economies, and certainly any other economy in the Pacific.’

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‘Post elections, Fiji will be a different story’

‘So all of that just goes to less money in the hands of people to be able to spend in the retails sector.’

Robin Fleming BSP

BSP’s Robin Fleming

Mohan asserts that Papua New Guinea has the potential to be the region’s lead economy.

‘Fiji businessmen are now beginning to travel fairly frequently to PNG looking for potential opportunities, and vice versa, as well as from Melanesian Spearhead Group and other Pacific countries as well.’

All eyes on Fiji’s election

‘The big issue for Fiji is that everyone’s waiting to see what happens with the elections, and whether that all goes ahead,’ notes Greg Pawson.

With an election in Fiji slated for late September this year, there is an air of optimism.

ANZ's Vishnu Mohan

ANZ’s Vishnu Mohan

‘Post elections, Fiji will be a different story,’ says Mohan. ‘I think there’ll be a lot of investment coming in. I know a lot of potential investors are waiting to see the elections happen and then to see a stable government coming in. Then, they will start building infrastructure and taking the country forward.’

BSP’s Robin Fleming agrees more investment is likely.

‘I get over there quite regularly, and the general mood of business is positive,’ he tells Business Advantage PNG, at the same time sounding a note of caution for his own sector:

‘It is a country which is over-banked for the population and the economic activity, which means that the margins are lower and it’s a very, very competitive country in which to operate from a banking perspective.’

As President of the Australia Fiji Business Council, Pawson says his executive reports ‘very, very strong domestic demand’.

There’s a lot of activity around refurbishment of the bigger tourism resorts, he observes, with some of the smaller resorts also considering upgrading.

Solomon Islands

Pawson describes Solomon Islands as ‘the shining star’ in the non-PNG Pacific context.

Prior to the April suspension of the Gold Ridge mine due to Tropical Cyclone Ita, Westpac was bullish in terms of GDP growth for the Solomons, predicting growth of five to seven per cent, mainly from the mining sector.

’We’re getting a lot of interest from foreign investors, particularly from Australian investors,’ says Pawson. ‘Pleasingly, over the last few months we’ve started to hear a lot more about sustainable plantations as well, which is a good sign that the Solomons might be shifting in that space.

‘Every country you look at in the Pacific has got potential …. It’s a question of how you tap into it and when they will realise that potential.’

‘Certainly we’ve seen good growth out of fishing and the tuna industry, and demand for copra cocoa and other agricultural products.’

BSP’s Robin Fleming sees opportunities again in mobile banking in the Solomons as technology and the telecommunications infrastructure there improve.

‘The economy is much slower than PNG. It’s been dependent on timber harvesting, and hence the need to reduce dependency on forestry—which the Government recognises. There is more potential for gold too,’ he says.

Elsewhere in the Pacific

Not all the growth is happening in the Pacific’s most populous economies.

‘Every country you look at in the Pacific has got potential,’ suggests Mohan. ‘It’s a question of how you tap into it and when they will realise that potential.’

‘It is pleasing to see them incorporate New Caledonia into the Melanesian Spearhead Group. New Caledonia is rich in natural resources and is the second largest economy in terms of per capita GDP.’

Meanwhile, Samoa is still recovering from recent cyclone damage, Westpac is forecasting growth of just two percent for Vanuatu this year, and Tonga is ‘doing it tough’, in Pawson’s words, as it has done for the past five years. He suggests the smaller countries may have the most to gain from the ongoing regional PACER Plus trade treaty negotiations with Australia.

Banks get closer to the customer

BSP Rural staff sign up a farmer at Potuna Village in PNG's Central Province. Credit: BSP

BSP Rural staff sign up a farmer at Potuna Village in PNG’s Central Province. Credit: BSP

Competition between the banks will continue apace, as they roll out mobile phone banking, and attract new customers in remote areas, most of whom are new to banking.

Pawson says Westpac has more than doubled its customer base over the last three years. Since opening up a phone banking service in Solomon Islands in March, Westpac has received 5,000 registrations. Its next target market is PNG.

‘The take-up of this new technology has been quite overwhelming,’ he notes.

‘What we have done is bring the decision-making processes closer to the community in which we operate’

Vishnu Mohan describes phone banking as a product ‘that seems to have an appeal for the masses’:

‘It’s still early days so we are continually assessing the performance of the product. Most importantly, it’s being received well by the community and the regulator and the wider public in those markets where we launched the product.’

Robin Fleming says BSP is leveraging as much as possible from its broad banking network across the country, ‘as distinct from our competitors’.

‘We’ve got the forty odd full branches. We’ve got another forty sub-branches—BSP Rural branches—so it’s up to us to start getting the benefit of that user reach to generate more transactional activity. This means more accounts using mobile banking technology and more telephone banking transactions.’

The trend of banks going out to the customer is perhaps best demonstrated by ANZ, which recently relocated its Pacific headquarters to Fiji from its Melbourne head office.

‘What we have done is bring the decision making processes closer to the community in which we operate and closer to the customers and closer to the regulator,’ says Vishnu Mohan. ‘In Fiji, we have nearly 700 staff. Close to 300 support the entire operating requirements of the Pacific business. What we’re doing is increasingly transferring some of the back office operations in every Pacific country into this hub, with the view to making in-country operations more nimble.’

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