28 Nov 2018
Australia needs to show friends in the Pacific that we mean business
Scott Morrison’s big Pacific push is to be commended. But the business relationship with the Pacific islands is the wobbliest leg on our regional engagement table.
Australian banks have retreated from the Pacific over the past few years. The Commonwealth Bank exited the region nearly a decade ago. Westpac, which along with ANZ had been in the Pacific for more than 100 years, decided three years ago to sell five of its smaller country operations to Bank South Pacific, leaving it with only PNG and Fiji. Trade with the region equates to only 1.3 per cent of Australia’s total trade, and PNG makes up more than half of that. Our investment in the region is even smaller.
But there are still significant business opportunities in a range of different areas. They include infrastructure projects such as roads, water and energy. The new gas-fired power plant for New Caledonia will offer opportunities for Australian companies in gas supply, technology and service. There’s potential for new digital business opportunities for Australian providers as bandwidth increases in Pacific countries.
Agribusiness is a strong area for Australian companies to supply Pacific islands. Australian businesses could also assist island governments with advice on the recycling of state-owned assets, such as airports and seaports.
For long-term infrastructure planning, island states will want their financial institutions to expand and have long-term investment structures. There are opportunities for Australian business to help build such structures.
Australian business can become more involved in disaster response. Resource projects have some of the best heavy equipment at their disposal, while retail Australian businesses have extensive warehousing and distribution networks, which are important for establishing emergency supplies.
Australian joint ventures with small and medium-sized enterprises are a way to involve locals. Areas might include tourism, where Australia has expertise, call centres, marine and aircraft maintenance and health. In Fiji, for example, there’s a burgeoning private hospital system.
Australian businesses can capitalise on the great demand for renewables in the Pacific, which is partly fuelled by existential risk but also their excessive reliance on fossil fuels for powering small remote islands and the subsequent high costs.
What should be done to leverage Australia’s private sector in the Pacific? There should be secondments of trade, economic and finance officials between the Australian and Pacific island governments to share knowledge on commercial opportunities.
Our foreign ministry should organise regular tours for Australian investors of the main infrastructure projects in the region to create a robust flow of information to institutional investors.
Select private-sector executives should be endorsed by the government as trade advisers to provide advice to government officials and represent the private sector at large ministerial conferences in the Pacific. There’s a case for a regional travel card similar to the APEC business travel card to facilitate Pacific business travel into Australia.
We need to do more to put Pacific infrastructure on the radar for Australian institutional investors. Within the Australian institutional superannuation market, the pool of private-sector capital able to invest in infrastructure is around $2.5 trillion. But no large Australian superannuation institution is looking to the Pacific for such opportunities.
The Australian government should consider establishing an institution that would assist here by insuring against currency illiquidity and sovereign risk, (not normal business risks). Such a body could vastly expand the amount available to fund Pacific infrastructure and build bridges between the Pacific and the large institutional superannuation sector.
Australian business should engage more with our aid program. When it comes to involving itself in co-financing programs and projects, Australian business has a patchy record of engaging with our official development assistance program. Internationally focused Australian business organisations should consider how they can best support existing Australia-Pacific groups.
Austrade’s Pacific operations should be expanded; there’s now no Pacific-based Austrade representative in the area of the Pacific between Port Moresby and Auckland. Two markets across that area (Fiji and New Caledonia) rank in the top 20 markets, as measured by Australian exporter numbers.
Australia should share specific state expertise through increasing sister-state relationships. For example, Queensland can share experience in mining, cyclone disaster relief and agriculture.
The Australian government should ensure that it includes senior business leaders when officials meet to discuss relevant political and economic matters with Pacific decision-makers. The government as a whole seriously underestimates the knowledge held by the private sector about the economies of Pacific countries in which they operate. Too often, connecting with business is an afterthought.
A new strategic economic dialogue should be established to bring together Australian and Pacific economics ministers with business leaders to focus on policy settings needed to strengthen economic relations.
Our trade and investment policies should be a tool of our foreign policy towards the Pacific. This doesn’t have to be under a Belt and Road-type label. But that sort of commitment is required if we’re going to deliver on the Morrison government’s long-term ambition to integrate Pacific countries into the Australian and New Zealand economies and our security institutions.
Read the report here.