Page 18 - IB July 2021

Economy Economy

Australia Minister for International FEMM Chair and Tuvalu Finance Pacific Islands Private Sector Organ-
Development and the Pacific, Zed Pacific Network on Globalisation
Seselja Minister, Seve Paeniu Coordinator, Maureen Penjueli isation Vice Chairperson, Jennifer
Ula-Fruen
ence with creditors to discuss options for debt relief for late ever, they’re becoming harder and harder to do. Both the
this year or early 2022. National Australian Bank and Westpac have effectively ended
Australia’s Minister for International Development and the their relationship with the Pacific, leaving domestic banks
Pacific, Zed Seselja agrees that the debt issues are concern- scrambling to find foreign currency accounts.
ing, saying that’s why Australia has provided direct budget The difficulties posed by de-risking have led to an erosion
support into countries: “We thought that was a very important of correspondent banking relationships. Overseas banks are
role to be played by Australia at the moment, to support the increasingly leery of dealing with Pacific banks due to rising
balance sheets of countries that have had to take on more penalties and compliance costs resulting from anti-money
debt.” laundering and anti-terrorism requirements. De-risking is a
Seselja said meetings with multilateral financing institutions global phenomenon, but it’s “particularly problematic in the
will be focussed on ensuring “Pacific Island nations are not Pacific” said the WTO’s Zhang.
saddled with debt that is debilitating, that it is at a fair rate The FEMM heard that in 2019, the number of active cross-
and that there is the ability to service that debt down.” border correspondents fell by 11% in Melanesia and 9% in
Pacific Network on Globalisation (PANG) Coordinator, Mau- Polynesia, compared to a global decline of 3%. While 2020
reen Penjueli says while direct budget support is helpful, it data are not yet available, there are suggestions this decline
also requires scrutiny. “This goes against everything that both has intensified.
Australia and New Zealand have historically done—this kind In a worst-case scenario, access to the global financial sys-
of budgetary support—so you need to pay attention to direct tem could become severely limited, “and with it, the ability
budgetary support and its implication for policy space for re- to perform the basic payment and currency exchange trans-
covery purposes,” she told journalists. Penjueli wasn’t specific actions which facilitate remittance and trade. Many people
about what aspects of policy making she was concerned might could lose access to payment and remittance services, while
be influenced. others might turn to unregulated payment options outside of
the formal banking sector,” a FEMM paper dealing with the
The difficulties of doing business correspondent banking issue states.
A critical barrier to doing business over the past 18 months In response to this challenge, Forum economic ministers
has been the dramatic increase in freight costs and decline in agreed to “consider policy actions to strengthen the Pacific’s
reliability and accessibility of freight options. financial and banking sector, including reforms to improve the
“The 2020 Pacific Islands Export Survey highlighted freight risk profile of Member jurisdictions.” That could include the
costs as one of the top three barriers to export – and was establishment of regional standards, the Chair, Seve Paeniu
further exacerbated when COVID-19 drastically affected ship- said.
ping routes, delays in consignments and inflated costs,” said In Tuvalu, he said, direct negotiations with commercial
PIPSO’s Ula-Fruen. She called for more support such as Pacific banks have brought some breathing room. “We saw some suc-
Trade Invest’s grant facility which helps meet some of these cess with the National Australia Bank (NAB) extending services
costs. from March to June this year and then facilitating introduc-
The finance ministers asked the PIFS to assess the possibility tions to other correspondent banks. We also managed to seek
of using the Pacific Humanitarian Pathway on COVID-19 to sup- an extended transition period and assistance from Westpac,
port the exports of high value products at subsidised rates. from the National Bank in Tuvalu who have now managed to
They’ve also asked the Secretariat to research supply chain secure an arrangement with another bank.
disruptions and the impact on businesses during the pan- “So those representations happening at the highest level
demic, and to explore ways to mobilise funding from develop- continue to happen so that we can make sure that where
ment partners to temporarily subsidise freight costs for Pacific there are withdrawals, where banks make those decisions,
SMEs. that there are viable and reasonable alternatives.”
At a time when international transfers matter more than

18 Islands Business, July 2021