Twelve Pacific Island countries are expected to receive vaccines for the coronavirus in the first half of this year through the COVAX initiative, with the region’s largest nation Papua New Guinea expected to receive by far the largest allocation.
PNG—which is still experiencing large-scale community transmission of COVID-19— is forecast to receive 684,000 doses of the AstraZeneca vaccine manufactured at the Serum Institute of India in the first quarter of the year. Solomon Islands will receive 108,000 doses from the same source.
The other Pacific Islands nations listed by COVAX last week will also receive the AstraZeneca vaccine, but from a different manufacturing source.
While these forecasts are subject to change, COVAX partners say the release of this information should help governments and public health leaders put into place practical steps to roll out the vaccines in-country.
The Facility aims to see total doses cover at least 3% of the total population of all 145 participant countries in the first half of this year, enough to protect the most vulnerable groups such health care workers.
While 1.2 million doses of the Pfizer-BioNTech vaccine will be available to the COVAX facility in the first three months of this year, no Pacific Islands are listed to receive it as this is the ultra-cold chain vaccine, requiring temperatures of minus-70 degrees.
More vaccine doses are expected to be available later this year.
After last week's Pacific Islands Forum Special Leaders' retreat, Secretary General Dame Meg Taylor said Australia and New Zealand have committed to ensuring vaccines will be shared across the region.
"They gave assurances to the leaders that supplies would come. However in terms of an exact date I would be misleading you if I said we had any clear indication of that."
In a speech in Fiji’s parliament today, Attorney General Aiyaz Sayed Khaiyum said vaccine dispersal is so far “shaping up to be a rich countries’ race. Countries with just 16% of the world’s population have bought out 60% of the world’s vaccine supply.”
“Fiji must secure its place in the world’s economic comeback by securing vaccines as quickly as we can, not months after the rest of the world but alongside it otherwise our people will be more vulnerable than they have ever been, exposed to infection, economically disadvantaged and left behind as the rest of the world races ahead.”
“Patiently waiting our time in the COVAX queue will be economic suicide for the country,” he said, noting that Fiji is working with bilateral partners to secure financial resources to buy vaccines now and will also be looking at making direct purchases from vaccine manufacturers.
“So far Australia and India have stepped up with direct funding and shifted support,” Khaiyum said.
This story was updated at 5:11pm Fiji time to reflect events in Fiji's parliament today.
The much-anticipated bid for Westpac Pacific (PNG and Fiji) operations by Kina Securities (the owner of Kina Bank) was finally confirmed last month. The offer did not come as a surprise as Westpac moved its Pacific assets into a specialist business division in May 2020, and Kina Securities undertook a capital raising in October. The proposed deal is still pending regulatory and shareholders’ approval.
Currently, only four commercial banks – Bank of South Pacific (BSP), Kina Bank, Westpac and ANZ – operate in PNG with ANZ focused solely on institutional banking. BSP owns more than 50% of the total assets of the commercial sector and has a market share of 63% of loans. If the acquisition goes through, Kina Securities will have nearly all the remaining market share.
Unlike its acquisition of ANZ retail, commercial and SME operations in 2019, Kina Securities says that it intends to maintain Westpac’s commercial banking licence and run the branch network separately. It claims therefore that there will be no lessening of competition. However, this is unconvincing. Despite being run separately, there will be ample opportunity for the two banks, which serve the same shareholders, to collude for strategic purposes. In addition, there is no guarantee that any separation will be permanent.
A further weakening of banking competition in PNG would be a bad thing for several reasons.
There is already a massive spread in PNG between the very high rates at which funds are lent out by the banks and the very low rates depositors receive on their savings – in fact, one of the highest interest rate spreads in East Asia and the Pacific.
Banks are already not incentivised to transmit interest rate adjustments by the central bank (the KFR policy rate) to their consumers as there is little need to compete for loans and deposit base. If banking competition reduces further, banks will possess even more market power to set their own lending and deposit rates, and monetary transmission will be further weakened.
The two remaining bank owners may engage in anti-competitive behaviour by manipulating interbank and other market interest rates to maximise returns. For instance, they may collude to set a common interest rate floor for their lending products and promise not to undercut each other to avoid direct competition. The same applies to deposit rates.
In other countries, banks with high market concentration have been found to fix prices and rig bids in the foreign exchange interbank market to boost profits. PNG is unlikely to be an exemption.
In addition, PNG banks are already some of the unfriendliest in the region. Consumers are often required to pay for basic banking services such as account opening, ATM balance enquiries and cash withdrawals but receive poor service delivery. As banking competition decreases there will be less economic incentive to improve service delivery, and rip-offs like these could get even worse.
Further reducing banking competition will also lead to heightened risk aversion, and less lending to the private sector. There are already signs that PNG banks prefer lending to governments rather than firms. Having private investment crowded out by public investment is detrimental to economic growth and development, and will make it harder for smaller firms especially to access credit.
Financial inclusion is also at risk. Lesser banking competition has been found to reduce the supply of financial products, increase the rates and fees paid, curtail financial innovation and decrease the quality and variety of products offered.
That said, Kina Bank made a commitment to expand its financial inclusion effort in PNG in 2019 via its investment in MiBank, a microfinance institution. The Asian Development Bank (ADB) is also currently the second largest shareholder of Kina Securities, following its $10 million investment in the company in 2019. They may use what shareholder power they have to encourage decisions that align with their own inclusion goals.
Though these are positive signs, greater profitability and expanded financial inclusion do not always go hand in hand, and economic theory would suggest that healthy competition is more likely to create sustainably lower prices and better access than does relying on the benevolence of banks.
PNG’s financial regulator should take its fair share of the blame for not making the PNG banking sector more entry friendly. A recent study by ADB shows that regulatory barriers and high costs have discouraged the growth of the banking sector. The study pointed out that the increasing compliance with regulations related to consumer registration has led to increasing documentary requirements and high compliance costs. While strong oversight is necessary to guarantee financial stability, financial regulators must tread carefully to avoid their actions leading to financial exclusion.
Of course, if Westpac wants to exit the Pacific, it needs to find a seller. But PNG needs new entrants into its banking sector. The central bank should consider encouraging new entrants from the existing non-bank financial institutions.
A competitive financial system is vital for high and sustained growth. The people of PNG will find themselves worse off if one day they wake up to just two companies serving their retail banking needs.
This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Accompanying graphs can be viewed on that page.
Dek Sum is an Associate Lecturer at the Development Policy Centre, based at the University of Papua New Guinea, where he is a Visiting Lecturer and Project Coordinator for the ANU-UPNG partnership.
At a brief sitting of Papua New Guinea’s parliament in November – with all Opposition MPs absent – the James Marape government passed its 2021 Budget, before abruptly adjourning until next April.
Treasurer Ian Ling-Stuckey told the 51 MPs present in parliament that government expenditure was expected to reach K19.61 billion (US$5.58 billion) in 2021.
It was, he said, “a very substantial increase of 9%” on the 2020 fiscal year. “The domestic and international context for our 2021 budget is the most challenging in our nation’s history. Since 1975, there has never been … a global crisis as the one we are now facing today,” he said. The Budget for 2021 also reveals lower government revenue at K12.9 billion (US$3.67 billion), and the largest planned deficit of K6.63 billion (US$1.88 billion).
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Papua New Guinea’s regional bank BSP will revisit an earlier plan to list on the Australian Stock Exchange (ASX).
In a message to shareholders last week informing them on the progress of the company, BSP Group chairman Kostas Constantinou said dual listing will be part of its strategic plan moving forward, which, after COVID-19, would likely involve expansion into Asia.
BSP is currently listed on the Port Moresby Stock Exchange (PomSox).
“As you would be aware BSP had previously pursued a dual listing on the ASX. There were various reasons as to why this did not proceed. BSP’s Board and Executive team, in conjunction with Deloitte, recently conducted a Strategy Workshop to confirm the Banks strategic intentions over the coming term. Those deliberations confirmed that when the circumstances are favourable BSP should once again pursue a dual listing,” Constantinou said.
“Unlike the previous attempt, which was primarily focused on share liquidity, a future dual listing would be used to position BSP for potential capital raisings to fund offshore growth opportunities. A dual listing in the future, accompanied by a targeted growth program in Australasia, will deliver our shareholders significant financial benefits whilst increasing the value of the bank. In summary, BSP’s well-capitalised balance sheet enables the Board to consider appropriate growth opportunities that do not pose an unacceptable risk whilst adding value to our shareholders, customers, staff and Papua New Guinea.”
BSP’s interest in ASX was widely reported in the Papua New Guinea and Australian media in 2016 but later, it revealed the plan was on hold.
“The Board of BSP is continuing its consideration of initiatives to generate greater liquidity in BSP shares. BSP has not ruled out undertaking a secondary listing on the Australian Securities Exchange (Potential Listing), but is not currently of the view that there will be a significant public offer of shares in conjunction with the Potential Listing,” Constantinou had said in a statement filed at PomSox in April 2017.
Last week, the confirmation that it would revisit the option had accompanied the result of a research it commissioned into how it fared under a number of metrics that global banks use to measure each other’s performance.
The metrics were: Return on Assets, Return on Equity, Net Interest Margin and Efficiency Ratio.
“In all four Key Performance Measures BSP, is placed in the top quartile for similar banks globally, and the Bank significantly outperforms the average and median results for its peers. These results should provide our shareholders with the confidence of knowing BSP is outperforming comparative banks and is well placed to grow from a position of operational strength,” said Constantinou.
With the drastic slowdown in the global economy due to COVID-19, Constantinou said long term thinking was now critical for survival.
“I believe long-term thinking has never been more critical than it is today. Companies and investors with a strong sense of purpose and a long-term approach will be better able to navigate the Covid-19 crisis and its aftermath. This includes taking a strategic view of our region and the role we want BSP to play in it. The economy will recover. And for those who keep their eyes not on the shaky ground at our feet, but on the horizon ahead, there will be tremendous opportunities to be had,” he said.
BSP recently announced a profit after tax of Kina381.9million (US$108.5million) for the half year ended June 2020, down from Kina434.9million (US$123m) for the same period last year.
Last week, it announced a consolidated net profit after tax of K216m (US$61.5m) for the 2020 third quarter, a 31 percent increase from Q2, 2020.
BSP has branches in Vanuatu, Tonga, Solomon Islands, Samoa, Fiji, Cook Islands and is headquartered in PNG.
The PNG government has approved and agreed to provide K100m (US$28.5 million) to kick start the country’s first Special Economic Zone, creating up to half a million jobs directly and indirectly in the country when it is fully operational. And there will be a role for other Pacific nations.
The Ihu Special Economic Zone (ISEZ) is located in Kikori District of Gulf Province, about from 45 minutes by air from the capital, Port Moresby and is expected to take 10-15 years to complete.
It will consist of a free trade zone, petroleum park with petrochemical plan, industrial zone, technology park, forestry park, marine park, a deep sea port and airport, a township with hotels and resorts, and a government and administration area, Peter KenGemar, the ISEZ Project Director has told Islands Business.
Read more in our November issue.