AFR – Sep 9, 2020 – 12.00am
Andrew Tillett – Political correspondent
Westpac Banking Corporation’s potential sale of its Fiji and Papua New Guinea businesses has sparked concerns within the Australian federal government that it undermines efforts to forge greater ties with the Pacific and could provide an opening for China.
The Australian Financial Review understands bank executives have briefed the Morrison government that it was considering cutting its ties to the Pacific Island nations but a decision has yet to be made.
Westpac said it did not comment on market speculation.
Pacific Minister Alex Hawke would not be drawn specifically on Westpac’s potential sale but indicated the government valued Australian banks’ role as a crucial part of the regional economy.
“The government is in regular discussions with Australia banks about their operations in the Pacific and continues to view these as important contributions to the prosperity of our region,” he said.
The PNG-listed Bank South Pacific is the most obvious suitor for Westpac’s assets, given it bought the bank’s operations in the Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu in 2015.
However, Chinese banks are keen to muscle into the region. Last year 10 Pacific nations including Fiji and PNG signed an economic co-operation agreement with China “to support Chinese-invested banks in operating financial business and innovative financial products in Pacific Island Countries”.
Jonathan Pryke, director of the Lowy Institute’s Pacific Islands programme, said while the government could not intervene in any sale, it would make clear that a sale to Chinese interests would be inappropriate.
“They will quietly put the hard word on Westpac executives to be good patriots,” he said.
Pryke said while the Pacific might be profitable for banks, it was ultimately a small and complicated market, at a time when the industry was grappling with the fallout of the banking royal commission and COVID-19 pandemic.
But while the decision in a business sense was unsurprising, Pryke said it did not line up with Australia’s strategic ambitions to deepen ties through the Pacific Step Up.
He said Westpac had a significant market share in Fiji and its potential departure from the Pacific would be a blow in diplomatic soft power terms.
“The Australian government has been in a full-court press to get engagement in the Pacific but we are seeing the private sector go in the opposite direction,” he said.
“Australia always talks about how many Australian businesses are in the Pacific, how we are their primary trading partner, but every time a business pulls out of the Pacific it is unlikely to be replaced by an Australian business.
“That undermines the argument of Australia being the primary partner in all parts of Pacific engagement.”
Westpac’s Pacific operations are part of its specialist business unit and the bank announced in May it was conducting a strategic review of the assets with a view to simplifying following a 70 per cent profit slump.
The last time Westpac reported the results of its Pacific business separately was in 2015, when it had cash earnings of AUD$120 million (US$86 million). However, this would be smaller now following the sale to BSP.
Ironically, Westpac’s name stems from its ambition to market itself as the bank of the western Pacific when it rebranded itself from the Bank of New South Wales in 1982.
SOURCE: THE AUSTRALIAN FINANCIAL REVIEW/PACNEWS