Business
Why ANZ's Investing In The Region And Its People
GM Bob Lyon talks frankly about an Australian bank's Pacific connections
The Pacific is beginning to feel the pain from an economic downturn from factors both beyond the islands' control--the slowing of the United States economy and the stagnation of Japan--and from local political traumas across the region.
In such circumstances, banking systems come under early pressure. The Pacific saw, through the 1980s and 1990s, a succession of international banks attempt to build profitable chains through the region--such as Indosuez from France, MBf from Malaysia, and the Bank of Hawai'i from the United States.
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But most such drives have ended in retreat. The exceptions have been the Australian banks Westpac and Australia and New Zealand Banking Group (ANZ), and the insurer Colonial, now owned by the Commonwealth Bank, and expanding into general banking through its acquisition of the National Bank of Fiji, and into other financial areas.
They have all been present in the region for more than a century, and have developed an institutional memory of and skill at handling the unique issues that tend to emerge to challenge businesses in the islands. Indeed, under ANZ's general manager Pacific, Bob Lyon, the company has been steadily increasing its regional exposure--most recently by opening a branch in the emerging country of East Timor, which has signalled its desire to join the Pacific Islands Forum family of nations, and which has a similar population to Fiji.
ANZ is establishing a back-office operation in Fiji, for which it will be the operator, but in which other banks can participate. "These are hard markets," says Lyon. "But you can get some scale and depth in them, whereas in Asia, where there is such intense competition, it is difficult to get depth, you are fighting for any margins. We have low risk, low capital, high returns."
He says ANZ has at least 20 young islanders working within the region, beyond their own countries, at any time, as localisation speeds up. The manager commercial business in Samoa has been a Papua New Guinean, for instance--and has enjoyed the experience so much that he named a new baby born in Apia, Samoa.
Seven years ago ANZ had no local managers in Papua New Guinea, now it has 13. "Some are OK, some are excellent, but that's the same in Australia. The important thing is, they're starting to act like managers, taking a management point of view."
Localisation has lowered the number of expatriates in Papua New Guinea from 48 to the mid-20s, enabling a couple of valuable properties to be realised. "It's saving me money," says Lyon.
People with the bank throughout the region are studying for Master of Business Administration degrees through an intranet programme. "Intellect and technical capacity are the same anywhere, it's just a matter of building up and sustaining a core of talent."
Lyon says: "It's a matter of time, you have to keep at it. And there will be disappointments. I could not believe it, when one of my best prospects in the region had his hand in the till. I was personally very disappointed, but that doesn't mean you stop the process."
The ANZ is one of the largest private sector employers in the Pacific, with 400 staff in Papua New Guinea and 600 in Fiji alone. Overall, it employs 1600 islanders, making it the biggest Australian employer in the region.
The region is more profitable for the bank than its painfully established Asian operations, earning almost $A50 million profit in the financial year 1999-2000. "And that's off a reasonably small asset base," says Lyon. Westpac's earnings were similar, $A45 million.
The bank has recently been investing a similar amount of its profit, back in to the region to build future growth. Some of the busiest ATM machines in ANZ's whole network are in the Pacific.
"Our technical people said to me, try three," says Lyon. Now there are 65 ATMs, and nearly 1000 EFTPOS devices, in the region. There will be more, he says, in part because the Pacific remains substantially a cash economy. "We're trying to reduce the long queues, by arranging alternatives to over-the-counter traffic." Phone banking, including bill paying, is starting in Fiji in November, for instance. And down the track, the company is moving towards Internet banking for the Pacific--though Lyon has to elbow his way, on behalf of his region, into the queue for new services within the bank.
Except in Papua New Guinea with its oil and mining multinationals, the Pacific fundamentally comprises local banks for local consumer needs, of which ANZ has 65 percent market share in Samoa, and 43 percent in Fiji--where it operates quite differently from its Asian operations, in which it typically focuses on corporate and trade finance, and niche banking in general.
"We are much more important to Fiji than we are to our home base of Australia, where we have a 13 percent market share," says Lyon. "We necessarily have closer relations with and greater input to government there than in Australia because of our scale."
ANZ has the leading position in Fiji, Vanuatu, Samoa and Cook Islands, and is second in the Solomon Islands, American Samoa and Tonga, and third in Papua New Guinea. "We think we know the region inside out because we've been there so long, and are close to our customers."
In the Cook Islands, where economic reform has taken root in recent years, transforming the tiny nation into something of a success story, the government asked ANZ to help draft its new banking legislation.
The Samoan Government invited Lyon, on behalf of ANZ, to join its official delegation to the annual World Bank meeting in Washington in 1999. "We do some quite big business in Samoa," he says, "such as a $NZ19 million lease for a new Boeing 737-800 plane for Polynesian Airlines."
Lyon has thrown himself into the region's business infrastructure, becoming vice president of the Australia-Fiji and Papua New Guinea business councils, and president of the Australia-Pacific Islands Business Council.
"Small countries don't know how to tackle Australia," he says. "We can help smooth the way for them and be a bit of a bridge, and try to build interest offshore." The business councils are dominated by big business in Sydney and Melbourne, but are attracting growing numbers of small and medium companies, especially in Queensland.
"Small businesses sometimes find it hard to get in to the region, and we can help with introductions."
Six months ago the Australia-Fiji council took five companies to visit Fiji, and each is already doing business there.
Fifty businesses had originally signed up to go, but had been put off by the uncertain political and constitutional climate.
Lyon believes the opportunities remain great. He points out that Australia's share of the import markets in the Pacific is stronger than anywhere else in the world. Of every $100 Australia earns from merchandise exports, $11 is earned in the region including New Zealand, to which about 10,000 Australian companies are selling.
Over the past five years, Australian exports to the region have increased by 14.6 percent, the fastest growth in the world. For example, Papua New Guinea ($1.27 billion exports) comprises a bigger market than France, Brazil and Norway combined; Fiji ($521 million) than Vietnam, Mexico, Denmark, Libya and Morocco combined; and New Caledonia ($219 million), than Argentina, Russia and Hungary combined.
But the coups in Solomon Islands and Fiji have inflicted massive blows on economic development there, and Papua New Guinea--recently troubled by military unrest--remains stagnant, so growth is expected to be difficult-both for Australian exports in general, and for the banking sector in particular--in the region for 2001.
ANZ lost 12 managers following the George Speight coup in Fiji. "It's a real shame, I've known some of them for 20 years," says Lyon. However, there is a strong prospect of increasing the bank's market by geographical growth, with the stable economies of French Polynesia and New Caledonia, and those of Micronesia--especially Guam--offering opportunities, which ANZ is actively examining. Each of these three markets is potentially bigger than any other in the region except for Papua New Guinea.
Lyon says that the brand name ANZ is proving a plus even where it has been used to replace an established local name that the bank has taken over, such as Bank of Western Samoa. "The business communities in the islands like that international touch." But Amerika Samoa Bank, which ANZ has recently taken over, will retain its name "for the time being."
