From canoes to corridors: the Pacific trade story

The Pacific was an exotic and distant land of opportunities where bold traders ventured where none had been before.

"Total trade flows between the Pacific and Asia have risen from $US1.7 billion in 2000 to almost $US10 billion in 2013."
Vishnu Mohan, CEO ANZ Pacific

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Two centuries on, there remain untapped trade opportunities for the brave. Allow me to explain.

A SPRAWLING HIVE OF ACTIVITY

The story is a good one: total trade flows between the Pacific and Asia have risen from $US1.7 billion in 2000 to almost $US10 billion in 2013.

Pacific-China trade is in the region of $US4billion, Chinese investment in Pacific sits at about $US2billion, and Australia-NZ-Pacific Trade is now worth over $US6billion.

This hive of activity across the Pacific's key trade corridors suggests to me the region has a greater role to play in the Asia Pacific economy.

The region also acts as a connector and differentiator for many a global corporate with subsidiary operations in the region.

PEOPLE CONNECT PEOPLE

There's a key element to this story and it's in the glue that connects the dots – people. As relationships between people grow across borders, so do trade opportunities.

Take New Zealand and the Pacific, for instance, where there are deeply-engrained cultural, economic and political ties. These ties are strong and old, predating written history to a time of oceanic people migration in grand canoes.

They predate the early traders and modern economies, and it would be remiss of us to ignore this past in considering the trade opportunities of the present.

Two-way trade between New Zealand and the Pacific is in excess of $NZ1 billion and the 12 Pacific countries where ANZ has a presence, combined, represent New Zealand's seventh largest trading partner.

I was in Auckland and Wellington recently as part of a Pacific client roadshow. Immediately I was struck by the level of interest in the opportunities in the Pacific, both among customers and staff of ANZ New Zealand.

The interest is clearly being driven by the region's natural resources and focussed investment in infrastructure.

ARCHETYPAL PACIFIC COMPANIES

Fulton Hogan, a company that earned its stripes building the backbone of New Zealand and Australia's road network, opened a permanent base in Fiji in 2013 as part of a joint venture contract maintaining Fiji's road network.

Fulton Hogan has carried out project work in Fiji since the 1980s, when they first traversed the Pacific to resurface the Nadi International Airport.

In short, they were key players in helping to make Fiji the 'hub' of the Pacific that it is today. The company is now busy connecting Fijian communities on the islands of Viti Levu and Ovalau.

We've also seen the likes of Hawkins, another big player from New Zealand, entering as joint venture partner with Pacific Building Solutions (PBS) to complete the Nadi International Airport Modernisation project.

Hawkins also has various projects underway in Papua New Guinea, Samoa and Cook Islands. Fletcher Construction, which established a presence in the region in 1946, now has permanent offices in Papua New Guinea, Fiji, American Samoa, Samoa, Tonga, the Solomon Islands and Vanuatu.

Pacific seasonal worker schemes with New Zealand and Australia have also created strong people connections over the years. More than 6500 Pacific seasonal workers were employed by New Zealand companies between 2013 and 2014, a number that's more than doubled since the scheme began in 2007.

Consider the world of rugby, where you could say that Pacific islanders are the All Black's number one import! There aren't many sporting events in the world that hold the power to stop a nation like the recent Manu Samoa vs. All Blacks match in Apia.

NEW OPPORTUNITIES

Like New Zealand in the past, as China continues to grow its role in global trade so has its relationship with the pacific changed.

Over the next 10 years, China is expected to become a top-three trading partner in most Pacific countries. For countries like Papua New Guinea, China is set to become the number-two trading partner behind Australia.

ANZ has had a presence in the Pacific for 135 years and is the only bank with a network across 12 countries, making it a 'home market' for the bank alongside Australia and New Zealand. As such, we have a unique view on trade and investment flows in the region.

ANZ research shows China has been an active investor in Fiji over the past decade, accumulating over $US200m in Foreign Direct Investment (FDI).

Fiji has increasingly tapped on Asian supply chains for trade and in 2014 the country's trade with Asia and the Pacific Islands reached 53 per cent. This ratio has climbed from 37 per cent a decade ago.

These people ties in between the Pacific and its neighbours open up tremendous opportunities because trust is at the heart of these relationships.

While we need to be realistic and acknowledge some of the challenges involved to grasp trade opportunities in the Pacific, such as perceived political risks, infrastructure challenges, scale in smaller economies and human capital challenges in some markets, I am optimistic.

NOTHING, YET SO MUCH, HAS CHANGED.

So we're not so different from 200 years ago and yet so much has happened to grow the Pacific region into what it is today.

One thing is certain – the opportunities imagined by early traders in the Pacific still exist, but only for the bold and the brave, and perhaps for anyone with a passion for rugby!