PARMENDRA SHARMA AND LUKE FORAU |
The inaugural Pacific Banking Forum (PBF) was convened in Brisbane on 8-9 July 2024, following an undertaking by the Australian Prime Minister and the US President in October 2023 during the former’s Official Visit and State Dinner in Washington. In launching the PBF, the joint statement noted: “we affirm our plan to provide new and additional technical assistance to improve the region’s access to financial services”.
The Brisbane event focussed on the region’s correspondent banking relationships (CBR). Eminent speakers and panellists from across Australia, US, NZ and the Pacific, spanning regulators, commercial banks and government departments, including the Federal Treasurer, US Secretary of the Treasury, Ministers, central bank Governors and CEOs deliberated on the challenges of withdrawal of CBR from the Pacific. Promptly, an Outcomes Statement was released, outlining actions to be taken by various parties in finding practical solutions to the CBR challenges[1].
With the conclusion of the Brisbane event, delegates have been asking: where to from here for the PBF. Will the PBF wind up once the CBR issue is addressed?
Little is known about the bigger agenda, if any, of the PBF. Given the interest, scale and prominence of the Brisbane event, the PBF could potentially have a bigger agenda.
Finance matters for growth and prosperity …
On one hand, it’s widely accepted that the financial sector is a key contributor to a country’s economic growth and prosperity. Allowing even for reverse causation, research shows a strong and positive link between financial sector deepening and economic growth and development. Evidence also shows that financial deepening has a pro–poor effect; countries with deeper financial systems are shown to experience more rapidly declining poverty levels. Finance could indeed play a key role in SDGs objective of eradicating extreme poverty by competently empowering and enabling the have nots to have access to financial services. Having access to financial services empowers an individual to be finically competent and secure that could lead to accomplishing other SDGs as well, including education, gender equality, health, environment, and global partnerships.
On the other hand, both Australia and US have long been concerned about and providing substantial aid and technical assistance (TA) to the Pacific region to foster economic growth and prosperity.
From the foregoing, an impending question then is, why not help develop and make the region’s financial sectors sustainable and more resilient with TA and other support of the PBF?
… but, research is critical
With the region’s mostly inherent shallow financial sectors, any policy initiative to develop the sector will have to be strategically designed and be grounded in research, as the recent Reserve Bank of Australia Review shows. Systematic research will help better and adequately understand issues and challenges on hand. It will help understand why, what and how of the problems.
The research-to-policy (R2P) approach was the core message in the keynote address by Solomon Islands’ Minister of Finance and Treasury, at the recent Honiara Pacific Research Conference.
When it comes to research-based policymaking, the region’s flagship research and policymaking capacity development program, Griffith University’s Pacific Islands Centre for Development Policy and Research (PICDPR) would be a meaningful prospective partner for PBF and other stakeholders interested in the economic and financial stability of the region.
For example, recently, the Central Bank of Solomon Island (CBSI) and PICDPR co-authored a research project to systematically understand Solomon’s financial sector development over the past forty years and found, among others, that the country’s banking sector remains among the shallowest and least efficient regionally. The findings were presented at the Honiara Pacific Research Conference and Leaders’ Forum. Convinced with the findings, CBSI Governors are supporting the recommendation of developing a policy paper emanating from the research, leading potentially to an updated financial sector development plan for the country.
Potential partnership with PICDPR
PICDPR’s Pacific partners include central banks of PNG, Fiji, Solomon Islands, Vanuatu, Tonga and Timor Leste (MoU with Samoa underway) plus Palau and Solomon Island’s MoF and RMI’s Office of Banking Commission. This is the biggest and most comprehensive and unique research and policymaking capacity development program designed specifically for the region. Through this program, Pacific researchers also gain access to Griffith University resources (such as the library) and expertise. Research-to-Policy is the end goal of PICDPR program.
Stakeholders of PICDPR include the Asian Development Bank, World Bank, IMF plus with Australian and NZ regulatory bodies—RBA, RBNZ, APRA and ASIC. It also has a sound working relationship with Federal Treasury and DFAT.
With an established track record in collaborating with the region’s central banks and other key policymaking institutions, plus various eminent stakeholders, PICDPR would be best placed to provide critical research-based solutions and strategies for deepening Pacific’s financial sector. There would not be a need to re-invent the wheel at many levels including, joint research and dissemination of findings via publications, seminars and conferences, as well as direct communication channels with decision-makers.
PBF will need local and regional context and experience—PICDPR could be a potential partner.
[1] Australian Treasury and U.S. Department of the Treasury
Dr Parmendra Sharma is the Program Director, PICDPR and member of the Griffith Asia Institute.
Dr Luke Forau is the Governor of the Central Bank of Solomon Islands.
The views expressed in this article are those of the author and do not necessarily represent the position of the above-mentioned institution. For more information about Pacific island economies, visit Pacific Island Centre for Development and Policy Research.
