Growing Services Speech, ANZ's Michael Rowland at Australia Pacific Islands Business Council

Australia Pacific Islands Business Council
Growing Services
Michael Rowland, Speaking Notes
Nadi, Fiji – 20 June 2011
Introduction• Bula vinaka, and thank you for the opportunity to
speak with you today.
• I always enjoy coming to Fiji – this is my second trip
here this year - it’s an important business for ANZ
and our Group CEO Mike Smith also visited in
February, meeting with customers and staff.
• I’m delighted to talk today about ‘Growing Services’
from a financial services perspective as I truly
believe that if the Pacific can focus on growing
services where it has a competitive advantage, it can
significantly improve the wellbeing of the region
• Today, I’ll touch on three main points:
o What we mean by services and why they are
important to all economies;
o The importance of services trade between
countries and regions;
o The opportunities for the Pacific to focus on
growing services trade and the environment
we’d like to see to ensure the services sector
and the Pacific economies can grow.
So, when we talk about services – what do we
mean?

Services include activities where the buyer does not
generally obtain exclusive ownership of the thing
purchased. Put simply, services include almost
everything we experience daily in our personal and
professional lives and for the finance industry
includes all services provided from loans and deposits
to foreign exchange to international money transfers.
• The key advantage enjoyed by service providers is
that they can participate in an economy without the
restrictions of carrying stock or the need to
transform bulky raw materials. The main input and
cost of services is labour.
• In financial services, capital, qualified staff and
regulatory requirements are the key inputs and are
the main barriers to entry provided liquidity is freely
available
• However as we have seen in the global financial
crisis, liquidity is fickle and can be quickly withdrawn
resulting in major disruptions to financial services.
• Luckily for the Pacific and ANZ our capital and
regulatory systems have been robust enough to
withstand the liquidity squeeze
So why are services important?
• Services are integral to every country’s economy.
They make a direct and significant contribution to
GDP and job creation and provide crucial inputs for
the rest of the economy
• For example, in Australia according to the Australian
Bureau of Statistics, services make up roughly 80%
of GDP and employ four out of every five people.
• In most developed economies today, services
typically account for between 60% and 90% of GDP.
Services are a growing international trade
• What most people don’t know is that services are a
rapidly growing part of international trade and it is
international trade which generates economic
prosperity. India, for example, may soon export
more services than goods.
• While services of themselves play an important part
in a country’s wellbeing – i.e., medical services and
education - international trade in Services creates
jobs and foreign exchange therefore increasing the
contribution to GDP compared to domestic services
alone.
• The provision of back office processing by ANZ for
our Pacific business and international call centres in
Fiji is a good example. Promoting these types of
services adds employment, foreign exchange,
expertise and significant economic value.
• Asia is now Australia’s most important emerging
growth market for services trade. An ANZ Services
Report released in 2010, found that between 2000
and 2008, trade in services grew 70%, almost twice
as fast as services trade with the rest of the world. In
the last financial year alone, services trade between
Asia and Australia reached a record AU$53.3 billion.
Financial services are also an international trade.
• As I said earlier, services play a crucial role in all
economies - and this is especially evident in financial
services and the internationalisation of this sector.
• Opening up the financial sector to trade can
significantly improve a country’s overall financial
sector performance and underpins private sector
development - facilitating investment in businesses,
technology and importantly, growth.
• There are also significant benefits for customers
through greater competition, improved service
delivery and for the economy as a whole through the
efficient allocation of capital.
• Total Asia-Australia trade in financial services
increased by 50% since 2000 to a total value of $640
million in 2008.
• ANZ is Australia’s largest financial foreign direct
investor in China with more than $1 billion in capital
invested in partnerships in Shanghai and Tianjin, and
in a network of branches and representative offices
in Shanghai, Beijing and Guangzhou.
• In the Pacific we are also the largest Australian
investor in financial services.
• We now have more than AU$500m of capital
invested in the region which continues to underpin
employment and economic growth.
What is the services trade industry like in the
Pacific?
• According to UNCTAD (United Nations Conference on
Trade and Development.), imports and exports of
services have steadily increased over the last 30
years alongside the increase of higher education
opportunities for Pacific Islanders, relaxing regulatory
environments and more foreign direct investment.
• In 1980, Papua New Guinea imported around
AU$300m worth of services. In 2009, this was
AU$1.8 billion. This can be attributed to rapid mining
and infrastructure development. However, in
contrast, in 2009, the value of exported services
represented only about 4% of the country’s total
exports for the year, which reflects the country’s
heavily reliance on the export of goods.
• In Fiji, it’s a different story. In 2009, of the total
exports for the country, services made up 54% of
that compared with 30% services imported.
• Why?
• Currently, Tourism makes up a significant proportion
of services trade with Australia. According to the
Australian Bureau of Statistics, in 2010, Australian
tourism to the Pacific increased by 19.1% and the
primary source of growth was the rejuvenated flow of
Australian tourists to the Fiji islands, which posted
growth of 28%.
• When you think about that in dollar terms - between
2009 - 2010, Australia imported more than AU$850
million worth of tourism services from Fiji - more
than 85% of the total value of services trade
between the two countries for that period.
• In the Pacific, much of the import of services is
brought about through foreign direct investment,
which also brings much needed capital into the
country. We have seen this direct investment
stimulate investment in infrastructure development,
where government and domestic private sector
funding may have otherwise been difficult to secure.
• The key, of course, is for transparent regulations and
policies to support foreign direct investment and the
repatriation of capital and profits over time. Without
this - FDI will be constrained.
PNG
o I travel to PNG regularly and each time notice
marked physical development
o As I said earlier, there is little doubt that Papua
New Guinea is experiencing strong growth and
is in a period of rapid expansion fuelled by the
LNG project and the associated build-out.
o We’ve been hearing a lot about LNG for some
time now, but the activity in PNG goes beyond
LNG.
o In the provinces there are a number of natural
resources projects and also the area has
experienced a boom in manufacturing,
industrial, agricultural and fishing industries.
Timor-Leste
o We are excited about the future for Timor-Leste.
o With sovereign wealth of more than USD8
billion, the Government has embarked on an
ambitious nation building program and plans to
to spend USD 2.6 billion on public infrastructure
in the next five years.
o We’ve also just completed a major transaction
for the government which will help bring reliable
power to the people of Timor-Leste the biggest
financing transaction in the country for over 10
years
Solomon Islands
o We’re seeing that the country is moving away
from timber with good opportunities in
   Natural resources
   Fishing and
   Infrastructure
Guam
o Like Timor-Leste, another example of significant
infrastructure opportunities is the growth of the
US military proposed for Guam.
o When we talk about the military build-up on
Guam, we’re referring to the plans to move
more than 8,000 US Marines from Okinawa in
Japan to Guam.
• We’re seeing that these countries are all benefiting
from strong investment, because the environment is
making it attractive for investors, which leads to
economic prosperity.
How to keep this momentum going?
• Where are the opportunities for future growth and
investment – for all Pacific countries?
• We think there’s a one word answer to that question
– Asia
• In addition to continuing opportunities in tourism, we
also think that the Pacific can deliver a competitive
services offering in back office processing, call
centres, and labour hire.
• As you know, Asia is the engine room of the world’s
economy and at ANZ, our strategy focuses on
maximising opportunities in our mature markets and
exploiting growing opportunities in Asia.
• For the Pacific, it’s obvious now that the region’s
future success is going to be closely linked not only
to Australia and New Zealand – but to Asia.
• There are very few statistics purely about service
trade flows between Pacific and Asia, however as the
world’s new growth engine, Asia provides enormous
opportunities for all Pacific countries to drive
investment in services, as long as the investment
environments they offer are attractive.
• In the next five years, emerging markets in Asia are
expected to account for more than 50% of global
economic growth.
• This is going to continue to create economic
opportunities for the Pacific to transform and it will
drive the need for foreign direct investment into the
region.
• We are already seeing this. In 2010, trade growth in
goods and services between the Pacific and Asia
reached new records.
o Exports from the Pacific to China were up by
around 75% in 2010 compared to 2009.
o Pacific exports to China reached an estimated
USD$1.2 billion for 2010 – more than eight
times the amount recorded in 2001.
o Specifically in Fiji, we’ve seen imports from
China to Fiji grow five-fold in the past decade.
• There is opportunity for the services in the Pacific to
become the second engine of export growth for the
Pacific beyond the current surge in natural resource
and soft commodities.
So how can Pacific countries make the investment
environment more attractive and ensure the
growth in services trade?
• Growth will only come with new investment in
sustainable ventures and the Pacific must be more
investor friendly going forward.
• It’s clear that investors won’t bring their money and
institutions like ANZ won’t support foreign customers
investing unless the environment is supportive. This
includes:
o Consistent and transparent legal and social
systems and processes;
o Providing certainty around government policy
particularly taxation and profit remittance; and
o Driving constructive engagement with the
business community.
Conclusion
• In conclusion,
• Provided there are clear and consistent policies in
place - we believe the opportunity to grow services
trade in the Pacific lies in:
o financial services
o tourism
o back office processing
o telecommunications and
o labour hire
• For countries that achieve this regulatory
environment, we believe the value of services and
international trade of services will grow and financial
services will become an increasingly important
international business.
Thanks for your time today – I’m more than happy
to answer any questions you might have.

Comments

Anonymous said…
Interstesting and a lot more balanced/positive than other blog sites would have you believe. Thanks.
The Dogs' Service said…
THE DOGS' SERVICE - from the Gulag Archipelago by Aleksandr Solzhenitsyn

"The title of this chapter was not intended as an intentionally scathing insult, but it is our duty to uphold the camp tradition. If you think about it, they themselves chose this lot: their service is the same as that of guard dogs, and their service is connected with dogs. And there even exists a special statute on service with dogs, and there are whole officers' committees which monitor the work of an individual dog, fostering a good viciousness in the dog."
...........

"And that is what this chapter is about: the 'camp keepers' (and the 'prison keepers' with them). We could begin with the generals - and it would be a marvellous thing to do - but we don't have any material. It was quite impossible for us worms and slaves to learn about them and to see them close up. And when we did see them, we were dazzled by the glitter of the gold braid and couldn't make anything out.

So we really know nothing at all about the chiefs of Gulag who followed one another in turn - those tsars of the Archipelago."

"Without even discussing the question of talent, can a person become a jailer in prison or camp if he is capable of the very least kind of useful activity? Let us ask: on the whole, can a camp keeper be a good human being? What system of moral selection does life arrange for them?"

"To be constantly a weapon of violence, a constant participant in evil! Not everyone can bring himself to this, and certainly not right off. You see, you are trampling on others' lives. And inside yourself something tightens and bursts. You can't go on this way any longer! And although it is belated, men can still begin to fight their way out, report themselves ill, get disability certificates, accept lower pay (sic), take off their shoulder boards - anything just to get out, get out, get out!"

Now does this describe the backlog of Passport Applications unaddressed still? So what 'Growing Services' are we talking about?

In his foreword to the abridged edition and writing from his home in Cavendish, Vermont, Solzhenitsyn add this reflection:

"If it were possible for any nation to fathom another people's bitter experience through a book, how much easier its future fate would become and how many calamities and mistakes it could avoid. But it is very difficult. There always is this fallacious belief:

"It would not be the same here; such things are impossible".

"Alas, all the evil of the twentieth century is possible everywhere on earth. Yet I have not given up all hope that human beings and nations may be able, in spite of all, to learn from the experience of other people without having to live through it personally".

So what does Solzhenitsyn have in common with Pullitzer Prize winning novelist Barbara Tuchman? These two books: The March of Folly and the Gulag Archipelago say all that can be said of the human propensity for tyranny and domination. They also make it clear that this domination will proceed from the most flawed and inadequate of men and that they will often prove successful but never indefinitely.
Anonymous said…
Today the ICC at The Hague has reinforced the view of noble Nobel Writer Solzhenitsyn: they have issued warrants for the arrest of Colonel Muammar Ghadaffi, his son Saif and his Intelligence Chief.
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