PDF Ebook Foreign Banks in the Pacific: Some History and Policy Issues
The problems facing the small, island economies of the Pacific are well known. They include remoteness (and concomitant high transportation costs), economies that depend on a limited range of exports of primary commodities, tourism, remittances and transfer payments, and exposure and vulnerability to natural disasters (Briguglio1995). Armstrong and Reed (2002) correctly criticize the view that these characteristics imply constraints to economic growth. As Cole (1993) points out, government policies of import substitution and domestic self-sufficiency have played an important role in the stagnation of the economies. What none of the studies have addressed is what role remoteness, small scale, narrow economic base, vulnerability, and misguided policies have played in the banking systems. As Chand (2002) points out, today the islands still lack financial depth, something that is a symptom and arguably also a cause of disappointing economic growth.
The story of the evolution of banking in the Pacific Islands has never been told. The foreign banks’ presence in the islands was often of such peripheral importance to the banks that several biographies of banks important to the region make no mention of the banks’ presence in the islands, or limit their mention to labels on maps of the banks’ global span (e.g., Amos 1948, Merrett 1985, Bussière 1992, and Ackrill and Hannah 2001). Still, some articles have appeared on the Australian banks (Hirst, et al. 1982, and Merrett 2002), or on a specific country, such as Papua New Guinea (PNG) and Fiji (Matthews and Tripe 2002).
The paper does not deal with offshore banking. A number of countries, perhaps most notably Nauru and Vanuatu (de Fontenay 2000), offer themselves as offshore centers. However, almost by definition such activities involve the local economy only through the fee income that they generate for the government. The banks involved do not operate in the local economy and generally have no personnel in the jurisdiction that sanctions them.
The discussion below initially proceeds along three dimensions. The discussion of the temporal dimension recaps briefly the general tenor of developments from the late nineteenth century to the present. The discussion of the organizational dimension provides a précis of the most active banks in the region. Lastly, the discussion of the geographic dimension groups the various islands into three spheres of influence—the Australian, the French, and the American—identifying the historical evolution of the foreign presence for each jurisdiction within each sphere. For our purposes, what defines a sphere is the national origin of the major foreign banks, though this now correlates strongly with the history and political economy of the islands in each sphere. The penultimate section discusses the nature of some of the banking problem facing banks operating in the Pacific islands and the role of regulation. The final section is a conclusion.
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Foreign Banks in the Pacific: Some History and Policy Issues
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