World Bank dollar lifeline for Pacific islands proceeds with US, Australia push
By Lucy Craymer and Lewis Jackson
WELLINGTON/SYDNEY, July 15 (Reuters) -The World Bank is preparing a financial lifeline for Pacific Island nations, backed by the U.S. and Australia, as an exodus of Western banks from the unprofitable market prompts concern that China could fill the vacuum in the strategic region.
Without a backstop, many of the 18 small countries and territoriesof the Pacific Islands Forum, spanning 30 million square km (10 million square miles) of ocean, risk being cut off from global finance as Western banks leave the less-developed region, a situation an Australian official involved in the plan called "Armageddon".
The $77 million proposal would initially enable emergency access to dollars or other major currencies that the far-flung island nations would need for trade and remittances if Western banks cut ties, the World Bank said in an email.
The region, which Washington has long considered its maritime neighbourhood, is caught in a superpower battle for influence as China makes steady advances.
Nauru, Solomon Islands and Kiribati switched diplomatic recognition from Taiwan to Beijing in recent years, and the Solomon Islands has struck security and policing pacts with China that sparked alarm in the U.S. and Australia.
Banking curbs after the 2008 financial crisis have made Western lenders cautious about ties to the Pacific, where banks and regulators often lack the resources to find and prosecute financial crimes, raising the risk that banks get embroiled in embarrassing and expensive scandals.
There is also little prospect of profit from the region's tiny, remote populations to entice banks to bear the cost of helping raise compliance standards.
CHINESE INTEREST AS WESTERN BANKS EXIT
"The proposed World Bank project is a creative way of addressing the challenge of de-risking and small scale in Pacific Island countries," said Lalita Moorty, the World Bank's East Asia and Pacific director for prosperity.
Without access to overseas banks, Pacific countries would struggle to receive remittances - a key component of their economies - welcome holidaymakers or trade with the wider world. Already as competition wanes, the cost of remittances has increased to some of the highest globally.
"It can create instability for the financial system," said Denton Rarawa, senior economics adviser at the Pacific Islands Forum.
Between 2011 and 2022, the region lost 60% of its correspondent banking relationships, where Western banks partner with local ones to enable transactions in international currencies.
ANZ Bank has sold assets in Papua New Guinea, Westpac tried to sell its Pacific business and Nauru's only lender, Australia's Bendigo Bank, announced plans to leave in 2025.
China may be seeking to fill that gap.
Bank of China has opened an office in Papua New Guinea and signed a memorandum of understanding with Nauru to look at how they could step in if Bendigo Bank leaves. Vanuatu last week asked Bank of China to set up a branch.
Bank of China did not respond to a request for comment.
Chinese banks have in recent years expressed interest in the Solomon Islands, Tonga and Samoa, the central bankers of those countries told Reuters, although nothing has eventuated.
'LIGHT AT THE END OF THE TUNNEL'
"We're well aware of the geostrategic interest of our region between U.S., China and Australia," said Cook Islands Prime Minister Mark Brown, the current chair of the Pacific Islands Forum.
"What we're saying is that if you're not going to address concerns and issues we have, Pacific countries will start looking elsewhere for support."
The U.S. and Australia were spurred to act against the festering problem in the past two years by planned exits like Bendigo's and concern that China could step in, said three officials who asked not to be identified because they were not authorised to speak to media.
A delegation of more than 20 U.S. Treasury and Federal Reserve officials flew in for a conference in Brisbane last week with Australian and Pacific Islands officials, opened by a video message from Treasury Secretary Janet Yellen.
Under the plan, the World Bank will also study ways to make the Pacific Islands more attractive to global banks, including a mechanism to aggregate payments from various countries to help achieve economies of scale, the World Bank said in a statement.
The Washington-based global lender's board is expected to approve the plan within a few months. Commercial banks will bid to run the facility, which can be used in an emergency to process transactions in dollars and other currencies.
Countries will be charged to use the facility so it does not undercut private providers. They will also need to meet standards on financial crimes regulation.
The U.S. and Australian effort convinced at least some conference attendees that after more than a decade of talk, a solution is close.
"We can see the light at the end of the tunnel," Reserve Bank of Fiji Governor Ariff Ali told Reuters. "I'm confident we'll find a solution and I'm confident we're making progress."
Reporting by Lewis Jackson in Sydney and Lucy Craymer in Wellington; Additional reporting by Ziyi Tang in Beijing; Editing by William Mallard
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
