Building the Pacific

Building for the future is crucial for every nation and can be central to achieving collective ambitions.

“Across the Pacific, we’re the regional banking partner for a major multi-national delivering a satellite-driven venture that will bring affordable internet to remote communities.”

When nations are spread across somewhere as culturally, economically and geographically diverse as the Pacific, it presents a unique set of challenges – and opportunities.

Three years ago, I was given the privilege to serve as ANZ’s Regional Executive for the Pacific, a region where ANZ has proudly been for over 140 years.

ANZ operates across nine countries in the Pacific including Fiji, Samoa, Vanuatu, Tonga, Kiribati, Solomon Islands, Cook Islands, PNG as well as Timor Leste. We have more than 1,200 dedicated staff and in the last five years alone, have invested nearly AUD $95 million in infrastructure and technology in the region.

We’re also funding our customers’ ambitions to invest in sustainable, resilient infrastructure that supports communities and drives long-term impact.

In Kiribati, we’re supporting the expansion of mobile coverage to previously unserved areas, a game-changer for digital inclusion.

In Tonga, we’re helping secure finance for network upgrades and a future 20MW solar site, supporting the country’s goal of 70 per cent renewable energy by 2025.

Across the Pacific, we’re the regional banking partner for a major multi-national delivering a satellite-driven venture that will bring affordable internet to remote communities.

But this is just the beginning. A key role is helping Pacific Island governments invest in building critical infrastructure for the future.

A looming need

Our latest Pacific Insight Infrastructure report outlines how Pacific nations balance competing priorities and a finite pool of resources.

All governments face short term pressures.

For many Pacific governments the immediate priority is often repairing damage from natural disasters like cyclones, floods, tsunamis and volcanic eruptions – as well as global crises like the pandemic.

These limit a government’s ability to borrow and to build the infrastructure needed to stimulate their economies.

The investment shortfall

Our analysis shows that Pacific infrastructure investment fell short of demand by USD $1.1bn in 2024, slightly lower than the USD $1.3bn forecast earlier.

With new supply coming on over the next two to three years due to increased development partner support, we see this gap narrowing further, although the deficit is likely to remain through to the mid-2030s.

In total, we estimate an infrastructure investment deficit of USD $11bn through to 2035.

But from our holistic day to day experience helping the region’s people persevere and grow, we believe there are ways forward.

Attracting the private sector

One way to significantly reduce the infrastructure deficit is by encouraging more private sector participation in capital projects.

With the current focus on sustainability there is a growing amount of capital being made available, but issues such as scale, the ability to build a portfolio, limited knowledge of the Pacific’s green ambitions and credit risks tend to discourage top tier investment funds.

For projects which have demonstrative net economic benefits but less ability to capture revenue streams directly through user charges, governments could adequately support development by financing the gap between economic benefit and revenue capture.

Joint ventures

Governments can also consider (minority) stakes in joint ventures as a way of showing support for the projects and ensuring common interests as well as sharing in the dividends.

This hybrid style financing can shorten the timeline of complex projects.

‘Green’ finance for climate mitigation and adaptation projects

Financing investment in projects and infrastructure that can better withstand climate events is a topical subject across the Pacific.

At COP29, developed countries pledged USD $300bn per year by 2035 for climate change mitigation and adaptation.

This commitment is at a global level and represents a small fraction of needs. It is likely that only a small amount of the funding will reach the Pacific at all.

Fiji: leading with green and blue bonds

There are other ways forward.

The Pacific may consider issuing its own green and blue bonds and using the proceeds to fund projects and programs with environmental benefits, both on the land and in the ocean.

The World Bank reports Fiji was the first emerging market to issue a sovereign green bond in 2017. Fiji then issued a blue bond in 2023, one of the few in the market.

Debt for nature swaps

Another option for the Pacific to raise funding is debt for nature swaps.

The World Economic Forum defines such a swap as: a financial instrument that allows countries to free up fiscal resources to build resilience against the climate crisis and take action to protect nature, while still being able to focus on other development priorities without triggering a fiscal crisis.

In practice, creditors provide debt relief in return for a government commitment to, say, decarbonise the economy, invest in climate-resilient infrastructure, or protect biodiverse forests or reefs.

Complementary structures

Programs such as the Trilateral Partnership of Australia, Japan and the USA and the Australia Infrastructure Financing Facility of the Pacific can also reduce the risk and interest rates of these new borrowings.

Asset recycling

Recently, ‘capital recycling’ (or ‘asset recycling’) has emerged as an avenue to bolster the public sector’s ability to fund infrastructure.

In this approach, governments privatise (or offer as a long-term lease) an existing and income generating public sector asset and use the funds to build new assets, hence the phrase ‘asset recycling’.

But privatisation should only take place where analysis shows that the asset would be more efficiently managed by the private than the public sector.   

Don’t shrink from ambition

Outlining shortfalls of such a volume across such a vast area can seem intimidating.

ANZ’s focus is evidenced by our partnering with the Australian Government through initiatives like the Australian Infrastructure Financing Facility for the Pacific (AIFFP).

In March this year, we also signed a 10-year presence and guarantee arrangement with the Australian Government.

This is a public and powerful commitment to the region and a demonstration of our shared commitment to providing access to safe, trusted banking services in the region.

This guarantee will support ANZ’s efforts to invest and build on our business in the Pacific, keeping communities and economies connected, and finance flowing in and out of the region.

These are solid foundations upon which we will continue to support an even greater Pacific.

Sarah Stubbings is Regional Executive, Pacific at ANZ