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Pacific Islands lose up to $US40m a year in costly money transfers: research
Pacific Islands remitters and their home economies are losing millions of dollars through the high cost of money transfers, according to an economic research funded by the World Bank.
New Zealand economics professor John Gibson, in studies funded by the World Bank, found that remitters to the Pacific Islands faced very high transfer fees compared to other parts of the world.
Gibson, who focused on New Zealand-Tongan remittances, said the transaction fees were about twice as expensive as transfers from the United States and Britain to a wide range of countries.
Gibson’s study found the most popular remittance methods such as a bank draft or Western Union money transfer incurred the highest cost. A typical transaction of NZ$200 would cost between 15-20 percent of that amount, he said.
But if remitters used less well-known methods, such as setting up New Zealand bank accounts with Islands ATMs or sending money through NGOs or churches, these would cost less than 5 percent of the typical sum.
Gibson said that if NZ$500 was sent to Tonga via an ATM account, it would cost between NZ$15 and NZ$20 on exchange rate losses. But it would cost approximately NZ$50 to send the same amount through a money exchange business such as Western Union because of higher fees and a less favourable exchange rate.
Gibson said this ten percentage point spread between the most popular and the cheapest remittance methods meant a potential loss for Tonga of equivalent to four percent of GDP.
Remittances comprise 39 percent of Tonga’s GDP, and across the Pacific they now total US$400 million a year. Extrapolating the ten percentage point spread, Gibson said that avoidable transaction costs may total up to US$40 million a year.
Although Gibson focused on New Zealand-Tonga remittances, he noted that other academic research suggested transaction costs for remittances from Australia to Fiji, Samoa, Tonga and Vanuatu are at least as high. This also appears to be the case for remittances from the United States to the Pacific.
It did not seem that this higher cost could be justified in terms of scale, Gibson said. He looked at two other non-Pacific countries (Ghana and Mozambique) with scales of remittances similar to New Zealand-Tonga. Both African countries had substantially lower money transfer costs than the Pacific, he said.
Gibson said that finding lower-cost alternatives was very important to Pacific Islands countries because of the high proportion of their population that live overseas.
The importance of remittances can be expected to grow even further as Australia and New Zealand increasingly use Pacific workers to deal with seasonal labour shortages, he said.
Gibson said there were several solutions. He said ATMs only cost about NZ$15,000 and banks might make greater use of them given the fees they would earn from remittance transactions.
Gibson also looked at a company run by a Tongan church, Meliemei Langi, which is open to people of any denomination. Its fees were very cheap—NZ$5 for amounts under NZ$1000 for example—and despite lacking the financial or technological resources of the large, multinational finance companies, was able to provide a fast, cheap and credible money transfer service.
Gibson said that greater competition in the money transfer sector could drive down the transaction costs to the benefit of remittance recipients and their countries.
But Gibson also suggested that a lack of information about the range of services and costs for sending remittances to the Pacific, meant that remitters and financial institutions were not aware of cheaper options.
That lack of information, along with remitters’ habits, had to change if Pacific nations want to seize up to US$40 million a year currently being lost on money transfer costs, Gibson said.—By Duncan Wilson
Tax reforms
Tonga’s Parliament has passed a series of tax reforms. Finance Minister Siosuia ‘Utoikamanu says the Income Tax Act simplifies and rationalises tax rates, deductions and withholding tax. It also modernises income tax applied to international transactions and provides measures to prevent tax avoidance, which has been a major problem in Tonga.
The minister says the changes are designed to give taxpayers greater equity and fairness, increased certainty and simplicity.
Dual citizenship for Tongans
Thousands of Tongans living overseas can now qualify to renew their citizenship, thanks to an amendment just passed by the Tongan Legislative Assembly. The Nationality (Amendment) Act was endorsed last month and will come into force soon after it has received the Royal approval and gazetted. An official in the Crown Law office, Lina Folaumoetui, told PACNEWS the amendment would mean that Tongans can have dual citizenship.
Kulim divests to focus on Solomons, PNG
Kulim (M) Bhd plans to divest its entire stake in four Indonesian subsidiaries to PT Union Sampoerna Triputra Persada for US$125 million (RM430 million) cash. The divestment includes Kulim’s entire 63,260ha of plantation land in Kalimantan and its 30-tonnes-per-hour palm oil mill. The gross proceeds totalling US$57 million from the sale of shares and US$65 million from the purchase of debts. The US$57 million excludes an allocation of up to US$3 million for workers’ compensation, which is the buyer’s responsibility. Following the divestment, Kulim will have total plantation land of 82,730ha—31,422ha in Malaysia, 44,714 ha in Papua New Guinea (PNG) and 6,594ha in the Solomon Islands. Managing director Ahamad Mohamad said the rationale for exiting Indonesia was to seek higher returns on the group’s investments and to focus on its oil palm businesses in Malaysia, PNG and the Solomon Islands. “Returns on investment from Indonesia have not been encouraging compared with those from Malaysia, PNG and the Solomons, where Kulim has invested approximately the same level of effort and funds,” Ahamad said.
Port Moresby to host tuna meet
The importance of the Pacific Ocean as the heart of the global tuna industry would be showcased when a major international conference themed Pacific Tuna Conference 2007 is convened in Port Moresby in September. The two-day conference to be held on September 12 will focus at the current tuna stock and resources in the region; investment opportunities for fishing and processing; resource management and its impacts on the industry; markets and marketing; export and quality product development for Pacific tuna industry; and, the prospects for the future. The Pacific Ocean contributes more than 64 percent of the world tuna catch of around 4.2 million tonnes.
Freight Embargo for Yap
Continental Airlines has posted its “Notice of Embargo” for all freight and QUICKPAK into and out of Yap. The reason stated for the embargo is due to severe weight/payload restrictions.
The embargo became effective June 15 and will remain in effect until further notice. According to sources, medical shipments and specimen are exempted from the embargo. Mail services should not be affected since Continental has a contract to carry mail.
The embargo comes after a long overdue issue of the lack of jet fuel service at the Yap International Airport. The newly seated Yap State Government has been scrambling over the past few months to address the jet fuel issue. However, it may not be quick enough to avoid the embargo on cargo.
Entry visa fees waived
Papua New Guinea national government has waived entry visa fees for bona fide tourists from primary source markets of Australia, New Zealand, Japan, Europe and the United States. It also announced it will make available K39 million (US$15 million) over the next three years to implement the National Tourism Master Plan (2007—2017).
ATR on a selling drive
Air New Zealand is expected to benefit from a drive by French aircraft maker ATR to sell more of its regional planes in the South Pacific, Stuff NZ reported. The national carrier already flies 11 66-seat ATR 72-500 turboprop planes on regional and some main trunk services.
In September, ATR plans to build in Christchurch a NZ$5.3 million pilot training simulator that is expected to significantly reduce training costs and attract pilots from Australia and the Pacific Islands. Thirty ATRs, some with Air Tahiti Nui and Fiji’s national carrier Air Pacific, are already flying in the South Pacific.
Our Airline suspends Majuro service
Flights to Majuro in the Marshall Islands by Our Airlines will be suspended from July 4. Our Airline flights from Australia will turnaround in Tarawa in Kiribati rather than continuing on over the last sector to Majuro on the inter island service.
Chief Executive Officer of Our Airline Geoff Bowmaker said “since recommencing services to the Marshall Islands in October last year, the loadings into and out of Majuro have been too low and the service has not been financially viable.”
World Bank helps Samoa
The World Bank has approved an additional US$8.27 million (credit and grant) to fund ongoing transport and coastal infrastructure in Samoa.
The additional funds will be used to provide gap financing for road and bridge works in the capital Apia and other areas that are part of the ongoing Second Infrastructure Asset Management Programme (SIAM). These works have had to be rescheduled due to higher than originally estimated costs. United States considering sanctions for Pacific tax havens
Sanctions against tax havens: US
Two bills being considered by the United States Congress would impose sanctions on Pacific Islands nations for providing tax havens.
A Radio Australia report said the US loses more than US$100 billion a year in revenue from money hidden in entities which have no other purpose than to avoid US tax. It named Nauru, Samoa, Vanuatu and the Cook Islands as among the 30 jurisdictions providing tax havens.
The proposed law would impose sanctions under the Patriot Act against nations which allow secrecy in their corporate, bank and tax transactions.
US$2.6m to buy weapons
Solomon Islands Police Commissioner Jahir Khan has put in a supplementary budget to the government of S$18 million (US$2.6 million) to purchase weapons for the police force.
Radio New Zealand International says Khan is proposing that two sections of the police would be re-armed.
They are the police patrol boats and the Close Protection Unit. The Commissioner said he would like to buy 40 self-loading pistols for the Close Protection Unit.
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