1 Transaction Banking Pacific Growth Story Presentation to Joint NEW ZEALAND FIJI BUSINESS COUNCIL FIJI NEW ZEALAND BUSINESS COUNCIL Annual Conference 13 June 2013 Iain Leech Head of Transaction Banking Pacific ANZ is a major commercial bank in the Pacific 2 A presence in 12 markets across the Pacific for over 130 years Regional connectivity is playing to our unique position in the Pacific Pacific-Asia Trade: US$6.9b U$4 PNG bn SI U$ 300 U$ TL 342 Denotes two way merchandise trade flow (2011) — 2,200 staff in 12 countries & 55 branches — 17,500 commercial/corporate customers — 420,000 retail customers Vanua U$ 368 tu Fiji US$ 2bn Aus-NZ-Pacific Trade: US$7.3b Denotes inward FI flow (2010) Trade flows between Asia and the Pacific have grown 25% p.a. for each of the past 5 years 2 1. ANZ estimates of underlying earnings based on published financial information as at 31 March 2012 Well positioned to support strong Trade Growth in Pacific…. 3 > Since 1977, Pacific has averaged an annual total trade expansion of 15.8% y/y to reach $19.8bn in 2011. > In 2011, Export Growth was 20%, Import Growth 22.5%. Weakened Commodity prices - adverse impact Pacific 4 > Tapis oil prices fell by 14.0% over the past three months, due to global growth concerns. Of particular focus for markets was the slower than expected Q1 growth in China. > Gold fell by 13.0% over the past three months, following the panic selling of early April. There has also been heavy selling by long term investors and exchange traded funds (EFTs) due to the lack of global inflation expectations, which reduce the demand for gold as an inflation shield. > Copper prices fell by 10.2% from three months ago, as copper is particularly sensitive to demand from China. Rising inventory levels have also increased the influence of supply conditions lately. Commodity price index (average 2010=100) Soft Commodities also impacted 5 > Palm oil prices remained at low levels in recent months, but are now finding a bit of support from slower output growth in Malaysia (largest producer) which should cap inventories there. > Sugar prices have fallen over the past three months, but are now largely range-bound. The weather outlook is supportive for strong cane-crushing volumes and should cap any upside. Lower taxes in Brazil on ethanol for producers and distributors, on the other hand, will limit the downside. > Arabica coffee prices have been rallying recently, on concern that a chill in Brazil may cut output in the world’s largest exporter. Commodity price index (average 2010=100) Fiji Country Update Expect steady growth of 2% this year > Consumption and investment look fairly robust. However, the dampening effects of Cyclone Evan on activity and the negative income shock from rising food prices create downside risks to growth. > Preliminary trade data was released for the full year 2012. — Exports rose 14.3% (sugar to UK and biscuits to NZ) — Imports increased by 3.1%. — Trade deficit dipped to USD1.8bn in 2012, from USD2.0bn in 2011. > Investment indicators also performed well. Domestic cement sales rose 50.3% ytd y/y in February, while new lending for investment more than doubled in March on a ytd y/y basis. > Inflation rose to 3.3% y/y in March, from 2.4% in February, driven by food prices. This is likely due to the effects of Cyclone Evan, but we expect more inflationary pressure to come in the following months from the drought in New Zealand. > Private domestic credit maintained its robust growth, at 9.6% y/y in March 6 NZ/Australia dominates trade flows with Fiji, but Asia is emerging Fiji Merchandise Export USD 860m (%, 2011) Fiji Merchandise Imports USD 2,300m (%, 2011) Not Specified, 1.2 United States, 3.6 China, 6.1 Not Specified, 17 Australia, 20.7 Singapore, 33 New Zealand, 16 EU, 5.5 New Zealand, 5.8 United States, 11.4 Japan, 7.6 Australia, 20.4 > The role of Asia is changing in Pacific Trade flows between Asia and the Pacific has grown by 25% per year for the past five years. This now represents $6.9bn (35% total trade) in 2011 (NZ/Aust $7.3bn) Trade between China and the Pacific grew by more than 30% every year between 2001 and 2011 (from $180 million in 2001 to more than $2.1 billion in 2011. > In Fiji, we’ve seen imports from China to Fiji grow five-fold in the past decade. Together with selective investment there is also an emerging tourism market with China. Source: WTO Country Profiles 7 In Fiji as with many other Pacific nations, export receipts from service sectors such as Tourism and Travel are also significant 8 Fiji Merchandise Export USD 860m (%, 2011) Fiji Merchandise Services USD 802m (%, 2011) Commercial Services, 4.3 USD34m Manufactures, 18.6 Transportation, 30.5 USD 160m USD 245m USD 393m Agri Products, 45.7 USD 226m Fuels and Mining, 26.3 Source: WTO Country Profiles USD 523m Travel, 65.2 Fiji – NZ Trade relationships continue to strengthen 9 > Fiji is an important export market destination for New Zealand; dominated by — raw materials — finished consumer goods — foodstuffs — manufactured products > Fiji Exports to New Zealand recorded an increase of $3.8 million to reach $80.1million and the major contributor was biscuits. Increase of 4.9 per cent. > Agriculture and Seafood sectors represent sustainable opportunities for Fiji exports to New Zealand. > Fiji continue to strengthen its Trade relationships with emerging Asia (eg China, South Korea, Japan), markets that are focused on securing sustainable food sources. > Food, Beverage, Agricultural and Seafood based sectors represent comparative advantage and a significant opportunity for Pacific nations such as Fiji. —New Zealand is leading the way into the Asia Pacific Basin; —Australia is thinking hard as its Resource Boom plateaus; —Fiji is taking its high quality sugar to Europe and Water as a premium product to America and the World. New Zealand - World Leader in the Business of Food Production 10 “New Zealand must become a world leader in the business of food production to maximise the enormous opportunities in the decades ahead….. The business of agriculture no longer ended at farm gate; it ended on the dinner tables on the other side of the World” “New Zealand needed to be the All Blacks of primary production” Graham Turley – ANZ Managing Director Commercial and Agribusiness Management of Cash and the efficient facilitation of offshore payments and receipts is critical to business success 3 ANZ’s insights and solutions help clients efficiently manage their cash flows across working capital cycles and financial supply chain practices Provides clients with the ability to receive and understand incoming remittances COLLECTIONS EXPORTS Provides exporters with confidence that a bank is facilitating an export transaction for goods and services Electronic Banking TRANSACTION BANKING SOLUTIONS Working Capital Management and Trade Finance Provides clients with the ability to streamline processing of payments for creditors and payroll Provides importers simple mechanisms to effect payments for imported goods and services 11 PAYABLES IMPORTS Case Study: Regional Supply Chain for food production supporting Fiji, New Zealand and Australia 12 Financial Intermediation can support the import of raw materials (Wheat from Australia, Dairy from New Zealand), through local Fiji Production to export of Biscuit product back to New Zealand and Australia. Wheat Dairy (Milk/Butter) Biscuit Exports Case Study: Fiji Sugar Pre-Export Trade Finance Facility FJD 120m pre-export structured trade loan to finance the operational expenditures and the purchase of sugarcane from growers Key Deal Highlights: > Provides working capital to fund the purchase of sugar and operating costs in advance of shipment and payment from sales under FSC’s supply contract with major buyer in Europe > Cost effective funding for each sugar season against export sales > Repayment of loan from cash flows from sales under the export contract paid into an ANZ operated account > Strong reinforcement of ANZ’s commitment to Fiji and support of its primary industry sectors > Reinforces ANZ’s specialist Trade and Supply chain model supporting Pacific region. 13 Transaction Banking Pacific Deal Success 14 Transaction Banking Australia and Pacific Transaction Banking Pacific Clearing Mandate Pacific Transactional Banking Requirements 2012 2012 2012 2012 Performance Bond requirements Performance Bond requirements Performance Bond requirements Export Trade Finance Facility 2012 2012 2012 2012 Trade Finance LC USD 172m Betano Power Plant 2012 14 Structured Trade Facility Mandated Lead Arranger syndicated STFL facility USD100M Structured Trade Facility Oil Imports Export Finance 2012 2012 2012 2012 Contacts Iain Leech Rakesh Ram Head of Transaction Banking Pacific Head of Corporate and Institutional Bank L8B 833 Collins Street Level 3 ANZ House Docklands, Melbourne 25 Victoria Parade, Suva Australia Fiji T. +61 3 865 40173 T. +679 321 3313 E. 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