Papua New Guinea firms are playing a key role in the Solomon Islands as investment floods in.

BSP’s new head office in Honiara

The opening of a landmark new head office building in central Honiara marks the final stage of the takeover by Bank South Pacific (BSP) of the former National Bank of Solomon Islands (NBSI). It also symbolizes the pivotal role PNG firms are playing in the development of Solomons’ private sector.

When PNG-based BSP bought out NBSI as part of its regional expansion in 2007, it may have obtained significant market share but it also inherited outdated systems and infrastructure. It has subsequently set about investing heavily in new technology, with the relocation in late 2011 of its head office to a gleaming new three-storey facility representing the final piece of the jigsaw.

‘Companies with experience of Papua New Guinea are much more comfortable with this environment because they can understand the risk profile’

The building’s exterior features the striking sight of no less than five ATMs, while the interior includes a spacious, air-conditioned and modern retail banking area and secure transactions facility on the ground floor. Dedicated sections for premium and corporate customers, as well as administration, are housed above.

While this flagship branch undoubtedly provides an improved customer experience, it also provides the platform for BSP to use electronic service delivery channels (especially mobile) to improve access to banking services for the Solomons’ large and under-banked rural population.

BSP’s Mark Corcoran

Country Manager Mark Corcoran explains: ‘One of the more costly parts of the building is our comms room. It is a state-of-the-art facility that contains all our servers and communication links. It has double redundancy to make it as bullet-proof as possible when we are rolling out ATMs, EFTPOS, SMS banking services countrywide.’

BSP may be the most prominent example of PNG investment in the Solomons, but it is by no means the only one. While the front of the new building faces the main Mendana Avenue, it backs into the Heritage Park compound, home to the PNG-owned Heritage Park Hotel. Since opening in late 2009, the hotel has set a new benchmark for accommodation in the capital. It is estimated that some 40 PNG-based firms have a physical presence in the Solomons, spanning a range of sectors. Most are recent arrivals, such as ICT firms Bemobile and Daltron, major agribusiness player Guadalcanal Plains Palm Oil and finance company Credit Corporation, that are fundamentally reshaping the private sector.

The Heritage Park Hotel is a high profile example of Papua New Guinean investment in the Solomons

No other two Pacific Island states are so similar culturally as PNG and the Solomons, and the resulting empathy is at the root of this blooming commercial partnership. One PNG executive working in the Solomons comments happily on how much at home he is in Honiara: ‘it just feels like another province of PNG.’

At the same time, PNG’s economy has enjoyed a decade of economic growth, boosting the coffers of its corporate sector, while its smaller neighbour has rarely looked like such a safe bet.

Interestingly, the investors making the short trip east are not necessarily PNG-owned. It is more a case of international companies regarding PNG as a natural springboard to the Solomons, as RAMSI’s Special Coordinator Nicholas Coppel (who has also had a stint as Australia’s Deputy High Commissioner in PNG) explains:

‘Companies with experience of Papua New Guinea are much more comfortable with this environment because they can understand the risk profile, whereas companies from other countries are still a bit wary of locking down their money in a physical investment. It is also true that for many Australian companies, the Solomons is a small market and so it doesn’t get quite the same attention as opportunities in Asia.’

Given the current dynamism in both economies, the flood of investment looks set to continue. The Solomons’ vastly underdeveloped retail sector is just one that, sooner or later, is likely to tempt investors from across the Solomon Sea.

First published in Business Advantage Solomon Islands 2012/13