Stay optimistic say bankers
Coook Islands News
Thurs 05 Feb 2009
Poor management is a key contributor to economic failure
ANZ bank general manager Phil Haynes, on behalf of the Cook Islands Bankers’ Association says an economic crisis should be seen as a weakness in which there must also be opportunities.
Speaking at the Cook Islands Research Association’s economic crisis summit yesterday, Haynes said much of the world crisis can be attributed to countries like the United States. He says over-consumption by the US is a product of greed and an example of common sense going straight out the window. Haynes says an example of this is that the US consumes about 20 percent of the world’s energy but has less than 10 percent of the world’s population.
Starting off his presentation, Haynes says he had not conferred with the Banker’s Association on what their current view is of the crisis. He says maybe the Cooks should take a leaf out of China’s book and ban the media from making any reference to words like economic crisis, downturn, depression and recession. “The pessimism sets in and then the bad news keeps flowing. People stop spending when they become scared about what the future holds,” he said.
But looking on the bright side can bring about economic recovery. Haynes says all economies go through a cycle of peaks and troughs commonly called the trade cycle. This trade cycle is driven by a number of factors and Haynes believes the troughs weed out bad performance in the economy.
He says it is only businesses with good management that will get through an economic crisis. Poor management on the part of individuals, businesses and governments is one of the key contributors to economic failure he says. “In the 15 years I’ve been in banking I’ve seen a number of business failures.” He says when businesses lose focus or don’t monitor the changes they need to make to change with the times then this is poor management. Not following accounting practices to be aware of profits can also be a downfall. His advice is to chase debtors and stretch creditors as much as possible. “Cash pays bills, profits don’t. Businesses can still fail if they don’t manage their cash.”
Keeping your bank informed of good times and bad can enable them to help, especially where loans and mortgages are concerned.
People management is critical to successful business says Haynes. Companies that are followers in the industry also don’t usually succeed he says.
Individuals are also guilty of poor management when they live beyond their means. Haynes says hard times should not be ignored and expenses should be looked at carefully. “Some people don’t know where their money goes,” he says. People that borrow for wants like travel, instead of needs like housing and education need to change their ways says Haynes.
“The Banker’s Association has long been concerned with the country’s liquidity.” He says in June 2008 the country’s borrowings exceeded its cash supply by $98 million. Haynes suggests what is critical to long term sustainable growth of the economy and social wellbeing of the people is the need to introduce a sustainable level of foreign investment and the need for infrastructure. The loss of skilled workers who head overseas is another concern for banks.
Investment in alternative energy should also be recognised by government he says. ANZ’s Aitutaki branch is solar powered, has provided over $17,000 in VAT to government as well as over 2800 kilowatt hours of power into the island’s grid free of charge. Haynes says more green initiatives like this will encourage economic growth.