Samoa plans big economic reforms

WESTERN Samoa’s Finance Minister Tuilaepa Sailele has

signalled major structural re

forms in his latest Budget, labelling his new policies as a “calculated risk” but warning that higher inflation would lead to further monetary restraint.

The WS$ 182.95 million budget, the highest even in the country’s history, will introduce major economic reforms. The minister said some structural characteris tics had stifled growth leading to de

clining agricultural production, reduced

exports, poor land resource use and in creased consumption over output. The new measures will cover commodity pric ing, rehabilitation of plantations, export credits and abolition of export taxes, and tariff rationalisation.

“Government is committed to taking a calculated risk in launching the proposed policy reforms, because of the potential for such an expansionary programme to cause an excessive boost to inflation and imports,” Tuilaepa said. However, if adverse inflationary effects were to de velop during 1990, the government would advise the Central Bank of a need for appropriate restraint in monetary

policies.

Goods and services tax would be ex panded to cover professional services and a capital gains tax would be intro duced, with a consequent drop in direct income taxes. Many import tariffs would be reduced, with total abolition of im port duties on agricultural machinery, fertilisers and breeding animals. Export taxes on farm products will be abolished.

The government will expand the bonus scheme for the planting of high-yield, long-term tree crops. State plantations would be leased to the private sector.

Manufacturers will be helped by more infrastructure development, reduction of import duties on raw materials from 42 per cent to 35 per cent, an export credit scheme and the establishment of an equity investment facility.

Under the heading of social policy re forms, the government plans to provide villages with interest-free loans for school building programmes, the estab lishment of a Housing Corporation to provide housing finance and a means tested benefit for people over the age of 65 years.

Western Samoa’s government will be

gin construction on the Afulilo hydro

electricity project, build a container park,

upgrade telecommunications, build new roads and introduce payment for water

supplies through meters.

A National Planning Office will be set up to co-ordinate government economic policies and there will be a new Environ mental and Conservation Unit.

Under the budget estimates, statutory expenditure dropped despite the gov ernment having to provide for a seven per cent increase in some public service positions and the advance payment on the Royal Samoa Hotel project. But one of the major features is the planning for use of the Asian Development Bank’s loan of WS$l7.l million. This will in clude cocoa and coconut replanting, a new curriculum development program me in schools, establishing environmen tal conservation and telecommunications improvements. □