David Barber

At the crossroads or a dead-end?

Wellington notes

THE polite say the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), 10 years old this year, is at a crossroads. Others say it has ossified . . . had its day .. . come to the end of the road.

Either way, it is clear that SPARTECA, signed with such hope at Tarawa in 1980 and brought into operation the following year, has failed to fulfil its original trade objectives.

The Forum island states are still way off economic viability. 11 would be unfair to say that it has not helped some, if not all, of the Forum countries in some way, especially since July 1988 when all their goods were given duty-free and unrestricted access to the New Zealand market, and most (with some quota restrictions) were similarly admitted into Australia.

But the value of this has diminished as both countries, and New Zealand in particular, have lowered their import barriers to the rest of the world and consolidated their own closer economic relations agreement.

It has long been clear that the island nations’ economic problem is not in fact one of access to our markets, but rather their lack of export production, investment capital and entrepreneurs, coupled with their retention of a dominant public sector and some sort of obsessive conviction that economic development is best left in the hands of the government.

When the Regional Committee on Trade and Economic Issues meets in Suva next month the future ofSPARTECA is bound to be high on the agenda, along with the need to find more creative ways to boost economic development in

the region.

This will be nothing new, for a number of options for improving or replacing the agreement have been floated in recent years.

But the meeting will also have before it evidence of Fiji’s success with a new approach to economic policy and a World Bank regional economic report that suggests other island nations should follow its example and cast off traditional thinking in favour of a more aggressive free-market stance.

The New Zealand and Australian economies are both in bad shape. I n giving years of aid and duty-free and unlimited access to Forum countries’ exports they have probably done as much as they can do. New Zealand at least is sorely strapped to attract the investment it needs to develop its own economy, so the islands cannot expect Kiwi capital to flow in their direction.

A hardening Wellington attitude was made clear when External Relations and Trade Minister Don McKinnon made his truncated South Pacific tour injanuary.

In Niue, (whose population of less than 2000 will get just under SNZ 10 million from New Zealand this year, making them the largest per capita aid recipients in the Pacific and amongst the largest in the world), he put the hard word on premier Sir Robert Rex and his cabinet.

McKinnon, making his first visit, was stunned to learn that

most of the money goes to support 600 public servants and that the island even imports all its eggs from New Zealand.

Noting that the poorest communities in the world usually managed to raise a few chickens, he asked what had come out of the Concerted Action Plan (CAP), the development programme that was supposed to sustain a living community on Niue, most of whose people now live in Auckland?

Although Sir Robert justifiably pleaded that the results of two cyclones in the last year had absorbed money intended for development, McKinnon equally justifiably said New Zealand wanted to see some results for its aid contributions.

In Rarotonga, which will get SNZB.B million in direct budgetary support this year (plus another $5.6 million in project aid), McKinnon said he wanted more accountability for how New Zealand’s money was spent. The $B.B million now represents only 20 per cent of the Cook Islands budget, against 100 per cent in 1965 when it gained internal self government, but he had to make the point.

The fact is, New Zealanders are still being asked by their government to tighten their belts and make sacrifices the like of which they have never experienced before.

McKinnon was saying that his government cannot ask its people to continue to absorb that pain while appearing profligate with cash resources abroad as close as the ties may be with nations like Niue and the Cook Islands.

The new government’s resolve is hardened by the experience of Fiji, which despite (or perhaps because of) the traumas of the 1987 coups, has bitten the bullet, cut government expenditure and border protection, reformed the tax structure, devalued the dollar and started corporatising government services.

As a result, Fiji posted an estimated 12 per cent growth in gross domestic product in 1989, boosted tourist numbers and hiked exports to New Zealand alone by nearly 38 per cent last year.

It’s acknowledged that Fiji had the population base, transport links, infrastructure and an imported entrepreneurial class a point that should never be overlooked in Suva to do it. But are there not lessons in the Fijian experience that other island nations should copy?

Tonga, which has a small but vigorous private sector despite the conservative economic restraints that continue to apply in the kingdom, could perhaps show the way.

It reported a modest, but significant, 13 per cent increase in exports to New Zealand last year, led by rises in taro, fruit and vegetable sales. The demand for these products from New Zealand’s Pacific Island community continues to grow and other states also have large and relatively undeveloped agricultural resources.

What could the island states do if they shook off their obsession with government control, deregulated their economies, gave their budding entrepreneurs a chance and seriously canvassed the Northern Hemisphere for investment capital, instead of continuing to rely on New Zealand and Australia?

New Zealand, I’m sure, will continue to offer them stepping stones to the international market and prosperity, but the reality is, neither it nor Australia can shelter island economies forever. □