Charting a growth pattern
From a New Zealand perspective, the Pacific trade scene looks good. New Zealand exporters hiked their sales to the region by more than 18 per cent last year and Trade Negotiations Minister Philip Burdon is preparing to lead a mission to Fiji and Papua New Guinea in confident search of a further export boost.
From the viewpoint of the Pacific island states, the outlook is less than rosy in fact, New Zealand’s 1992 trade figures paint a downright dismal picture and one that should be seriously worrying their leaders.
Total exports to New Zealand from 24 island states and territories during the year crept up marginally over 1991 to 5133.5 million, but remained $2O million below the figure of four years previously and $36 million under the peak reached in 1990.
Almost one-half of that $133.5 million export total came from just one country
Fiji.
Despite the overall increase in 1992, nine of the 24 sold less to New Zealand last year than in 1991. In many of these cases, the drop in exports was substantial. Another five sold absolutely nothing at all. Only four posted what might be called reasonable increases and two of these rises were due to major purchases of a single product phosphate from Nauru and petroleum oil from Papua New Guinea.
Such was the state of affairs 11 years after the South Pacific Regional Trade anu Economic Cooperation Agreement (SPARTECA) came into effect and four and a half years after New Zealand allowed duty-free and restricted access for all Forum country goods and opened an office in Auckland to encourage and facilitate their entry.
Clearly SPARTECA, signed with such hope at Tarawa in 1980 and containing provisions for development assistance aimed at enhancing the export capabilities of the Forum Island Countries, has not worked.
In most cases, that is Fiji is the exception. And Fiji, in the eyes of many people, is an outstanding example of what a Pacific island country can do, given the will to shake off traditional economic thinking and chart a pattern of growth.
The island leaders seem to know this. The 1991 Forum communique from Pohnpei endorsed the view that programs of economic structural adjustment were needed at the national, as well as the regional, level.
LAst year’s Honiara communique said, “(The Forum) again stressed the importance of putting in place effective domestic economic policies, with recognition of the vital role that an effective private sector should play in ensuring economic growth.
A sound investment strategy was vital for ensuring the maximum development of local resources and for encouraging foreign investment into Forum countries.”
But with very few exceptions, the leaders have done little to translate those words into action.
It remains clear that the island nations’ economic problems and lack of export growth have little to do with access to markets and everything to do with outdated inward-looking policies, retention of a dominant public sector and some sort of obsessive conviction that economic development is best left in the hands of the government.
They remain short of export capacity, investment capital and
the sort of entrepreneurs local or
foreign who can give their fledgling
economies the shot in the arm they need.
Simply put, private enterprise has
not been given a chance throughout much of the Pacific and this is stunting the island countries’ growth.
Their leaders seem paralysed, de spite the evidence of New Zealand’s export-led recovery and the example of Fiji, which has followed New Zealand in radically liberalising its economy. As far as SPARTECA is
concerned, Fiji’s textile industry,
which has had such spectacular suc cess that it attracted quota restrictions from the United States, was virtually built on duty-free access to New Zealand, and this remains probably
the biggest single SPARTECA
achievement.
Now when New Zealanders say
this, it is simply not a matter of promoting their own policies.
The World Bank, among others, has tried to encourage the island states to drop their long-standing inward-looking, highly protective, economic policies to promote growth that will not only generate more two-way trade but improve living standards.
The most recent World Bank study (of six member countries, Fiji, Kiribati, Solomon Islands, Tonga, Vanuatu and Western Samoa) showed growth rates in the 1980 s averaged less than two per cent a year. Per capita GDP in four of them actually declined because of population growth.
The bank said island country exports would grow, and their economies generally improve, only with more outward-looking policies based on attaining international competitiveness , deregulation and less government intervention.
Additional keys to success, the experts say, are for the islands to cast their eyes further afield than New Zealand and Australia as Fiji has done, making the United States its biggest single garment export market and firstly perhaps, cutting their teeth by expanding the woefully small trade between themselves.
Finding other overseas markets will require, in many cases, inviting overseas investment, and that in itself is often a problem.
Steve Houlihan, who heads the South Pacific Trade Office in Auckland, tries to promote investment from this country into the islands, but says it is frequently difficult to get accurate details from some states on their investment regulations. If he has problems, imagine how hard it would be for a potential northern hemisphere investor.
After 12 years of SPARTECA, it has to be said time is running out for the island states to get their economic acts together. They are losing their trading advantage in New Zealand and Australia as both countries lower their import barriers against the rest of the world.
If there is a GATT agreement, the margins of preference they enjoy in Europe under the Lome Convention will also diminish.
In the long term, they will lose what international competitiveness they already have.
The writing is on the wall and the island leaders owe it to their people to read it and act upon its message. □