Cook Islands
p. 41 · Read in the full issue
Opinion
Wake up, Cook Islands
In February last year, the South Pacific Forum Finance Ministers met in Suva and made a breakthrough declaration acknowledging that island countries needed radical changes to survive in the coming Pacific Century.
They accepted the need for a long-term strategic vision, strin gent expenditure controls, less State involvement in the economy and a vibrant private sector.
In a statement, they said: “We recognised that we were meet ing against the background of a rapidly changing international environment, profound social and economic challenges - the need to promote sustainable development and the importance of posi tioning ourselves for the growth of the Pacific into the 21st centu ry”
Wise words indeed, echoing as they did a World Bank report noting the island states “need to change course and rely on a more effective private and public investment oriented growth strategy”.
Sad then that the Cook Islands appeared to have slept through the Suva meeting.
The wake-up call came loud and clear 12 months later, shock ing the Cooks into realisation that it had been living in a dream world for years.
The sun kept shining, the tourists kept coming, and the aid cheques from New Zealand arrived regularly. Despite the Sheraton Hotel disaster, the grandiose schemes continued and the government kept borrowing money from an overseas pool it thought was bottomless.
It accumulated huge debts and kept paying a public service wage bill that consumed about 80 per cent of total government
expenditure.
The population of little over 18,000 supported 3500 public ser vants - three times as many per capita as the average in the Pacific Islands. While the government provided the jobs, there was no incentive for the private sector and no need for workers to use their initiative to find something else to do. The crunch came when the Asian Development Bank - which had apparently been seen as a limitless source of funds - refused to lend any more.
Lloyd Powell, a New Zealander sent to Rarotonga to head the new Finance and Economic Management Ministry in conjunction with the ADB, came back to Wellington to report that not only was the cupboard bare, the patient was sick and only radical surgery could help.
It was out of sadness rather than anger that New Zealand’s Foreign Minister Don McKinnon personally drafted a press release declaring that “tough love” was the only way to deal with
the Cooks.
Continued “profligate spending” had to stop immediately, he said, and New Zealand would provide no bail-out funds on top of the $12.3 million in aid it had already committed for this year.
It was a message New Zealand had been preaching for 10 years since it started cutting Budget support from its peak of $10.35 million in 1985/6 with a view to phasing it out completely by 2007. But no one was listening.
The World Bank had been sending similar warnings to its Pacific Island member nations since 1993 when it highlighted: “The Pacific Paradox” - the failure to increase real per capita incomes during the previous decade despite good natural and human resources and high levels of aid”.
As Sir Geoffrey Henry’s government belatedly took a surgical knife to the public service, there was sympathy as well as relief in
Wellington.
Relief that the Cooks seemed to have finally realised what needed to be done and sympathy because it was embarking on a painful process that New Zealand knew only too well.
New Zealand had also lived in its economic dreamworld dur ing the days of Robert Muldoon, who operated on the same prin ciple of borrowing with no thought to tomorrow.
New Zealand’s wake-up call came in 1984, heralding a decade of agonising restructuring, including slashing an over-fat public service, abolishing subsidies and steering the country and its workers into productive areas to develop a sustainable economy.
New Zealand has loads of experience to offer if the Cooks wants it, but McKinnon was at pains to stress that the form of restructuring it undertakes if entirely up to it.
There is another case history in the region which the Cook Islands could study to its benefit - tiny Niue.
It is seen in Wellington as a shining example of what a small island country with limited resources can do given political courage and willingness to accept painful reform.
Niue has taken some very hard decisions in recent years, cut ting its public service by 50 per cent and privatising widely. It, like New Zealand which is enjoying growth levels not reached for decades, is now reaping the benefits, but few others in the Pacific have followed suit.
It won’t be easy, but Sir Geoffrey Henry has a wonderful opportunity to take a leaf from Niue’s book and show the rest of the region what can be done with some courage and vision. ■