Higher growth rates expected

Special Report

Higher growth rates expected in the Pacific this year: ADB

Reports By Sophie Foster Hilobrand

GROWTH in Pacific

Islands developing

member countries should be higher this year, according to the Asian Development Bank.

In its Asian Development outlook 1999, the Bank said that Fiji, Kiribati, Papua New Guinea and Samoa are likely to achieve positive growth this year.

But it said in no case was it expected to exceed three per cent.

The regional representative of the South Pacific Regional Mission of the Asian Development Bank, Jeffry Stubbs, launched the report.

He said that the Asian crisis was not the major factor in explaining the poor growth rates of most of the Pacific Island DMCs as their direct exposure to the rest of Asia was

generally limited. But he said, that the Solomon Islands was hit hard by the crisis because of its heavy dependence on forestry and the collapse of log export mar kets in Japan and Korea. Vanuatu and Nauru also experienced significant adverse impacts, he said.

Drought affected several countries, as did the decline in the price of exports such as sugar and copra.

“Many Pacific Island DMCs suffered from the impact of fiscal adjustment fol lowing periods of unsustainable fiscal expansion or from the impact of weak gov ernance arrangements. In many cases, busi ness confidence deteriorated and this was reflected in weak investment,” he said.

Stubbs said to accelerate their growth, it would be extremely important for Pacific Island DMCs to continue their reform pro grammes comprising both macro and micro-economic reform policies.

“Sound fiscal and monetary policies aimed at providing economic and social services, keeping inflation low, and keeping currencies in bal ance are essential.

Key micro-economic reform policies encompass reforms to free up labour and land markets, open markets to competition, and strengthen financial markets to facili tate private sector activity,” he said.

ADB’s operations in the Pacific islands cover 12 DMCs: the Cook Islands, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.

Since operations started in the Pacific, ADB has provided 130 loans totalling US$965 million and 430 technical assis tance grants amounting to $132 million to Pacific Island DMCs. In 1998, ADB pro vided eight loans worth $B3 million to Kiribati, Nauru, PNG, Samoa, Solomon Islands, and Vanuatu. Thirteen per cent ($16.6 million) of the total amount of tech nical assistance grants given out by ADB were for the Pacific. ■