Pacific Islands: Fiji New Caledonia Samoa Solomon …...COUNTRY REPORT Pacific Islands: Fiji New Caledonia Samoa Solomon Islands Tonga Vanuatu 4th quarter 1998 The Economist Intelligence

COUNTRY REPORT

Pacific Islands:

Fiji

New Caledonia

Samoa

Solomon Islands

Tonga

Vanuatu

4th quarter 1998

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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Contents

3 Summary

The region5 Outlook for 1999-20006 Review

Fiji11 Political structure12 Economic structure13 Outlook for 1999-200015 Review15 The political scene16 The economy

New Caledonia19 Political structure20 Economic structure21 Outlook for 1999-200022 Review

Samoa26 Political structure27 Economic structure28 Outlook for 1999-200028 Review

Solomon Islands31 Political structure32 Economic structure33 Outlook for 1999-200034 Review

Tonga37 Political structure38 Economic structure39 Outlook for 1999-200039 Review

1

EIU Country Report 4th quarter 1998 © The Economist Intelligence Unit Limited 1998

Vanuatu43 Political structure44 Economic structure45 Outlook for 1999-200046 Review

Other island countries50 Palau

52 Quarterly indicators and trade data

List of tables17 Fiji: public finances17 Fiji: foreign-exchange reserves, 199842 Tonga: domestic credit42 Tonga: foreign-exchange reserves, 199848 Vanuatu: ADB lending as of Apr 30th 199849 Vanuatu: technical assistance by donor and sector52 Fiji: quarterly indicators of economic activity53 Samoa: quarterly indicators of economic activity53 Solomon Islands: quarterly indicators of economic activity54 Tonga: quarterly indicators of economic activity54 Vanuatu: quarterly indicators of economic activity55 Pacific Islands: direction of trade55 Pacific Islands: main commodities exported

List of figures15 Fiji: gross domestic product15 Fiji: Fiji dollar real exchange rates28 Samoa: gross domestic product28 Samoa: Tala real exchange rates33 Solomon Islands: gross domestic product33 Solomon Islands: Solomon Islands dollar real exchange rates39 Tonga: gross domestic product39 Tonga: Tonga dollar real exchange rates45 Vanuatu: gross domestic product45 Vanuatu: vatu real exchange rates

2


November 6th 1998 Summary

4th quarter 1998

The region Outlook for 1999-2000: With the Asian economic downturn unlikely to letup, further contractions are expected in most economies in the Pacific region.Politicians will face a difficult choice between implementing crucial structuralreforms and averting the total disaffection of islanders, who will not respondwell to economic hardships. Environmental concerns will remain firmly on theregional agenda.

Review: The annual meeting of the South Pacific Forum (SPF), held in theFederated States of Micronesia in August, examined the role of the privatesector and foreign direct investment in stimulating long-term economicgrowth. The environmental policy of the SPF, and particularly the implement-ation of the Kyoto accords, has remained a source of controversy in the Forum,with widespread disapproval of Australia’s special dispensation to increasegreenhouse gas emissions. The Sea Launch project has been delayed indefi-nitely pending a legal inquiry. Australia has offered technical support to dealwith the “Y2K” computer compatibility crisis. Thirteen countries in the regionhave launched a joint website on the Internet in a bid boost tourism.

Fiji Outlook for 1999-2000: While the political elite focuses on the first nationalelection under the new constitution, due in April 1999, Fijians will press thegovernment to provide disaster relief as the worst drought since records begancontinues to devastate the islands. The latest available data suggest that theeconomy is in recession, and there is little likelihood of a recovery until late inthe forecast period. The 1998 sugar harvest will struggle to reach 250,000 ton-nes, a drop of nearly 50% on the previous year.

Review: Major-General Rabuka has set April 24th as the date for the firstnational election, despite widespread expectations of further delays. An Indiandelegation has visited Suva and the Indian High Commission is to be reopened.An agreement has been signed with Australia on crime prevention. Inflationcontinued to rise in the second quarter of 1998 and the government’s fiscalposition has deteriorated.

New Caledonia Outlook for 1999-2000: The referendum on the Nouméa Accords is almostcertain to result in a “yes” vote. The major political parties will then jockey forposition in the run-up to the territory’s first election in March 1999. Tensionswill mount within the anti-independence camp as the RPCR leader, JacquesLafleur, tries to formulate a cohesive alternative political strategy. Late note:The result of the referendum on the Nouméa Accords on November 8th was aresounding “yes” vote, with nearly 72% of the electorate voting in favour.

Review: Several parties from the métropole dispatched politicians to NewCaledonia in August to lead campaigns in the run-up to the referendum on theNouméa Accords. The French government has emphasised the inevitability ofpolitical devolution not only in New Caledonia but also in French Polynesia.

3


The collapse in world nickel prices has intensified the economic downturn anddemand for nickel has plummeted, particularly from Japan.

Samoa Outlook for 1999-2000: Structural reforms implemented in the mid-1990swill help the economy to weather the regional economic downturn relativelywell, and as a result Mr Tofilau’s position will be consolidated further.

Review: A religious dispute on Upolu island has provoked widespread criti-cism both in Samoa and abroad. The island of Savai’i has been ravaged by fires.The balance-of-payments deficit widened in the first quarter of 1998. The UScompany StarKist has announced plans to open a tuna-handling facility inApia. Vailima, a local Samoan beer, has won a major international award.

Solomon Islands Outlook for 1999-2000: It is increasingly likely that the ruling Alliance forChange will manage to serve out its term, after a narrow victory in a censuremotion in September. The prime minister, Mr Ulufa’alu, will come under in-creasing pressure to deliver improvements in living standards as economicconditions worsen.

Review: The Ulufa’alu government has survived a no-confidence motion, andthe prime minister has retained the finance portfolio. New legislation has beenapproved to prevent the sale of passports. The Gold Ridge mine has opened.

Tonga Outlook for 1999-2000: Tonga will face major problems as the combinationof the regional economic downturn and the prolonged drought continues towreak havoc on the economy.

Review: The parliamentary speaker has been accused of improprieties. Kavaproduction has surged in response to strong foreign demand. The vanilla sectorhas been hit hard by falling prices and the pumpkin squash harvest has beendevastated by drought. The current-account deficit widened considerably inthe first quarter of 1998.

Vanuatu Outlook for 1999-2000: The dissolution of the VP-NUP coalition has castdoubt on the government’s commitment to the comprehensive reform pro-gramme (CRP). The Kalpokas administration will also have to contend withincreased tensions between the francophone and anglophone communities,exacerbated by the public-sector redundancies due to commence in 1999.

Review: The NUP has been dismissed from the government. Mr Kalpokas hasreiterated his commitment to the CRP, although scepticism remains wide-spread. Amnesty International has exposed appalling conditions in Vanuatuanprisons, but the government has cracked down on police brutality.

Other Pacific islands Palau’s tourism sector is booming. The government has set a target of 250,000visitors by 2005, and is determined to attract the high-value, medium-volumemarket. A vigorous marketing campaign has been undertaken, primarily inJapan, Taiwan and the US. The merchandise trade deficit has widened consider-ably, however, as expansion in the tourism sector has caused imports to surge.

Editor: Noah BeckwithAll queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

4


The region

Outlook for 1999-2000

Economic recovery willremain elusive—

With the financial and economic downturn in Asia set to continue, the out-look for the Pacific region remains grim, and further economic contractions areforecast for all the small island economies (SIEs). Increasing economic hardshipand resource constraints will test the political skills of many regional govern-ments, as they struggle to convince islanders that economic reform pro-grammes and associated austerity measures will pay tangible dividends soonerrather than later. Politicians will have to walk a tightrope between domesticpolitical expediency and the need to stick to reforms in order to keep keyinternational donors and multilateral organisations on board. The option ofreturning to subsistence agriculture and fishing, as many islanders do duringeconomic downturns, has become less viable given the droughts, fires andwater shortages that have plagued the region in recent months, largely as aresult of adverse weather conditions associated with El Niño.

—and environmentalissues will remain high on

the agenda—

The economic downturn will intensify concerns in the region about climatechange and environmental degradation, with regional governments strivingto keep these issues high on the global agenda. In late September ChalapanKaluwin, the climate change officer at the South Pacific Regional EnvironmentProgramme (SPREP), expressed concern at the increased incidence of droughtand coastal erosion, and the destruction of important cultural and spiritualsites on many islands, and, more worrying still, the disappearance of minus-cule islets in at least two countries. Moreover, at a conference of senior forestryofficials in Nadi, Fiji, evidence was presented that the El Niño phenomenonwas becoming more frequent, increasing rainfall levels in the north-east Pacificand decreasing levels in the south-west. As a consequence, water shortages anddrought conditions have been experienced in Papua New Guinea, the MarshallIslands, the Federated States of Micronesia (FSM), Samoa, Tonga, Kiribati andFiji. There is also a higher risk of tropical cyclones in the region, particularly forTuvalu, Samoa, Tonga, the Cook Islands and French Polynesia.

The latest research indicates that sea levels are rising more rapidly in the Pacificregion than elsewhere. Whereas the average annual increase in global waterlevels since 1900 has been 2 mm, data compiled by the Australian NationalTidal Facility from 11 tide gauges suggest that in the past decade sea levels insome parts of the Pacific have risen by up to 25 mm a year.

—prompting changesin farming practices

throughout the region

According to leading experts on climate change, it is likely that agriculturalpractices will be forced to change on many islands in the region, as areasbecome too dry, wet or hot to sustain crops currently growing there. Govern-ments have been urged to take account of meteorological changes in nationalplanning exercises, and to consider issues such as population density, thelocation of infrastructure, food security levels and cultural practices.

The region 5


New Caledonia is tobecome an official Forum

observer in 1999

Representatives from New Caledonia will attend the 1999 South Pacific Forummeeting in Palau with official observer status. The decision was taken at the1998 meeting, at which members “warmly welcomed” the signing of theNouméa Accords on May 5th. It was also agreed by the Forum ministerialcommittee that events in New Caledonia will continue to be monitored closelyduring the period covered by the Nouméa Accords, particularly with respect tothe various referendums involved. The delegation attending the 1999 Forummeeting will represent the first government of New Caledonia following elec-tions due in March 1999 under the terms of the Nouméa Accords.

Meanwhile, the Forum pressed the French government to maintain the mo-mentum of the decolonisation process. However, members are keen not toalienate France and took the opportunity to emphasise that there was scope forFrance to increase its involvement in the region, particularly through the con-duit of French Polynesia, which is also interested in gaining observer member-ship of the Forum.

Review

The SPF chairman’swarning against

gratuitous reforms—

The theme of the 1998 South Pacific Forum (SPF) meeting in late August in theFederated States of Micronesia (FSM), entitled “From reform to growth: theprivate sector and investment as the keys to prosperity”, reflected the growingemphasis placed by international financial institutions, donors and indus-trialised SPF members, such as Australia and New Zealand, on the role of theprivate sector in sustainable economic development in the small island econo-mies (SIEs) of the Pacific region. The meeting got off to an inauspicious start,however, when the FSM president and recently elected Forum chairman, JacobNena, warned that SIEs should not embark on “reform just for the sake ofreform”. Mr Nena cautioned that SIEs may be tempted to follow the latestdevelopment initiative in order to reap the perceived benefits of donor assis-tance, and that donors sometimes made blanket diagnoses of regional prob-lems. By the same token, Mr Nena acknowledged that the best hope forincreased income and employment generation in the region lay in the privatesector, although this was not to disregard the role of governments in nationaldevelopment. The chairman argued that the government must be the catalystin fostering a competitive private-sector environment, ensuring that the prop-erty rights of investors and institutions are secure and that markets are genu-inely competitive.

—is echoed by theacademic community—

Mr Nena’s concerns about prevailing economic prescriptions for the regionwere echoed by Sitiveni Halapua, the director of the Pacific Islands Develop-ment Programme at the East-West Centre in Hawaii. Dr Halapua warned thateconomic models currently being applied to the Pacific region were repeatingmistakes made in the 1970s, while the reform programmes imposed on SIEsby international financial institutions were often unrealistic. According toDr Halapua, current development models are flawed by their failure to assessresource capacity in SIEs and an inability to accommodate socio-cultural idi-osyncrasies within the region. Too much emphasis is placed on economic

6 The region


growth rates. Moreover, he argued that even institutions such as the WorldBank had acknowledged that the objective of raising living standards through-out the region had not been attained.

—and the question oflocal capacity remains

crucial

Another question tackled at the meeting was the role of local participation indevelopment initiatives. Dr Halapua suggested that planning of developmentprojects often preceded consultation with local communities, and that humancapital and capacity at the community level was thus often erroneously evalu-ated or simply left out of the equation. Moreover, he warned of a dangerousassumption underlying many public-sector reforms: that the private sector wasconstrained by shortages of capital and human resources because these wereabsorbed by governments. He argued that, on the contrary, public-sectordownsizing was often initiated without any awareness of what human re-sources might be “released” into the private sector in the process. There wascertainly no guarantee that retrenched public-sector employees would besuited to working in the private sector without training. Perhaps Dr Halapua’smost resonant point was that it would be preferable for SIEs to pursue less rapiddevelopment objectives and maximise local participation levels, rather thansimply pursue the highest nominal economic growth rates.

Environmental issuesthreaten to divide the

Forum

At opening ceremony of the Forum meeting in the FSM capital, Pohnpei, theoutgoing chairman and prime minister of the Cook Islands, Sir Geoffrey Henry,officially confirmed that schisms over the issue of SPF policy on greenhouse gasemissions had nearly led to a public split in the Forum in Rarotonga in 1997.The problem arose when Australian representatives, alone among Forum mem-bers, supported differentiated emission targets in advance of the conference onclimate change in Kyoto, Japan. Sir Geoffrey also indicated that many SIEs inthe Pacific region were disappointed at the limited progress made in Kyoto, butthat it was imperative for Forum members and other nations with similarconcerns to lobby hard on environmental issues.

Meanwhile, at the 1998 Forum meeting, a fresh policy statement was issued onclimate change, stressing areas of consensus rather than contentious issues.The importance of speedy ratification and implementation of the Kyoto agree-ment was emphasised; however, many Forum members once again took issuewith Australia’s stance. The conservative coalition government in Australia, ledby John Howard, said while campaigning for the national election in earlyOctober that it would not ratify the Kyoto agreement until the US did so.Re-elected, albeit with a reduced majority in the House of Representatives, theHoward administration has yet to reveal how it will present its decision to theForum. The Smaller Island States (SIS) group of Forum members—the CookIslands, Kiribati, the Marshall Islands, Nauru, Niue and Tuvalu—is particularlyconcerned that rising sea levels could inundate much, and in some cases all, oftheir territory. In a dramatic statement on climate change issued before the1997 Forum meeting, the SIS group declared: “The avoidable destruction ofentire communities and countries and their cultures contravenes the basicright of every state … to exist.” The group has continued to call for tough andbinding commitments on reducing greenhouse gas emission targets since theKyoto summit.

The region 7


Australia’s greenhouse gasemission quota sparks

controversy—

While developed countries agreed at the Kyoto summit to a 5% reduction ingreenhouse gas emissions by 2012, Australia, under a special arrangement, hasbeen allowed to increase emissions by 8% over the same period, a dispensationthat has elicited vociferous criticism from conservation groups and environ-mental pressure organisations in the region and beyond. The groups wereoutraged by Australia’s refusal to ratify the agreement and the government’sassertion that approval would only follow broad international support for theimplementation of the accord. While the Australian authorities cannot befaulted for their insistence on obtaining agreement on reductions in develop-ing countries such as China and India, which produce major greenhouse gasemissions, the SIS is still smarting over Australia’s position on the issue.

—while the Forumstrengthens its

anti-nuclear stance

The Forum’s traditionally tough position on nuclear weapons tests in the re-gion was reinforced in August, when it expressed concern at the risk of anuclear arms race in southern Asia. There was unilateral condemnation of thenuclear tests that were conducted by India and Pakistan in May 1998, and aForum communiqué stated that the tests undermined the international non-proliferation regime. Looking ahead to the Nuclear Non-Proliferation TreatyReview conference in 2000, Forum leaders pledged to pursue universal disarma-ment and to focus on issues of regional concern, such as the transport ofnuclear materials and enhanced co-operation between weapon-free zones, par-ticularly in the southern hemisphere. The US was once again urged to ratify theprotocols of the South Pacific Nuclear Free Zone Treaty.

8 The region


The findings of a study by the International Atomic Energy Agency (IAEA) werenoted; the study concluded that negligible residual contamination had beensustained by the Mururoa and Fangataufa atolls, where underwater atomic testswere conducted by the French government in 1995-96. The Forum agreed thatthe lack of geological detail in the IAEA study should be fully assessed andresponded to. The French authorities were called on to continue monitoringradiation levels on the two atolls, and the Forum demanded that the concernsof the inhabitants of French Polynesia be addressed, particularly where healthrisks were concerned. On a similar note, Forum members reiterated their posi-tion that shipments of plutonium and radioactive waste through the regionwere a source of “continuing concern”, and it was agreed that discussionswould be pursued with the French, Japanese and UK authorities on the currentliability and compensation regime for economic losses sustained by the re-gion’s tourism and fisheries industries in the case of accident.

The Sea Launch project ison hold but remains a

worry

The highly controversial Sea Launch project, which would involve a satellitelaunchpad converted from an oil-rig platform being positioned 20 km outsidethe exclusive economic zone (EEZ) of Kiribati’s Kiritimati island (3rd quarter1998, pages 8-9), remained firmly on the agenda of the Forum meeting inAugust. Members reiterated concerns about the potentially devastating envi-ronmental effects of the project, dismissing the US Federal Aviation Adminis-tration’s “finding of no significant impact”, and agreed on the need for aconsultative mechanism to handle such matters. Almost simultaneously, theFederal Aviation Administration agreed that the 22-member South PacificRegional Environment Programme (SPREP), based in the Samoan capital, Apia,should represent the region in discussions on the project, which is due tocommence in 1999. While the move led to a slight improvement in relationsbetween the two organisations, the SPREP remains adamant that a full environ-mental impact assessment of the project is required.

For its part, the Sea Launch Limited Partnership (SLLP), a joint venture betweenthe US aircraft manufacturer Boeing and a consortium of Russian, Ukrainianand Norwegian companies, suffered a setback when the US authorities sus-pended the project while a potential breach of security laws by Boeing wasunder investigation. The SLLP had originally planned to launch two satellitesfrom the platform in late 1998, and a further six launches a year for 20 years.

The sustainability ofregional tuna fishing isdiscussed in California

Representatives of the US tuna industry have expressed concern at the practicesof other “distant-water” fishing nations in the Pacific region, alleging that largelandings of small fish by Taiwan, South Korean and other fleets are exacerbatingthe excess supply of tuna and driving prices down. At an informal meeting inCalifornia in early October between a South Pacific Forum Fisheries Agency(SPFFA) delegation and US tuna industry and government officials, discussionsfocused on issues relating to the US$18m tuna treaty already in place betweenthe US and SPFFA members. Both parties reiterated familiar concerns aboutoverfishing, stock depletion and threats to the sustainability of fisheries in thecentral and western Pacific region in the long term. According to an SPFFAstatement, a multilateral tuna fisheries management accord is currently undernegotiation, and measures are being devised to tackle issues such as overfishing.

The region 9


The forum is courted byother Pacific Rim

countries

In response to approaches from several countries, including Mexico and Chile,the Forum is to elaborate criteria covering the admission of more repre-sentatives to the dialogue that follows the annual meetings. Among the maincriteria are:

• established historical links with the region;

• significant trade and investment links with the region;

• a long-term commitment to the economic and political development of theregion through participation in regional organisations and/or the estab-lishment of diplomatic missions;

• strong social and cultural links with communities in the region;

• provision of development assistance to the region through bilateral ormultilateral programmes; and

• shared interests and common positions on international issues, notablyenvironmental concerns.

The structure of Forumfunding is altered slightly

The admission of the Marshall Islands to the Forum as part of the SIS group lastyear has led to minor changes in the scale of members’ contributions to thefunding of the secretariat. The Marshall Islands’ contribution for 1999 will bein the lowest category, at just over 1% of the Forum’s budget, along with theother SIS members—the Cook Islands, Kiribati, Nauru, Niue and Tuvalu. TheFSM, Palau, Samoa, the Solomon Islands, Tonga and Vanuatu will each contrib-ute just under 2%, Fiji just over 2%, Papua New Guinea nearly 6%, and NewZealand and Australia 37% each.

Australia offers support tothe region to tackle the

Y2K crisis

Australian representatives at the Pohnpei meeting announced that an assis-tance programme would be launched for governments in the Pacific region toaddress the so-called Y2K computer compatibility crisis, which could haveserious repercussions for financial systems, transport, energy and communi-cations networks, and the delivery of essential government services. Australia isto provide technical assistance to governments and regional organisations todevelop a systematic response to the problem, identifying priority areas,strengthening local planning and co-ordination facilities, and enlisting add-itional donor support and funding.

An amalgamated tourismwebsite is launched

Thirteen countries in the Pacific region represented by the Tourism Council ofthe South Pacific (TCSP) have agreed to boost their presence on the Internetthrough an agreement with a leading travel information company, JasonPublishing (JP). In mid-September TCSP announced an agreement to amalga-mate its existing website with JP’s South Pacific Islands Travel Channel, part ofa project that already includes the Australia and New Zealand travel channels.The new channel will feature the official websites of all TCSP member coun-tries—American Samoa, the Cook Islands, Fiji, Kiribati, New Caledonia, Niue,Papua New Guinea, Samoa, the Solomon Islands, Tahiti, Tonga, Tuvalu andVanuatu—as well as industry webpages.

10 The region


Fiji

Political structure

Official name Republic of Fiji

Form of state Parliamentary

The executive The president, chosen by the Great Council of Chiefs, appoints the prime ministerwho selects the cabinet

Head of state The president, Ratu Sir Kamisese Mara

National legislature Bicameral parliament comprising the appointed upper house or Senate (34 members)and an elected House of Representatives (70 members); the 1990 constitution ensuresan indigenous Fijian majority in parliament. There is universal suffrage for all citizensaged over 21. Recent constitutional changes will alter the composition of thelegislature following an election in 1999, removing the guarantee of a Fijian majority

Regional government Local administration is on a divisional basis with separate councils for urban areas.There is a separate local government system for the indigenous Fijian population

Legal system Magistrates’ courts, High Court and Court of Appeal with the Supreme Court at the apex

National elections February 1994; next election due on April 24th 1999

National government Major-General Sitiveni Rabuka became prime minister in June 1992 and formed acoalition government comprising the Soqosoqo ni Vakavulewa ni Taukei and theGeneral Voters’ Party; re-elected in February 1994

Main political parties Fijian Political Party (Soqosoqo ni Vakavulewa ni Taukei, SVT); Christian Fellowship Party(Veitokani ni Lewenivanua Vakarisito Party, VLVP); National Federation Party (NFP); FijiLabour Party (FLP); General Voters’ Party (GVP); Fijian Association Party (FAP)

Prime minister & minister with special responsibility for constitutional reform & multi-ethnic affairs & regional development Major-General Sitiveni RabukaDeputy prime minister & minister of education & technology Taufa Vakatale

Key ministers Agriculture, fisheries & forests Militoni TeweniqilaAttorney-general Etuate TavaiCommerce, industry & public enterprises Isimeli BoseCommunications, work & energy Ratu Inoke KubuabolaFijian affairs Ratu Finau MaraFinance Jim Ah KoyForeign affairs & external trade Berenado VuniboboHealth Leo SmithImmigration, women & culture Seruwaia Hong TiyLabour & industrial relations Vincent LobendahnLands & mineral resources Ratu Timoci Vesikula Local government & environment Vilisoni CagimaiveiNational planning Filipe BoleTransport & tourism David PickeringYouth, employment opportunities & sport Jonetani Kaukimoce

Fiji 11


Economic structure

Latest available figures

Economic indicators 1993 1994 1995 1996 1997

GDP at current pricesa (F$ m; factor cost) 2,171 2,269 2,351 2,524 2,568b

Real GDP growtha (%) 1.6 3.9 2.1 3.1 –1.8c

Consumer price inflation (av; %) 5.2 0.6 2.2 3.1 3.4

Population (m) 0.77 0.78 0.80 0.82b 0.83b

Exports fobd (US$ m) 370.9 490.2 519.6 655.2 n/a

Imports fobd (US$ m) 652.8 719.7 761.4 837.7 n/a

Current-account balanced (US$ m) –138.1 –112.8 –112.7 10.2 n/a

Reserves excl gold (US$ m) 269.5 273.1 349.0 427.2 360.3

Total external debt (US$ m) 330.0 283.9 250.4 217.4 n/a

Debt-service ratio, paid (%) 8.7 8.6 6.0 3.6 n/a

Exchange rate (av; F$:US$) 1.542 1.464 1.406 1.403 1.444

November 6th 1998 F$1.961:US$1

Origins of gross domestic product 1996 % of total Components of gross domestic product 1994 % of total

Agriculture, forestry & fishing 19.4 Private consumption 65.3

Mining 3.3 Government consumption 16.6

Manufacturing 14.8 Gross investment 10.7

Construction 4.5 Change in stocks/statistical discrepancy 6.1

Electricity & water 4.1 Exports of goods & services 58.9

Transport & communications 12.6 Imports of goods & services –57.5

Wholesale & retail trade, restaurants & hotels 16.5 GDP at market prices 100.0

Other services 32.3

Total incl imputed service charge 100.0

Principal exports fob 1996a US$ m Principal imports cif 1996a US$ m

Sugar 215.1 Manufactured goods 255.0

Garments 135.4 Machinery 235.6

Gold 58.1 Food 139.0

Fish 37.6 Mineral fuels 132.0

Timber 32.5 Total incl others 986.2

Total domestic exports incl others 585.2

Main destinations of exports 1996a % of total Main origins of imports 1996a % of total

Australia 27.0 Australia 44.3

New Zealand 12.1 New Zealand 14.7

UK 14.0 US 9.3

Pacific islands 9.3 Japan 5.2

US 8.2 Singapore 5.0

a National figures. b EIU estimate. c Official estimate. d IMF balance-of-payments figures.

12 Fiji



Electoral campaigningwill be overshadowed by

the drought—

Although the attention of the political elite is firmly focused on the first nat-ional elections to be held under the new constitution, now scheduled forApril 24th 1999, most Fijians will remain far more concerned about the impactof drought, which continues to devastate the central and southern regions.Food shortages are such that an increasing number of families are joining theemergency rations distribution programme and, despite some recent rains,there are no signs of an end to the dry spell. In co-operation with the Australiangovernment, long-term rehabilitation measures for affected farming areas arebeing developed, but an accurate assessment of the location and type of assis-tance required will probably not be completed until early 1999.

—and the outlook for theeconomy is grim—

On October 30th the Reserve Bank of Fiji (RBF, the central bank) reported thatthe economy had contracted in the third quarter of 1998. According to RBFofficials, a further contraction of the economy is likely in the fourth quarter,primarily because of the collapse in sugar production, which is now at itslowest level for three decades. On a more optimistic note, the RBF speculatedthat if the momentum of vigorous marketing campaigns in the tourism andtextiles industries is maintained, it could help offset the downturn in the sugarsector. The RBF issued a preliminary forecast of real GDP growth of 2-3% in1999. Although a gentle upturn in the economy in 1999 is conceivable, thisprojection may err on the side of optimism. During discussions betweengovernment officials and the IMF board of directors in early October, the latterexpressed concern that Fiji may be on the brink of the first prolonged recessionsince independence. The Fund warned that decisive economic policy initia-tives were required if a further contraction of the economy was to be averted.Moreover, the IMF noted the increasingly precarious state of Fiji’s publicfinances, partly a symptom of the postponement of crucial structural reforms.The Fund has made it clear that the 1999 budget is being perceived by multi-lateral institutions—and, by implication, by Fiji’s main international donorsand creditors—as an indication of the government’s commitment to prudentfiscal management and macroeconomic stabilisation to 2000 and beyond. TheEIU forecasts that economic growth will at best reach 1% in 1999, rising to 3%in 2000 as the sugar industry begins to recover.

—particularly for thesugar sector—

Not only has the drought reduced sugar production by around 50%—officialsources expect the 1998 harvest to plummet to 250,000 tonnes from 400,000tonnes in 1997—but the decrepitude of sugar-processing infrastructure hasexacerbated the situation. Over half the cane crop in the crucial northerngrowing region had yet to be harvested by the beginning of October, and morethan 800 cane farmers had to cease cutting cane owing to mechanical problemsat the sugar mills during the rest of the month.

There is widespread concern about the future of the Fijian sugar industry.Rehabilitation of planting areas and of vital infrastructure will require consid-erable resources and will make sluggish progress. Moreover, the pessimisticoutlook for world sugar prices over the forecast period, combined with uncer-tainty about the future of sugar export quotas, which are due to be renegotiated

Fiji 13


under the Lomé agreement in 2000, does not augur well for the future of thesector, which is the backbone of the Fijian economy.

—but ethnic tensionsreturn to the fore

In late October, on his first official visit to New Zealand since Fiji’s new constit-ution came into force in July, the prime minister, Major-General SitiveniRabuka, declared that the provisions of the document made another coup in Fijihighly unlikely. The prime minister maintains that the new constitution estab-lishes a healthy balance between ethnic groups and that if an Indian-led groupwere to be elected, the constitution is solid enough to ensure political stability.Indeed, Major-General Rabuka reiterated the axiom, dubious though it may be,that there is nothing to stop an Indo-Fijian from becoming prime minister. Therhetoric of unity belies the ethnic hostilities that have resurfaced in Fijian poli-tics, notwithstanding the new constitution. At the annual meeting of the rulingparty, Soqosoqo ni Vakavulewa ni Taukei (SVT), in mid-October, the primeminister launched a considered, if risky, attack on extreme Methodist nat-ionalists and the newly formed Christian Democratic Alliance (CDA).

Ethnic tensions can be expected to increase in the run-up to the nationalelection in April, and will be exacerbated by the economic downturn, as com-peting groups squabble over the distribution of limited government resources.Although Major-General Rabuka’s rhetoric on national unity is encouraging,his perception that the new constitution will quell the fears, let alone ambi-tions, of ethnic groups that see themselves as marginalised is probably unreal-istic. The 1999 election will provide a litmus test of the new constitution. In allprobability, those groups that perform poorly at the ballot box will denouncethe document, arguing that it reinforces the ethno-political status quo.

Export competitivenesswill remain high on

the agenda

Further downward pressure on many Asian currencies has spawned renewedconcerns about the competitiveness of Fijian exports, notwithstanding the20% devaluation of the Fijian dollar in early 1998. During his visit to Aucklandin October, the prime minister expressed concern about the prospects for Fijianexports, asking the New Zealand authorities to consider measures that wouldenhance export competitiveness. Major-General Rabuka is particularly con-cerned that the benefits to small island economies (SIEs) of membership ofthe South Pacific Regional Trade and Economic Co-operation Agreement(Sparteca), which gave SIEs concessional access to the Australian and NewZealand markets, are now dwindling. While the reimposition of anachronistictariffs by Australia and New Zealand to provide SIEs with trade concessionsis extremely unlikely, Major-General Rabuka pressed New Zealand to followAustralia’s example in easing Sparteca’s rules of origin provisions to help boostthe competitiveness of Fijian products, especially garments.

The long-term competitiveness of Fijian exports in the Asian context is morelikely to be enhanced by achieving productivity and efficiency gains at sourcethan by securing concessional commercial deals with key trading partners. Thesalient question is whether Major-General Rabuka is willing to divert therequired resources to modernise and rationalise industries such as textiles.

14 Fiji


Review

The political scene

An election date is finallyannounced—

In mid-October, several days before the annual meeting of the ruling party,Soqosoqo ni Vakavulewa ni Taukei (SVT), the prime minister, Major-GeneralSitiveni Rabuka, announced that national elections would be held onApril 24th 1999. Although the elections were due by February 1999 under theterms of the constitution, many had expected longer delays if not an indefinitepostponement (3rd quarter 1998, pages 14-15). In addition to announcing theelection date, Major-General Rabuka stood down as president of the SVT at themeeting. The local media attempted to draw ominous conclusions from hisdecision to relinquish the post. The reason was more prosaic: the party constit-ution stipulated that another successive term was not allowed. In the event, aprominent chief and senator, Adi Litia Cakobau, tabled a motion to amend theconstitution to enable the prime minister to remain in office, arguing that achange in leadership was ill-advised with the election just a few months away.Mrs Cakobau’s motion gained unanimous support, and Major-General Rabukaremains parliamentary leader and organisational head of the party. The annualmeeting also authorised the SVT board of management to consider a formalcoalition with the National Federation Party (NFP).

—followed by jostlingamong political parties

Immediately after the announcement of the election date, complex man-oeuvring between the plethora of political parties began, as leaders looked toforge new alliances. The prime minister himself expressed some support for theconcept of a “grand alliance” between the major parties, given that the mainaim of the new constitution is to end adversarial politics in Fiji (3rd quarter1998, page 14). Major-General Rabuka held “very preliminary” discussionswith the leader of the opposition NFP, Jai Ram Reddy, about forming a coali-tion, although no concrete agreement has been reached. The tensions beneaththe veneer of political entente emerged, however, during Mr Reddy’s discus-sions with the prime minister, when the NFP’s coalition partner, the Fiji Labour

60

80

100

120

140

160

1980. . . . 85 . . . . 90 . . . . 95 . .

Fiji: Fiji dollar real exchange rates (c)1980=100

F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$F$:US$

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-2

0

2

4

6

8

10

1993 94 95 96 97(b)

Fiji (a)

Asia excl Japan

Fiji: gross domestic product% change, year on year

(a) National sources. (b) Official estimate. (c) Nominal exchangerates adjusted for changes in relative consumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

Fiji 15


Party (FLP) announced that the opposition did not require an alliance with theSVT. The FLP leader, Mahendra Chaudhary, was confident that the oppositionwould win 60% of the vote in April, a sufficient margin to provide stablegovernment without other partners, despite the provision that any partywhich secures 10% of the vote can claim seats in the cabinet.

Ethnic tensions re-emergedespite the rhetoric of

national unity

Notwithstanding the prime minister’s insistence that the new constitutionsafeguards equality among Fiji’s ethnic groups, political groups linked to theMethodist Church and the newly formed Christian Democratic Alliance (CDA)have issued apocalyptic warnings about the future of the nation under Indo-Fijian rule. The prime minister seized on the fact that no constructive criticismsof the new constitution had been advanced and dismissed the assertions, argu-ing that the Methodists were using the church to mislead the population.

The CDA was launched on October 17th, with the support of several seniormilitary figures, including former SVT members and the commander, RatuEpeli Ganilau. The guest of honour was the Turaga Na Ratu, Ratu IlisoniRavoka, who warned of the need to “conquer the darkness of evil that willdishearten supporters from seeing the truth”. Although it remains to be seenwhether the CDA will manage to extend its limited support base, the fact thatthe party’s long-term objective is to transform Fiji into a Christian state doesnot augur well for ethnic politics in Fiji.

The Indian HighCommission is to be

reopened

Two senior officials from the Indian foreign office arrived in Suva at the begin-ning of November to plan the formal reopening of the High Commission inFiji. Diplomatic relations between India and Fiji were severed after the first oftwo coups led by Major-General Rabuka in 1987. The Indian government hasannounced that Bal Anand, a career diplomat who has extensive experience inAfrica, will be the next high commissioner to Fiji.

An agreement is signedwith Australia on crime

prevention

In mid-October the cabinet approved a memorandum of understanding (MoU)with the Australian authorities on joint action to tackle the sexual abuse ofchildren and other serious crimes. The MoU provides for increased collabor-ation between the relevant authorities in Australia and Fiji, including intelli-gence sharing.

The economy

Inflation continuesto rise—

According to the latest Quarterly Review from the Reserve Bank of Fiji (RBF, thecentral bank), average inflation continued to rise in the second quarter of 1998,reaching 5% in the year to June. The RBF estimates that average consumerprices rose by 5.8% between the time of the 20% devaluation of the Fijiandollar in January (1st quarter 1998, page 14) and end-June. Food prices, whichaccount for 33% of the consumer price index (CPI), rose by 9.5%. Increases inthe prices of the other main components of the CPI—heating and lighting,transport costs, and alcoholic drinks—were generally anticipated at the time ofthe devaluation; however, the largest rise in prices since January, at 18%, hasbeen in the miscellaneous items category, which comprises various items rang-ing from laundry goods to medical supplies. According to the RBF, the full

16 Fiji


effects of the devaluation have yet to feed through the economy. Consumerprice inflation is expected to start to fall by early to mid-1999.

—and the government’sfiscal position is set to

deteriorate—

The RBF’s projections that government expenditure will increase to roughly5.3% of GDP in 1998 err on the side of conservatism. The devastation of theagricultural sector by the ongoing drought will require the mobilisation ofresources the government can ill afford and, despite encouraging revenue col-lection in the first quarter (excluding grants) of F$158.16m (US$83m), theeconomic downturn will further reduce revenue from corporate and personaltaxation. It is difficult to see how the government can meet its target of reduc-ing the budget deficit to 2.4% of GDP in 1998.

Fiji: public finances(F$ m)

1997 19984 Qtr 1 Qtr

Total revenue & grants 803.46 158.77 Customs & excise 219.56 49.81 Inland revenue 445.20 87.77 Non-tax revenue 133.75 20.58 Grants 4.95 0.61

Total expenditure 1,085.33 197.89 Administration 196.55 43.37 Social services 296.22 68.76 Economic services 86.56 19.19 Infrastructure 133.74 18.43 Public debt charges 180.16 32.17 Miscellaneous 183.18 7.82 Net underlying account 8.92 8.14

Net deficita 201.81 31.35

a Excludes loan repayments.

Source: Reserve Bank of Fiji, Quarterly Review.

—but foreign reserveshold their own

Largely thanks to the devaluation of the Fijian dollar in January, reserve levelshave remained remarkably stable over recent months, hovering at around5.4 months’ import cover. Total reserves excluding gold fell by just 10% be-tween the end of February and the end of August 1998 which, given theseverity of the drought and concomitant poor external position, was encourag-ing. Foreign-exchange reserves are likely to tumble in the coming quarters,however, as the government is forced to deplete its stocks to compensate forweak sugar receipts.

Fiji: foreign-exchange reserves, 1998(US$ m; end-period)

Feb Mar Apr May Jun Jul Aug

Foreign-exchange reserves 354.61 344.23 332.88 334.86 317.63 319.85 316.03

SDRs 11.30 11.18 11.27 11.29 11.25 11.24 11.46

Reserve position in the Fund 13.61 13.47 13.58 13.47 13.44 13.42 13.55

Total reserves (excl gold) 379.52 368.89 357.73 359.62 342.32 344.51 341.04Source: IMF, International Financial Statistics.

Fiji 17


Advertising andsponsorship by tobacco

companies is banned

After 15 years of intensive lobbying by the Ministry of Health, parliamentapproved a bill to ban tobacco advertising and sponsorship in October. Thebill, which has yet to be considered by the Senate, also bans smoking in publicplaces and makes it more difficult for children to buy cigarettes. The attorney-general, Ratu Etuate Tavai, informed parliament that sporting bodies would begiven two years to find alternative sponsorship under the bill, which comesinto effect 12 months after it receives presidential approval. According to thehealth minister, Leo Smith, the Tobacco Control Bill will also regulate label-ling, and restrict nicotine and tar content in cigarettes.

The foreign ministerwarns of the consequences

of globalisation

Echoing a familiar theme in the Pacific region, the minister of foreign affairsand external trade, Berenado Vunibobo, insisted that the pace and conditionsof globalisation and economic interdependence were inequitable, and unjustfor small, vulnerable island nations such as Fiji. At a meeting of the Australia-Fiji/Fiji-Australia Joint Business Council Executive in Sydney in September,Mr Vunibobo expressed concern that Fiji was being made to adjust to the forcesof globalisation at a pace and on conditions not of its choosing, but insteadthose of the international donor community and multilateral lending organis-ations. In this context, the minister added, Fiji had welcomed the proposal putforward by Australia at the 1997 Commonwealth heads of government meet-ing in Scotland that an international trade and investment access facility beestablished to identify and manage the impact of trade and investment liberal-isation, and respond creatively to the challenge of globalisation.

Mr Vunibobo informed delegates that the government had set a target of aver-age annual real GDP growth of 3% by 2000, with employment for at least 95%of the active population, and the raising of rural household incomes to at leastF$200 (US$102) per week. The minister reiterated that Australia and NewZealand continued to play a crucial role and provided the best opportunitiesfor the expansion and diversification of Fijian exports. The government’s as-sessment was that the greatest potential for export growth, over and above thesugar sector, lay in agriculture. Mr Vunibobo noted that bilateral trade withAustralia had reached over A$1bn (US$510m) in 1997 and that, on currenttrends, would again exceed A$1bn in 1998.

Changes to the electricityindustry are approved

The cabinet recently approved legislation under the Electricity Reform Billwhich paves the way for the fundamental reorganisation of the Fiji ElectricityAuthority (FEA). The bill provides for the FEA’s functions to be separated intothree state commercial companies handling power generation, transmissionand sale. The three entities will be known as Genco, Transmissico and Sellco.Competition will be introduced into the generation and retail subsectors, al-though power transmission will remain a regulated monopoly; 49% of thegeneration and transmission companies will be privatised. During the samesitting, the cabinet approved legislation to reorganise the regulation of theports and the maritime authority and the Civil Aviation Authority.

18 Fiji


New Caledonia

Political structure

Official name French Overseas Territory of New Caledonia and Dependencies

Form of state Largely autonomous territory within the French state, except in such areas as foreignrelations, defence, justice, currency and credit

The executive The government delegate, High Commissioner of the Republic in New Caledonia,Wallis and Futuna, currently Dominique Bur

Head of state President of France, Jacques Chirac

Territory legislature A combination of French metropolitan government and local autonomy. TheTerritorial Congress, comprising the combined elected membership of the threeprovincial assemblies (15 members from the Northern Province, 32 members from theSouthern Province and 7 members from the Province of the Loyalty Islands). Membersare elected for terms of six years by universal suffrage. The Nouméa Accords, signed inMay 1998, provide for the extensive devolution of powers to New Caledonia. Theaccords are to be put to a referendum at the end of 1998; a further referendum oncomplete independence will follow in 15-20 years’ time

Local government In addition to the three provincial assemblies, there are 32 basic local governmentunits known as communes

Legal system French style, augmented by mandatory consultation with the Advisory Council onCustom (Conseil coutumier territorial, comprising 40 members drawn from the 8custom areas) in matters of customary law and land law. Magistrates preside over thedecentralised lower courts. The Court of Appeal is based in Nouméa and there is accessto the higher appeal court of France in certain matters

National elections July 1995; next election due in March 1999

Main political organisations The two main groupings are the Rassemblement pour la Calédonie dans la République(RPCR), which is affiliated with the Rassemblement pour la Calédonie (RPR) in France,and comprises the Centre des Démocrates Sociaux (CDS) and the Parti Républicain(PR); and the Front de Libération Nationale Kanak Socialiste (FLNKS), comprising theUnion Calédonienne (UC), the Parti de Libération Kanak (PALIKA), the Parti SocialisteKanak (PSK) and the Union Progressiste Mélanésienne (UPM). Une Nouvelle-Calédoniepour Tous (UNCT) has significant support in Nouméa, as does the Union Nationalepour l’Indépendence. The Rassemblement Démocratique Océanien (RDO) represents alarge segment of the population of Wallis and Futuna and the Libération KanakSocialiste (LKS) is strong in the Loyalty Islands

President of the Northern Province Léopold Jorédié (FLNKS)President of the Southern Province Jacques Lafleur (RPCR)President of the Loyalty Islands Nidoïsh Naisseline (LKS)President of the Territorial Congress Pierre Frogier (RPCR)Vice-president Richard Kaloï (UC)Deputies to the French Assemblée nationale Jacques Lafleur (RPCR)

Pierre Frogier (RPCR)Representative to the French Senate Simon Loueckhote (RPCR)

New Caledonia 19


Economic structure



GDP at current prices (CFPfr bn) 290.6 306.7 n/a n/a n/a

Real GDP growth (%) 0.7 n/a n/a n/a n/a

Consumer price inflation (av; %) 2.6 2.0 1.6 1.7 n/a

Populationa (’000) 174 184 185 197b 200

Exports fob (US$ m) 376 326c 483 500 n/a

Imports cif (US$ m) 854 763c 868 930 n/a

Exchange rate (av; CFPfr:US$) 102.96 100.93 96.25 96.54 105.85

November 6th 1998 CFPfr101.209:US$1


Agriculture 4.9 Private consumption 77.3

Mining & metallurgy 14.0 Government consumption 9.4

Construction & energy 11.0 Fixed investment 32.9

Miscellaneous industries 6.4 Change in stocks –1.5

Transport & communications 7.5 Exports of goods & services 29.6

Commerce 31.0 Imports of goods & services –47.7

Other services 25.2 GDP at market prices 100.0

GDP at market prices 100.0

Principal exports fob 1993 US$ m Principal imports cif 1993 US$ m

Ferro-nickels 212 Foodstuffs 148

Nickel ore 76 Transport equipment 147

Foodstuffs & animal products 9 Machinery & electrical equipment 145

Metal & metal products 1 Minerals 84

Total incl others 376 Total incl others 854

Main destinations of exports 1996c % of total Main origins of imports 1996c % of total

Japan 30.6 France 45.1

France 28.9 Australia 17.9

US 12.2 Singapore 6.8

Australia 6.9 New Zealand 6.4

Taiwan 6.1 Japan 3.7

a EIU estimates. b Census result. c Derived from trading partners’ records.

20 New Caledonia



A “yes” vote in theNouméa referendum is

almost certain—

There is little doubt that the referendum on the Nouméa Accords, due onNovember 8th will result in a substantial vote in favour. While the largelypro-independence Kanak community is overwhelmingly supportive of the ac-cords, anti-independence groups will remain divided, although the indicationsare that the largest and best organised of these, the Rassemblement pour leCalédonie dans la République (RPCR) has begun to show more solidarity withits leader, Jacques Lafleur. Mr Lafleur, one of the architects of the NouméaAccords and the subsequent legislation to implement them, has vociferouslydenounced scaremongering by extreme anti-independence parties. Confidentthat full independence can be averted through clever yet moderate politicalstrategies, Mr Lafleur is concerned that the inflammatory campaigns of theextreme anti-independents will merely accelerate the devolution process bydisaffecting potentially loyalist voters. Assuming the referendum results in a“yes” vote, urgent political jostling can be expected both within and betweenpro- and anti-independence camps, as New Caledonia gears up for its firstelection for a new territorial government in March 1999.

—but the territory’s firstgovernment will facedaunting challenges

Whatever the nature of the government that emerges from the election inMarch, it will face formidable challenges. New Caledonia’s new status willrequire the establishment of diplomatic relations and missions throughout thePacific region, and a presence at various regional and international organis-ations. Domestically, the government will have to demonstrate quickly thatthere are tangible benefits to the accelerating process of political devolution, atall order in the context of the global economic downturn, which has severelydented the nickel industry, New Caledonia’s foremost employer and exportrevenue earner. Although the latest available official data point to encouragingtrends on the export front—seafood sales surged in the first seven months of1998—growth in such sectors will only partially mitigate the downturn in thenickel industry. By the end of August unemployment had risen only slightly,to 8,250, but the number of people actively seeking work had increased by6.2%. If this trend continues, islanders are unlikely to attribute it to the harshexternal environment; on the contrary, given the sensitivity of the issue ofpolitical devolution, the viability of independence—an almost irreversible con-tingency once the Nouméa Accords are in place—will increasingly be calledinto question.

Late note The result of the referendum on the Nouméa Accords on November 8th was aresounding “yes” vote, by a majority of nearly 72%. Just under 75% of theestimated 107,000 eligible voters participated in the poll. The French president,Jacques Chirac, welcomed the result, relieved that consensus had been reachedin the territory on the issue of political devolution. The minister for overseasterritories, Jean-Jacques Queyranne, commended the anti-independence camp,notably the RPCR, for its tempered and more unified approach to politicaldevolution.

Urgent jockeying for position among politicians and parties is now expected inthe run-up to the election for the first government of the territory in March.

New Caledonia 21


Frantic political exchanges and high-level visits between Paris and Nouméawill increase in the coming months, while local parties will reconsider alliancesand partnerships in order to improve their chances at the ballot box. Thepolitical scene will become increasingly tense, as the struggle for control of theterritory’s new political institutions ultimately represents the struggle over thepace of devolution.

Review

Vigorous campaigning isorganised from the

métropole—

The run-up to the referendum on the Nouméa Accords on November 8th sawan influx of French politicians from the métropole and increasingly vigorouscampaigning from the anti-independence camp, notably the extreme right-wing Front national (FN) and local rightist parties such as the Mouvement pourla France (MPF) and Une Calédonie pour tous (UNCT). The controversial FNleader, Jean-Marie Le Pen, dispatched several deputies from the party head-quarters in France to spearhead the campaign. The FN informed the localmedia that a “yes” vote in the referendum would equate to a vote for inde-pendence, that French people would be forced to leave the territory, and thattheir land would be returned to the indigenous people, the Kanaks. The FNdenounced the stringent eligibility requirements for voting as institutionalisedapartheid, arguing that they contravened the principles of the French republic.

—as the “yes” and “no”camp jockey for position—

Meanwhile, the Parti socialiste (PS) sent a delegation from Paris to run a pro-independence campaign, led by Bernard Grasset, a former high commissionerto New Caledonia. Mr Grasset stressed that in the event of “no” vote, theamendment to the constitution would have been in vain and New Caledoniarisked the prospect of renewed political turmoil. In a snipe at Mr Le Pen, heaccused the FN of intransigence and political nostalgia, hankering for thecolonial era. Mr Grasset also denounced the UNCT leader, Didier Leroux, asobstreperous, arguing that he was frustrated at not having participated in theelaboration of the Nouméa Accords and that he had spearheaded a “campaignof disinformation”.

The leader of the anti-independence Rassemblement pour la Calédonie dans laRépublique (RPCR), Jacques Lafleur, adopted an even more vociferous ap-proach. He dismissed a 14-page document drawn up by UNCT lawyers, whichrejected the accords, as a pack of lies. Examples and cases cited in the documentwere discarded as unfounded, and Mr Leroux was accused of focusing his cam-paign on the next congressional election rather than on the accords them-selves. Mr Lafleur warned that if the referendum resulted in a “no” vote, NewCaledonia faced economic doom, given that France had effectively approvedthe accords and would not be interested in the country’s economic develop-ment if they were rejected.

—but France underlinesthe inevitability of

devolution—

As the referendum approached, a spokesman for the French minister for over-seas territories, Jean-Jacques Queyranne, intimated that the degree of futuresupport for New Caledonian institutions would reflect the margin of the “yes”vote. Not only was Mr Queyranne confident that a “yes” vote would materialise,

22 New Caledonia


but he stressed that the Nouméa Accords made provisions for islanders to deter-mine their political and economic development in a manner that went wellbeyond autonomy. “Full-fledged sovereignty” within 20 years, or sooner, wasentirely possible. The minister also indicated that the decolonisation process inFrench Polynesia would follow a similar course to that in New Caledonia, andthat political devolution was an irreversible reality. Both New Caledonia andFrench Polynesia would increasingly conclude their own regional co-operationagreements, he added. According to Mr Queyranne, French development assis-tance to Pacific governments and institutions had increased by 40% since 1994.Financial support now amounted to around US$25m a year, with additionalassistance provided in the form of technical training, surveillance facilities forfisheries industries, and natural disaster relief.

—and the polls point to anoverwhelming “yes” vote

A poll undertaken by a local company, Sofres, in October indicated thatroughly 69% of the population was in favour of the Nouméa Accords. Howeveronly 60% of those questioned intended to vote. In total 107,462 voters areeligible to take part in the referendum.

The economic downturnreduces demand for

nickel—

According to the latest available data from the Institut territorial de la statis-tique et des études économiques (ITSEE), nickel-ore production continued torise in the first six months of 1998. The abrupt halt to nickel exports to the USin January, however, has begun to hit producers hard (3rd quarter 1998,page 24). Nevertheless, output of wet nickel in the first seven months of theyear, at over 4.5m tonnes, was comparable to the corresponding period of1997. However, exports have declined sharply since the end of 1997 for severalreasons. First, the nickel market has been severely affected by sluggish demandas a result of the Asian economic downturn. Second, there is excess supplyowing to unregulated sales of Russian nickel, combined with increased use ofrecycled nickel in stainless steel production. Third, new treatment processeshave emerged using cheap ore, notably in Australia and Canada.

Provisional export figures for the first seven months of 1998 point to a 15.8%drop in volume terms and a 30.7% drop in value terms compared with thesame period of 1997. The fall in export volumes, along with the maintenanceof relatively high production levels, will lead to a rise in the stockpile, whichreached 972,000 wet tonnes at the end of the second quarter compared with653,000 wet tonnes at the beginning of 1998.

—particularly fromJapanese smelters—

In the fourth quarter of 1997 the cessation of nickel exports to the US wasexacerbated by a 17% reduction in orders from Japanese smelters, which inturn was compounded by an 18% drop in ore prices. New Caledonian exportersare expecting a further drop of around 20% in Japanese orders owing to sub-dued world nickel prices, which have rendered Japanese smelters uncompeti-tive. Moreover, the depreciation of the yen to its lowest level for eight years hasaccentuated the difficulties facing Japanese companies buying ore in US dol-lars. In another adverse development, the Australian company QueenslandNickel failed to purchase the planned tonnages and renegotiated part of itscontract to define a new base price for ore.

New Caledonia 23


—and employment inmining begins to fall

In spite of the slump in global nickel demand, employment in mining com-panies rose by 7% in 1997, while direct and indirect mine-site employment wasup 8%. The decline in exports since the beginning of 1998 has slightly reduceddemand for trucking and other contractors. So far, the Société minière du sudpacifique (SMSP) mining centre at Poum, in the north of the main island, hasreduced production levels and working hours to avoid lay-offs. The 250 directand indirect employees of the Nickel Mining Corporation (NMC) may not beas fortunate.

Meanwhile, Société le nickel (SLN) has announced plans to reduce operatingcosts by 15% over the next three years, entailing a reduction of the workforcefrom 2,100 to 1,850. Output of nickel content in the first seven months of 1998reached 32,849 tonnes, representing a 1.9% rise on the same period of 1997.Despite the industrial action that disrupted production in the last quarter of1997—output fell by 25% in that period—the target of 53,000 tonnes of metalcontent in 1997 was reached, and production in the year to July reached56,000 tonnes. Nevertheless, SLN will maintain output at 57,000 tonnes thisyear instead of the 58,000 tonnes initially scheduled, owing to weak demand.A fifth calcination furnace is due to be fired by the end of the year, whichshould enable annual production to reach 65,000 tonnes over the next decade.

Tourist arrivals dipslightly—

Although 9,837 tourists visited New Caledonia in July, 3,000 more than in theprevious month, the figure represented a decrease of 4.4% on July 1997. Totalvisitor arrivals in the first seven months of 1998, at 54,282, were down 3.2% onthe corresponding period of 1997. The 4.7% drop in visitor levels from themétropole was attributable to interruptions to air services associated with indus-trial action at Air France. The number of visitors from Australia and NewZealand fell by more than 5%, largely because of the depreciation of theirrespective currencies. The Japanese market proved the most resilient, withnumbers dipping by just 2.2%. Hotels in Nouméa appear to have weathered thestorm so far, with the number of clients rising by 4.6% in the first sevenmonths of the year, thanks to an increase in domestic business.

—but the outlook forfisheries is brighter

than ever

Prawn exports reached record levels in the first seven months of 1998. A totalof 677 tonnes were sold for CFPfr745m (US$7.4m), exceeding export levels forthe whole of 1997. The increase represents year-on-year growth of 54.6% and39.2% in volume and value terms respectively. Prawns accounted for 62% ofseafood exports in the first seven months of 1998, 50% of which were sold toJapan, 25% to Australia and 22% to France. According to the ITSEE, the pros-pects for aquaculture are perceived as increasingly bright, with the Japanesemarket especially promising. Prawn exports to Japan have risen dramatically in1998, reaching 333 tonnes in the first seven months of the year compared with38 tonnes in the corresponding period of 1997.

Growth prospects in longline tuna fishing are also promising, and at presentNew Caledonian vessels are far from meeting external demand. Various studieshave indicated that an annual catch of around 20,000 tonnes is possible andenvironmentally sustainable. Exports of fresh tuna to Japan in the first sevenmonths of 1998, at CFPfr232.6m, were up 13.5% on 1997.

24 New Caledonia


Growth in imports isattributed to private-sector development—

Merchandise imports in the first seven months of 1998 totalled CFPfr57.9bn(US$575m), a 4.8% increase on the corresponding period of 1997. ITSEE hasattributed the increase to stronger private-sector demand for transport-relatedmaterials associated with business development. The most noteworthy pur-chases included four new vessels by the local fishing company, Navimon, anew ferry, Mary D Princess, and a range of passenger vehicles and trucks for thetourism industry. Imports of machinery and electrical equipment rose by16.4%, largely owing to capital investments by SLN and a local brewery. Over-all imports from Europe rose by 10.2%, while purchases from France, whichaccounts for over 60% of New Caledonian imports, registered an 8.5% rise.

—but the sharp decline inexports is worrying

Merchandise exports fell by 24.7% year on year in the first seven months of1998, from CFPfr34.5bn (US$343m) to CFPfr26bn. The decline reflects theimpact of the global economic downturn on the mining and metallurgicalindustries. The value of nickel exports fell by 30.7%, that of ferronickel by22.7% and that of mattes by 36.8%. Most other exports recorded far less dra-matic declines and these were partly offset by the boom in seafood exports. Thetrade deficit rose to CFPfr31.9bn in the first seven months of 1998 fromCFPfr20.7bn in the same period of the previous year.

Changes to the taxationsystem are approved—

In September the territorial congress approved changes to the general importtax, New Caledonia’s main source of indirect revenue. The changes were in-tended to stimulate the retail sector, which has been stagnating recently owingto exorbitant prices. The rate of tax on a range of luxury items—watches,jewellery, perfume, sound equipment, crystal, and leather and silk products—was reduced from 41% to 24%. Taxes on sparkling wines, some motor vehiclesand toys were reduced from 41% to 31%. Duty on mail order items was,however, raised from 25% to 30%.

—and Air Calédoniereceives a welcome capital

injection

The territorial congress also voted to provide a capital injection of CFPfr500m(US$5m) to the local carrier, Air Calédonie International, in which it is themajor shareholder. If the airline meets certain conditions, it may receive anadditional boost of CFPfr800m over the next three years, which would allow itto buy a second Airbus aircraft, possibly in 1999, to service the Japanesemarket. The airline, which has struggled with an operating deficit for severalyears, now has 11 destinations in its Pacific network. A weekly service toHoniara, Solomon Islands, was launched in August.

New Caledonia 25


Samoa

Political structure

Official name Independent State of Samoa

Form of state UK-style cabinet government

The executive The prime minister, chosen by a majority in the parliament (Fono), selects 12ministers to form a cabinet; cabinet decisions can be reviewed by the ExecutiveCouncil, which consists of the cabinet and the head of state

Head of state HH Malietoa Tanumafili II until his death, at which time a successor will be elected bythe Fono for a five-year period

National legislature Unicameral, 49-member Fono; 47 members are elected by all Samoans aged 21 or overto represent 41 constituencies, while the remaining 2 are elected from the electoralrolls made up of non-Samoans; the Fono sits for five-year terms

Legal system System of lower courts leading to Court of Appeal at apex

National elections April 26th 1996; next election due by April 2001

National government The Human Rights Protection Party, led by Tofilau Eti Alesana, holds 37 of the 49 seatsin the Fono

Main political parties Human Rights Protection Party (HRPP); Samoa National Development Party; Samoa AllPeople’s Party

Prime minister Tofilau Eti AlesanaDeputy prime minister & minister of finance Tuilaepa Sailele Malielegaoi

Key ministers Agriculture, forestry, fisheries & meteorological services Solia Papu VaaiEducation Fiame NaomiHealth Misa TelefoniJustice Molio’o TeoriloLabour Polataivao FosiLands, surveys & environment Tuala Sale TagaloaPosts & telecommunications Le’afa VitaleTransport Joe KeilWomen’s affairs Leniu Tofaeono AvamagaloWorks Luagalau Lavaula KamuYouth, sport & cultural affairs Leota Lu II

26 Samoa


Economic structure



GDP at current prices (Tala m) 291.8 321.2 369.0a 421.0a 481.0a

Real GDP growth (av; %) 9.5 –7.8 9.6b 6.0b 3.4b


Population (m) 0.16 0.16 0.17 0.17a 0.17a

Exports fobc (US$ m) 6.43 3.53 8.75 10.10 14.57

Imports fobc (US$ m) 87.37 69.01 80.22 90.88 99.70

Current-account balancec (US$ m) –38.68 5.78 9.32 12.29 9.09




Exchange rate (av; Tala:US$) 2.568 2.535 2.472 2.462 2.556

November 6th 1998 Tala2.974:US$1

Origins of gross domestic product 1996d % of total Components of gross domestic product 1988 % of total


Manufacturing 17.9 Government consumption 18.6

Electricity 6.4 Fixed investment incl change in stocks 31.5

Construction 1.9 Exports of goods & services 30.4

Services 22.8 Imports of goods & services –66.8

Government 11.1 GDP at market prices 100.0

GDP at market prices 100.0

Main destinations of exports 1996e % of total Main origins of imports 1996e % of total

Australia 81.5 Australia 33.3

New Zealand 6.2 New Zealand 25.0

Slovakia 3.1 Japan 14.9

Germany 3.1 Fiji 8.0

American Samoa 1.5 US 7.5

a EIU estimate. b Official estimate. c IMF balance-of-payments figures. d IMF staff estimates. e Derived from trading partners’ statistics.

Samoa 27



The economy will proveremarkably resilient

The government will squeeze as much political capital as possible from the factthat the Samoan economy is proving remarkably resilient in the face of theglobal economic downturn, and is outperforming many other small islandeconomies (SIEs) in the Pacific region. The prime minister, Tofilau Eti Alesana,will continue to stress that his Human Rights Protection Party (HRPP) em-barked on the process of economic restructuring and reform well ahead of mostSIEs, and deserves credit for its foresight. While there is some truth in thisargument, the flexibility of the Samoan labour market—notably the fluiditybetween the formal, informal and subsistence sectors—is also a key factor inthe resilience of the economy. This unusual characteristic will stand Mr Tofilauand the country in good stead over the forecast period, with little prospect of amajor recovery in the regional economy.

Review

A religious disputeattracts widespread

attention

The village of Salamumu, on the main island of Upolu, attracted internationalattention in October owing to its strict rule that only the Methodist religionmay be observed within its boundaries. When a breach of the rule was sus-pected, village chiefs hog-tied five family members and deposited them outsidethe village, formally declaring their expulsion. Their home was then destroyed.The five, who were freed by a passing motorist, maintained that they were notaffiliated to any other church and had merely been engaging in bible studiesand prayer meetings. Although only the Methodist religion is permitted in thevillage, non-Methodists are allowed to worship elsewhere on the island.

Fires ravage thedrought-stricken island of

Savai’i

The agriculture minister, Solia Papu Vaai, described as a national disaster aseries of fires that ravaged the drought-stricken island of Savai’i , the largest inthe Samoas, in August. More than one-quarter of the island was razed byflames. According to the minister, many plantations and farms were severelydamaged, though no casualties were reported. Some 6,000 ha of kava plants

60

80

100

120

140

1980. . . . 85 . . . . 90 . . . . 95 . .

Samoa: Tala real exchange rates (b)1980=100

Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$Tala:US$

Tala:¥

Tala:US$

Tala:¥Tala:¥

Tala:DMTala:DMTala:DM

Tala:US$

Tala:¥

Tala:US$

Tala:¥Tala:¥

Tala:DMTala:DMTala:DM

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:US$

Tala:¥

Tala:DM

-8

-6

-4

-2

0

2

4

6

8

10

1993 94 95(a) 96(a) 97(a)

SamoaAsia excl Japan

Samoa: gross domestic product% change, year on year

(a) Official estimates. (b) Nominal exchange rates adjusted forchanges in relative consumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

28 Samoa


and cocoa trees were destroyed. The fires, which burned for a month, werestarted by farmers trying to clear agricultural plots.

Domestic productionstruggles slightly in the

first quarter—

According to the latest Quarterly Bulletin from the Central Bank of Samoa (CBS),the economy recorded a mixed performance in the first quarter of 1998. Agri-cultural output for domestic consumption increased, and overall throughput offruit and vegetables at the main market in Apia rose by 18% compared with thecorresponding quarter of 1997. There was a 1% increase in output from theexport processing zone (EPZ), to Tala3.9m (US$1.3m). However, activity in theconstruction sector fell, as did industrial output. In the construction sector, theapproval of building permits rose by 17%, but their value fell by 54%. Therewere substantial increases in residential and commercial permit approvals, butconstruction activity by institutions, particularly the churches, all but ceased.Gross tourism earnings grew by 11%, reaching Tala23.1m, with tourist arrivalsup 7% and average expenditure per tourist up 2%.

The CBS report indicates that the quarterly index of industrial output declinedby 6% compared with the first three months of 1997, although the averageprice of industrial products surveyed rose by 3%. The total value of productssurveyed fell by 4%, to Tala19.3m. The fall was attributed to a drop in the priceof coconut products and building materials.

—and thebalance-of-payments

deficit widens

Samoa’s overall balance-of-payments deficit in the first quarter of 1998 wasTala4.8m (US$1.6m). Although an exceptional surplus of Tala5.9m was re-corded in the corresponding quarter of 1997, in the two preceding years therewere deficits of Tala9m and Tala6.3m. The CBS attributed the first-quarterresults to lower capital inflows and increased services outflows. The merchan-dise trade deficit decreased by 7%, to Tala50m, as exports rose by 20% toTala10.1m and imports fell by 4% to Tala60m.

StarKist plans to establishoperations in Apia—

The giant US tuna-processing company, StarKist Samoa, based in Pago Pago,American Samoa, initiated negotiations with the government of independentSamoa in September to build a first-stage tuna-handling facility at the fishmarket in Apia. The refrigerated plant would improve the quality of fish ex-ported to the StarKist cannery in American Samoa and help the company tomeet US and Japanese export standards. In response to the concerns of localfish exporters, the chief executive of StarKist, Philip Thirkell, denied that thecompany had any intention of establishing a cannery in Apia, saying that theplant would centralise fish preparation operations for shipment to Pago Pago.The plant was first proposed in 1996 but, like several proposals for co-operationbetween the neighbouring Samoas, it was shelved when the new adminis-tration took office in American Samoa in January 1997. Talks on the plantresumed during an official visit to Pago Pago by Mr Vaai.

—and new vessels enhancethe prospects for long-line

fishing

The long-line fishing industry received a boost in September when two newboats were purchased and presented by the deputy prime minister, TuilaepaSailele Malielegaoi. The new vessels will radically improve the capacity of theSamoan fisheries industry, which was previously restricted to small, village-based fishing boats. The government is seeking to build up a commercial fleet ofmodern long-line fishing vessels to boost offshore fisheries, while safeguarding

Samoa 29


the artisanal fisheries sector. Both vessels, Agniu I and Samoan Girl, are owned byprivate-sector fishing companies.

Vailima wins aninternational award

Samoa’s popular local beer, Vailima, won a major international award inSeptember at the annual Monde Selection in Brussels. Vailima lager won thegold medal in competition with 133 other beers from 57 breweries from aroundthe world. The Monde Selection, founded in 1961, is a trade fair run by anindependent international institute, which tests and rates an extensive rangeof foodstuffs and beverages. The general manager of Samoa Breweries, FomaiLei Sam, described the prize as a tribute to his local staff.

Japan funds hospitalrenovations

In September the government of Japan provided a US$100,000 grant to Samoato renovate district hospitals in Leulumoega and Sataua. The hospitals werebuilt with Japanese assistance in 1983, but suffered serious damage fromCyclones Ofa and Val in 1990 and 1991.

30 Samoa


Solomon Islands

Political structure

Official name Solomon Islands

Form of state Constitutional monarchy

The executive UK-style cabinet, chosen from within parliament, headed by the prime ministerchosen from and by parliament

Head of state Queen Elizabeth II, represented by a governor-general who must be a SolomonIslander; Moses Pitakaka currently holds the position

National legislature Unicameral, 50-member National Parliament; elected for four-year terms by universalsuffrage

Local government The islands are divided into eight provinces and one town council (Honiara)

Legal system English-style system; a series of lower courts exists, leading to the Court of Appeal atthe apex; the Court of Appeal is staffed by justices from Papua New Guinea, Australiaand New Zealand

National elections August 6th 1997; next election due by September 2001

National government Bartholomew Ulufa’alu was elected prime minister by parliamentary vote after theelections of August 1997

Main political organisations The ruling coalition is the Alliance for Change, consisting of six parties including theNational Action Party, the Labour Party and the National Party. Other parties includethe coalition, Solomon Islands National Unity, Reconciliation and Progressive Party

Members of cabinet Prime minister & acting minister of finance Bartholomew Ulufa’aluDeputy prime minister & minister for transport, works & utilities Sir Baddeley Devesi

Key ministers Agriculture & fisheries Sanga AumanuCommerce, employment & tourism Enele KwanairaraEducation Ronidy ManiForeign affairs & trade Patteson OtiForestry, environment & conservation Hilda KariHealth & medical services Dickson WarakohiaHome affairs Leslie OseroIndigenous business development David HolosiviLands & housing Jackson PiasiPolice & national security Rubins MesepituProvincial government Japher WaiporaWomen’s affairs, youth & sports Gordon Mara

Solomon Islands 31


Economic structure



GDP at current prices (SI$ m) 781 931a 1,093a 1,264a 1,402a

Real GDP growth (%) 2.0 5.2 7.0 3.5 –1.0

Consumer price inflation (av; %) 9.2 13.3 9.7 11.8 12.0b

Population (m) 0.36 0.37 0.38 0.39 0.40b

Exports fobc (US$ m) 129.0 142.2 168.3 184.0b n/a

Imports cifc (US$ m) 136.9 142.2 154.5 150.8b n/a

Current-account balancec (US$ m) –7.4 –3.6 8.3 18.4b n/a




Exchange rate (av; SI$:US$) 3.188 3.291 3.406 3.566 3.717

November 6th 1998 SI$4.82:US$1



Mining –0.3 Public consumption 34.7

Manufacturing 3.7 Fixed investment 28.1

Electricity, gas & water 0.9 Exports of goods & services 64.8

Construction 4.3 Imports of goods & services –105.6

Trade 9.6 GDP at market prices 100.0

Transport & communications 7.2

Finance 3.3

Public administration 23.0

GDP at constant prices 100.0

Principal exports fob 1995 US$ m Principal imports cif 1995 US$ m

Timber 83.1 Machinery & transport equipment 49.5

Fish 42.8 Manufactured goods 34.7

Palm oil 19.5 Food 23.5

Copra 9.6 Miscellaneous manufactured articles 14.8

Cocoa 3.9 Mineral fuels 14.3

Palm kernel 1.6 Chemicals 7.8

Marine shells 1.6 Total incl others 154.5

Coconut oil 1.2

Total incl others 168.3

Main destinations of exports 1996d % of total Main origins of imports 1996d % of total

Japan 50.5 Australia 41.5

Spain 15.5 Japan 10.2

Philippines 7.8 Singapore 8.8

Thailand 4.9 New Zealand 7.5

UK 4.4 US 4.8

a EIU estimate. b Official provisional figure. c National figures. d Derived from trading partners’ statistics.

32 Solomon Islands



The Ulufa’alu governmentmay manage to serve out

its term—

After a period of extreme political turbulence and a narrow victory in a censuremotion tabled by the opposition, it appears increasingly likely that the rulingAlliance for Change (AFC), led by the prime minister, Bartholomew Ulufa’alu,will last its five-year term, which expires in 2001. The political fallout from theno-confidence motion has, however, altered the contours of Solomon politics.The former prime minister, Solomon Mamaloni, has returned to frontline poli-tics as leader of the opposition, despite claims that he had shelved his politicalambitions after his election defeat in 1997. The salient question is whether henow intends to mount a full campaign for the premiership. Mr Mamaloni willremain a wildcard in the political pack throughout the forecast period. He willhave to cover considerable political terrain to widen his support base, given theunpopularity of the recent no-confidence motion. Many islanders interpretedthe move as the sort of self-serving realpolitik typical of the previous Mamaloniadministration. For his part, Mr Ulufa’alu appears to be taking the potentialthreat from Mr Mamaloni seriously, and is depending on widespread economicreforms and liberalisation measures to deliver tangible improvements in livingstandards.

—but the economicdownturn will renderreforms more painful

The prime minister will have to walk a political tightrope between pressingahead with key economic reforms, and thus keeping international donors andmultilateral organisations on board, and ensuring that fiscal and monetaryausterity measures inflict the minimum economic pain on the population. Thiswill be a tall order in the context of the global economic downturn. Theimprovement in prices for some commodities, such as cocoa and coconutproducts, will only partly offset the devastating effect of the collapse of globaltimber prices as demand falters in Asia and beyond. Indeed, the governmenthas already advised some creditors that it will be unable to keep up withpayments. The encouraging, if politically cumbersome, corollary to this is thatMr Ulufa’alu has little choice but to pursue economic reforms, notably down-sizing and restructuring the civil service.

60

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Solomon Islands: Solomon Islands dollarreal exchange rates (a)1980=100

SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$SI$:US$

SI$:¥

SI$:US$

SI$:¥SI$:¥

SI$:DMSI$:DMSI$:DMSI$:US$

SI$:¥

SI$:US$

SI$:¥SI$:¥

SI$:DMSI$:DMSI$:DMSI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:US$

SI$:¥

SI$:DM

-2

0

2

4

6

8

10

1993 94 95 96 97

Solomon Islands

Asia excl Japan

Solomon Islands: gross domestic product % change, year on year

(a) Nominal exchange rates adjusted for changes in relativeconsumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

Solomon Islands 33


Review

The government survivesa censure motion—

The ruling Alliance for Change (AFC), led by the prime minister, BartholomewUlufa’alu, has survived a no-confidence motion tabled in parliament onSeptember 18th. The vote was evenly split. Soon after the motion, however,two members of parliament who had defected to the opposition, Ronidy Maniand David Holosivi, returned to Mr Ulufa’alu’s camp, restoring the AFC’s nar-row majority. Mr Mani resumed his post as minister of education and humanresources while Mr Holovisi was appointed minister for indigenous businessdevelopment. According to official sources, Mr Holovisi’s position was helpedby another MP, Lester Saomasi, who was absent during the no-confidence vote,but has also returned to the fold. The AFC’s majority was rendered slightlymore comfortable with the by-election victory of William Gigini, an AFC MP,on October 10th.

Political tensions mounted in the run-up to the censure motion, as tit-for-tatexchanges between the government and opposition, and threats of legal actionagainst the government pointed to a likely victory by opposition parties. Withparliament in recess, the barometer of opinion was difficult to gauge. Tensionscame to a head in early August when the leader of the opposition, DuddleyTausinga, wrote to the governor-general, Sir Moses Pitakaka, arguing that theUlufa’alu administration should be dismissed on account of the defections.The request was denied by the acting governor-general and parliamentaryspeaker, Paul Tovua, who called for moderation.

—but the politicaltemperature heats up

further

On Mr Pitakaka’s return to Honiara in early September, he announced that ameeting was to be called in parliament on September 8th. Mr Ulufa’alu re-sponded to the announcement with a speech aired on the Solomon IslandsBroadcasting Corporation (SIBC) network, rejecting the need for a meeting.SIBC also broadcast a press conference in which Mr Ulufa’alu suggested that themedical treatment the governor had received in Australia may have affected hisstate of mind. Sir Moses is suing the SIBC for defamation of character.

Meanwhile, the government challenged the governor-general’s decision toconvene the meeting in the High Court, and the sitting on September 8th waspostponed. The chief justice, Sir John Muria, indicated that he was unable tooverrule the governor-general’s decision, but maintained that the censure mo-tion could not take place without the High Court’s approval. In a nationwideradio broadcast, Mr Ulufa’alu appealed for calm between political factions,saying that rising tensions had led to the early closure of businesses andschools. Police subsequently imposed a ban on liquor sales.

Solomon Mamalonibecomes leader of the

opposition

On September 28th opposition MPs elected the former prime minister Solo-mon Mamaloni leader of the opposition, with Mr Sogavare as his deputy.Mr Tausinga, the previous opposition leader, was overseas for medical treat-ment at the time.

Mr Ulufa’alu retains thefinance portfolio until the

budget is passed—

The prime minister has decided to retain the finance portfolio until the 1999budget has been approved. The political turmoil and acrimonious public ex-changes that surrounded Mr Ulufa’alu’s dismissal of the finance minister,

34 Solomon Islands


Manasseh Sogavare in July (3rd quarter 1998, page 36), appear to have dieddown. After his narrow victory in the censure motion, the prime minister de-clared that legislation would be introduced to ensure that defecting MPs wouldlose their seats once a government and opposition were formed. However, shift-ing alliances and defections are common practice in Melanesian politics, andMr Ulufa’alu may find it difficult to garner support for the proposal.

—and cements relationswith international

donors—

With the adjournment of parliament in late September, the prime ministerembarked on an extensive foreign tour to strengthen relations with develop-ment partners. According to Mr Ulufa’alu, the Solomon Islands’ major inter-national donors and creditors remained sensitive to the economic challengesfaced by the archipelago and the consequent difficulties of implementing re-form measures. The impact of the global economic downturn on the SolomonIslands was discussed, along with the increase in poverty and social costs thatwill probably result, which could undermine political and social stability.

—keeping the plight ofdeveloping countries on

the international agenda

Speaking at the World Bank and IMF annual meetings in Washington DC inearly October, after participating at the Commonwealth finance ministers’meeting in Ottawa, Canada, the prime minister made a statement on behalf ofthe governments of small island economies (SIEs) in the Pacific region.Mr Ulufa’alu emphasised that boosting demand in industrialised nations wasinsufficient to stimulate growth in developing countries, and that more directassistance was required by Asian and Pacific economies in the form of add-itional financial resources and restructuring of external debt.

According to the prime minister, bilateral discussions resulted in pledges fromthe World Bank to provide a programme loan of US$10m to assist the health,education, forestry and environment, and finance sectors. A World Bank mis-sion was dispatched to Honiara in early November to define the programme

Discussions with lending agencies

Asian Development Bank: financial support for economic reforms.

International Fund for Agricultural Development: possible funds forassistance to farmers with rice planting.

The Kuwait Fund for Arab Economic Development and the Organisationof Petroleum Exporting Countries: possible settlement of loan arrears andproblems with the Honiara road development project, for which funds have beenprovided; possible assistance with a port development project in Malaita province.

Commonwealth Development Corporation: discussions on theprivatisations of Solomon Islands Plantations and Telekom.

International Finance Corporation: assistance to the private sector; draftingof new foreign direct investment legislation and incentive schemes.

US State Department: confirmation of the extension of fishing quotas and helpwith fisheries surveillance; private-sector investment; possibility of reopening theUS embassy in Honiara; assistance in cleaning up wartime shipwrecks and mines.

Solomon Islands 35


and observe the national economic summit. Discussions were also held withbilateral and multilateral lending agencies (see box).

New legislation preventsthe sale of passports

On October 13th parliament approved legislation to prohibit the sale ofSolomon Islands passports. Offenders found either selling or in possession ofillegally obtained passports face fines or prison sentences of five years. More-over, under the legislation, any master, owner or agent of an aircraft or vesselinvolved in the transport to the Solomon Islands of people without validdocuments will be responsible for the cost of their repatriation. The immigra-tion minister, Enele Kwanairara, emphasised that the measures demonstratedthe government’s determination to protect the sovereignty of the SolomonIslands. According to Mr Kwanairara, in recent years Solomon Islands passportshad been disappearing and many had remained unaccounted for. In 1997alone more than 100 passports went missing. Regarding the repatriation meas-ures, he said that the government had spent thousands of dollars deportingAfrican and Asian nationals who had entered the Solomon Islands withoutproper travel documents.

The Gold Ridge mine isopened

The Solomon Islands’ first gold mine, at Gold Ridge in central Guadalcanal,was officially opened by the governor-general on September 29th. Gold RidgeMining, a subsidiary of Australia’s Ross Mining, unearthed the first lot of ore inmid-August, the culmination of an investment of SI$300m (US$62m) since1994. Operations are expected to produce a minimum of 100,000 oz of gold ayear. With ore reserves estimated at 1.36m oz, Gold Ridge should have a life of13 years or more. Ross Mining has commenced an additional drilling pro-gramme in the lease area, which totals 20,000 sq metres. Since it was estab-lished, the mine has generated more than 250 local jobs; it is the first mine inMelanesia to contain all tailings and waste on site.

Speaking at the opening ceremony, the chairman of Ross Mining, IanMatheson, confirmed that over 50% of profits from the mine would be distrib-uted to the government and landowners in the form of royalties and taxes. Heestimated that the mining operation would add 33% to the country’s GDP. Thecompany made its first payment of US$53,178 to the Gold Ridge Royalty Fundon October 14th, and transferred the same amount to the government in theform of export duties. The figure represented 1.5% of the gross value of goldand silver exported in August and September.

36 Solomon Islands


Tonga

Political structure

Official name Kingdom of Tonga

Form of state Constitutional monarchy, with the monarch retaining significant power

The executive The king appoints a cabinet, headed by a prime minister, comprising the governors ofHa’apai and Vava’u and ministers of the Crown; ministers are appointed permanentlyuntil retirement age

Head of state King Taufa’ahau Tupou IV

National legislature Unicameral Legislative Assembly with limited powers, comprising the speaker, thecabinet, 9 nobles chosen by the 33 nobles of Tonga, and 9 representatives elected byall Tongans aged 21 or over; 3 of the representatives are elected from Tongatapu,1 each from Toputatu Niua and Niua Fa’ou, 2 from Ha’apai and 2 from Vava’u; thenobles chosen cover similar areas

Legal system Modelled on the English system, with the Privy Council (consisting of the cabinetheaded by the king) sitting as the Court of Appeal

National elections January 1996; next election due by 1999

Main political organisation People’s Party

Prime minister & minister of agriculture, fisheries & forestry Baron Vaea of HoumaDeputy prime minister & minister of education & civil aviation Dr Langi Kavaliku

Key ministers Finance Tutoatasi FakafanuaForeign affairs & defence Prince Lavaka Ata UlukalalaHealth (acting) Tilitili PulokaJustice & attorney-general Tevita TupouLabour, commerce & industries, tourism Masaso PaungaLands, survey & natural resources Honourable Tu’i’afituPolice & prisons Clive EdwardsPublic, fire services & prisons Cecil Cocker

Governor of Ha’apai Fielakepa

Governor of Vava’u Ma’ulupekotofa Tuita

Tonga 37


Economic structure



GDP at current pricesa (T$ m) 201.0 214.8 229.5b 343.5b n/a

Real GDP growtha (%) 4.7 2.6 1.6b 3.0b n/a


Population (’000) 100 100 100 100 100b

Exports fob (US$ m) 16.1 13.9 14.6 15.3b n/a

Imports fob (US$ m) 56.6 68.9 77.2 82.9b n/a

Current-account balance (US$ m) –6.0 20.4 n/a n/a n/a




Exchange rate (av; T$:US$) 1.38 1.32 1.27 1.23 1.26

November 6th 1998 T$1.5779:US$1

Origins of gross domestic product 1994b % of total Components of gross domestic product 1991b % of total


Mining 0.2 Government consumption 18.9

Manufacturing 4.5 Gross capital formation 15.5

Electricity, gas & water 1.5 Increase in stocks 1.9

Construction 5.0 Exports of goods & services 20.7

Services 44.1 Imports of goods & services –50.9

GDP at market prices GDP at market prices 100.0 incl indirect taxes & subsidies 100.0

Principal exports 1995 US$ m Principal imports cif 1995 US$ m

Squash 6.6 Food 17.6

Fish products 3.4 Machinery & transport equipment 16.0

Vanilla 2.2 Basic manufactures 15.0

Total incl others 14.6 Mineral fuels 9.6



Japan 42.9 New Zealand 34.2

US 19.0 Australia 16.4

Canada 14.3 US 9.6

Australia 4.8 UK 8.2

New Zealand 4.8 Japan 5.5

a Fiscal years beginning July 1st. b EIU estimates. c Estimates, derived from trading partners’ statistics.

38 Tonga



Prolonged droughtexacerbates the economic

downturn—

The combination of the regional economic downturn and the effects of theprolonged drought has quashed any hopes of a recovery of the Tongan eco-nomy until late in the forecast period. Independent analysts suggest that thefull impact of the drought has yet to hit the ailing economy. Tonga’s main foodexport crop, pumpkin squash, has been devastated by adverse weather condi-tions and there is increasing concern that in the context of falling internationalcommodity prices, many farmers will cease squash production despite govern-ment encouragement for them to persist. A replacement for pumpkin squash interms of suitability to the climate and export earnings will not easily be found,let alone introduced.

—increasing pressure ongovernment resources

The ongoing drought will continue to exert pressure on government resources,which are already overstretched. Severe water shortages in the Ha’apai islandgroup in August and September sparked outbreaks of diarrhoea and vomiting,and the health authorities warned that all drinking water should be boiled. Bymid-October the islands of Mo’unga’one and Lofanga had exhausted theirdrinking water supplies. With water initially having to be shipped in by thedefence force, the government has ordered emergency supplies of pumpingequipment from Australia and New Zealand. Meanwhile, a senior agricultureofficial, Haniteli Fa’anunu, has appealed to Tongan expatriates to respond tothe crisis with financial assistance. While such remittances are expected to rise,so too is the number of Tongans leaving the country.

Review

The parliamentaryspeaker is accused of

improprieties—

A Legislative Assembly committee, comprising three nobles, three people’srepresentatives and the finance minister, Tutoatasi Fakafanua, has completedan inquiry into a petition signed by more than 1,000 Tongans alleging impro-priety on the part of the parliamentary speaker, Honourable Fusitu’a. Thereport, which was approved by parliament on September 29th, was submitted

70

80

90

100

110

120

130

140

150

1980. . . . 85 . . . . 90 . . . . 95 . .

Tonga: Tonga dollar real exchange rates (b)1980=100

T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$T$:US$

T$:¥

T$:US$

T$:¥T$:¥

T$:DMT$:DMT$:DM

T$:US$

T$:¥

T$:US$

T$:¥T$:¥

T$:DMT$:DMT$:DM

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:US$

T$:¥

T$:DM

0

2

4

6

8

10

1993 94 95(a) 96(a)

Tonga

Asia excl Japan

Tonga: gross domestic product % change, year on year

(a) EIU estimates. (b) Nominal exchange rates adjusted for changesin relative consumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

Tonga 39


to the head of state, King Taufa’ahau Tupou IV, who will decide whether or notaction should be taken. The petitioners alleged that parliament had been de-ceived into paying legal fees incurred by Mr Fusitu’a in a contempt of courtcase; that he had improperly authorised payments to a minister attending the1996 Olympic Games in Atlanta, US; and that he had failed to release auditors’reports on parliamentary expenditure. The Honourable Fulivai, a nobles’ repre-sentative for Vava’u, who chaired the committee, informed the local news-paper The Tonga Chronicle that no evidence of malfeasance had emergedregarding the payments and that, as to the auditors’ report, official procedurerequired that it be submitted to the prime minister before transmission toparliament. The speaker had no authority to table the report unless directed todo so by the prime minister.

—but the LegislativeAssembly is in recess until

February

Following a decision by the Privy Council, which comprises the king and hiscabinet, parliament broke for recess on October 14th, with the 1999 budget thelast issue to receive attention. According to the independent local journal theTimes of Tonga the early closure was due to a lack of funds to pay members ofparliament. This is the final year of the current parliament’s three-year term,and a legislative election is expected in February 1999. In his speech to closethe parliamentary session, the king indicated that negotiations were under waywith the US authorities to lease more land for agriculture in Hawaii. Tongansare already farming leased land in Hawaii and Papua New Guinea.

Kava production increasesas foreign demand surges—

Drought conditions continued to wreak havoc with Tongan agriculture in thethird quarter, affecting the production of root crops for the domestic marketand causing food prices to rise. The latest available data on exports of food andcash crops point to mixed results. Kava producers throughout the Pacific regionhave experienced soaring demand from Europe and the US, as kava has becomea fashionable and a legal drug of choice. Tongan kava, particularly from theVava’u region, is of high quality and, according to the National Reserve Bankof Tonga (NRBT, the central bank), a survey produced by the Ministry ofAgriculture in 1998 indicated that roughly 1,300 acres of land were under kavacultivation, double the 1997 level. According to the central bank, kava sales arecurrently realising around T$12 (US$7.50) per kg for the root, T$8 for the stemand T$3 for the rest of the plant, which is of the pepper family.

—but falling prices hit thevanilla sector—

The NRBT has indicated that subdued world vanilla prices are affecting exportrevenue levels, with the Vava’u region suffering the most. Whereas A-gradegreen vanilla beans sold at around T$8/kg in 1997, prices have halved in 1998.Plummeting prices have caused farmers to neglect their plantations or substi-tute alternative crops, while a Ministry of Agriculture survey suggests that 20%of the 1,855 acres under vanilla cultivation in Vava’u are either non-producingor neglected.

—and the squash harvestis devastated by drought

The pumpkin squash harvest, which began in the last week of September,attests to the severity of the drought that has plagued the southern and centralPacific region since late 1997. The previous official forecast of 7,000 tonnes in1998 is now out of reach. Given the dearth of rainfall on Tongatapu andVava’u, the main growing areas, Tonga’s 1998 export quota of 15,000 tonnes

40 Tonga


now seems impossible to achieve. By late September the principal export com-panies for the Vava’u group, Friendly Islands Marketing Co-operative (FIMCO)and Tomifaa Fainga’a, had halved their export forecasts for 1998 and cancelledreserved shipping space. Elsewhere, Island Produce Corporation (IPC), the firstcompany to begin harvesting, was unable to produce even 50% of its planned1,500-tonne shipment which was due to leave Tongatapu by October 3rd.

At the end of September the Ministry of Agriculture announced that it wouldprovide squash farmers with two hours of free ploughing to prepare for thenext crop if they had been forced to sell their tractors or could not afford to hirethem. The aim of the programme was to prevent farmers from turning to othermore drought-resistant crops. However, it remains to be seen if the sector canbe preserved in the long term. Squash producers have been further hit byoverproduction in the Hokkaido region of Japan, exacerbated by a slump indemand associated with the Japanese economic downturn.

Produce exports to NewZealand are set to rise

Potentially important new export markets for fruit and vegetables in NewZealand and Fiji have been established with the commissioning and certifica-tion of new hot-air fumigation facilities in Nuku’alofa in September. More than50 cartons of lesi, or papaya, and 11 cartons of tomatoes were exported to NewZealand in mid-September, just days after the formalities were completed. Bylate October papaya exports had reached 3 tonnes a week. The shipment, thefirst since 1994, was welcomed by the head of Tonga’s quarantine service, SioneFoliaki. The New Zealand authorities have also shown an interest in increasingimports of two types of papaya developed in Hawaii, Solo Waimanalo and SoloSunrise, which command prices of around T$3.50-5.00 (US$2.20-3.10) each.The Ministry of Agriculture has indicated that papaya exports could become analternative to pumpkin squash exports, especially as no pesticide treatmentwould be required during the growing period.

The current-accountdeficit widens

considerably

According to the latest Quarterly Bulletin published by the central bank, thebalance-of-payments position deteriorated considerably in the first quarter of1998, with the current-account deficit widening to T$17.1m (US$10.6m),around 7% of GDP. The NRBT has attributed the increase to a 15.4% expansionof credit in the year to March 1998. The credit was absorbed by a new private-sector electricity generating company, controlled by a member of the royalfamily, which was contracted to supply power to the Tonga Electric PowerBoard. Most of the generating equipment had to be imported, putting pressureon foreign reserves. The credit rise also facilitated an 11.7% increase in privatemortgages and a 10.1% hike in personal loans. As far as electricity generation isconcerned, official data suggest that in the second quarter the number of elec-tricity consumers increased by 1.8%, while prices fell from 36 cents/kw to27 cents/kw.

Tonga 41


Tonga: domestic credit(T$ ’000)

1997 1998 3 Qtr 4 Qtr 1 Qtr 2 Qtr

Foreign assets (net) 30,813 28,923 19,117 16,366

Domestic credit 71,434 76,107 81,523 82,952 Claims on central government (net) 4,045 5,474 4,270 771 Claims on non-financial public enterprises 496 164 48 603 Claims on private sector 64,343 68,094 75,030 78,903 Claims on other banking institutions 2,550 2,375 2,175 2,675Source: IMF, International Financial Statistics.

Interest rates rise asforeign-exchange reserves

tumble

By mid-September the NRBT was forced to increase interest rates and commer-cial banks’ reserve requirements in a bid to quell import demand and stop thedepletion of foreign-exchange reserves, which fell by 36% to a precarious$15.7m in the seven months to July 1998. On September 18th the central bankannounced its decision to raise the minimum lending rate—the base rate forcommercial banks to borrow from the NRBT—from 7% to 9% and the reserveratio for commercial banks from 10% to 12%. According to NRBT officials, thebank had been monitoring the decline in foreign-exchange reserves closely.Although official and IMF statistics on foreign-exchange reserves at the end ofthe third quarter have yet to be released, the NRBT indicated that levels wereequivalent to just under 2.5 months’ import cover. The NRBT’s target is mini-mum cover of 3 months.

While the NRBT is hoping that the tightening of monetary policy will facilitatethe recovery of reserve levels, it has also rightly indicated that the revitalisationof the export sector is crucial if reserves are to be built up in the medium andlong term. A package of measures is being prepared to stimulate growth inexport and productive sectors, and is to be submitted to the government.

Tonga: foreign-exchange reserves, 1998($ m; end-period)

Jan Feb Mar Apr May Jun Jul Aug

Foreign-exchange reserves 24.63 22.03 18.55 17.84 16.46 17.34 15.71 15.45

SDRs 0.14 0.16 0.16 0.16 0.17 0.17 0.17 0.19

Reserve position in the Fund 1.63 1.63 1.62 1.63 1.62 1.61 1.61 1.62

Total reserves (excl gold) 26.40 23.83 20.32 19.63 18.25 19.13 17.49 17.26Source: IMF, International Financial Statistics.

42 Tonga


Vanuatu

Political structure

Official name Republic of Vanuatu

Form of state Parliamentary, based on the UK model

The executive Council of Ministers, made up of 12 members of parliament chosen by the primeminister, who is in turn elected by parliament from among its members

Head of state The president, Harold Martin, was elected in 1995 for a four-year term by an electoralcollege drawn from members of parliament and heads of local government

National legislature Unicameral parliament, 50 members elected for four-year terms; universal franchisecontaining an element of proportional representation

Regional legislature The National Council of Chiefs, elected from the district councils of chiefs, existsalongside parliament to discuss and be consulted on matters relating to custom andtradition

Legal system System of magistrates’ courts leading to Supreme Court at apex

National elections March 6th 1998; next election due by March 2002

National government Donald Kalpokas, the prime minister, heads a coalition comprising the Vanua’akuPati, the John Frum group, the Vanuatu Republican Party and one independent

Main political organisations Union of Moderate Parties (UMP); National United Party (NUP); Vanua’aku Pati (VP);Vanuatu Republican Party; John Frum group

Members of Council ofMinisters

Prime minister, minister for foreign affairs, the comprehensive reform programme, trade & the public service Donald Kalpokas (VP)Deputy prime minister & minister for business development Willie Jimmy (UMP)

Key ministers Agriculture, forestry & fisheries John Morsen Willie (VP)Education, youth & sports Joe Natuman (VP)Finance Sela Molisa (VP)Health Jean S Keasipai (John Frum group)Infrastructure, utilities & public works Henry Taga (UMP)Internal affairs & justice Vincent Boulekone (UMP)Lands, geology & mines Silas Hakwa (VP)

Vanuatu 43


Economic structure



GDP at current prices (Vt m) 23,779 24,962 26,633 27,679a 29,308a

Real GDP growth (%) 4.5 2.5 3.2 3.0 3.5b


Population (m) 0.16 0.16 0.17 0.18 0.18a

Exports fob (US$ m) 17.4 25.1 28.3 30.2 n/a

Imports fob (US$ m) 64.7 74.7 79.4 97.0 n/a

Current-account balance (US$ m) –14.9 –19.8 –18.3 –22.0a n/a




Exchange rate (av; Vt:US$) 121.6 116.4 112.1 111.7 115.9

November 6th 1998 Vt128.42:US$1



Manufacturing 6.4 Government consumption 27.0

Electricity, gas & water 1.5 Fixed investment 30.5

Construction 6.0 Stockbuilding 2.1

Trade 27.9 Exports of goods & services 45.2

Transport & communications 7.7 Imports of goods & services –54.8

Finance 13.3 Statistical discrepancy 2.0

Other services 14.4 GDP at market prices 100.0

GDP at constant factor cost 100.0

Principal exports 1995 US$ m Principal imports cif 1995 US$ m

Copra 9.8 Machinery & transport equipment 28.8

Beef 3.8 Basic manufactures 18.3

Timber 2.2 Food & live animals 13.0

Cocoa 1.1 Miscellaneous manufactured goods 9.6

Total incl others 28.3 Mineral fuels 7.1



Japan 27.6 Japan 46.6

Spain 20.7 Australia 23.0

Germany 13.8 Singapore 8.1

Côte d’Ivoire 6.9 New Zealand 5.6

UK 6.9 France 3.1

a EIU estimate. b Asian Development Bank estimate. c Estimates, derived from trading partners’ statistics.

44 Vanuatu



The collapse of theVP-NUP may jeopardise

crucial reforms—

Vanuatu’s long-term economic prospects and the government’s commitmentto the comprehensive reform programme (CRP), which is underwritten by theAsian Development Bank (ADB), appear to rest on the personal credibility ofthe prime minister, Donald Kalpokas. While the dissolution of the Vanua’akuPati (VP)-National United Party (NUP) coalition just seven months after gen-eral election in March (2nd quarter 1998, page 43) was disappointing, it waswidely expected. The salient question now is whether it will hinder the imple-mentation of the CRP. Despite the political wrangling and in-fighting spawnedby the collapse of the coalition, for the moment all politicians associated withthe CRP have reiterated their commitment to the programme and havepledged to redouble their efforts to strengthen national support for it. Emer-gent political schisms along linguistic lines paint a less encouraging picture,however. In the first round of redundancies associated with public-sectordownsizing, a cornerstone of the CRP, 124 retrenched workers were Englishspeakers and 108 francophone. Both former colonial powers, the UK andFrance, will make every effort to demonstrate support for the CRP, but thisalone will not salvage it from political scrambling.

—and tough times lieahead for the economy

Although the latest available data suggest that the economy performed surpris-ingly well in 1997 despite the Asian economic downturn—exports of key com-modities, especially copra, rose in both price and volume terms—this trendappears to have been reversed in the first three quarters of 1998, and averagereal GDP growth has been estimated at no more than 1% for the year. Accord-ing to the ADB, contrary to promises made in the CRP, real falls in livingstandards are expected in the forecast period, given Vanuatu’s high rate ofpopulation growth.

60

80

100

120

140

1980. . . . 85 . . . . 90 . . . . 95 . .

Vanuatu: vatu real exchange rates (b)1980=100

Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$Vt:US$

Vt:¥

Vt:US$

Vt:¥Vt:¥

Vt:DMVt:DMVt:DM

Vt:US$

Vt:¥

Vt:US$

Vt:¥Vt:¥

Vt:DMVt:DMVt:DM

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:US$

Vt:¥

Vt:DM

0

2

4

6

8

10

1993 94 95 96 97

Vanuatu

Asia excl Japan

Vanuatu: gross domestic product % change, year on year

(a) Asian Development Bank estimate. (b) Nominal exchange ratesadjusted for changes in relative consumer prices.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)(a)

Vanuatu 45


Review

The NUP is dismissed fromgovernment—

The prime minister and leader of the ruling Vanua’aku Pati (VP), DonaldKalpokas, expelled the National United Party (NUP) from the government onOctober 19th declaring that the party’s leader, Father Walter Lini, could nolonger be trusted. The NUP ministerial positions were promptly filled by mem-bers of the Union of Moderate Parties (UMP) and the so-called John Frumgroup (see box). Mr Kalpokas explained that he was left with no choice but todissolve the coalition. Despite Father Lini’s recent assurances that the coalitionwas functioning effectively, it emerged that the NUP had organised and spon-sored meetings with opposition leaders at Luganville, on the island of EspirituSanto, and on Tongoa island, in the Shepherds group, to plan a new coalitiongovernment excluding the VP. Mr Kalpokas also alleged that Father Lini wasinstrumental in drafting a no-confidence motion in the government. Mean-while, at the NUP congress on Tongoa, the NUP derided its dismissal from thecoalition, and the party executive was directed to combine forces with the UMPand Melanesian Progressive Pati (MPP) to “unify Vanuatu”.

—and tensions mount inthe UMP

The former prime minister and UMP leader, Serge Vohor, claimed that he wasunaware of the decision by UMP members of parliament to join the govern-ment, and maintained that the new deputy prime minister, Willie Jimmy, wasnot authorised to enter into a coalition on behalf of the party, particularlygiven that Vincent Boulekone and Henry Taga are, respectively, vice-presidentand secretary-general of the UMP. The UMP parliamentarians’ action was allthe more surprising in light of the joint statement issued by Mr Kalpokas andFather Lini on September 24th, after they held talks on the growing rumoursabout changes in government. The then coalition partners confirmed that thealliance would not be dissolved, and that the government would complete itsfour-year term.

Mr Kalpokas reiterates hiscommitment to the CRP—

The prime minister was keen to signal to islanders, key international donors andthe Bretton Woods institutions that the comprehensive reform programme(CRP) would remain on course, and would not be delayed or altered by thechanges in government. In particular, he gave assurances that the issues of goodgovernance, transparency and accountability would receive the full attention of

The new cabinet, October 1998

Deputy prime minister: Willie Jimmy (UMP, Port Vila)

Minister of internal affairs and justice: Vincent Boulekone (UMP, Pentecost)

Minister of infrastructure and public utilities: Henry Taga (UMP, Port Vila)

Minister of health: Jean S Keasipai (John Frum group,Tanna)

Assistant minister for ni-Vanuatu business development: Paul Telukluk(UMP, Malekula).

46 Vanuatu


the VP and any “partners of goodwill” in government, and that private-sector-led economic growth would remain the central objective. However, the politicalupheaval forced the postponement of the second national summit meeting onthe implementation of the CRP, scheduled for October 21st. An alternative datewas not announced immediately, and a senior official indicated that new min-isters would have to be briefed first.

—and the new LeadershipCode comes into effect

The Leadership Code Act came into effect in September, and Mr Kalpokasurged politicians to ensure that they were familiar with its provisions. Theprime minister said that the code was essential to restoring the rule of law inVanuatu, and formed the cornerstone of the CRP. Strict standards of behaviourhave been laid out for those in leadership positions in public and privateforums alike. The act empowers the ombudsman and the police to investigatepossible breaches of the Leadership Code, with the public prosecutor givenpower to initiate legal proceedings against offenders. Possible penalties includelarge fines and dismissal.

A national census is to beheld in 1999

The government has announced plans to conduct a national census in 1999,the second since independence. A census office has been established within theNational Statistics Office.

Appalling prisonconditions are exposed—

According to a report by Amnesty International, conditions in Vanuatu’sprison system were found to be appalling when the international human rightswatchdog investigated allegations of ill treatment following the arrest of some500 suspected rioters after a state of emergency was declared in January(1st quarter 1998, page 46). Two weeks after the state of emergency ended inFebruary, an Amnesty delegate visited Port Vila to investigate the allegationsand found that prison buildings were unsafe owing to earthquake-related struc-tural damage and water seepage, and that accommodation for female prisonerswas not secure. According to the delegate, safety concerns led to the evacuationof all male, but not female, prisoners from the country’s main prison in August.Moreover, Amnesty denounced the conditions for male prisoners as cruel,inhumane and degrading in a decaying, overcrowded, former colonial prison.Sentenced prisoners were held along with those awaiting trial and there was noseparation between juvenile and adult offenders.

—and the governmentcracks down on police

brutality

According to Amnesty, in late September some 20 officers of the Vanuatupolice and military force were prosecuted on charges of assaulting prisoners.The charges were brought after a doctor informed the police commissioner thatone prisoner might die from injuries consistent with severe beatings duringinterrogation. Amnesty commended the Vanuatu authorities for acting swiftlyon the allegations. Meanwhile, the police commissioner, Peter Bong, reiteratedthat prison conditions concerned both the government and the police, andthat their improvement was a crucial aspect of the CRP. Mr Bong did, however,lament the fact that while the implementation of many Amnesty recommend-ations had begun, lack of funds was still a problem.

The former chief justicewins a legal battle

The former chief justice, Vaudin D’Imecourt, won a court case against thegovernment in October for wrongful dismissal. The Supreme Court found that

Vanuatu 47


there had been a clear breach of legal procedure in that Mr D’Imecourt hadbeen wrongfully declared an undesirable immigrant by the Judicial ServicesCommission (JSC) under the Immigration Act and that he had not had anopportunity to present his case to the JSC. Mr D’Imecourt’s lawyer acceptedthat it was inappropriate to seek his reinstatement, but sought the payment ofthe balance of his contract. According to the Supreme Court, further evidencewas required for such a payment.

The prospects foreconomic growth are

limited—

According to the latest available data from the Asian Development Bank (ADB),average real GDP growth reached 3.5% in 1997, but is projected to fall toaround 1% in 1998. The ADB attributes the sharp rises in copra, beef andtimber exports to economic expansion in 1997. Growth in copra sales wasparticularly high, at 57%, thanks to increases in both volume and price terms.The tourism sector, Vanuatu’s largest foreign-exchange earner, recorded steadyif sluggish growth. The ADB warned that economic performance had beenerratic in recent years, with increases in real GDP barely keeping pace withpopulation growth, estimated to have averaged 2.4% a year since 1990. Theslowdown in growth in 1998, which implies a decline in GDP per head, andwas attributed to several factors. First, copra exports had fallen by an estimated10-15% in price terms and 25% in volume terms in 1997. Second, demand forbeef and timber in the country’s main export markets had been severely af-fected by the Asian economic downturn. The ADB estimates that beef andtimber exports have fallen by 10% and 33% respectively in 1998, largely be-cause of declining prices. Tourism receipts, meanwhile, are also projected tonose-dive in 1998, largely because of political instability in the first quarter ofthe year following the publication of the Ombudsman’s report on the VanuatuNational Provident Fund (VNPF; 1st quarter 1998, page 45).

—as the trade deficitwidens—

The ADB estimates that the trade deficit will have widened considerably in1998 owing to reduced export receipts and an increase in imports, possibly ashigh as 30%. The rise in imports is attributed to a surge in private con-sumption, mainly of food products, which followed the pay-out of MPs con-tributions from the VNPF. The current-account deficit is estimated to havemore than doubled from Vt2bn ($17.3m) in 1997 to Vt4.7bn in 1998, equiva-lent to nearly 17% of GDP.

Vanuatu: ADB lending as of Apr 30th 1998(US$ m)

Development Bank of Vanuatu 1.0

Agricultural extension projects & training 1.1

Multiprojecta 3.0

Espiritu Santo Port 5.8

Espiritu Santo Port (supplementary) 3.4

Development financeb 5.0

Urban infrastructure 10.0

Total 29.3

a Umbrella funding for a variety of projects. b An undisbursed balance of $533,000 for developmentfinance was cancelled.

Source: Asian Development Bank.

48 Vanuatu


—and the ADB stressesmacroeconomic stability

and good governance

The restoration of macroeconomic stability and institutional reforms to pro-mote good governance to attract foreign direct investment (FDI) should be atthe top of the government’s agenda, according to the ADB. The bank warnedthat the combination of political turmoil and a lack of accountable governmenthad severely eroded business confidence since the mid-1990s. The bank alsohighlighted the fact that public finances had deteriorated steadily since 1989,and that between 1994 and 1997 government expenditure had increased threetimes faster than revenue. The financing of VNPF refunds in the first quarter of1998 had left the country vulnerable to a serious fiscal and monetary crisis.

The ADB acknowledged that the CRP addressed the issues of macroeconomicand governance reforms, particularly through the enactment of a leadershipcode and the approval of fresh financial legislation. However, the bank warnedthat the CRP should be a participatory process, not a set of regulations imposedfrom above.

Vanuatu: technical assistance by donor and sector(US$ ’000 unless otherwise indicated)

No. of projects ADB Japan Other Total % of total

Agriculture & agro-industry 5 542.0 0.0 85.0 627.0 8.4

Finance 4 958.0 0.0 0.0 958.0 12.9

Energy & industry 2 227.8 0.0 0.0 227.8 3.1

Social infrastructure 5 675.0 946.0 0.0 1,621.0 21.8

Transport & communications 4 1,387.0 0.0 0.0 1,387.0 18.6

Multiproject & others 12 2,569.0 50.0 0.0 2,619.0 35.2

Total 32 6,358.8 996.0 85.0 7,439.8 100.0Source: Asian Development Bank.

Vanuatu 49


Other island countries

Palau

The government aims for250,000 tourists by 2005—

Entering its fifth year of independence, Palau looks likely to consolidate itsposition as the boom economy of the South Pacific Forum with medium-volume, high-value tourism expanding apace. In a paper delivered to theForum in August, the president, Kuniwo Nakamura, confirmed that the tour-ism sector now accounts for 53% of annual GDP, providing employment for27% of the workforce and contributing US$10m to domestic revenue in directand indirect taxes. Tourism-related employment has doubled since 1990, to1,600. According to Mr Nakamura, Palau had nearly 75,000 visitors in 1997, a 40%increase on 1995 and double the number of tourists in 1992. Total receipts fromtourism rose from US$12.5m in 1991 to over US$70m in 1997, while averageexpenditure per tourist increased from US$624 in 1994 to over US$1,000 in 1997.

Despite the economic downturn in Asia, visitor numbers in the first half of1998 fell by only 9%. The resilience of the tourism sector has led the govern-ment to announce the ambitious target of 250,000 visitors by 2005, which isconsidered environmentally sustainable.

—and is seeking todiversify the sector—

President Nakamura indicated that the government is seeking to diversify thetourism sector in addition to expanding it, and would like to attract touristsother than scuba divers and entice a more geographically diverse clientele.There are now more than 17 scheduled flights a week to Palau, in addition todirect charter flights from Japan and other Asian countries. Negotiations to addmore scheduled flights are under way with Japan, Taiwan and Papua NewGuinea. Construction of a new international air terminal is due to begin beforethe end of 1999. According to Mr Nakamura, Palau currently has 1,200 hotelrooms. Construction of a five-star, 450-room resort began in August. Thegovernment’s goal is to have 3,500 quality hotel rooms by 2005.

Mr Nakamura said that for some time Palau had recognised that it could notattract visitors and foreign direct investment (FDI) unless it had adequate andconsistent water and electricity supply, sanitation facilities, and communi-cations. A modern communications system now extends throughout each ofPalau’s 16 states and from the northernmost to the southernmost islands—Palau comprises 8 principal islands and 252 smaller ones. By the end of 1998all states will have 24-hour water and electricity services, and work is due tocommence on an 85-km paved road encircling the main island, Babeldaob.

—through a vigorousmarketing campaign—

President Nakamura said that the tourism industry was being underpinned bystrong promotional campaigns in Japan, Taiwan, Europe and the US, in add-ition to Internet marketing, through which a wider market could be accessed ata fraction of the cost. He added that Palauans recognised that visitor numberscould not simply be increased at the expense of environmental sustainabilityand cultural heritage. The government has apparently rejected the option of

50 Other island countries


transforming Palau into a mass-market destination with high-rise hotels and alarge foreign workforce.

—but a high trade deficitis the price to pay

The vice-president and regional economist of the Bank of Hawaii, Wali Osman,warned that one consequence of the growth in tourism would be that themerchandise trade deficit would remain high unless the country minimisedraw materials imports, as well as those of capital and consumption goods.Mr Osman added that Palau’s reliance on imports would not be offset by serv-ices exports, even though they were rising, and that the drop in the contrib-ution of exports to GDP from 20.4% in 1990 to 9.9% in 1996 might swell thetrade deficit. According to the latest available official data, Palau earnedUS$14.3m from fishing fees levied on foreign vessels and small quantities ofmerchandise exports in 1996, a 16% drop in nominal terms on the 1990 levelof US$17.1m. While total exports remained in decline, merchandise importsrose from US$32.3m in 1990 to US$72.4m in 1996. Consequently, the tradedeficit had soared from 15.2% of GDP in 1990 to 58.1% of GDP in 1996.

Other island countries 51


Quarterly indicators and trade data

Fiji: quarterly indicators of economic activity

1996 1997 1998

2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr

Exports Qtrly totals

Sugar ’000 tonnes 60.5 216.8 170.7 0.0 38.9 132.3 140.2 16.6 26.5 0.0a

Tourism

Visitor arrivals ’000 76 101 92 84 84 100 92 78 95 74b

Prices Monthly av

Consumer prices: 1990=100 124.7 124.7 124.6 128.5 129.8 128.2 128.2 132.3 135.5 137.3

change year on year % 3.4 3.6 2.5 3.8 4.1 2.8 2.9 3.0 4.4 7.1

Money & banking End-Qtr

M1, seasonally adj: F$ m 444.5 483.8 453.6 419.0 391.4 463.1 443.5 464.3 472.0 441.9c

change year on year % 18.9 34.8 18.4 –1.2 –12.0 –4.3 –2.2 10.8 20.6 n/a

Commercial banks:

total depositsd F$ m 1,455.9 1,483.2 1,459.0 1,375.8 1,348.5 1,367.5 1,334.6 1,335.2 1,330.2 n/a

loans & advances “ 1,134.6 1,169.2 1,168.2 1,178.1 1,169.2 993.8 1,020.0 1,030.0 1,008.3 n/a

Foreign trade &

payments Qtrly totals

Exports fobe F$ m 229.9 385.9 249.4 124.1 196.4 349.0 203.5 168.5 n/a n/a

Imports cif “ 327.8 405.2 359.1 300.4 342.2 421.2 328.9 334.3 n/a n/a

Government revenue

Total F$ m 186.3 189.8 225.6 155.1 202.2 195.6 250.6 158.8 n/a n/a

income taxes ” 100.5 107.4 125.3 85.5 111.6 113.0 135.1 87.8 n/a n/a

Exchange holdings End-Qtr

Foreign exchange US$ m 302.0 350.2 401.3 347.3 327.9 334.7 335.5 344.2 317.6 316.0c

Exchange rate

Official rate F$:US$ 1.404 1.397 1.384 1.411 1.421 1.472 1.549 1.942 2.047 2.045

Note. Annual figures of most of the series shown above will be found in the Country Profile.a July only. b Total for July-August. c End-August. d Demand, savings and time deposits. e Includes re-exports.

Sources: ISO, Statistical Bulletin; Fiji, Bureau of Statistics; IMF, International Financial Statistics; Reserve Bank of Fiji, Quarterly Review.



Samoa: quarterly indicators of economic activity

1996 1997 1998


Prices Monthly av

Consumer prices: 1990=100 124.2 125.5 126.7 131.3 132.0 137.1 133.4 134.4 138.5 140.8a

change year on year % 4.1 5.7 7.0 6.7 6.3 9.2 5.3 2.4 4.9 n/a

Money End-Qtr

M1, seasonally adj: Tala m 47.85 52.65 51.28 52.65 58.63 55.69 62.47 54.53 57.36 61.69b

change year on year % –2.0 –6.2 –1.6 3.7 22.6 5.8 21.8 3.6 –2.2 n/a

Foreign trade Qtrly totals

Exports fobc Tala ’000 6,242 7,552 5,787 8,422 8,757 11,009 10,343 10,091 10,887 4,678a

Imports cif “ 56,378 66,231 62,496 62,394 58,238 66,284 60,461 59,957 61,762 21,436a


Foreign exchange US$ m 48.92 52.84 56.82 57.45 58.56 58.03 60.39 56.79 58.44 60.64b

Exchange rate

Official rate Tala:US$ 2.452 2.434 2.434 2.472 2.533 2.612 2.766 2.884 3.106 3.074

Note. Annual figures of most of the series shown above will be found in the Country Profile.a July only. b End-August. c Includes re-exports.

Source: IMF, International Financial Statistics.

Solomon Islands: quarterly indicators of economic activity

1996 1997 1998


Prices Monthly av

Consumer prices: 1990=100 192.6 193.6 195.7 203.8 209.2 209.5 212.1 222.8a n/a n/a

change year on year % 13.2 10.5 9.2 7.2 8.6 8.2 8.4 n/a n/a n/a

Money End-Qtr

M1, seasonally adj: SI$ m 183.80 190.72 197.16 201.70 205.75 218.34 212.45 195.71 200.04 224.05

change year on year % 11.4 30.3 15.8 7.1 11.9 14.5 7.8 –3.0 –2.8 2.6

Foreign tradeb Qtrly totals

Exports fob US$ 33.6 48.4 78.4 39.5 42.7 58.5 42.9 n/a n/a n/a

Imports fob “ 32.9 34.5 44.7 34.1 38.8 40.8 41.0 n/a n/a n/a


Foreign exchange US$ m 28.0 28.6 31.8 28.6 30.2 32.3 35.6 30.7 32.1 35.6

Exchange rate

Official rate SI$:US$ 3.550 3.587 3.622 3.648 3.681 3.870 4.748 4.785 4.799 4.933

Note. Annual figures of most of the series shown above will be found in the Country Profile.a January only. b DOTS estimates. Include re-exports.

Sources: IMF, International Financial Statistics; Direction of Trade Statistics, quarterly.

Quarterly indicators and trade data 53


Tonga: quarterly indicators of economic activity

1996 1997 1998


Prices Monthly av

Consumer prices 1990=100 127.9 127.1 126.7 128.6 130.4 130.1 130.6 132.3 134.6 128.2a

change year on year % 3.8 2.3 1.8 1.2 2.0 2.4 3.1 2.9 3.2 n/a

Money End-Qtr

M1, seasonally adj T$’000 23,399 21,662 21,797 24,695 22,467 22,597 22,603 22,998 23,197 23,166b

change year on year % –7.8 –10.7 –4.0 3.2 –4.0 4.3 3.7 –6.9 3.2 n/a


Exports fobc T$’000 1,499 1,881 8,649 1,723 1,618 n/a n/a n/a n/a n/a

Imports cif “ 22,517 24,379 24,249 17,595 23,805 n/a n/a n/a n/a n/a


Foreign exchange US$ m 25.06 22.32 28.77 27.60 29.32 29.50 25.72 18.55 17.34 15.45d

Exchange rate

Official rate T$:US$ 1.232 1.219 1.213 1.227 1.251 1.290 1.362 1.385 1.502 1.609d

Note. Annual figures of most of the series shown above will be found in the Country Profile.a July only. b End-July. c Includes re-exports. d End-August.


Vanuatu: quarterly indicators of economic activity

1996 1997 1998


Prices Monthly av

Consumer prices: 1990=100 121.6 122.0 120.0 122.6 124.3 125.0 126.1 125.9 126.3 n/a

change year on year % 2.9 1.8 –0.1 1.4 2.2 2.5 5.1 2.7 1.6 n/a

Money End-Qtr

M1, seasonally adj: Vt m 6,314 6,449 6,425 6,342 6,513 6,174 6,525 7,442 7,085 7,234a

change year on year % 15.3 13.8 3.3 1.9 3.2 –4.3 1.6 17.4 8.8 n/a


Exports fobb Vt m 1,091 990 719 1,080 724 1,339 950 703 802 n/a

Imports cif “ 2,748 2,988 2,693 2,370 2,573 2,910 3,035 1,909 3,168 n/a


Foreign exchange US$ m 44.43 39.87 39.82 40.54 34.00 38.70 33.34 21.67 21.14 34.78

Exchange rate

Official rate Vt:US$ 111.4 111.2 110.8 112.8 115.1 118.1 124.3 124.3 130.5 130.9

Note. Annual figures of most of the series shown above will be found in the Country Profile.a End-August. b Includes re-exports.




Pacific Islands: direction of tradea

(US$ m)

Fiji Solomon Islandsb Vanuatu Samoa Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

1996 1997 1996 1997 1995 1996 1995 1996

Imports cifAustralia 428 427 65 66 32 37 28 39China 16 22 1 1 2 1 n/a 0Fiji – – n/a n/a n/a n/a 12 14Germany 6 6 1 1 3 1 1 3Hong Kong 19 23 5 4 3 3 1 1Japan 41 49 15 17 62 75 30 26New Zealand 141 145 11 9 10 9 50 45Singapore 58 58 13 25 13 13 6 2UK 13 19 3 1 n/a n/a 1 2US 30 36 7 2 1 1 8 13Total incl others 876 920 147 155 142 161 144 155

ExportsAustralia 211 210 2 3 4 1 51 50Germany 2 2 2 7 5 4 1 2Hong Kong 6 6 1 2 n/a n/a n/a 1Japan 60 31 104 106 7 8 1 0Malaysia 20 19 2 5 n/a n/a 0 0New Zealand 29 31 1 1 n/a n/a 4 4Portugal 16 n/a n/a n/a n/a n/a 0 0Spain 1 1 32 n/a 4 6 0 0UK 127 90 9 14 2 2 0 0US 76 86 2 1 n/a 1 1 1Vanuatu n/a n/a 10 n/a – – n/a n/aTotal incl others 714 646 206 183 28 29 60 63

a DOTS estimates. b Imports fob.

Source: IMF, Direction of Trade Statistics, yearbook, quarterly.

Pacific Islands: main commodities exported

Solomon Fiji (F$ m) Islandsa (SI$ m) Vanuatu (Vt m) Samoa (US$ ’000)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Sep Jan-Sep Jan-Dec Jan-Dec 1996 1997 1994 1995 1994 1995 1995 1996

Beef & veal n/a n/a n/a n/a 310 330 n/a n/a Fish 60.44 50.41 99.1 145.7 n/a n/a 176 629 Sugar 301.73 213.45 n/a n/a n/a n/a n/a n/a Coffee n/a n/a n/a n/a 1 5 n/a n/a Cocoa n/a n/a 12.5 13.4 149 104 0 0 Logs & lumber 45.59 34.02 276.9 283.0 197 181 84 342 Copra & copra oil n/a n/a 19.8 32.9 723 875 1,887 1,761 Palm oil n/a n/a 39.9 66.5 n/a n/a n/a n/a Coconut oil 5.58 5.73 2.0 4.1 n/a n/a 3,254 3,309 Gold 81.57 73.96 0.3 0.6 n/a n/a n/a n/a Clothing 189.93 200.13 n/a n/a n/a n/a n/a n/a Total incl others 821.07 714.62 467.9 573.2 1,673 1,880 8,686b 10,047c

a Including re-exports. b Including coconut cream, 1,959. c Including coconut cream, 1,764.

Sources: National sources; IMF, Samoa—Recent Economic Developments..

Quarterly indicators and trade data 55


Documents

Pacific Islands: Fiji New Caledonia Samoa Solomon …...COUNTRY REPORT Pacific Islands: Fiji New Caledonia Samoa Solomon Islands Tonga Vanuatu 4th quarter 1998 The Economist Intelligence