Pacific Islands: Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa

Transcription

1 COUNTRY REPORT Pacific Islands: Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa 1st quarter 1997 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong Kong Tel: (44.171) Tel: (1.212) Tel: (852) Fax: (44.171) Fax: (1.212) /2 Fax: (852) london@eiu.com newyork@eiu.com hongkong@eiu.com Website: Electronic delivery EIU Electronic New York: Lou Celi or Lisa Hennessey Tel: (1.212) Fax: (1.212) London: Moya Veitch Tel: (44.171) Fax: (44.171) This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) Inc (USA) Tel: (44.171) DIALOG (USA) SilverPlatter (USA) Tel: (1.415) LEXIS-NEXIS (USA) Tel: (1.800) M.A.I.D/Profound (UK) Tel: (44.171) Copyright 1997 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission ISSN of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author s and the publisher s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. Symbols for tables n/a means not available; means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

3 1 Contents 3 Summary The region 5 Outlook for Review Fiji 15 Political structure 16 Economic structure 17 Outlook for Review 18 The political scene 20 The economy New Caledonia 25 Political structure 26 Economic structure 27 Outlook for Review 27 The political scene 32 The economy Solomon Islands 34 Political structure 35 Economic structure 36 Outlook for Review 37 The political scene 38 The economy Tonga 42 Political structure 43 Economic structure 44 Outlook for Review 44 The political scene 47 The economy

4 2 Vanuatu 50 Political structure 51 Economic structure 52 Outlook for Review 53 The political scene 56 The economy Western Samoa 59 Political structure 60 Economic structure 61 Outlook for Review 62 The political scene 63 The economy 65 Quarterly indicators and trade data List of tables 8 The region: world commodity price forecasts 21 Fiji: tourism statistics 21 Fiji: foreign trade 22 Fiji: balance of payments, national estimates 22 Fiji: inflation rates, Fiji: quarterly indicators of economic activity 66 Solomon Islands: quarterly indicators of economic activity 66 Tonga: quarterly indicators of economic activity 67 Vanuatu: quarterly indicators of economic activity 67 Western Samoa: quarterly indicators of economic activity 68 Fiji, Solomon Islands, Vanuatu, Western Samoa: direction of trade 68 Fiji, Solomon Islands, Vanuatu, Western Samoa: main commodities exported List of figures 18 Fiji: gross domestic product 18 Fiji: Fiji dollar real exchange rate 36 Solomon Islands: gross domestic product 36 Solomon Islands: Solomon Islands dollar real exchange rate 44 Tonga: gross domestic product 44 Tonga: Tonga dollar real exchange rate 53 Vanuatu: gross domestic product 53 Vanuatu: vatu real exchange rate 61 Western Samoa: gross domestic product 61 Western Samoa: tala real exchange rate

5 3 March 7, 1997 Summary 1st quarter 1997 The region Outlook for : The changing international environment will force Pacific governments to become less aid-dependent and to reduce the public sector. The role of preferential trade agreements will decline and many regional organisations are seeking to redefine their policies. The outlook for the commodities that dominate many regional economies is mixed. Review: The fisheries agency has bought a Vessel Monitoring System and international fisheries agreements are coming under scrutiny, with an emphasis on conservation. Pacific governments are concerned about the transport of nuclear waste across the area. Australian immigration rules may be eased. Both France and Australia have stressed their commitment to the region. Fiji Outlook for : The constitutional deliberations will not reach easy agreement, but the deadline is approaching amidst rumours that the prime minister s position is weak. After a good year in 1996, marred by the effects of a major bank failure on the budget, growth will slow in , but the outlook is positive. The budget deficit will rise to over 8% of GDP in 1996/97 because of the cost of a bank failure, but it is expected to fall thereafter. Review: The parliamentary committee considering the recommendations of a working party on constitutional change has held its sixth meeting and seems reluctant to endorse reform. Lawyers have expressed concern about the administration of the courts. Foreign trade receipts were healthy in 1996 and inflation was moderate. Some capital-account restrictions have been eased. New Caledonia Outlook for : There is every reason to expect the French government to take action to resolve the impasse over mineral rights that is also blocking political dialogue. Long-term growth prospects look good. Review: A complex dispute involving corporate, metropolitan and local interests over an exchange of mineral rights is hindering progress on agreement over how to approach the 1998 deadline for a referendum on independence. The main parties to the political negotiations share some important points of agreement. The economy performed well in 1996; although exports were lacklustre, tourism and mineral output were healthy and inflation was low. Solomon Islands Outlook for : The government claims economic development has stalled. But as an election looms, reform will be pushed to the bottom of the agenda. Despite some problems, the extractive sector will continue to grow and exports will remain buoyant. Review: Legislation reforming provincial government has been overturned by the High Court. Relations with Papua New Guinea have worsened because of the Bougainville crisis. The economy is described as precarious, mainly because of the poor budgetary position, which is getting worse. Exports and tourism have shown buoyancy.

6 4 Tonga Outlook for : Although political wrangling will continue, the royal prerogative will provide ballast. Efforts to rebuild the damaged squash industry will be slow to materialise. Review: The squabbling involving parliament, the press and the courts, has continued. Tonga is trying to rebuild the squash export industry, once a mainstay of the economy. A major hotel development has started. Tonga is outraged about Indonesia s jamming of its satellite earth station on Sumatra. Vanuatu Outlook for : The coalition government is confident of its durability. A return to sustainable growth awaits the enactment of economic and political reforms. Review: There have been calls for MPs to cease quarrelling and many revelations of malfeasance by those in high office and murky plans by recalcitrant members of the paramilitary security force, whose future is under consideration. A reform programme, under the auspices of the Asian Development Bank, is to be enacted. New rules will protect sandalwood. Copra prices have been raised. Western Samoa Outlook for : A recovery in agriculture is boosting growth and the outlook for budgetary revenue is healthy. Review: The political scene is stable. Australia has praised the performance of the government. Agriculture and tourism were strong in Foreign exchange controls are to be eased. A new tuna cannery has been swamped with job applicants. Editor: All queries: Sophie Lewisohn Tel: (44.171) Fax: (44.171)

7 The region 5 The region Outlook for A changing global environment demands new initiatives Most governments in the region are in the process of implementing economic reforms to equip them for a new global environment in which investment, aid and preferential trade arrangements will be harder to find. All governments have relied on these sources of support to varying degrees for many years. The need to find new approaches has highlighted the roles that regional organisations and institutions can play. The initial areas of reform for most governments have been reductions in the size and scale of their own operations; this invariably means calling on outside help, usually the Asian Development Bank (ADB) for advisory and technical assistance and funds. In a keynote speech given to an ADB-sponsored meeting in Suva on development issues on November 28, 1996, Fiji s finance and economic development minister, Berenado Vunibobo, described the constraints on development in the region: small domestic markets, remote locations, a narrow industrial base, shortages of skilled labour and vulnerability to global economic shocks and natural disasters. These had combined to bring growth in income per head more or less to a standstill in the last decade. Many countries in the region bore the twin burdens of large public-sector bureaucracies and weak private sectors. Governments, multilateral financial institutions and donors were now focusing on promoting the private sector and making the public sector more efficient. to resolve the Pacific paradox of high aid and low growth SPARTECA s importance will decline Mr Vunibobo highlighted the most pressing issue confronting donors and recipient countries alike: the Pacific paradox of high levels of aid and low levels of economic growth, which often arose from failings of human resource development and management, and government. In many Pacific Island countries the absence of a strong correlation between the level of public investment and economic growth rates was partly the result of their small size and remoteness. But in addition public investment had been geared towards projects of longterm benefit, such as roads, schools and health facilities, where the economic returns had yet to be realised. He also pointed to the positive impact of development assistance in the region; in raising levels of investment, particularly in human resource development; in funding imports critical for economic development; and in introducing international technical assistance to cover the lack of management and technical skills in the region. Improvements in the utilisation of the region s natural resources were also a prerequisite for higher growth rates. South Pacific Forum governments, such as Fiji, have been pressing for changes in the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), which gives them preferential access to the Australian and New Zealand markets. Australia, however, has been urging new approaches,

8 6 The region including a new regional economic association (4th quarter 1996, pages 13-14, 43-44), rather than fiddling with preference rates and rules of origin. During a visit to Tonga in December the Australian foreign minister, Alexander Downer, indicated that he thought that SPARTECA was decreasing in importance. In the years ahead it would be important for Australian businesses to invest more in Pacific Island countries, help develop raw materials and agriculture, and play a part in developing tourism industries. He hoped that this would happen, but its extent and pace depended very much on the regional governments themselves, on their ability to foster sustainable economic growth and to ensure political stability. Preferential access under SPARTECA was becoming less important as Australia and New Zealand were progressively liberalising their trade regimes through the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC) forum. Developed APEC economies have committed themselves to remove all protection by The South Pacific Forum secretariat seeks to redefine its role as does the South Pacific Commission The South Pacific Forum secretariat, based in Suva, Fiji, is redefining its role with a new structure that took effect on January 1. According to the secretary-general, Ieremia Tabai, the proposed budget of F$14.1m (US$10m), which includes F$3.21m in assessed member contributions, was drawn up to cover the cost of major internal changes. These include phasing out technical programmes and a new approach to the organisation s regional activities which will allow the secretariat to focus on providing policy advice in the key areas of economic policy, international relations, trade and investment. The budget also provides a F$60,000 contribution by Forum Island Countries (FICs) towards the cost of running the newly established Pacific Islands Centre in Tokyo, which is funded by Japan and FICs. The South Pacific Commission (SPC), based in Nouméa, New Caledonia, is also going through a process of restructuring and redefinition. More than 100 delegates from the 26 SPC members met in Saipan, in the Northern Mariana Islands, in November 1996 to endorse the new structure at the annual South Pacific Conference. The changes result from a review commissioned by the new secretary-general, Bob Dun, which recommended measures aimed at making the organisation leaner, more efficient, with more modern management practices, making it more attractive to the international donor community. Many of the recommendations are designed to increase the authority of the secretary-general (who will be known as director-general) and his deputy (currently there are two deputies). It was also agreed that the name of the organisation should be changed to reflect its membership more accurately. A decision on the new name will be made at this year s 50th anniversary conference to be held in Canberra, after a competition held in all Pacific Island secondary schools. In future the conference will be held every two years in October instead of annually and its task will be to appoint the director-general, determine major policy issues and endorse changes to staff and financial regulations once these have been approved by the formal body of officials from member states and territories, known as the Committee of Representatives of Government and Administrations (CRGA).

9 The region 7 Officials will review programmes and performance annually The CRGA is to meet annually in Nouméa and its functions will include examining the work programme evaluation done by the secretariat and approving changes to it; examining and approving policy issues put forward by the secretariat and members; considering applications for the post of director-general and recommending one to the conference; approving work programmes and administrative budgets; and conducting an annual performance evaluation of the director-general. (There is to be a two-term limit for the director-general s post, but the conference was unable to reach consensus on the length of each term.) The SPC is to establish a Small Islands States fund to provide technical, training and other services as required by its small island members. Island member countries and traditional and non-traditional donors are to be invited to contribute to the fund on a continuing basis. The PIDP fights back after drastic funding cuts Investment in fisheries will be hard to find and overcoming the risk factors will not be easy The prime minister of Fiji, Major-General Sitiveni Rabuka, opened a two-day meeting of the standing committee of the Pacific Islands Conference of Leaders (PICL) in Honolulu on February 12. He emphasised that its deliberations were critical to the future of the Pacific Islands Development Programme (PIDP) and its Pacific-wide services. The PIDP (which is sponsored by the East-West Center, a public, non-profit education and research institution based in Hawaii) serves as the research and training arm and secretariat of the conference. It suffered a drastic cut in funding for last year s operations. However, the US government is expected to provide an additional US$500,000 next year for the PIDP-organised training and education programme. Japan s consul-general in Honolulu also presented a cheque for $450,000 on behalf of the Japanese government. The prime ministers of the Cook Islands and Tonga attended the meeting, together with ministers, ambassadors and officials representing the Federated States of Micronesia, French Polynesia, Kiribati, New Caledonia, Papua New Guinea and Vanuatu. In coming years there will be an even greater emphasis on fisheries resources and management. However, even if a fisheries project in the Pacific Islands seemed to make good business sense, it would be difficult to secure the foreign investment necessary, according to a Hawaii attorney, Dean H Robb. At a conference on establishing a tuna industry in the Pacific held in Honolulu in October, Mr Robb pointed to the track record of failed investment in fishing projects, the remote location of most Pacific Island countries, concerns about country-specific and regional risk, the difficulty of collateralising or securing any loan, and the pervasive but ineffective government involvement in fishing enterprises. Most fisheries projects in the region would therefore have to be funded from public sources, because they would not be perceived as secure money-making opportunities by private lenders or investors unless, obviously, they were already involved in commercial fisheries. Mr Robb pointed to one of the main obstacles to raising money, which was securing collateral for the loan. Fishing vessels were notoriously poor collateral because they were mobile, incurred liens, deteriorated and, when sold at foreclosure sales, always made less than projected. In most Pacific Island countries, land also would not serve as a valid collateral for a loan. Most Pacific Island

10 8 The region countries were viewed as having high country risk, not so much because they were likely to nationalise investments, but because they tended to be antibusiness and anti-profit, and had inadequate commercial and legal foundations. Pacific Island countries should develop their commercial legislation and adopt many of the now fairly uniform international commercial laws on the enforceability of arbitration awards. The outlook for commodities is mixed Pacific Island economies which rely on agricultural exports will face constraints arising from the poor outlook for commodity prices in The prices of agricultural commodities such as sugar and copra will fall in Higher Philippine output of lauric oils will lower the prices of coconut and palm kernel oil by about US$100/ton and US$60/ton, respectively, by the end of The price of cocoa will rise rapidly over the forecast period as production shortfalls underpin prices. The region: world commodity price forecasts (US cents/lb unless otherwise indicated) The EIU expects global demand for crude oil to grow more slowly in than in 1996, but supply will pick up assuming the resumption of Iraqi oil exports and higher non-opec production. Oil prices are therefore forecast to weaken from the second half of 1997, which will provide some relief on the import side. Our forecast price for copper has been revised upwards in light of higher than expected growth in demand % change a 1996 % change 1997 % change 1998 % change Copper b (refined) (US$/ton) Nickel (US$/lb) Cocoa c (US$/lb) Coffee d (cents/lb) Sugar e (cents/lb) Crude palm oil f (US$/ton) Palm kernel oil f (US$/ton) Copra f (US$/ton) Coconut oil f (US$/ton) Crude oil g (US$/barrel) a Year on year. b London Metal Exchange. c International Cocoa Organisation daily indicator. d International Coffee Organisation composite indicator price. e International Sugar Association daily average. f Basis: cif Europe. g Weighted average cif cost of International Energy Agency imports. Source: EIU, World Commodity Forecasts. Review A US economist sees scope to upgrade US economic ties with the region A Hawaiian economist has called for a major US initiative to upgrade and expand economic relations between the USA and Pacific Island countries. In a presentation to the Inter-Pacific Bar Association on January 27, Wali M Osman, vice-president and regional economist of the Bank of Hawaii, proposed using as the vehicle for change the Joint Commercial Commission (JCC), which was established with the encouragement of the former US president, George Bush,

11 The region 9 after a meeting with 13 regional leaders in Honolulu in 1990, with the aim of fostering commercial links between businesses in the USA and the Pacific Islands. Although up and running on a limited scale, the JCC has never fulfilled initial expectations. Mr Osman suggested that it was time to consider elevating it to a regional economic and political cooperation forum in the spirit and letter of either the North American Free Trade Agreement (NAFTA) or the Asia-Pacific Economic Cooperation (APEC) forum, for the purpose of fostering economic relations between the USA and Pacific Island countries. Mr Osman also said that the new stipulations of the World Trade Organization (WTO), which are aimed at eliminating subsidies to domestic industries, should not apply to the Pacific Island economies because they are designed rather to regulate large economies which have extensive and varied resources and are less exposed to the challenges of economic change. The regional economic cooperation pact that Mr Osman was describing would make allowances for the special factors shaping these economies and its charter would allow special incentives for US trade and investment interests to explore the region for opportunities. and Island governments are encouraged to expand the private sector Fisheries agency signs contract for vessel monitoring system According to Mr Osman, the important role played by the state in Pacific Island economies has often led to inefficiencies and created obstacles to economic change. An important role for governments now was to help the markets by removing barriers to foreign trade and investment through new measures and legislation. Pacific Island governments should further the expansion of the private sector by privatising essential economic activities such as utilities. Instead of aid and the dependency it often created, the new emphasis for the region should be on the production and distribution of its resources. The Forum Fisheries Agency (FFA) and an Australian professional services and systems integration company, Aspect Computing, signed a contract on November 7 for a regional Vessel Monitoring System (VMS), capable of monitoring the positions of up to 1,000 fishing vessels at any one time and with the potential to raise the number to 2,000 vessels. It will also be capable of securely transferring information on positions to each FFA member country, as required, on a timely basis. The decision to sign followed years of deliberations by the 16 FFA member countries, whose exclusive economic zones (EEZs) cover about 30m sq km in the central and western Pacific. Aspect Computing is one of Australia s largest independent professional services and systems integration specialists. Absolute Communications of New Zealand will provide software consulting and development services, global positioning system-based tracking solutions and computer and network security systems as a subcontractor. International fisheries agreements are under scrutiny in Honiara Four regional fisheries meetings were held at the FFA s base in Honiara, Solomon Islands, on November 21-29: the 12th Special Session of the Parties to the Nauru Agreement; the first Special Meeting of the Federated States of Micronesia Agreement; the first Special Meeting of the Palau Arrangement; and the 30th meeting of the Forum Fisheries Committee (FFC) the body of ministers and ministerial delegates that oversees the FFA and Forum fisheries policies. The

12 10 The region meetings covered a broad range of technical fisheries issues relating to the central and western Pacific. The director of the FFA, Victorio Uherbelau, said decisions taken at the meetings would set the direction and the pace of the gathering movement towards effective in-zone management plans for tuna stocks in the EEZs of FFA member countries, which provide a substantial proportion of total world tuna production. as countries set an example on fisheries conservation South Pacific countries are determined to set an example in conservation and management standards for the region s valuable tuna resources, Akau ola Inoke Faletau, chairman of the FFC, said after its annual meeting in Honiara. Akau ola, who is secretary for fisheries in Tonga, said the 16 member countries of the FFA would convene the Second High-Level Conference on the Conservation and Management of Highly Migratory Fish Stocks in the Central and Western Pacific in Majuro, the Marshall Islands capital, on June Akau ola noted that since the establishment of the FFC in 1979, Pacific Island countries had been united in their stand to develop effective conservation and management arrangements to protect the region s tuna resources. Invitations to the Majuro conference will be sent to other Pacific Island territories, coastal states such as Indonesia and the Philippines and leading fishing countries such as Japan, South Korea, Taiwan, the USA and China. The meeting will look at areas of concern such as the status of stocks, examine the latest scientific data and set the agenda for future meetings. Akau ola said that FFA countries had always acknowledged that no one state or group of states could effectively manage the highly migratory tuna resources in the region. The central and western Pacific is the most productive tuna fishing ground in the world: the gross value of the 1995 catch was estimated at US$1.7bn. Micronesian leaders plan to start a cooperative tuna venture The Council of Micronesian Chief Executives has formed a technical working group to consider the establishment of a tuna cooperative which would be owned by the various Micronesian Island governments. The decision was made at the February annual meeting in Palau of the leaders of the Marshall Islands, Kiribati, Nauru, Palau, the Federated States of Micronesia (national and state leaders), the Commonwealth of the Northern Mariana Islands and Guam. The resolution stated that tuna resources in Micronesia held the region s greatest natural potential for achieving economic self-sufficiency and affecting the exploitation, management and sustainability of the resource could be most effectively addressed through collective efforts. The resolution recognised the efforts of regional and subregional fisheries organisations and stated that the working group would include in its assessment the economic and social impacts, legal and political implications, as well as enforcement, monitoring and research. Governments express grave concern about nuclear waste plans The government of Kiribati last year led a series of protests to the USA in response to the proposals of a US company, Fuel and Security, to store nuclear waste at Palmyra atoll, a US possession 300 miles north of Tabuaeran Island (also known as Fanning) in the easternmost part of Kiribati. An executive of Fuel and Security, Alex Copson, claimed that the company had bought Palmyra for use as a waste dump. Kiribati s concern was supported by all members of the South Pacific Forum at the Majuro meeting in September 1996 and

13 The region 11 by all US territories in the region, and the plan was cancelled by the US government. Palmyra was first suggested as a storage facility for spent nuclear fuel in 1979, and the decision of the South Pacific Forum last year reaffirmed the region s strong opposition to this proposal since that time. In February, however, Greenpeace made public draft legislation prepared for the US Senate that would allow a Russian-US joint venture to establish a nuclear waste facility on nearby Wake Island, also a US possession but subject to a claim by the Marshall Islands that it was a site of great significance for traditional chiefs rituals. Palmyra was again cited as a possible alternative for the waste dump. The joint-venture partners are reportedly the Russian government s ministry of atomic energy (Minatom), and a US company, Nuclear Disarmament Services, of which Mr Copson is the director. and the Forum is concerned about nuclear waste transport The regional environment programme appoints a new head The secretary-general of the South Pacific Forum, Ieremia Tabai, reiterated in February the Forum s continuing concern about the use of the region for the shipment of nuclear and other hazardous wastes. He was reacting to the announcement that the UK-based Pacific Teal was on its way from France to Japan via the Pacific with a cargo of vitrified nuclear waste. The position of the South Pacific Forum was clear on this issue, he said: such shipments should be carried out in accordance with the highest international safety and security standards in a manner which satisfactorily addressed all contingencies and in full consultation with Forum members. The secretary-general s statement was made at the same time as a delegation from the owners of Pacific Teal Pacific Nuclear Transport, owned by British Nuclear Fuels, Cogema of France and the Overseas Reprocessing Committee of Japan were touring the region in order to assure South Pacific governments of the safety measures incorporated in the vessel and for its cargo. Tamarrii Pierre Tutangata of the Cook Islands was appointed as the new director of the South Pacific Regional Environment Programme (SPREP), at its November meeting in Nuku alofa, Tonga. Mr Tutangata has had a 25-year career working in Cook Islands administration and regional institutions including the South Pacific Forum Secretariat and the South Pacific Commission. The November meeting was regarded as the most significant for SPREP since its formal establishment in 1982 and only the third at ministerial level in that time. SPREP revised its action plan, adopted in 1991, to take account of significant political, economic and environmental changes at global, regional and national levels. The action plan sets the framework for a regional approach to environmental issues, and ministers said that its review, along with the appointment of the new director, would give direction and focus to its operations. The new plan for focuses on five key elements: conservation of biological diversity; climate change and integrated coastal management; waste management; environmental management, planning and institutional strengthening; and environmental education, information and training. The overall goal is to build national capacity in environmental and resource management in order to improve and protect the environment.

14 12 The region and declares 1997 the Pacific Year of the Coral Reef Australia considers new environmental assessments for aid and easier immigration for remittance-dependent countries In February, SPREP launched a regional campaign for 1997 as the Pacific Year of the Coral Reef, in order to increase understanding and action for the conservation and wise use of coral reefs. In the Pacific, it said, too many reefs were being damaged by pollution, destructive fishing techniques, over-harvesting of fish and poor land-use practices that washed soil and wastes on to reefs. New environmental assessment guidelines for Australian overseas aid projects have been circulated to regional governments by the parliamentary secretary for foreign affairs, Andrew Thomson. The guidelines strengthen procedures that were last revised in 1991, and were developed for the Australian aid organisation, AusAID, in conjunction with interest groups, such as non-governmental aid organisations and leading Australian environmental technology companies. The guidelines aim to strengthen and streamline procedures and introduce a risk management approach in order to target environmental assessment where it is most needed. The Australian government is considering easing immigration restrictions to help Pacific Island countries that depend heavily on remittances from their nationals living abroad. The head of the National Centre for Development Studies in Canberra, Ron Duncan, recommended last year in a study commissioned by the Australian government that Pacific Island nationals be granted free movement to Australia and New Zealand as part of the basis of a new regional economic association. The government, without endorsing the idea, circulated the recommendation to South Pacific governments, among others, for discussion. A more detailed case was made publicly by a Queensland University economist, Richard Brown, in mid-october, at a conference in Canberra organised by the EIU. The employment of Tongan and Western Samoan immigrants in Australia and New Zealand is crucial to both countries and their remittances are a vital source of income and their most important source of foreign exchange. He calculated that, based on 1994 figures, household remittances could represent about two-thirds of GDP in both Tonga and Western Samoa. Because of the great dependence on the earnings of overseas workers, it was important to consider the extent to which existing restrictions and visa-screening processes affected the migrant labour market. If there was no difference in treatment between those who enjoyed unrestricted access (mainly as a result of step migration via New Zealand, for example) and those who had visas, there was a stronger argument for free movement of labour. as data show no difference in employability Mr Brown s data indicated that in 1993/94 about 80% of Tongans in Australia had emigrated directly from their country of birth and over 90% of Western Samoans had step-migrated via New Zealand. His study found that whether a migrant entered Australia under a visa category or enjoyed unrestricted entry under the Trans-Tasman Agreement had no significant bearing on their employability. It was unlikely that any differences in educational attainment could be attributed to the visa-screening process, he said. In countries where emigration and remittance dependence were common, households invested in the human

15 The region 13 capital of particular members for export, and this was an essential element of survival strategy in the absence of attractive investment opportunities in their domestic economies. Migrants continued remitting large sums of money over long periods of time, often more than 20 years. Other studies have shown that families deliberate carefully about which members are likely to do well overseas. The possible closure of Radio Australia draws wide regional criticism France and Australia reach agreement on closer collaboration in the region France declares a new policy for the South Pacific A review of the Australian Broadcasting Corporation (ABC) has suggested wideranging cuts in spending, including the possibility of closing the corporation s overseas service, Radio Australia, which was established in The suggestion has attracted much criticism from governments, individuals and organisations. Western Samoa s High Commissioner to Australia, Feesago S Fepulea i, said, reflecting much of the comment, that Australia would be the ultimate loser if Radio Australia were closed down. Its programmes, especially news, were followed keenly in most Pacific Island countries and re-broadcast regularly by many. The services had long projected a positive image of Australia and helped to keep countries of the region in touch with each other and their common causes, a recent example being the French nuclear testing programme. France and Australia have agreed to work more closely together in the provision of development assistance to the South Pacific. France s new permanent secretary to the South Pacific, Pierre Garrigue-Guyonnaud, described the agreement after his first round of meetings in Canberra with regional ministers and senior officials in February. He said that the two countries agreed on the guiding philosophy of development cooperation in the region: good government, sustainable development and economic and monetary reform. They had agreed to exchange information on aid projects to avoid duplication. They would work on joint projects or try to complement each other. Australia and France had several joint development projects under way in Vanuatu and could also work together in the health sector, for example, on strategies to combat AIDS in the region. The two countries have also decided to work closely together in research, especially in marine science, remote sea-bed sensing and agriculture. Mr Garrigue-Guyonnaud said that at the beginning of this year France had decided to review its policy towards the South Pacific, reaffirming its interest in the region and developing aid and dialogue with all countries not just the large countries such as Australia, New Zealand, Papua New Guinea and Fiji, but also all the smaller island countries. There would be a new emphasis on opening up to the region, the integration of French territories and cooperation. France would maintain its financial (mostly aid) commitment. Sectors to receive priority would be fisheries, marine science, agriculture and rural technology, energy, particularly solar energy, telecommunications and health. Projects in these sectors would be funded not only through multilateral programmes such as those of the South Pacific Commission but also through voluntary contributions for projects initiated by France.

16 14 The region Malaysia becomes the ninth dialogue partner of the South Pacific Forum Malaysia has become the South Pacific Forum s ninth dialogue partner, joining Canada, the EU, France, Japan, China, South Korea, the UK and the USA. The secretary-general, Ieremia Tabai, said that Malaysia was an important member of the Association of South-east Asian Nations (ASEAN) as well as a committed business partner in many Forum countries. Mr Tabai has invited the Malaysian government to participate at an appropriate level at the post-forum dialogue sessions in the Cook Islands in September. The post-forum dialogue was established in 1989 in response to the need to communicate important decisions made by the Forum to non-forum countries and organisations with long-term interests in the region.

17 Fiji 15 Fiji Political structure Official name Form of state The executive Head of state National legislature Regional government Legal system Republic of Fiji Parliamentary The president, chosen by the Great Council of Chiefs, appoints the prime minister who selects the cabinet The president, Ratu Sir Kamisese Mara Bicameral parliament comprising the appointed upper house or Senate (34 members) and an elected House of Representatives (70 members); the 1990 constitution ensures an indigenous Fijian majority in parliament; universal suffrage for all citizens over 21 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 with 14 provinces governed by a council and an executive head, approved by the Fijian Affairs Board Magistrates courts, high court and court of appeal with the Supreme Court at the apex National elections February 1994; next election due by February 1999 National government Main political parties Major-General Sitiveni Rabuka became prime minister in June 1992 and formed a coalition government comprising the Soqosoqo ni Vakavulewa ni Taukei and the General Voters Party; re-elected in February 1994 Fijian Political Party (Soqosoqo ni Vakavulewa ni Taukei, SVT); National Federation Party (NFP); Fiji Labour Party (FLP); General Voters Party (GVP); Fijian Association Party (FAP) Prime minister & minister for Fijian & multi-ethnic affairs & regional development Major-General Sitiveni Rabuka Key ministers Agriculture, fisheries & forests Militoni Leweniqila Attorney-general & minister for justice Taru Etuati Tavai Commerce, trade & industry Isimeli Bose Education, women & culture Taufa Vakatale Finance & economic development Berenado Vunibobo Foreign affairs Filipe Bole Health & social welfare Leo Smith Home affairs & immigration Colonel Paul Manueli Information, broadcasting & communications Ratu Jo Nacola Labour & industrial relations Vincent Lobendahn Lands, mining & energy Ratu Timoci Vesikula Public works & infrastructure Ratu Inoke Kubuabola Tourism, transport & civil aviation David Pickering Urban development, housing & environment Vilisoni Cagimaivei Youth, employment opportunities & sport Jim Ah Koy

18 16 Fiji Economic structure Latest available figures Economic indicators GDP at current prices a F$ m 2,019 2,171 2,269 2,351 2,506 b Real GDP growth % Consumer price inflation % b Population m Exports fob US$ m b Imports fob US$ m b Current account US$ m b Reserves excl gold US$ m c Total external debt US$ m n/a n/a Debt-service ratio % d n/a Exchange rate (av) F$:US$ February 29, 1997 F$1.412:US$1 Origins of gross domestic product 1995 % of total Components of gross domestic product 1994 % of total Agriculture, forestry & fishing 21.3 Private consumption 65.3 Manufacturing 12.4 Government consumption 16.6 Transport & communications 15.6 Gross investment 10.7 Wholesale & retail trade 21.9 Change in stocks/statistical discrepancy 6.0 Services & others 28.8 Exports of goods & services 58.9 GDP at factor cost Imports of goods & services 57.5 GDP at market prices Principal exports fob 1995 a US$ m Principal imports cif 1995 a US$ m Sugar 196 Manufactured goods 240 Garments 132 Machinery 198 Gold 42 Food 130 Fish 40 Mineral fuels 98 Timber 32 Total incl others 867 Total incl others 618 Main destinations of exports 1995 % of total Main origins of imports 1995 % of total Australia 24.0 Australia 39.0 UK 20.2 New Zealand 16.0 USA 11.6 Japan 7.2 Japan 5.8 USA 7.1 New Zealand 5.3 Singapore 7.1 a National figures. b EIU estimate. c November. d Official estimate.

19 Fiji 17 Outlook for Progress on constitutional reform will not come soon Reform of the racially-biased constitution remains the central political and economic issue, as well as the biggest single challenge facing the prime minister, Major-General Sitiveni Rabuka. The constitution was introduced in 1990 after General Rabuka s two coups ousted a government led by Fijian Indians, giving effective control of the political system to indigenous Fijians. General Rabuka has given mixed signals about his own attitude to the constitution. In December he claimed that most Fijians were happy with it and was concerned by some claims that it was undemocratic. At the same time, however, he said, Fijians acknowledged the need to improve the constitution so that all communities could participate equitably in parliament and cabinet. Meanwhile, the slow deliberations of a parliamentary committee on the findings of a Constitutional Review Commission (CRC) continue in camera, and there seems no early prospect of amendment, although a July deadline for agreement looms. The prime minister may be vulnerable Growth will fall back in General Rabuka s ability to deal with constitutional reform has been diminished by rumours of moves within his fragile coalition government to replace him. Such rumours have arisen precisely because some members of his government believe that he will indeed support breaking the indigenous stranglehold on government, putting economic considerations, especially foreign investment, ahead of the sensibilities of the hardline tribal chiefs. The CRC report stated bluntly that Fiji could not claim to be democratic under the present constitution and this is likely to have influenced some potential investors. After a strong rebound in 1996, growth is likely to moderate in , but the EIU still expects the economy to expand by around 3%, assuming strong performances from the mining and sugar sectors, and consequently the external sector. The finance and economic development minister, Berenado Vunibobo, has forecast growth of 3.2% for 1997 based on the production of 470,000 tons of sugar and 350,000 visitor arrivals. There are high hopes for trade The minister said that export earnings in Fijian dollar terms were expected to increase 22% this year, with a 6% increase in garment export earnings and a 10% increase in fish and timber export earnings. As one of the few Pacific Islands to be a member of the World Trade Organization (WTO), Fiji would next year review custom tariffs to comply with non-discretionary policies, with the aim of improving transparency and earning the confidence of investors. Investment regulations would also be liberalised, simplified and made more transparent. As a result of growing services income and substantial official transfers, the current-account balance is expected to move further into surplus to around US$25m in Foreign reserves at the end of 1996 had risen to almost US$450m, covering more than five months imports, and we expect further

20 18 Fiji rises in reserves based on growth in export earnings. Inflation is expected to be maintained at 3%. However, the bail-out of the National Bank of Fiji (NBF) is a continuing financial millstone for the government and the economy. Writing off the bad debts incurred by the government-owned bank will absorb 12.3% of the government s 1997 expenditure budget, according to estimates tabled in parliament by Mr Vunibobo. The NBF scandal also may cause more political damage The NBF scandal has the potential to become a more serious political problem for the prime minister. He told his ministers that if they are charged in connection with the NBF inquiry, they are to step down and allow justice to take its course without hindrance. It was contrary to his policy to allow ministers to continue in office if they are charged. One former minister, Koresi Matatolu, resigned as leader of the house of representatives in November, after being charged in connection with the NBF collapse, although he has declared his innocence. Another former minister, Ratu Ovini Bokini, faces charges of official corruption, obtaining money by false pretences and fraudulent conversion of property; he too has declared his innocence. The former chief manager of the NBF, Visanti Makrava, has pleaded not guilty to six charges of abuse of office. The Fiji police force has called in Australian and other foreign investigators to assist in examining the bank s affairs, estimating that the pursuit of some 100 cases identified so far will take at least three years. 8 6 Fiji: gross domestic product % change, year on year Fiji: Fiji dollar real exchange rate (a) 1980= F$:DM F$:US$ 0-2 Fiji Asia excl Japan (a) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World Economic Outlook. 70 F$: Review The political scene Constitutional deliberations continue A 25-member joint parliamentary select committee held its sixth meeting on March 4 to deal with the findings of the Constitutional Review Commission (CRC) which reported in September (4th quarter 1996, pages 41-43). After its fifth meeting, in January, it announced that unanimous agreement had been reached on 373 of the report s 697 recommendations, but did not specify

21 Fiji 19 which ones had been dealt with. A statement from the committee said that where agreement had not been reached, there were observations that would be dealt with subsequently. The fifth meeting also received progress reports from four subcommittees that are examining different chapters of the CRC report. A fifth subcommittee has already finished its work. After the March meeting the committee issued a statement saying it had not agreed to the CRC recommendations relating to the Great Council of Chiefs and the Senate. The committee suggested that the present system, as prescribed under the Fijian Affairs Act, be retained for the Great Council of Chiefs and that the Senate be appointed by the president on the nomination of the Great Council of Chiefs, the prime minister, the leader of the opposition, and the Council of Rotuma. This means that the upper house will comprise 22 members, eight of whom will be nominated by the chiefs (with power of veto over legislation), seven by the prime minister, six by the leader of the opposition and one by the Council of Rotuma. The CRC had recommended that two members be elected by each of the 14 provinces with no racial restrictions on candidacy or voter rolls, one from Rotuma and six appointed by the president on the advice of the electoral commissioner to represent people who would otherwise be underrepresented, such as women or minority groups. Further meetings are scheduled for March and April before a report is prepared for tabling in the May parliamentary session. The deadline for a consensus on reform is July 25. Review of media laws recommends a new approach to regulation A report on Fiji s media laws prepared by two UK consultants, Ken Morgan and John Prescott, was presented to the information minister, Ratu Jo Nacola, in November. The report, Future of Media Legislation and Regulation in Fiji, was commissioned to look into such matters as newspaper licensing, foreign ownership of the media and unauthorised publication of official documents. The report recommended against the introduction of legislation to restrict media freedom and instead called for laws such as the Press Correction Act and the Official Secrets Act to be repealed and replaced by a new body to regulate the industry. Media awareness training for politicians was recommended, as was the establishment of a Fiji Media Council of industry members to adjudicate complaints against a set code of practice. Legislation should be drawn up which embodied fundamental and inalienable principles and their detailed application should be governed by regulatory codes of practice, which could be amended in response to changing circumstances. The requirement for annual registration of the print media, however, amounted to licensing and was contrary to the concept of freedom of expression. The report recognised that a government was entitled to discipline members and civil servants over the unauthorised disclosure and publication of official documents, but considered that criminal procedures were inappropriate, particularly for journalists or editors who were doing their duty. Lawyers go public with concerns about courts administration Fijian lawyers have expressed concern about the administration of the higher court and magisterial court systems. Some judges have also criticised the long delays, procedural irregularities and the incompetence of court staff and even