Country Profile 2006 New Caledonia This Country Profile is a reference work, analysing the country s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit s Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at www.eiu.com/schedule The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom
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Saipan Guam Northern Mariana Is. NORTHERN MARIANA ISLANDS (US) Marshall Is. Johnston Is. Kauai Honolulu Oahu Maui Wake Is. Hawaii Hawaiian Is. MARSHALL ISLANDS HAWAII Revilla Gigedo Is. MEXICO Babelthuap PALAU Caroline Islands Bismark Archipelago Manus Rabaul New Britain PAPUA NEW GUINEA AUSTRALIA Port Moresby Pohnpei FEDERATED STATES OF MICRONESIA New Ireland New Georgia Bougainville Brisbane Kolonia Choiseul Honiara Guadalcanal Kwajalein SOLOMON ISLANDS Santa Isabel Malaita San Cristobal VANUATU Port Vila NEW CALEDONIA New Caledonia Nouméa Lord Howe Is. Nauru Tarawa Norfolk Is. Majuro Ratak Chain c i M Ralik Chain n o r NAURU Espiritu Santo Efate Gilbert Is. Funafuti TUVALU Vanua Levu Viti Levu WALLIS & FUTUNA Suva Funafuti Phoenix Is. Tokelau SAMOA AMERICAN Northern Cook Is. SAMOA Wallis Apia Futuna Upolu Pago Pago Cook Is. Tutuila TONGA COOK ISLANDS NIUE Southern Cook Is. Alofi Tongatapu Avarua Nuku' alofa Rarotonga Kermadec Is. KIRIBATI Kiritimati a i s e FIJI PACIFIC OCEAN Leeward Is. Tahiti Tubai Is. Papeete THE PACIFIC ISLANDS L i n e I s l a n d s Marquesas Is. Windward Is. Hiva Oa Gambier Is. Pitcairn Is. PACIFIC OCEAN Tuamotu Archipelago Society Islands FRENCH POLYNESIA Sala y Gómez. Easter Is.. Canberra Melbourne Sydney Auckland NEW ZEALAND Ernest Legouve Maria Theresa. TASMAN SEA Tasmania Wellington Hobart Christchurch Chatham Is. 0 km 500 1,000 1,500 2,000 2,500 International Date Line The Economist Intelligence Unit Limited 2006 0 miles 500 1,000 1,500
New Caledonia 1 Contents New Caledonia 2 Basic data 3 Politics 3 Political background 4 Recent political developments 5 Constitution, institutions and administration 6 Political forces 6 International relations and defence 7 Resources and infrastructure 7 Population 7 Natural resources and the environment 8 Transport, communications and the Internet 8 Energy provision 8 The economy 8 Economic structure 9 Economic policy 10 Economic performance 10 Economic sectors 10 Agriculture 10 Mining and semi-processing 11 Manufacturing 11 Other services 11 The external sector 11 Trade in goods 12 Regional overview 12 Membership of organisations 14 The regional economy 16 Appendices 16 Sources of information 16 Reference tables 16 Estimated population 16 Territorial finances 16 Gross domestic product 17 Inflation 17 Visitor arrivals 17 Exports 17 Main imports 18 Net official development assistance The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
2 New Caledonia New Caledonia Basic data Land area Population Major islands Capital Climate Weather Languages Measures Currency Time Public holidays, 2006 19,103 sq km 196,836 (1996 census); 231,000 (2004 official estimate) New Caledonia island (la Grande-Terre), 16,750 sq km; and the Loyalty Islands (principally Lifou, Mare, Ouvea and Tiga), 1,981 sq km Nouméa: population 91,389 (2004 official estimate) Tropical Average annual temperature of 23 C with little variation. Cyclones can occur during the wet season, November-April. Average annual rainfall in Nouméa is 1,000 mm French (official language); many local languages also in use Metric CFPfr (the French Pacific franc Communauté française du Pacifique, CFP). Average exchange rate in 2005: CFPfr93.9:US$1. Exchange rate on July 20th 2006: CFPfr94.48:US$1 11 hours ahead of GMT January 1st (New Year's Day); April 16th (Easter Monday); May 1st (Labour Day); May 8th (1945 Victory Day); May 25th (Ascension Day); June 1st (Whit Monday); July 14th (Bastille Day); August 15th (Feast of the Assumption); September 24th (New Caledonia Day); November 1st (All Saints' Day); November 11th (Armistice Day); December 25th (Christmas Day) Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 3 Politics The Nouméa Accord The Nouméa Accord of 1998 defined New Caledonia as an "overseas country" of France, a status that required the French government to adopt a constitutional amendment because of its unprecedented nature. It was a mark of the French government's determination to resolve the long-simmering and sometimes violent struggle between the proponents of independence in New Caledonia, led by the Front de libération nationale kanak socialiste (FLNKS), and supporters of the status quo, represented by the Rassemblement pour la Calédonie dans la République (RPCR). Both groupings and the French government are signatories to the accord, which outlines processes for the progressive transfer of government functions from France to the local government and for a referendum on independence to be held between 2013 and 2018. Progress on implementing the accord, however, has been slow. The first government of New Caledonia was inaugurated after elections in May 1999. Elections held in May 2004 for the three provincial legislatures and the Territorial Congress ended 25 years of domination of the territorial government by the anti-independence RPCR, which was beaten by the Avenir Ensemble (AE, or Future Together), a party formed by disenchanted former RPCR supporters. The AE-led government now has the difficult task of implementing political and economic reform, while remaining within the Nouméa Accord. Political background From its annexation in 1853 until the Nouméa Accord of 1998, New Caledonia was an "overseas territory" of France. However, the pro-independence sentiment of the Kanaks, the country's indigenous Melanesian people, has always been strong, leading to violence as far back as the 19th century. By the 1980s they faced the possibility of becoming a voting minority because of continuing French settlement, and violence erupted again. Successive French governments had encouraged the growth of the French population in the territory as a buffer against the independence movement. At the 1996 census the Kanaks remained the largest ethnic group, but with 44% of the total population of 196,836, they did not constitute a majority. French and other Europeans accounted for 34%, and Wallisians and Futunians (Polynesians from the Wallis and Futuna islands, a French possession in the Pacific) for 9%, with Indonesians, Tahitians and several smaller groups making up the balance. The results of the 2004 census were rendered inaccurate by a boycott of around 10% of the Kanak population after the French government refused to allow a count of ethnic community numbers, on the grounds that all French citizens were equal. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
4 New Caledonia Recent political developments The relationship with France is central The RPCR and FCCI coalition government The relationship with France has been at the centre of political debate for three decades, with the FLNKS arguing for independence and the RPCR, which is affiliated to the Union pour un mouvement popularie (UMP) in France, and now the AE seeking continued close association. Years of violence led to the signing of the Matignon Accord in 1988 and then, in May 1998, the Nouméa Accord, which accepted the principle of shared sovereignty in New Caledonia. The accord provided for the creation of new institutions, including representative assemblies, and the progressive transfer of powers from France to New Caledonia over a 15-year period. Eligible voters would then decide whether to take a final step to independence. Divisions in the territory, however, flared up again at the end of 1998, after a resounding endorsement of the Nouméa Accord in a referendum. The Fédération des comités de coopération indépendantistes (FCCI), a breakaway group from the FLNKS, allied itself with the RPCR after elections in May 1999 to form the first executive government of New Caledonia under the new arrangements. The territory's first president, Jean Lèques of the RPCR, resigned in March 2001 and was replaced by Pierre Frogier, also of the RPCR, which held 24 of the 54 seats in the Congress. In coalition with the FCCI, it had a majority and initially held seven of the 11 executive positions in the government. The FLNKS and its affiliate party, the Union Calédonienne (UC), held the other four positions. The decision of the UC's only cabinet member, Gerald Cortot, to resign forced a re-election of the executive by the Territorial Congress in November 2002. This was under a provision contained in the Nouméa Accord, which requires a fresh executive election when one member of the cabinet resigns and is not replaced by a member of his party. Although the re-elected executive was largely unchanged, the precedent set by Mr Cortot highlights the extent to which a single party can unsettle the government under the "collegiality" provisions of the Nouméa Accord. Elections in May 2004 end 25 years of RPCR domination Elections held in May 2004 for the three provincial legislatures and the Territorial Congress ended 25 years of domination of the territorial government by the anti-independence RPCR, owing to a split that led RPCR dissidents to form a new party, the AE. The elections were followed by weeks of political turmoil. However, a new coalition government, led by the new territorial president, Marie-Noelle Théméreau, one of the former RPCR supporters who left to form the AE, was finally installed in June 2004. The AE and the RPCR each have four executive seats in the territorial government, with the FLNKS holding the balance of power with three. Like the RPCR, the AE is supported by white French settlers who want New Caledonia to remain a French dependency, although the AE appears more inclined to placate indigenous Kanak, independence-minded parties by co-operating with them on the implementation of the Nouméa Accord. Progress towards greater autonomy is hence expected to accelerate under the AE-led government, which announced earlier Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 5 in 2005 that teaching in primary schools, hitherto restricted to French, should also be conducted in Kanak languages from 2006. However, the AE-led government must also battle with extra-parliamentary action groups: industrial disputes and occasional riots were a feature of the political landscape in early 2006, often linked to proposed mining developments. Constitution, institutions and administration Devolution from France The provincial assemblies The Territorial Congress Compétences are transferred to the territory New Caledonia is a largely autonomous territory within the French state, except in areas such as foreign relations, defence, justice, currency and credit. The Nouméa Accord, signed in May 1998, provides for devolution of power. A referendum on complete independence is due to take place between 2013 and 2018. The head of state is the president of France, Jacques Chirac. The legal system is based on the French system, augmented by mandatory consultation with the Territorial Custom Council (Conseil coutumier territorial, comprising 40 members) on matters of customary and land law. Magistrates preside over the decentralised lower courts. The Court of Appeal is based in Nouméa, and there is access to the higher appeal court of France for certain matters. New Caledonia has provincial assemblies for the Northern Province (with 15 members), Southern Province (32 members) and the Loyalty Islands Province (seven members), elected by direct universal suffrage for six-year terms. The next provincial elections fall due in 2009. The provincial assemblies are responsible for local economic development, land reform and cultural affairs. Together, the members of the provincial assemblies constitute the 54-seat Territorial Congress, which is responsible for New Caledonia's fiscal affairs, infrastructure and primary education. The congress and assemblies each elect a president who joins the High Commissioner (also responsible for the French Pacific territory of Wallis and Futuna) appointed by the French government, as part of the territory's executive. The High Commissioner is responsible for external relations, defence, law and order, finance, and secondary education. There are also eight local councils, as well as the Territorial Custom Council, which is consulted by the congress and the French government, and which is responsible for maintaining Kanak tradition and culture. Local government is in the hands of 32 communes (local government units). New Caledonia elects two members to the French National Assembly and one member to the French Senate. From 2007 it will elect two members to the French Senate. The scope of New Caledonia's political institutions is slowly changing under the Nouméa Accord as state powers, or compétences, are transferred. The first transfer, in January 2000, covered external trade and economic affairs. The process was expected to accelerate under the new coalition government installed following the May 2004 elections, but progress so far has been limited. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
6 New Caledonia Political forces The FLNKS, the RPCR and the new AE When the Nouméa Accord was signed in 1998, the main political forces were the FLNKS, the RPCR and the FCCI, along with the French government, but the political scene has since become more splintered. In 2001 a group of younger activists from the UC (the largest of a number of pro-independence parties that make up the FLNKS coalition) began agitating for greater recognition of the UC in its own right, including in the Territorial Congress, to which they had been elected on an FLNKS ticket. In-fighting within the FLNKS could eventually lead to the dissolution of the grouping. In August 2002 the FCCI reconsidered its coalition with the RPCR after losing its sole seat in the executive government when the FCCI leader, Raphaël Mapou (who had responsibility for customary affairs), was sacked after criticising a government decision on the granting of mining and prospecting rights. (Mr Mapou again came into the spotlight in March 2006 as the figurehead of a new Kanak activist group, Rheebu Nuu, whose profile was raised by a series of attacks on the Southern Province's Goro nickel mine.) The AE was formed in 2004 by dissidents from the RPCR and was legally constituted as a political party in August that year. The AE favours moves towards greater autonomy for the territory, but has stopped short of committing itself to supporting complete independence from France, which is advocated by most indigenous Kanaks. Representation in the French National Assembly Jacques Lafleur, the former leader of the ruling RPCR and president of the Southern Province, is one of the two deputies to the French National Assembly (the lower house). The other is Pierre Frogier, the former president of the New Caledonian government and the current leader of the RPCR. The president of the territorial government is Marie-Noelle Théméreau, and Simon Loueckhote, of the RPCR, is New Caledonia's member of the French Senate (the upper house). New Caledonia will elect two senators from 2007. International relations and defence Integration into the region is growing Defence of the territory is the responsibility of France. The FLNKS is a member of the regional grouping known as the Melanesian Spearhead Group (MSG), along with the governments of Fiji, Papua New Guinea, the Solomon Islands and Vanuatu. The MSG met in Nouméa for the first time in 2001, with the government and the FLNKS acting as joint hosts. For several years the FLNKS and the RPCR were invited to attend the annual meeting of the largest regional grouping, the Pacific Islands Forum (PIF), as guests. Only the FLNKS took up the invitation, but after the approval of the Nouméa Accord New Caledonia was given observer status in the PIF in 1999. The accord also provided for a New Caledonian diplomatic presence within each French mission. The AE leader and territorial president, Marie-Noelle Théméreau, has stated her government's desire for closer relations with the PIF and greater participation in its activities, and in 2005 the territorial government began negotiating with the Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 7 body for accession to the Pacific Island Countries Trade Agreement (PICTA). In February 2006 a request was submitted to the French government, asking permission to apply for associate status at PICTA, a newly defined level of affiliation that improves on the territory s current observer status. Resources and infrastructure Population Internal migration is towards Nouméa The 1996 census showed that New Caledonia's population totalled 196,836, up from 164,173 at the time of the 1989 census and 145,368 at the time of the 1983 census. The figure produced by a 2004 census is too low, owing to a boycott by around 10% of the Kanak population in response to the objection of the French president, Jacques Chirac, to a proposed question on ethnic origins in the census. The census is therefore likely to be repeated. Latest national estimates put the population at around 231,000 in 2004. Average annual population growth of around 2.4% in 1990-96 was supported by a high birth rate, especially among Kanaks, and by the arrival of people from France and other French overseas territories (in 1996 around 23% of the population comprised people born outside New Caledonia). However, population growth slowed to around 1.7% per year in 1997-2000. At the time of the 1996 census nearly one-half of the population was aged under 25, with 68% living in the Southern Province, 21% in the Northern Province and 11% in the Loyalty Islands. Despite attempts to "rebalance" development away from the capital, Nouméa, the main internal pattern of population migration has continued to be towards the city and its neighbouring suburban areas. The current government has expressed alarm about social tension fomented by poor and overcrowded housing in Nouméa and has launched a low-cost housing programme to help alleviate the problem. Natural resources and the environment Nickel reserves are large New Caledonia is the third-largest nickel producer in the world, after Russia and Canada. It is estimated to have reserves of about 50m tonnes, around 25% of the world's total, all in the central mountain chain that runs for most of the length of the main island. Apart from nickel, there are reserves of cobalt, iron and chrome and smaller amounts of copper and lead. The mountain chain creates two distinct regions. The east coast is humid, with abundant and varied vegetation and most of the cropping land. The west coast, which is much drier, supports extensive eucalypt stands and most of the livestock production. The climate is temperate, with only two distinct seasons. The warm season, from November to April, can be subject to cyclone activity. Average temperatures in the cooler season still reach 20-23ºC. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
8 New Caledonia Transport, communications and the Internet Reliance on air transport is heavy Communications The territory relies heavily on air transport for both international and internal movement of passengers and freight. There are frequent international services linking Nouméa's airport, La Tontouta, with neighbouring countries and with the US, Japan and Europe. There are regular services from the domestic airport, Magenta, to the outer islands and major towns on the main island. There is a good road system in and around Nouméa, the most populous region, and although the road infrastructure is more basic in the rest of the country, it continues to improve. Overseas shipping is predominantly through Nouméa. Postal services and telecommunications are in the hands of the state-run Office des Postes et Télécommunications (OPT). In early 2006, OPT bought a range of billing systems from a US firm, Alcatel, to enable it to support more diverse services. Internet facilities and usage have grown rapidly in recent years, but statistics are lacking. The publication Les Nouvelles Calédoniennes has a monopoly position in the daily newspaper field. French government services tend to dominate radio and television, although some variety is provided by two pay-tv services and some private-sector radio entertainment. Energy provision According to the Direction de l Industrie, des Mines et de l Energie, total primary energy production was around 30,590 tonnes of oil equivalent (toe) in 2005, of which most was generated from thermal sources and the balance from hydroelectricity. This still left New Caledonia 96.5% dependent on energy imports. Wind power is a viable option in the islands. A French company, Vergnet Pacific, has installed two wind farms and estimates that wind power could eventually meet 30% of residential electricity demand in New Caledonia. The economy Economic structure The nickel industry is a key support for the economy The economy is highly dependent on the growing nickel industry and payments from the French government. Nickel production accounts for around 10% of GDP and about 90% of total export earnings. The territory's reliance on imports means that it runs a persistent and large trade deficit, the value of which surged from CFPfr35.6bn in 1995 to CFPfr83bn (US$800m) in 2003, before easing to CFPfr58bn in 2004 and CFPfr67bn in 2005. The trade deficit is largely offset by French transfer payments. Approximately 80% of transfers are spent on health, education and the payment of public service salaries, with the remainder funding development schemes, mainly in the northern and island provinces. Other industrial activity is mostly in the small and medium-sized business sector, with 15% of these businesses employing ten or fewer workers. Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 9 However, transport and communications, other services (including tourism) and commerce account for around 70% of total GDP. Formal economic activity is largely confined to the main island. Economic policy The emphasis is on regional development Mining expansion is key Under the Nouméa Accord of 1998 and the earlier Matignon Accord (1988), the French government committed itself to providing high levels of economic development assistance. From the time of Matignon, it also began to scale back the special allowances and subsidies given to civil servants seconded from France, making secondment less attractive and helping to make local living costs more realistic. An important provision in both accords is economic "rebalancing", meaning an emphasis on economic development in areas other than Nouméa and its environs. Moves towards achieving this aim have centred on further development of the nickel-mining industry, in particular the proposed joint venture between the Société Minière du Sud Pacifique (SMSP) and a Canadian company, Falconbridge, for a smelter in the Northern Province, which involves the construction of an international port and airport and the creation of about 2,000 jobs. The project has been approved, and is due to come on stream in 2009-10. A similar project, costed at about US$1.8bn, has begun at Goro in the Southern Province. The project, a joint venture by another Canadian mining company, Inco, two Japanese companies, Sumitomo Metal Mining and Mitsui, and the Société de Participation Minière du Sud Calédonien (SPMSC), was due for completion in 2007, but suffered setbacks earlier in 2006 when Kanak protestors under the Rheebu Nuu umbrella blockaded and vandalised the mine in protest against its environmental impact. Work resumed after three weeks, but the incident has served to damage investor confidence, and even drew criticism from the Front de libération nationale kanak socialiste (FLNKS). As the economy relies so heavily on nickel and French transfer payments, it is vulnerable to global developments that affect demand for nickel and global nickel prices, as well as developments in France. The sizeable tourism industry is also dependent on wider economic trends. There is considerable potential in the agricultural and fisheries industries, which has yet to be fully tapped. However, with the exception of mining, significant increases in private-sector investment are unlikely until the political process has progressed further. The French government urges the adoption of the euro The French president, Jacques Chirac, and the French minister for overseas territories, François Baroin, have urged all three French Pacific territories to adopt the euro in place of the Pacific franc. The business sector in New Caledonia also favours adopting the single European currency. A committee in Paris has begun work to prepare for the switch and will consult with the territorial authorities and the local business community on the issue. Assuming that the conversion is approved by the European Central Bank, the euro will be adopted by the territory by January 1st 2007. In other policy initiatives, the current government has raised the minimum wage and increased taxation for larger businesses in order to help fund reforms since its election in mid-2004. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
10 New Caledonia Economic performance Growth depends on nickel prices The economy's dependence on nickel means that economic performance varies with world nickel prices and domestic nickel production. Rapid expansion of nickel production and high prices in the late 1980s produced rapid real GDP growth, which slowed in the 1990s. Official GDP figures from the Institut territorial de la statistique et des études économique (ITSEE) only reach as far as 2001. These suggest that GDP growth of 8.2% in 2000 was followed by a contraction of 0.6% in 2001. Economic sectors Agriculture Commercial agriculture is underdeveloped About 30% of the population live or work on farms. However, commercial agriculture is a small component of the economy (together with food processing, it accounted for only 4.5% of GDP in 2001), so food still normally accounts for around 13% of total imports. The prospect of lower-cost, large-scale farming still appears distant, but increasing numbers of farmers are looking to generate more income from eco-tourism. Fisheries are also underdeveloped, but shrimp exports to Japan and China are increasingly important to the economy. Shrimp exports were the second-largest export category in 2005, after nickel and nickel products, earning the country CFPfr2.4bn (US$25.6m). The Northern Province and Loyalty Islands authorities are implementing plans for a significant expansion of their fishing fleets, and aquaculture has expanded rapidly in the last ten years. Mining and semi-processing New nickel ventures are planned Mining, metallurgy and energy together accounted for only around 7% of GDP in 2001, although the economy is much more dependent on the mining of nickel and other metals than this figure suggests, with nickel and associated products accounting for around 90% of New Caledonia's total export earnings. The various nickel industry investments have become caught up in the islands' ethnic politics. As noted above, a Canadian company, Falconbridge, will invest at Koniambo in the Northern Province, populated by the indigenous Kanaks, and another Canadian nickel corporation, Inco, is investing at Goro in the Southern Province, where the population is mainly pro-french. The Koniambo venture will have an annual production capacity of 60,000 tonnes of nickel, and the Goro venture will have a capacity of 54,000 tonnes of nickel and 52,000 tonnes of cobalt. In addition to this, the established local player, Société Le Nickel (SLN), also plans to raise output. Spiralling costs at Goro, caused Inco to suspend work there in November 2002, pending a costsaving assessment. However, Inco announced in July 2003 that it had identified cost savings and it resumed work at Goro in 2004. Despite recent attacks by an indigenous group of protestors, which saw work at the mine suspended for Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 11 three weeks, production is still expected to begin in 2007. The opening of both the Koniambo and Goro mines would lift New Caledonia's annual nickel output to around 200,000 tonnes within the next three to four years. Manufacturing Manufacturing is small-scale and limited; even low-value consumer items are flown in from France. There is some local food processing, and a small building industry. In 2005 approvals for residential and commercial buildings averaged about 414 per month for the territory as a whole, almost one-half of which was related to projects in and around Nouméa; building projects in the Northern Province accounted for only 14.6% of the total. Many Kanaks work in cottage industries producing artefacts for the tourist trade. Other services Tourism shows promise Large-scale tourist resorts outside the capital, Nouméa, have been difficult to develop because of opposition from Kanak communities, who own most of the land, but facilities on a smaller scale have been developing steadily. Traditionally, most visitors have come from Japan, France, Australia and New Zealand. Tourist arrivals totalled 100,651 in 2005, but the sector s growth in recent years has been disappointing. This may be related to a previous decision to close the national tourism office and assign promotion of the territory overseas to three provincial offices. However, a national office has since been reopened. Authorities in New Caledonia have acknowledged the success of neighbouring Fiji in boosting tourist arrivals. However, the territory has lost out to Fiji by refusing to make any concessions to the Australia-based no-frills airline, Virgin Blue, which was keen to begin operating flights from Australia to New Caledonia. Virgin Blue claimed that the airport charges that it faced in New Caledonia were not only high compared with other destinations in the region, but much higher than the rates paid by its rival, the national carrier, AirCalin. The external sector Trade in goods New Caledonia runs a persistent trade deficit The merchandise trade deficit has crept up in recent years, with imports regularly around twice the value of exports. This situation is only sustainable because of the huge transfers (around 30% of GDP) provided by France. France supplied 47% of imports (in value terms) in 2005, followed by Singapore (15%) and Australia (9%). France also absorbed 16% of New Caledonia's exports (in value terms) in 2005, but the country's single largest export market was Japan, which accounted for 19% of exports in that year. The various developments planned for the nickel industry provide the only real hope for New Caledonia to raise its export earnings substantially. High world nickel prices and the resolution of some of the production problems that plagued the industry in 2002 helped to push up earnings from metallurgical exports to CFPfr75bn (US$800m) in 2003, CFPfr90bn in 2004 and CPfr94bn in 2005. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
12 New Caledonia Regional overview Membership of organisations The Pacific Islands Forum The Pacific Islands Forum (PIF) is the most important regional organisation. It was formerly known as the South Pacific Forum, which in turn developed from the South Pacific Bureau for Economic Co-operation, established more than 40 years ago. The Forum officially adopted its new name at its annual meeting in 2000, recognising that not all of its members are in the South Pacific since the admission of former US trust territories north of the equator. The Forum was created in 1971 in response to the spread of self-government in the region and the need of the new states to have a political forum. The 16 current members are Australia, the Cook Islands, the Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, the Marshall Islands, Samoa, the Solomon Islands, Tonga, Tuvalu and Vanuatu. The Forum meets each year at head of state/government level, and after the meeting ministers spend two days in consultation with the Forum dialogue partners Canada, China, the EU, France, India, Indonesia, Japan, Malaysia, the Philippines, South Korea, the UK and the US. A separate dialogue session is held with Taiwan by the five Forum members with which it has diplomatic relations. The Forum Secretariat (based in Suva, the capital of Fiji, with a staff of about 70) administers a series of programmes aimed at promoting regional cooperation among member states through trade, investment, economic development, and political and international co-operation. It has also developed a growing portfolio of technical training programmes as part of broader initiatives for institutional strengthening, good governance and accountability. Operations are funded by contributions from member governments and donors. Current donors are the dialogue partners, together with Australia, New Zealand, the Commonwealth Secretariat and Germany. Since October 1994 the Forum has had observer status at the UN General Assembly. Island governments have used the PIF and other regional forums to make their views known on other issues, such as climate change and the impact of rising sea levels. Other perennial issues are pooled regional governance, greater cooperation on regional air transport, security and crossborder crime (eg moneylaundering). The PIF is now focusing on implementing the Pacific Plan, a wideranging package of measures agreed at its summit meeting in October 2005 in Papua New Guinea. One key objective is to integrate trade in services (including temporary labour movement) into the Pacific Island Countries Trade Agreement (PICTA) and the proposed EU Economic Partnership Agreement (EPA) by 2008. There are also plans for the bulk purchase of commodities such as oil. Greg Urwin, an Australian and a former high commissioner to Fiji, Samoa and Vanuatu, was appointed secretary-general-designate of the PIF at the organisation s annual summit in August 2003. The post of secretary-general, the senior regional position, had always previously been filled by a Pacific islander, and the leaders of some of the smaller PIF member states, including Nauru and the Cook Islands, were unhappy at the aggressiveness of Australian lobbying for Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 13 their candidate and suspicious of Australia s motives in seeking the top position in the organisation. Nevertheless, Mr Urwin, who is married to a Samoan, was finally appointed in a secret ballot. Australia s increasing military role in the region, along with its aid activities, means that it is likely to play a crucial role in PIF activities. The rising power in the region is China, and the Chinese government held discussions with several PIF members in Fiji in 2006. The Pacific Community Other regional organisations The EU-ACP Convention A second regional organisation is the Pacific Community (formerly the South Pacific Commission), formed in 1947 by Australia, France, the Netherlands, New Zealand, the UK and the US. They were then the colonial powers in the region and insisted that the organisation be non-political, dealing only with technical issues and matters of practical co-operation. It now has 26 members and continues as a non-political body, offering technical advice, assistance, training and research. Its headquarters are in Nouméa, New Caledonia, with a substantial presence in Suva. It is a bilingual organisation (English and French), with a staff of around 175 and a limited budget, augmented by special funding for particular projects. Its director-general is Jimmie Rodgers, who was appointed in November 2005. It has an integrated work programme based around the development of the region s land-based, marine-based and human resources. Its current corporate plan concludes in 2006, so the organisation will now need to draw up a new list of priorities. Better use of land and marine resources will be an important future focus. The secretary-general of the Forum Secretariat chairs the Council of Regional Organisations of the Pacific (CROP), which brings together the Forum and the Pacific Community, as well as six other regional organisations: the Forum Fisheries Agency (based in Honiara, Solomon Islands); the Pacific Islands Development Programme (based in Hawaii); the South Pacific Regional Environment Programme (based in Apia, Samoa); the South Pacific Applied Geoscience Commission (based in Suva, Fiji); the South Pacific Tourism Organisation (also based in Suva); and the University of the South Pacific (based in Suva, but with campuses and centres throughout the region). A further regional organisation, although narrower in membership than either the PIF or the Pacific Community, is the Melanesian Spearhead Group (MSG), which brings together the Solomon Islands, Papua New Guinea, Vanuatu, Fiji and the New Caledonia independence coalition, the Front de Libération Nationale Kanak Socialiste (FLNKS). The MSG aims to promote co-operation between members in economic, political and cultural matters, and is implementing a free-trade agreement between its members. All PIF members excluding Australia and New Zealand are also members of the 78-state ACP (Africa, Caribbean and Pacific) group within the Cotonou Agreement. This agreement, which was ratified in February 2003, is the successor to the Lomé Convention and gives the ACP nations preferential trading access to the EU market and a share in EU aid programmes and other assistance. The secretariat of the PIF is charged with the task of drafting a joint position for negotiations between the PIF members and the EU provided for under the agreement. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
14 New Caledonia The Cotonou Agreement, which is to last for 20 years, has a strong political dimension. As well as respect for human rights, democratic principles and the rule of law, which were all essential components of the Lomé Convention, the ACP countries have also agreed to promote good governance and to combat corruption and illegal immigration into the EU. Under previous conventions, ACP products, whether agricultural or industrial, entered the EU duty-free, but four agricultural products beef, sugar, bananas and rum were subject to a more restrictive system of tariff quotas. The new agreement offers a negotiating framework for tailor-made regional free-trade agreements (RFTAs), under which ACP countries, preferably within existing economic groupings, will gradually open their domestic markets to European products. Given the adjustment costs involved, a preparatory period of eight years has been agreed, during which the old system of preferences will continue to apply. The exact form of future relations with the EU will become clearer over the next two years, as negotiations continue over the proposed EPA. The EU maintains a regional delegation in Suva. The regional economy The region is diverse Economies dependent on aid and external conditions The 22 island countries of the Pacific region are spread across more than 30m sq km, but occupy less than 2% of that area. Although almost all of the countries are politically independent and have their own governments and heads of state, aid from the former colonial powers, and from other bilateral and multilateral donors, remains important. The importance of aid reflects the relative weakness of most of the economies in the region, as well as problems of poverty, law and order and poor governance. Agriculture, in particular the export of agricultural commodities, is central to the economies of many of the Pacific islands. Other important industries are fishing and tourism. Fiji and New Caledonia have important mining industries, but none of the other small island communities has significant natural resources. The high degree of dependence on such sectors renders the islands vulnerable to external shocks, the weather (most island countries are vulnerable to cyclones, among other things) and the vagaries of commodity markets. The economic performance of trading partners also has a direct and usually rapid impact on the island economies. Tourist arrivals fell in the wake of the terrorist attacks on the US on September 11th 2001, although not to the extent initially feared. Inbound tourism rose once again in 2002, partly as a result of the October bombings in Bali, Indonesia, which had the effect of diverting some tourists to the Pacific. Over the same period, the recovery in world gold and nickel prices has benefited Fiji s small gold production industry and New Caledonia s important nickel industry, which is attracting a high level of new investment. But political instability within the region remains a major obstacle to investment and growth. Islands struggle with problems such as crossborder trade The Australian-led multilateral intervention in the Solomon Islands, which began in late July 2003, should be seen in the context of the wider difficulties faced by island-state governments. Regional governments, including those of Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 15 Australia and New Zealand, have for some time been intensifying their efforts to deal co-operatively with a range of new problems arising from organised crime and the impact of globalisation, but the smaller states lack the ability and resources to deal effectively with issues such as the smuggling of drugs, arms and people through and into the region, overpopulation, environmental degradation, money-laundering and corruption. The governments of Australia and New Zealand have been reluctant to be seen to be intervening in their neighbours affairs in a neo-colonialist fashion. However, faced with the effective collapse of the Solomon Islands, and the security implications of having a failed state on their doorstep, they have obtained support from the government in Honiara, the capital of the Solomon Islands, and more widely among the Pacific island countries, for intervention. The other island states depend on patrol and surveillance operations carried out by Australia, New Zealand and France (from New Caledonia). Regular meetings are held between law enforcement, customs, immigration and legal officials to review developments and exchange information. However, the joint implementation of a modernised legislative framework and co-ordinated border control systems has been slow. Six island jurisdictions have offshore financial centres (tax havens) to augment their meagre revenue. Most of these have implemented new laws following the threat of sanctions, made in 2000 by the Paris-based Financial Action Task Force (FATF), which operates under OECD auspices, unless regulatory regimes were strengthened to minimise opportunities for money-laundering and other criminal activities. A Pacific free-trade area has been established The Pacific Island Countries Trade Agreement (PICTA), first envisaged at the inaugural meeting of the Pacific Islands Forum in 1971, came into force on April 13th 2003. The free-trade agreement, which will be phased in over the next ten years, aims to remove trade barriers such as import duties, quotas and tariffs between the 14 PIF island nations, to help boost trade, promote regional integration and improve the economic efficiency of the island economies. There are, however, some concerns about the benefits of a free-trade area relative to the costs, especially given the low level of intra-island trade (which accounts for just 3% of total trade within the region) and the impact on government revenue of lower export taxes and import duties, which represent the main source of income for most island governments. The main beneficiary of the free-trade agreement is likely to be Fiji, which has the most developed economy and is the biggest trader with the other islands. Closely connected with PICTA is the Pacific Agreement on Closer Economic Relations (PACER), which provides a framework for the future development of trade relations between the 16 PIF countries. Under this agreement, the two developed PIF members, Australia and New Zealand, have agreed to provide technical assistance to and preferential market access for products from the developing PIF members. These members in return have assured Australia and New Zealand that they will not be disadvantaged by any trade arrangements the developing PIF members may enter into with other developed countries. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006
16 New Caledonia Appendices Sources of information National statistical sources Institut d'emission d'outre-mer: www.ieom.fr Institut de la statistique et des études économiques Nouvelle Calédonie (ISEE): www.isee.nc Institut territorial de la statistique et des études économiques (ITSEE), Tableaux de l'économie Calédonienne Service des Douanes en Nouvelle-Calédonie: www.douane.gouv.nc International statistical sources OECD, Geographical Distribution of Financial Flows to Aid Recipients (annual) Reference tables Estimated population 2000 2001 2002 2003 2004 Total n/a n/a 215,904 218,977 230,789 Source: Institut de la statistique et des études économiques Nouvelle-Calédonie. Territorial finances (CFPfr m) 2001 2002 2003 2004 2005 French state spending 86,344 90,606 98,608 100,387 105,735 Territorial revenue 82,348 82,560 90,242 103,333 n/a Territorial expenditure 79,208 83,185 88,763 96,484 n/a Budget balance 3,140-625 1,479 6,849 n/a Source: Institut territorial de la statistique et des études économiques. Gross domestic product 1997 1998 1999 2000 2001 Total (CFPfr m) At current prices n/a 381,463 408,433 441,872 439,383 At constant (1990) prices n/a 286,170 288,746 294,810 n/a % change, year on year n/a 2.6 5.9 8.2-0.6 Per head (CFPfr '000) At current prices n/a 1,879.3 1,952.3 2,072.3 2,021.8 At constant (1990) prices n/a 1,412.3 1,401.7 1,409.1 n/a % change, year on year n/a n/a 3.9 6.1-2.5 Source: Institut territorial de la statistique et des études économiques. Country Profile 2006 www.eiu.com The Economist Intelligence Unit Limited 2006
New Caledonia 17 Inflation (% change year on year; period averages) 2001 2002 2003 2004 2005 Consumer price inflation 2.3 1.5 1.0 0.6 2.6 Source: Institut territorial de la statistique et des études économiques. Visitor arrivals 2001 2002 2003 2004 2005 Total 100,515 103,933 101,983 99,515 100,651 Japan 27,954 27,202 28,490 29,229 31,486 France 25,202 29,964 29,440 27,358 27,727 Australia 19,200 19,216 15,957 16,212 16,062 New Zealand 8,048 5,935 6,030 6,368 6,328 Source: Institut territorial de la statistique et des études économiques, Tableaux de l'économie Calédonienne. Exports (CFPfr m; fob) 2001 2002 2003 2004 2005 Nickel ore 8,491 7,385 9,544 15,793 15,911 Ferro-nickels 35,350 40,180 54,668 59,969 64,592 Mattes 9,853 8,528 11,225 14,461 13,629 Prawns 1,958 2,060 1,771 2,235 2,372 Tuna 773 491 514 374 381 Total incl others 60,346 62,414 82,757 98,860 104,047 Source: Institut territorial de la statistique et des études économiques, Tableaux de l'économie Calédonienne. Main imports (CFPfr m) 2001 2002 2003 2004 2005 Foodstuffs 19,545 19,859 20,480 21,804 22,944 Minerals 18,053 17,033 16,826 19,623 27,989 Chemicals 9,655 10,674 11,435 12,260 13,145 Rubber & plastic products 5,109 5,175 5,264 5,930 7,402 Timber & wood products 1,537 1,440 1,671 1,743 1,888 Paper & paper products 3,728 3,590 3,743 3,752 3,850 Textiles 4,240 4,352 4,462 4,605 4,911 Metal & metal products 7,611 8,146 8,750 11,075 12,537 Machinery, appliances & electrical supplies 23,519 23,138 26,760 32,828 34,871 Vehicles & spare parts 19,431 19,373 46,909 27,577 25,324 Other 11,744 14,398 17,568 15,569 15,831 Total 124,171 127,178 163,869 156,767 170,692 Source: Institut territorial de la statistique et des études économiques, Tableaux de l'économie Calédonienne. The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006