November 19, 2006

Aussie Pacific Economy Report Nov 2006

Pacific states in economic mire: Report

Tuesday, November 21, 2006

Update: An Australian Treasury Department report says Fiji is among Pacific countries who have squandered $US75million ($F126.9million) since independence through poor governance.

And it says most of Australia's Pacific neighbours are economic basket cases in long-term decline and mired in corruption.

The report said countries that have squandered as much as Fiji include Papua New Guinea and Nauru.

According to The Australian newspaper, the report says while Fiji, Tonga and, recently, Samoa have performed better, the review says many of the risks facing Pacific economies are widespread.

The review report shows that in Papua New Guinea, Solomon Islands and Vanuatu there has been no real economic growth in the past 20 years.

It said average incomes in PNG and the Solomons were only marginally above $US500 ($846) a year, which is the level of sub-Saharan Africa.

An assessment of corruption by the World Bank placed PNG in the worst 25 per cent of offenders in five of the six measures, while the Solomons was among the worst in four out of the six.

"There is ample evidence suggesting that governance in the Pacific Islands has generally been poor," the Treasury report says.

It said rapid population growth in Melanesia has made it hard for nations such as PNG and Solomon Islands to achieve growth in income per person.

It would take PNG 20 years of sustained economic growth of 3.3per cent a year to get average incomes back to the level they achieved in 1994. Average incomes in the Solomons have been in decline since 1980. It would need average economic growth of 4.6 per cent a year for 20 years to return to that point.

"Demographic pressures are interacting with weak economic performance to worsen unemployment and associated social unrest and criminal activity in several countries," it says.

Agriculture has only a limited ability to absorb a rapidly growing labour supply and is, in any event, declining as a share of Pacific economies. The result is growth in unemployment among the urban workforce, with the numbers of unemployed young men rising to between 30 and 42 per cent.

The Pacific islands depend heavily upon commodity income to support their budgets. Aid provides important support to many nations, although it has been in long-term decline.

The level of aid in PNG is $US40 a head, compared with an average of $US31 in Africa.

Private investment is also low, at between half and two-thirds of the average level for developing countries.

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