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What it’s like doing business in the islands
SPEED UP REFORM PACE, OR ELSE... What it’s like doing business in the islands
By Dionisia Tabureguci
The economic challenges facing most Pacific Islands countries in terms of business activities being generated in their economies are not unknown.
As these governments put in place well-meaning social and economic policies to try and move their countries forward, they still face a daunting task of creating an environment that is conducive to doing business.
While each economy in the world faces a degree of this challenge, it has been found that some countries have moved quickly to make important changes that foster a more friendly business environment and in this way are in tune with the ongoing need for such reforms.
Among countries that lag miserably behind are a handful of Pacific islands countries, giving an overall reflection that it is more difficult to do business in the Pacific region than in other parts of the world.
This may be gauged from the findings of a new report released last month by the World Bank and the International Finance Corporation, the bank’s private sector arm.
Titled Doing Business 2007: How to Reform, the report is the fourth in a series of annual reports that investigate regulations that enhance business activity and those that constrain it. “Regulations affecting ten areas of everyday business are measured: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. The indicators are used to analyse economic outcomes and identify what reforms have worked, where and why,” said the report’s introduction.
The data set, it added, covers 175 economies and is benchmarked to April 2006. Overall, the report found that doing business generally became easier worldwide in 2005/06 where some 213 regulatory reforms—in 112 economies—reduced the time, cost and hassle for business to comply with legal and administrative requirements.
The report also emerged with a surprising result: “Africa is reforming”. For the first time, it said, Africa made the top three among reforming regions, after Eastern Europe and the high-income OECD countries. “If ‘Africa is reforming’ sums up how things went last year in that region, then may be ‘the Pacific is moving sideways’ is a good way to sum up how things went in our region,” said Alan Moody in an interview with ISLANDS BUSINESS.
Moody is a Sydney-based senior investment policy officer for IFC. In helping shed some light on why Pacific Islands countries have done poorly in this report, Moody said while reforms had been taking place in the Pacific, some “negative moves” had also been made, making the general pace of reforms not as fast as seen in many other regions.
“As a consequence, we face the prospects of a gradual decline over time in the Pacific’s ranking unless the pace of reform does pick up,” he said. After studying 10 Pacific islands economies, the World Bank ranked Fiji at 31 when it came to the ‘ease of doing business’ and Micronesia at 106. Between them were Samoa (41), Tonga (51), Papua New Guinea (57), Vanuatu (58), Kiribati (60), Palau (63), Solomon Islands (69) and Marshall Islands (86).
While this list may make these countries look relatively good considering they were being benchmarked against 165 other nations, the picture was weak when it came to the crucial question of “Who is reforming?”
Out of the 10 PICs, Micronesia came out on top with two net reforms while Palau was at the bottom of the ladder with a negative one net reform. The rest scored zero, indicating that the reforms they had put in place made little difference as other weaknesses in the system negated the intended impact of the reform measures.
Moody cautioned against reading too much negativity in the World Bank report, for “while the overall reform tally for the Pacific was not that impressive compared to the top-reforming regions this year, it would be wrong to say that nothing at all is happening.”
“For example, Micronesia introduced its first bankruptcy law and also reduced the minimum capital requirements to start a company. Australia introduced reforms on three fronts: lowering the cost to register a property; making labour regulations more flexible; and raising the threshold for small claims courts,” Moody said.
“With both Australia and New Zealand in the top 10 in the world and Fiji on 31, there are some useful models and experience to draw from right here in our own region,” he added. In this way, the report could be used as a tool by governments to track their progress and compare it with what’s going on in the rest of the world.
“It provides information to policy makers on how their private sector regulatory regime stack up in global and regional contexts,” Moody said.
“But perhaps even more importantly, it provides an easy and inexpensive way for governments to learn from the insights and experience of countries right around the world. Its other great value is in highlighting areas that are ripe for reform. For instance, an indicator against which a country is performing particularly poorly is often one where relatively easy improvements can be made. This can be seized by reforming governments eager to achieve “quick wins” to gain momentum on the regulatory reform front.”
While the new report could only assist at long as information it contains are relevant, Moody said it was more important to keep in mind that reform was an ongoing process.
“Reform never ends because the world never stands still: technology changes, modes of production change, the nature and prices of manufactures, services and commodities all change. Reform is core business for governments everywhere. Many realise this and institutionalise the processes for reform within their bureaucracies. But many don’t, acting only when forced to in response to economic crises. Recognising and responding effectively to change is one of the key factors that separates high performing countries from the rest.”
PNG huge market for CBIP
Palm oil mill specialist CB Industrial Product Holdings Bhd (CBIP) expects exports to Papua New Guinea to be a major contributor to its revenue next year. Its managing director Lim Chai Beng said the current outstanding order book from Papua New Guinea should contribute 30% to the company’s exports next year. Currently, exports account for 70% of CBIP’s revenue. “At the moment, Papua New Guinea is the biggest export market. The palm oil industry is growing very fast there and it is a very good country to invest in.”
Vanuatu beef for organic market
Vanuatu has been producing some of the world’s best beef for years. But now it is trying to take a cut of the organic market. “The overall concept is this,” explains Janette James, general manager of Port Vila’s beef processor Vanuatu Abattoirs Limited (VAL-Pacific), “What does Vanuatu have? We have tourism, kava, timber...and beef. It is one of the main export earners.”
Not only that, this Pacific Island nation has organic beef—an increasingly desirable commodity on the international market, one that this former joint colony of England and France hopes to exploit if it can only procure more cattle. Between 8000 and 9000 head of cattle are processed annually at VAL with two thirds being for the local market and the rest for export.
Airlines PNG’s new Australia service
Last month, Airlines PNG introduced a Boeing B737 service between Port Moresby and Brisbane. So far, PNG’s flag carrier Air Niugini, on a code share arrangement with Australia’s Qantas, has dominated routes between the two countries. Airlines PNG has leased its single B737 aircraft from Australia’s Oz Jet. The additional service is testimony to the growing traffic between the two neighbouring countries.
Importing bananas—and Indians
A couple of generations ago, Niue made most of its revenue exporting bananas—now it imports the fruit. Some blame cyclones, particularly Cyclone Heta, for playing havoc with the fertility of the island’s soil. Bananas are still grown, but they are so scarce that they are reported to be selling at US$3.50 a kilo—perhaps the most expensive banana in the world. The little island country is also planning to import other tropical fruits like mango. Meanwhile, after unsuccessfully trying to get labour from neighbouring islands countries to work in its farming sector, Niue has had to resort to getting people from far away as India. In a bid to attract foreign investors, the country has made its Niue Companies Act 2006 fully operational making it possible for local and overseas companies to set up shop.
Business opportunities in the islands
The US Department of the Interior will be hosting its third Conference on Business Opportunities in the Islands on November 13 and 14 in Honolulu, Hawaii. The purpose of the conference is for businesses to take advantage of opportunities in the United States territories and in nations in “free association” with the America. Leaders of all seven U.S. jurisdictions are expected to introduce their islands and business, and government leaders from these jurisdictions will discuss opportunities that exist there in sectors ranging from tourism to information technology. The New Zealand Pacific Business Council will be represented at the conference by its chairperson.
No more New York/Paris service
French Polynesia’s international flag carrier Air Tahiti Nui will from the end of this month scrap its newly introduced New York-Paris service. Airline chairman Éric Pommier has confirmed the decision.
Air Tahiti Nui has come under fire after critical conclusions from an audit carried out by international aviation consultants Simmons & Simmons.
The report came at Pommier’s request. It contained criticisms of Air Tahiti Nui’s management and strategic decision-making, including last year’s decision to launch a new direct route to New York. The report also slams the apparent “lack of any plan to bring the company back to financial balance.”
Last year, the airline had accumulated around six billion French Pacific Francs (US$60 million) in losses for that year’s financial exercise. This year, it is tipped to conclude the current financial year with an estimated loss of US$20 million.
Marshallese oppose proposed dry-dock
Marshall Islands residents are opposing an US$18 million Taiwan backed floating dry-dock proposed for a heavily urbanised area of Majuro Atoll, the capital of the central Pacific nation, according to the Marianas Variety.
Although people acknowledged the job-producing potential of the venture in the country that is facing a 34 percent unemployment rate, they also gave a strong thumbs down to a proposed new location for the dry-dock during an Environmental Protection Authority public hearing.
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