Samoa's private sector to feel heat

Dev Nadkarni
Samoa

Samoa's economy hit a rough patch following the government's politically expedient spending spree in the run-up to last year's election.

Samoa's business district. Pic: Dev Nadkarni

The credit squeeze put in place in the latter half of last year continues into 2007 and the private sector will feel the heat well into this year.

The construction and infrastructure industries will especially find the ride bumpy with the squeeze on credit as projects related to the 13th South Pacific Games (SPG) to be held in the middle of this year near completion.

Two new big-ticket hotel projects from the Warwick and the Fiji-based Reddy groups-besides a slew of smaller ones-will fuel economic growth as will tourism, thanks  to the SPG and increased numbers following Fiji's coup. The early successes of two new high profile business initiatives in the country-Polynesian Blue and Digicel-will keep business sentiments on the positive side despite the tightness in the money market.

Of some concern this year will be the recent slump in Australia's automobile industry because it may affect Yazaki, the country's largest private sector employer with a nearly 2000 strong workforce. Yazaki manufactures automotive components supplying mainly to Australia. The government is believed to be in discussions with Yazaki on diversification projects.

A recent US$15-million refurbishment at the fish cannery in Pago Pago in American Samoa and a resurgent fishing industry in Samoa has seen fish exports to both American Samoa and the United States grow impressively and this growth will continue this year buoyed by improved fish stocks in Samoan waters.

Samoa now has a more definitive plan to woo investment. It has set up a one-stop shop involving the ministries of commerce, industry and labour for faster clearance of projects.

But local businesspeople complain the country still has among the highest costs of power (more than twice that of Fiji) and telecommunication in the region, making local business activities uncompetitive-something the government will have to address sooner than later.

On the political side, the ruling HRPP will have little opposition in the House after its main opposition lost its party status following a split at the end of a long drawn-out spat last year which resulted in less than the required eight members to sustain party status.

The highlight for the country this year will be the South Pacific Games and the events surrounding it. But it remains to be seen how much the event will ultimately benefit the economy in real terms and whether it will bring back the pep in the country's growth rate that it has seen in the early 2000 after last year's rough patch.

Outlook: Construction activity and the run-up to the SPG will boost business sentiments as well as tourism numbers and the continued disarray in the country's main opposition will pose few political issues for the ruling Human Rights Protection Party. The government will need to take measures to see the economy back on its usual pace of growth after last year's slowdown.

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TONGA

Two activities will consume much of Tonga's resources this year: investigations into the horrific events that led to the near total destruction of its capital Nuku'alofa on November 15 last year and the rebuilding of the town as well as the country's reputation as a safe and peaceful tourist destination.

Rebuilding will take up most of Tonga's resources in 2007.

Soon after the disturbing events, business associations in both New Zealand and Tonga have been working together at a frenetic pace finding resources to restore infrastructure and encouraging businesses to restart operations.

The governments of New Zealand and Australia have committed funds for rebuilding infrastructure particularly in and around the destroyed business district and remittances from overseas Tongans will, in all likelihood, increase to supplement the overall aid effort.

Judging by the pace with which the business community in New Zealand has rallied around the beleaguered kingdom, we should see things pretty much back to business as usual before the year is out. Tongan businesspeople coordinated by the Tonga New Zealand Business Association have already begun accessing credit from various quarters in New Zealand for rebuilding businesses, helped by business associations in the country.

As the kingdom rebuilds its lost infrastructure, its administration must shed its opaqueness and open wide its channels of communication with the pro-democracy and reform movement's leadership. Any delay or failure to do so will take the momentum out of the rebuilding process-something both the people of Tonga and the government itself cannot afford.

Tonga has done exceptionally well in the development indices over the last few years earning it the top slot among Pacific Island countries. These will continue improving and the kingdom will continue to lead the pack in MDG (Millennium Development Goals) achievement in the coming years.

With a highly educated and affluent overseas Tongan community with strong ties back home, this is as good time as any for the kingdom to make all the right moves to lure its own back home to build on some of its innate strengths.

With a little more openness and genuine firm steps towards a modern, egalitarian political ethos on the part of the King and the government, there is no reason why Tonga shouldn't rise from the ashes like the proverbial Phoenix. That process may well kick off in 2007.

Outlook: This is Tonga's big chance. If the King and the government play their cards right in displaying their willingness to reform at a quicker pace, the kingdom may yet cross the Rubicon. A continuing disconnect with the people at large will only take things back to the days before November 2006.

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VANUATU

The 83-island archipelago has so far successfully ducked the menacing sweep of the so-called Melanesian arc of instability that swept up political turbulence last year in Papua New Guinea, the Solomon Islands, past Fiji all the way to Tonga.

Vanuatu's produce market in Port Vila. Pic: Dev Nadkarni

Vanuatu's present coalition government led by Prime Minister Ham Lini has so far faced as many as five no-confidence motions in as little as two years keeping it on its toes with all kinds of political machinations.

The government's finances will be stretched to its limits this year as it prepares to implement the Government Remuneration Tribunal's recommendations that will increase salaries of government employees by a whopping 25 percent. Little of that has been budgeted for and there is a bit of a scramble to find funds to meet the huge expense. Government employees' remuneration has not been revised for over a decade and any further postponement would be disastrous for the Lini administration.

The situation in Fiji has given a welcome boost to the country's tourism sector, which has seen a steady rise in numbers since the Fiji crisis began snowballing early in mid-November last year. Shortly before that, flag carrier Air Vanuatu's code-share arrangement with Air New Zealand has begun to bring in additional flights and tourists from New Zealand.

A couple of largish hotel projects will keep the construction industry booming this year. Also a number of small to medium-sized entrepreneurs in the tourism sector especially from Australia are eyeing Vanuatu as a relatively safer destination for investing their project dollars.

Its investment board is also getting its act together in coordinating various departments to offer a one-stop shop to potential investors. The country's tax haven status has recently won praise from international monitoring agencies though the Australians have raised concerns but the sector will likely to grow.

Potential conflict lies in the rapid development of customary land by overseas developers. Over the last couple of years, a number of developers have been hawking prime waterfront properties to overseas investors and there have been sporadic voices of concern raised in some of the country's islands. The government would do well to watch that trend carefully and pro-actively.  

Vanuatu will have to do much more in the area of exports of its agricultural sector, particularly its kava, which has seen growing opposition from across the world. Last year exports fell precipitously with the rejection of entire shipments.

This year, it has a lot to look forward to in its tourism sector-new hotels and resorts, an European Union-funded hospitality training college that will ultimately be used as a regional training facility by the soon to be established Pacific Technical Training College, funded by Australia, and some new initiatives in both cultural and adventure tourism. The new Chinese-funded headquarters of the Melanesian Spearhead Group (MSG) will also begin construction this year.

Its government will continue to face a choppy ride with a very vocal opposition but the country is unlikely to face the political instability of the kind that hit some of the other Melanesian states last year.

Outlook: Smooth sailing with gains in tourist numbers, thanks to problems in Fiji. New infrastructure and tourism sector projects will keep up economic activity.

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