‘We can’t pretend that everything is fine’

Dr Satish Chand
Forum Economic Ministers (FEMM) will be having their 11th annual meeting in less than a month to ponder on the economic challenges facing their region. The meeting will be held in Koror, Palau, on July 10-13.

For those of you not familiar with this annual meetings, it is a gathering organised by the Pacific Islands Forum Secretariat that has been held annually since 1997 where Economic Ministers and their senior officials gather to ponder the developmental challenges facing their nations and the region as a whole.

The formal sessions entail presentations and discussions in closed-door settings while the evening cocktails provide an informal setting for further deliberations on issues of concern.

The alcoholic beverages that flow freely following the formalities help those struggling to manage their moribund economies drown their sorrows. The warm welcome, the traditional mekes, the plentiful feasts and after-dinner speeches all lull the senses of many, providing a well-deserved break from the grind of balancing the books at home.

It is perhaps in these delusions that the visions of the Pacific as “a region of peace, harmony, security, and economic prosperity” first arose.

If FEMM 2006 (at which yours truly was present) is any guide, then ministers will once again retire back to their desks following a week of ‘talkfest’ and with an armful of papers in a hefty file that will collect dust on a corner shelf in their offices.

This bundle of papers could as much have served as a door stop.

Every FEMM, much like the last one, comes up with an anodyne Action Agenda.

The one for last year, for example, notes that the “Ministers recalled the vision of the Forum Leaders that economic growth is the basis for higher sustainable living standards for all the peoples of the Pacific”; they “reaffirmed their responsibility to provide leadership on regional economic integration”; and, “agreed that FEMM must facilitate the implementation of the Pacific Plan, particularly in areas pertaining to economic growth and good governance”.

The Action Plan even included some self-congratulatory remarks like: “Ministers noted that FICs have progressed the furthest in the implementation of the Forum Eight Principles of Accountability, with significant movement over the last two years”.

The document makes several mention of the need for ‘technical assistance’ and the ‘Pacific Plan’.

It is shocking to note that ministers even need reminding of the many economic challenges facing the region and their responsibilities of leadership.

It would be great to trace where those millions of dollars worth of technical assistance—funded by taxpayers in donor nations in the name of poor Pacific islanders—end up.

Forum speak

As the keynote speaker at the last FEMM, let me share with you some of my observations at this meeting. Much of what happened leaves much to be desired.

FEMM is a tightly controlled event where everything that happens is decided upon and planned for well in advance by a handful of senior officials of the Forum Secretariat. Everything from the papers, power point presentations, seating arrangements, and the list of invitees is vetted months in advance.

Consultants are often hired to ‘provide’ expert opinion on issues of pertinent interest to the region. My instructions were to provide a report on the economic progress made over the decade since FEMM first began.

A fairly straightforward exercise, you may think, but not nearly so.

My assessments were not too favourable for several of the economies, reaching the conclusion that the economic problems besetting the region were more of our own making than due to forces beyond our control. In short, the plight of the struggling economies was in the main due to poor governance.

Getting this simple message through the gatekeepers at the Forum Secretariat was close to impossible.

The officials not only objected to any bitter truths being revealed, but came back with the requirement that all member nations be mentioned at least once and each only in a favourable context.

To cut a long and sad story short, I was allowed to continue only after threatening to withdraw my services and with a watered down version of the initial paper.

Two ministers had requested that the lessons from the keynote paper be incorporated in the final proceedings. This is as yet to take place.

The purpose of the FEMM Action Plan, as one Ministerial official had informed me at the meeting, was to transcribe all of the lessons into ‘Forum Speak’—that is, inactionable bureaucratic jargon.

Forum speak, with the benefit of hindsight, was effective in achieving inaction on all of the 11 recommendations.

As good as it gets

A number of the Pacific economies are doing well, no credit to FEMM, however. External conditions for the Pacific remains as good as ever.

Real gross domestic product in Industrial Asia—comprising Australia, Japan, and New Zealand—as projected by the IMF in its April Outlook, is to expand by 2.4 percent in 2007.

Emerging Asia is projected to grow by 8.5 percent while real GDP in China and India are projected to expand by a whopping 10 and 8.4 percent, respectively.

The 2008 prospects are just about as rosy. Exports from and investments into the Asia-Pacific region are as healthy as ever while inflation risks remain subdued.

Downside risks include a rapid slow down in the rate of growth of the US economy, turbulence in the financial markets a la Asian Financial Crisis of 1997, and another oil price hike.

The IMF, however, concludes that upside risks in terms of the spill-overs from of the booming Chinese and Indian economies are likely to outweigh any of the downside risks.

The picture for the members of the Pacific Forum is a lot murkier, however.

Australia and New Zealand, the richest members of the Forum, are projected to witness growth of real GDP of 2.6 percent and 2.4 percent, respectively, in 2007.

Amongst their poor and smaller cousins in the neighbourhood, the story is favourable for Solomon Islands, Samoa, and Papua New Guinea who are all projected to grow by around 5 percent in 2007. Fiji and Tonga, credit to problems of governance, risk a decline in per-capita GDP this year.

Governance for growth

The immediate challenge for our economic managers is in creating the conditions at home that enables the tapping into the benefits of a booming regional and global economy.

Poor governance has been a perennial problem amongst several of the members of the Forum.

Clearly the nations that have done well economically over the past decade were those with improved economic management while those with the severest of economic challenges have had an equally dismal record with governance.

FEMM provides the opportunity to share these experiences, both good and bad, in the hope of providing lessons to improve on past performance.

For this to happen, the minders of FEMM need to muster sufficient courage in facing up to the economic realities of the region.

Pretending that everything is fine within the member nations or blaming all of the ills at home on external forces is a disservice to the Ministers, their officials, and the people of the Pacific as a whole.

Unfortunately, no amount of technical assistance will rectify this deficiency.