A Pacific islands economy without remittances is simply unthinkable.

Dev Nadkarni
Come to think of it, there is almost no incentive for the average Pacific Islander to contemplate embarking on an entrepreneurial career. In a predominantly subsistence-driven economic climate, where there is little commercial infrastructure and no marketplace that would justify any economies of scale, only the bravest would consider venturing into an activity like manufacturing.

Additionally, there are any number of dampeners to private enterprise—ranging from poor government policy and an almost complete lack of encouragement to high costs of doing business owing to expensive utilities, and a fast evaporating skilled workforce. This is not to mention socio-cultural hurdles like land use—a very touchy issue in the Pacific islands—and the general lack of a professional work ethic.  

Arguably the biggest discouraging factor to the spirit of entrepreneurship in the islands, however, is that very one which has kept its economies ticking for decades and is often the highest single revenue earner for them: Remittances. It is just not in the Pacific islands economies that remittances are growing. In fact globally, remittances total in excess of one hundred billion US dollars every year and exceed aid inflows in several developing economies—most Pacific islands included. Despite looming global terrorism, work-related migration continues to grow in many parts of the world and remittances will only keep pace with that growth in the medium term. The Pacific islands, too, have seen increased migration in recent years, particularly as political turmoil and the resultant economic hardships tighten their grip in some of them.

In addition, shrinking labour markets in the developed west have increased seasonal migration particularly in industries like agriculture that has helped boost remittances, with many governments now putting in place elaborate systems for this activity in a planned manner.

This has resulted in remittances becoming so important for some governments that they have begun to depend solely on that major inflow to help maintain their foreign exchange reserves in the face of falling exports and uninspiring levels of foreign direct investments.

A Pacific islands economy without remittances is simply unthinkable. But it is these very inflows that tend to discourage indigenous investment in business. Remittances tend to feed a lifestyle-driven consumptive market, particularly in the subsistence economy environment. It is therefore not hard to see why an average Pacific Islands family with some of its members earning abroad would find it more compelling to spend much of the surplus funds remitted on glitzy cars or expensive digital gizmos than use it as a corpus to start an enterprise.
Given the higher exchange rate values and the regular ‘income’ that remittances bring in, there is simply no incentive to venture into business.

This behaviour, in effect, has bred a growing dependency on remittances for survival and in many economies it is already a vicious circle that will be difficult to break. On their part, governments too have been smug. Their efforts to encourage private enterprise have never been concerted. Loathe loosening their monopolistic stranglehold on essential utilities; they have in fact thrown major disincentives and hurdles in the path of that minority who may have been courageous enough to embark on an entrepreneurial path.

Business councils in the islands, especially the ones partnering with those in neighbouring developed countries, have been in discussions with islands governments to usher in an enabling climate for business for years. They have urged governments to ease bureaucratic procedures and enact legislations that better address the modern business environment especially in the technology sector.

But their efforts have often come a cropper—mostly because there has been no system for sustained followup. Neither has there been a determined champion to espouse these causes. The new Pacific Islands Private Sector Organisation (PIPSO) hopefully will address that lacuna. It is hoped its inaugural session this month will bring politicians, bureaucrats, industrialists and businesspersons in the wider Pacific region for a meaningful dialogue that will result in finally charting new paths for private sector enterprise in the islands. PIPSO has its work cut out. 

A major concern for big-ticket investors— particularly those involving high technology infrastructure in the Pacific islands business environment—is assurance of the continuation of contracts across governments and regimes. It is all too often that we hear disturbing stories of premature termination and cancellation of contracts, of new hurdles put in the path of an investor when a government changes, inordinate delays in giving clearances, and so on.

The quick implementation of regional trade agreements, the resolution of long standing intra-regional freight and passenger transportation problems and the long delayed automation in banking processes—all need a concerted effort at following up with governments. Especially so because some of these may be technically possible to implement as we speak, but not possible owing simply to outdated legislation that have no redress mechanisms in the new technology context. 

Importantly, PIPSO might do well to encourage governments to put their growing volumes of remittances to better use while simultaneously enabling a climate for private enterprise in their respective countries—at least to begin with. Governments need to encourage citizens to invest in business for the creation of local jobs. They need to offer people the right incentives for investing a part of the family remittances into small business ventures—for it is the small and medium sized ventures that power national economies anywhere in the world.

It might also do well to offer advise to Pacific Islands governments on letting go their vice-like grip on monopolies and letting in more competition to make telecommunication and energy services cheaper and better, not just for business but for all islanders. 

Speaking of competition, it was interesting to see on PIPSO’s agenda three players in the telecommunications industry vying to sponsor morning teas, lunches and dinners at its Nadi meet in early August. Indeed an encouraging sign for the opening up of Fiji’s long suffering telecommunications environment. Competition seems to be here at last—at least on the agenda!