‘While governments have done little to enable a climate conducive to business even in their own countries at a policy level, it is not surprising that there has been no worthwhile initiative for developing businesses at the regional level.'


No matter which way you look at it, the Pacific islands environment is heavily loaded against the very idea of private sector enterprise.

Isolation, small populations, logistic challenges, high costs of utilities, paucity of a skilled workforce, migration and outdated, highly centralised government policies—to name just a few—all conspire to create one of the most business -unfriendly environments anywhere.

This is not to mention some very specific pan Pacific cultural and economic factors that exacerbate the situation in no small measure such as unchanging cultural attitudes to land ownership and use, an overwhelming dependence on the tourism sector and a great reliance on overseas developmental aid and remittances. In fact, in the case of most islands countries, tourism and remittances alone drive their economies.

While many of these factors happen to be natural and cultural, there are others that can be easily addressed with vision, commitment and political will. Take for instance the simple act of setting up a new business.

In most Pacific islands countries, it takes several weeks if not months to get all the permissions required to set up a business entity.

There is a race around the world among countries to cut down red tape and reduce levels of bureaucracy at many levels of government and many countries have succeeded in facilitating the setting up of businesses in a matter of hours.

New Zealand tops the list of countries in the speed stakes. None in the Pacific figure anywhere in the top 50.

There’s no magic wand at play here. It’s just a matter of governments having the will to do it: better coordination among ministries, removal of unnecessary procedures and integrating the necessary ones—and above all, using technology.

In most countries, companies can be set up online in a matter of minutes. It is not that such technology does not exist in the islands.

It does and so does the know-how. What is not there is the regulatory and bureaucratic framework to make the technology work.

Though many governments have realised this and are making attempts to set up single window clearance mechanisms for projects, they need to move fast on decentralising decision-making and integrating tasks such as the processing of applications across various departments. Most governments are ill equipped to offer advise to enthusiastic young indigenous entrepreneurs, much less offer them a mentoring service to lead them through their baby steps in the manner of business incubation services that exist in business savvy nations.

Likewise, few have credible mechanisms in place to seed fund new ventures, offer tax incentives to domestic greenfield projects, to say nothing about marketing channels. And commercial credit, while being hard to obtain, is expensive.

Many islands governments have also been slow to let go of their mid-twentieth century highly centralised, socialistic mindsets. They continue to be involved in running monopolies in vital sectors.

Telecommunications and energy generation are two sectors where governments have been loathe to loosen their stranglehold, mainly citing age old legislation adopted in an age before modern information and communication technologies came into existence.

The Pacific islands still have the stiffest tariffs in both telecommunications and power and until recently most governments have shunned the very idea of competition in these highly infrastructure and technology-intensive fields.

As with most monopolistic business models, quality of service often gets low priority and customers end up paying high costs for poor service simply because they have no choice.

This has driven up the cost of doing business in the islands and has left an environment that thoroughly discourages small and medium enterprises (SMEs) which are the very powerhouses of economies across the developed world.

For instance, as much as 80 percent of New Zealand’s economy is driven by SMEs that have fewer than a dozen employees.

Both domestic and regional policies as regards private enterprise have been skewed for years.

With the result that in several countries imports are cheaper than traditional domestic products. Imported rice, in Samoa for instance, is cheaper than locally grown taro.

And thanks to poor integration between regional trade agreements and domestic indirect taxation policies, the tuna canned in the Solomon Islands is cheaper to buy in Fiji than in its home country—despite there being no freight costs. 

With all this, it is hardly surprising that the failure rate among Pacific islands businesses is as high as it is.

That vacuum is more often than not filled by foreign-owned enterprises that can achieve economies of scale, thanks to their activities over a more diverse geographic area and deep pockets.

While governments have done little to enable a climate conducive to business even in their own countries at a policy level, it is not surprising that there has been no worthwhile initiative for developing businesses at the regional level.

Enterprise development is an important part of the Pacific Plan. But there has been little action in that regard from Pacific Islands Forum member countries.

That scenario looks set for a change. This month, the Pacific Islands Private Sector Organisation (PIPSO) holds its first major initiative involving the private sector, business leaders, government officials and policymakers from around the region.

Called the Pacific Islands Business Forum (PIBF), the group will discuss private sector-led economic growth and identify priorities for building a conducive environment that will encourage and spur private enterprise as an important engine powering islands economies.

At a time when trading globally has become imperative to the very survival and growth of businesses, private enterprise in the Pacific islands—especially in its small manufacturing sector—begins with multiple disadvantages, some owing to physical and geographical realities; but many simply because of poor policy making at government level.

Businesses that have done well in such an environment—and there are quite a few notable successes—need to be congratulated and their considerable skills and experience in surmounting hurdles must be put to good use in not just mentoring young businesspeople but launching initiatives like meaningful public-private dialogue with a view to ushering in an enabling climate for a successful private enterprise.