| Trade: PRIVATE SECTOR NEEDS PRO-BUSINESS ENVIRONMENT |
Little effort and encouragement by islands govts
Dev Nadkarni
For years, Pacific Islands leaders have blamed obvious natural factors like isolation, logistic challenges, small populations and the difficult to change traditional approach to landuse as the main factors in the way of creating a business friendly environment in the region.
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Business talk... Fiji’s Jenny Seeto and Digicel’s Vanessa Slowey.
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But just about three years ago, in 2004, a report by the Asian Development Bank titled ‘Swimming Against the Tide’, which was an analysis on the business environment in the islands, pointed out that state interference in the economy, poor investment policies, an expensive operating environment and poor management of natural resources, among several others, were equally to blame.
Islands governments have hardly encouraged free enterprise in all these decades. Little effort, if any, has gone into building an enabling environment for business despite there being a number of regional trade agreements in place. Some of these offer great advantages to them. But they have never been utilised to their full potential.
This lack of a meaningful investment and savings climate in the islands has inevitably led to an over-reliance on remittances and aid inflows to keep their economies afloat. Also, the lack of opportunities for entrepreneurial-minded people has fuelled their migration as they continually scout for better opportunities elsewhere in the world.
At last, there seems to be some concerted effort to usher in a business-friendly climate in the islands. Last month, nearly 200 ministers, bureaucrats, heads of apex business organisations and businesspersons from around the region, including a few from New Zealand and Australia, gathered at Nadi, Fiji, for the inaugural Pacific Business Forum, under the aegis of the newly-formed Pacific Islands Private Sector Organisation (PIPSO).
PIPSO was formed as an extension of the idea that private enterprise was an important driver of the economy as rightly identified and enshrined in the Pacific Plan.
Sponsored by the Pacific Islands Forum Secretariat and the United Nations Development Programme, the two-day deliberations concluded with a draft strategy to facilitate an enabling climate for doing business in the islands.
The agenda was no novelty: regional integration, better shipping and air links, costs of doing business, land issues, monopolies and centralised regulation. Business councils have been discussing these over the years at their annual meetings with government officials and ministers. Little has been done by way of follow-ups however.
“I’ve attended such meetings for years and have been disappointed,” says Mark Halabe, who has been exporting garments from Fiji for over two decades. He has been a long time campaigner for renegotiating trade agreements like SPARTECA in keeping with the changing realities of the global marketplace in recent years but has found little support from regional governments.
Pohnpei businessman Frank Panuelo was amazed that he was hearing about trade agreements like SPARTECA and PACER for the first time at the PIPSO conference.
“We’ve been trading internationally and within the region for a decade and I had never heard of these trade agreements until they came up for discussions here’” he said.
PIPSO, which has formed its own secretariat based in Fiji, has taken on the task of following through on each of these long-standing, contentious issues both at national and regional levels by regularly engaging with the relevant departments.
“We have planned a schedule for interaction with concerned groups for achieving our prioritised goals,” said chairman James Movick, himself a businessman from the Northern Marianas.
The new initiative seems to have gone down well with many of the participating politicians. Fiji’s Interim Prime Minister Frank Bainimarama, quoted Lee Kuan Yew, saying the government needed to get out of running businesses. Salaries gobbled up eighty percent of the budget leaving a pittance for infrastructure projects, he said. His Interim Foreign Affairs Minister, Ratu Epeli Nailatikau was even more forceful. “If government cannot make money out of its enterprise, sell the damn thing,” he said.
As if on cue, Fiji’s telecommunication ministry’s permanent secretary Amena Yauvoli announced he had a strict deadline for completely deregulating the country’s heavily monopolised telecom sector by the end of October this year, to rounds of applause from the participants.
“The Pacific is the last of the world’s regions where monopolies exist in the essential services sector,” said Vanessa Slowey, Pacific Islands CEO of Caribbean mobile operator Digicel, which has plans to roll out its services in all the islands in the next few years.
Digicel has successfully been operating in Samoa for close to 10 months now and recently in Papua New Guinea. Its plans in Fiji have been put on hold, owing to a number of regulatory and legal problems. But neither Digicel nor the other significant telecommunication players in Fiji—Telecom Fiji, FINTEL and Vodafone—participated in the debate on competition in the telecom sector—something many were looking forward to.
The companies blamed one another for jumping ship at the last moment and said there was no point in the debate if all the players were not present.
The deregulation in the telecommunication sector in Samoa and Tonga did not get the attention it deserved during the two-day session. In fact no players from the sector were present. To its credit, Samoa emerged as a frontrunner in trying out winnable ideas in public-private partnerships. One successful example of a public-private partnership is its government’s joint venture with Virgin Pacific.
From running an airline mired in losses, it went on to churn out a one million Samoan Tala profit in the very first year of its operation as Polynesian Blue—which has now grown to several million US dollars in the second year.
“We are ever looking for such joint venture opportunities with national governments,” said Virgin’s Brisbane-based Head of Commercial Operations Karam Chand, told ISLANDS BUSINESS. “Polynesian Blue is a low cost airline that matches the region’s connectivity needs very efficiently.”
Public-private partnerships will also open up infrastructure projects like roads and ports for joint venture partnerships with developed countries. Already construction is among the fastest growing sectors in many islands particularly Fiji, Samoa and Papua New Guinea. The United States’ plans to ramp up its military presence in Guam and the Northern Pacific states is also expected to fuel a construction boom that could potentially employ thousands of Pacific Islanders.
The discussions were primarily focused on trade within the region and creating the right atmosphere for inviting international investment in projects in the region. A number of other ideas as regards liberalising the regulatory regime within the islands region and among islands governments themselves came up for discussion during the sessions.
Among these were internal adjustments to revenue streams, redirection of investment capital and policy adjustments to fiscal, micro and macro regimes, explained Papua New Guinea businessman Wayne Golding.
The long discussed idea of a “South Pacific Brand” was also discussed briefly in the context of the region’s products losing out to Asian products simply due to a lack of product quality differentiation.
On its part, PIPSO will soon come up with a strategy to take the outcomes of the two-day meet forward. Among the events it has planned is a convention for Small, Medium and Micro Enterprises sector—perhaps the most important sector in any nation’s business environment. It plans to organise the event some time early next year.
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