the fact that the overall performance of the islands region has slipped, simply indicates that the rest of the world has moved faster in improving the business climate in their respective countries. In other words, the reforms in the islands have been tak

Three major global assessment reports released by world organisations in September have all highlighted the fact that the governments of the Pacific Islands states need to put in a lot more effort than they currently do in several areas of national endeavour.
These were the World Bank’s ease of doing business report for 2009, the United Nation’s Millennium Development Goals progress report for the current year, and Transparency International’s index of the perception of corruption in different countries.
While the interpretation of each of these reports has implications to all countries that forces their leadership to sit up and take a long hard look at their reflection in the mirror, the report of perhaps the most concern from the regional economic standpoint is the index that lists the world’s pecking order of the ease of doing business in individual countries.
It is a high profile institution like the World Bank that ranks some 181 countries in a manner that measures performance along some ten indicators that makes the report so important for national governments and its implications on their economies.
Some of these indicators have to do with regulation that tracks the cost and time in meeting requirements set up by government ministries in starting off and running a business, the ease of trading within the country and outside its political borders, taxation rules and processes, and such other standard factors that concern businesses in any country.
Ten Pacific Islands nations—Fiji, Kiribati, Marshall Islands, Micronesia, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu—have been considered in the latest report that is put together annually since the index began four years ago in 2004.
While the news seems not too encouraging for the islands region overall because their performance as regards the ease with which a business can be set up and run has slipped continuously on most fronts for the second year running, it must be said that a few of the countries have shown some improvements in at least some of the parameters.
The better performers have been Vanuatu, Tonga, Samoa and Fiji who have improved their rankings slightly. Tonga carried out the most reforms in the past two years especially in the area of its legal systems concerning contract laws. That has a direct impact on doing business—as also the ease of starting an enterprise and the process of awarding construction permits, which has enhanced its ranking. Samoa reduced corporate tax and both Vanuatu and Fiji implemented some reforms that affected doing business positively.
But the very fact that despite all this the overall performance of the islands region has slipped simply indicates that the rest of the world has moved faster in improving the business climate in their respective countries. In other words, the reforms in the islands have been taking place at a slower rate.

The ease of doing business is an increasingly important indicator among business investors looking to invest their capital in countries. With competition heating up in the developing world for investment funds following the global credit crunch, it is imperative that the Pacific Islands governments move far more quickly on the path of reform than they have done in the past few years.
While they may take some comfort that they are still in the top 100 of the 181 countries ranked and some of them rank higher than far bigger economies like China and the Philippines, they would do well to remember that when it comes to attracting investment, they begin with some distinct natural disadvantages and handicaps about which little can be done: their remoteness, small populations and the lack of natural resources—at least as far as the Polynesian nations are concerned—and, of course, the scarcity of trained manpower.
The only possible way in which they can balance these disadvantages is by reforming the way business is done: making it easy both for their own investors as well as those from overseas to run businesses providing the right infrastructure, legal framework and financial incentives in areas that are unique to them such as in the newer and evolving aspects of tourism and hospitality.
Since tourism continues to power the region’s economies, governments must target almost every business that is related to this sector for reform.
These could be aviation—such as an open skies policy—as demonstrated by Vanuatu that opened itself to several new airlines boosting tourist numbers.
An excellent instance of a public private partnership is the spectacular success story of the Samoan government’s aviation joint venture with Pacific Blue that not only turned its loss making national flag carrier into a commercial success in the space of less than one year but also started a whole new segment in the travel sector in the Pacific—that of budget airlines, which is now being emulated by other major airlines.
Further reform in the business sector would also be timely as the world’s attention turns to the Pacific for scarce and rare minerals that are being increasingly found in the territorial waters of the Pacific island nations.
While dispensing licenses is one thing—and sure to get revenue—the countries must make their business environments so attractive that their overseas mining partners must feel encouraged to set up downstream processing and value addition infrastructure on the islands themselves, instead of shipping the ore elsewhere at a potential loss that could be worth millions of dollars to islands economies.
Countries like the Solomon Islands have failed in this respect as regards the processing of its logging industry. Much of their round logs that are destined for the distant markets for further processing could well have been processed in the Solomon Islands thereby not just earning considerable revenue for the government but also creating a whole new range of jobs for locals and spurring the economy and therefore development.
Following the global credit crisis, there will be more businesses chasing an ever shrinking and elusive credit base but this situation could well be turned to an advantage by governments by initiating the right mix of reform in the ease of doing business and offering the right mix of financial incentive for investors.