‘Of course, there will be several factors outside the pale regional governments as the downturn unfolds. But this is not a time to throw up hands in a sign of helplessness. Rather, it is the time to take bold steps to stimulate growth by hitherto unconven

The ripples caused by the global financial crisis are sure to be increasingly felt across the world in the months, perhaps years, to come. There is no economy that will be completely shielded from its adverse effects—and that includes the Pacific Islands.
Already, some of the islands nations’ trust fund investments that have been bringing them a steady income in interest and dividends over the years have been affected. The trust funds of Nauru, Kiribati and Tuvalu will undoubtedly turn in diminished returns for the fragile economies of those nations this year. There have been media reports alluding to this.
Sources have said that Tuvalu has already been warned by its fund managers in Australia that it is unlikely to receive the annual amount of approximately A$6 million its fund normally earns every year. That amount is critical to the government of that small islands state for running its budget and this year it will have to look elsewhere for those funds.
The bulk of the islands’ economies depend on tourism and with the effects of the credit crunch across the globe combined with high fuel prices will see a downturn in tourist numbers in the next few quarters.
The effects on the travel industry have already been severe with over a dozen airlines in the United States alone closing shop in the past couple of months.
The islands will therefore have to look at other avenues not just for growth but even to keep their economic engines running.
Perhaps the one sector that holds promise is the private sector. Promoting and encouraging this sector—especially small, medium and micro enterprises (SMME) that form the backbone of several larger economies like New Zealand—would help national economies in several ways from generating internal investment to creating jobs as well as export incomes.
The Pacific Islands private Sector Organisation’s (PIPSO) “Building Opportunities Together” forum that is targeted at SMME in all 14 Pacific members of the African, Caribbean and Pacific (ACP) grouping, being held in Apia, this month, is therefore extremely timely.

The theme of the conference that will have sessions spread over two days reflects the need for governments, the private sector, donors and civil society to work in partnership to foster the growth of SMMEs, sustainable economic development and poverty reduction throughout the Pacific Islands region, according to PIPSO’s communiqué.
Though planned to be held in the early months of this year, there could not have been a more opportune for this endeavour than in the middle of the global credit crunch.
The forum will bring opportunities for enterprises not just to discuss opportunities and possibilities of doing business together but also bring together government departments, banks and NGO service-providers to network better in a bid to improve the flow of technical and financial resources to assist the SMME sector.
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 for the state of the private sector in the islands.
One of the aspects that Pacific Islands governments need to pay special attention to especially in a global economic downturn like the current one that will affect revenue from traditional sectors like tourism is public-private partnerships.
These will not only open up new investment avenues but also have a number of flow-on effects ranging from encouragement of the private sector itself to the creation of local jobs and ancillaries. And this is not without precedent.
Some governments have already made this happen. It needs to be scaled up.
Projects for such participation could be in the construction and infrastructure sectors—such as the building of roads, ports and other infrastructural utilities in joint venture partnerships with developed countries.
The other areas in which the islands need to work together as a bloc is inter-island trade.
This important aspect has languished over the years because of poor and infrequent shipping and air links as well as islands governments’ nearly exclusive concentration on trade with the developed nations of the region and beyond.
In an economic downturn, the governments need to come together and remove any barriers to inter-island trade whether they relate to transport and logistics or even tariffs.
Free movement of goods within the islands region needs to be encouraged without delay.
An organisation like PIPSO is well positioned to take the lead in dealing with islands governments to facilitate these matters and it must do so forthwith, especially if the islands are to minimise the deleterious effects of the global downturn over the coming months and years.
But given the gloomy mood in the world’s financial markets expected to stay for the next several quarters, it is unlikely that regional governments will take any bold steps in the area of investment on their own.
This is where an organisation like PIPSO needs to step in offering the experience of the private sector that it has among its members to work with the governments to make it happen.
Regional governments have not exactly covered themselves in glory on this front if one goes by the World Bank’s Ease of Doing Business Report 2009. Most islands have a long way to go before they are in a position to offer a conducive environment for business and enterprise.
But there is hardly any argument against the fact that as the world economy slows down and its effects are increasingly felt across the world, it is imperative for small country governments like those of the Pacific Islands to stimulate their economies by strengthening business activities particularly in the small, medium and micro sector both within individual nations and across the region.
Of course, there will be several factors outside the pale regional governments as the downturn unfolds. But this is not the time to throw up hands in a sign of helplessness. Rather, it is the time to take bold steps to stimulate growth by hitherto unconventional ways.