World Bank’s Director for the Pacific

Duncan Wilson




The World Bank has played a major financial role in the Pacific Islands since the early 1980s.

Nigel Roberts..."Pacific Islands economies are sublect to global economic activities and i think the general outlook in the Pacific is that you will have low to negative growth."

Its policy advice, loans and grants often dwarf many foreign countries’ involvement in the region. The bank’s involvement has grown markedly over the last decade.
In just the last two years, the World Bank has tripled its staff numbers in the region. Islands leaders say the institution’s new Pacific head Nigel Roberts is refreshingly open and genuine in his regard for islands’ input into economic policies and loan decisions.
These representatives also claim to appreciate the bank’s coordinating role among islands states as well as agencies such as the International Monetary Fund and the Asian Development Bank.
Roberts has more than 30 years experience in international development and is recognised as an expert on issues of security and development, local development and agricultural growth. He directed the bank’s West Bank and Gaza programmes from 2001- 2006.
In a wide-ranging interview, ISLANDS BUSINESS spoke with Roberts in his capacity as the institution’s programme director for the Pacific Islands, Papua New Guinea and Timor-Leste.
How badly will the global recession hit the Pacific Islands economies?
“It’s a very widespread impact but it’s not clear at the moment how deep it’s going to be or where the axe is going to fall first. Pacific Islands economies are subject to global economic activities and I think the general outlook in the Pacific is that you will have low to negative growth; that will be common to all the Pacific Islands countries. Governments will have a much tighter fiscal situation and significant pressure on the balance of payments. At the particular sector or industry level, there is generally less demand for primary exports, be they from agriculture, forestry or the mineral sector. There are not very many bright points in this.
“Although the crisis is breaking here later, it’s a second order crisis, it’s not a crisis that manifests the banking system, it’s essentially a loss of demand. And it’s a loss of demand because of contraction in the neighbouring economies, particularly China, which even though it’s quite resilient has still nonetheless contracted compared to previous expectations, and that’s lowered the demand for a number of the imports that flow out of the Pacific region in general, particularly primary products such as timber and oil, as well as copra. For example Papua New Guinea and Timor-Leste have taken a real hit in terms of price and demand there, and that’s the case for timber from the Solomon Islands.
“We have to also think about the impact that this [recession] is going to have on tourism; tourism as a global phenomenon is in recession. Here, you would be worried particularly about Vanuatu and Fiji.We anticipate a fall in remittances from those who are working overseas, with Fiji, Samoa and Tonga likely to be hard hit. Those countries that have national trust funds such as Kiribati and Northern Pacific countries have also taken a big hit on their equities. Whereas they don’t need to draw those equities down and convert them into cash anytime soon, nonetheless you have to wonder how many of those equity investments are going to recover at all and to what extent.”
How much will the recession stymie large-scale investments in the islands? Several projects, such as the proposed Gold Ridge mine in the Solomons have struggled to secure finance in the current economic climate.
“It doesn’t mean though that Pacific investment cannot go ahead; these are individual business decisions, they depend a great deal on the potential investment but also on the project and its degree of risk. As a general proposition, however, you are going to see less available capital for financing in the Pacific.”
Will the World Bank, alongside other financial institutions such as the International Monetary Fund and the Asian Development Bank, finance the Pacific Islands governments’ budget shortfalls and other problems?
“We are anticipating that Pacific Islands countries will call on the World Bank and the International Monetary Fund (IMF) to provide compensatory assistance and that is something that we have not seen as a common phenomenon in the Pacific for many years, certainly not in the first decade of the 21st century
“There are regular discussions ongoing with the Solomon Islands, for example, as well as with a number of other Pacific Islands countries. These discussions involve not just the World Bank, but also the IMF, the Asian Development Bank, the European Union, as well as agencies such as AusAid and NZAid. This is part of a regular interchange with islands countries around their cash balances, as well as their balance of payments situation, implicitly looking at the likelihood of greater involvement. This is part of a general trend brought on by the global recession and its effects on islands economies.”
How do you ensure that the World Bank’s engagement with islands governments does not come at too high a cost to nations’ autonomy? “I think what is required is for these economies to have as much internal autonomy and control over their economies as possible; a stable, predictable partnership with the international community and one that is really stimulated by a continuous process of discussion so that both sides understand where the other is coming from. Then, when we get into an economic crisis of this kind, it doesn’t simply appear to have dropped from nowhere, in terms of how the country is managing it, but it’s understood to be part of a continuum of challenges that they’re having to balance off against each other as part of managing small, peripheral economies which have to accept the economic conditions that the world sets.
"That gives a very different optic to the whole governance challenge in the Pacific. One of the things donors have to do—and which I very much feel is part of the World Bank’s reengagement with the Pacific—is to come to a much deeper understanding not only of the nature of the economies but also of the governance challenges that those in authority face and the limited freedom that they have in their choices, not only because of social norms and political structures, but because of how much and sometimes how little of the world’s economic space they actually control themselves.
“The World Bank is taking the Pacific much more seriously than in the past. In the middle of 2007, just over a year and a half ago, we had 20 technical staff in the Pacific, in Sydney, and in two country officers. We now have 55 posts for Sydney and three country offices and three other satellite offices so that’s already a big difference. Now if you ask me if that is enough, I would say no but there are budget constraints.”
In light of the current crisis, how will he islands fare? The Solomons?
“In the Solomon Islands, it’s coming into an economic crises, particularly in the form of a rundown of foreign exchange reserves and you also have a situation where the expectations of the elected members of parliament are particularly high in terms of continuing to receive significant transfers that they can use in their constituencies. This particular equation doesn’t add up at the moment. It’s compounded and intensified by the expected fall in logging revenue coming earlier than expected because of the drop in demand and in prices for logging at this point of fading global demand.
“There is going to be a need for some significant external support for the Solomon Islands economy to prevent the prospect of a relapse into another period of uncertainty and potential tension.
"If you also say that the overriding priority is to preserve stability and all of the investments and goodwill from the international community, a way of looking at this is to say which aspects of the development programme, which components of the economy, need to be kept running under a situation of stress. First of all in terms of basic services, the schools and health which consume bulk of the current spending. There is clearly a high priority to making sure those services continue to run.
“In a situation of economic stress you should ensure there is sufficient employment. We’re looking at some kind of national workfare programme that can provide over a sustained period work for significant numbers, particularly unemployed young people. The World Bank has had a team in the Solomon Islands which has established that a national workfare programme is feasible.
“One of the challenges is to give incentives for young people to remain within their communities. If you’re just going to give people laboring work…that’s better than nothing at all but you’re also missing the opportunity of capturing and growing the skills that young people have.
“I would look at a programme of this kind as something that could be used as the basis for very relevant skills development; a lot of those skills you would like to see then translate into entrepreneurial kinds of activities, where people have the skills to move into the informal sector and gradually create economic activities of their own.”
Fiji?
“Fiji is deeply politically troubled. The country faces some really fundamental questions in terms of needing to get to grips with that issue. Otherwise the price that they will continue to pay is that a country that does have very significant growth prospects, particularly as a service hub for the Pacific—it is the natural hub in many respects—will not be able to fulfill that potential.”
“Recently however, and I think that this is out of concern for what is happening inside the country as opposed to any softening of attitude toward the regime, a number of donors have been looking for ways to engage in support, particularly of those ordinary Fijians who have been suffering as a result of this political impasse.
“We have been looking at the country’s social safety nets and particularly some of the programmes being run out of the Ministry of Social Welfare.
“However the speed with which we would be able to go ahead with the technical assistance programme and what we could like to do subsequently to expand the programme is not going to be taken in isolation from the regional context. We have to take adequate account of the attitudes and the relationship with that country and other regional and development
“Currency devaluation has been a recommendation from the International Monetary Fund for some time. The IMF’s view is that the currency was seriously out of alignment with the real exchange rate and that an adjustment was desirable so in broader terms this was something that was recommended.
“In Fiji, there is a broader problem which is the broader level of confidence that the international community feels with the way that the government has handled not only the economy but the general governance of Fiji, so that I would presume is actually an overriding factor.”
Samoa?
“I think Samoa’s downturn is a temporary phenomenon in the sense that they have been hit by a lot of very different factors all at the same time. I think that Samoa’s economic management is well regarded, our own relationship with Samoa is an excellent one and one in which we have been very impressed by the quality of implementation of the programmes and the projects that we have had in place.”
And Tonga?
“Tonga has very few natural resources and a tremendous but successful dependence on remittances and aid. From my view that is a very legitimate balancing factor in the future of Tonga but obviously it’s vulnerable.
“You do have fairly generous aid flows and I think there is no reason to question their continuation, [although] they might be affected at the margins…The challenge for Tonga in the short term becomes how to maximise these flows and use them as efficiently as possible in the country.
“Tonga is not such a strong economy compared to Samoa; it is smaller, has half the population, fewer resources, and it’s therefore that much more vulnerable but again the dialogue with the Tongan authorities that we have had is very productive, we have had good projects there in health and education…and I think that right way to look at what has happened in Tonga is again they have been hit by these global phenomenon.”
Papua New Guinea?
“Papua New Guinea has benefited from seven years of very good macroeconomic management, unprecedented since independence. Now we have seen this fall in commodity prices and there are prospects for a massive natural gas investment, but that’s many years away in terms of resources. In the interim, expectations have been raised and the income from various commodity exports was significantly effected and that represents quite a difficult macrobalancing act.”