October 2009 Issue

Over the several months, the Cook Islands has been enjoying relatively good visitor numbers despite the global financial crisis which has badly affected the tourism industry as well as airlines all across the world.
In June 2009, the numbers registered an impressive 11.6 percent increase over the same month the previous year.
Observers have attributed this to reasons varying from unfavourable travel advisories issued in Australia and New Zealand about travel to Fiji—which has hitherto been the staple tourism market for Australians and Kiwis—that has encouraged tourists to consider Cook Islands, to signs that the recession in the two leading Australasian economies may actually have bottomed out.
In August, Prime Minister Jim Marurai said he was inclined to believe the recent spurt had to do more with travel advisories in Australia and New Zealand warning tourists about travel to Fiji.
While that may well be part of the reason, last month’s reports that the recession may officially be over in New Zealand where a growth of a 0.1 percent—tiny, but growth all the same—was reported in the country’s GDP in the second quarter this year lend credence to the latter reason.
Similar reports of Australia’s recovery have also been making the rounds for over a month now.
But a brilliant advertising campaign by Cook Islands Tourism revolving around the idea that it is the world’s recession free zone got the country an estimated US$2.5 million worth of publicity free of cost as the news item was picked up by no less a media outlet than the Wall Street Journal which was then relayed across the world by major news networks.
Some American and British tourists that ISLANDS BUSINESS met on a cruise to the islands in the country’s famed Aitutaki group said that they had heard about the Cooks for the first time because of the news item.
It is too early to say if the campaign, which garnered more free publicity than any other South Pacific destinations ever because of the creative use of the recession tag will cause visitor numbers to swell in the next few months.
Cook Islands Tourism’s marketing manager Glenda Tuaine, who is credited with coming up with that line, is hopeful and thinks the after-effects of the campaign will continue to bring in visitors from newer markets.
The industry has also been boosted by the New Zealand Government’s aid of about $1 million to keep Air New Zealand continuing its service connecting Rarotonga with the western coast of the United States.
This provides a far more convenient link for visitors from the American continent. 
Consequently, in anticipation of the growing tourist numbers, the terminal at Rarotonga is being expanded and will sport a new glass frontage on the airside in a few months from now.
Check-in counters have already been upgraded and flight bookings to Aitutaki are now available online.
Almost every hospitality business that Islands Business talked to while on a visit to Rarotonga and Aitutaki said that their properties were enjoying more than 80 percent occupancy.
Such occupancy rates would indeed be the envy of the hospitality industry in many parts of the world including established tourism markets since the global financial meltdown began and the swine flu pandemic escalated the problem by further drying up tourist numbers.
Most operators in these circumstances have been struggling to achieve even as less as 60 per cent occupancies.
But despite being in such a relatively happy position, ISLANDS BUSINESS noticed an unusually large number of hospitality properties wanting to either sell out entirely and exit the business or their owners wanting to dilute their equities in their enterprises to raise debt for financing their existing operations or expanding them.
Enquiries revealed a series of problems that may be responsible for this ironic situation where despite increasing tourist numbers and impressive occupancy rates, small to medium hospitality property owners are looking to sell or bring in investors even for financing day to day operations instead of what most businesspeople would do—raise loans from financial institutions.
Most investors claimed that bank financing was far too expensive with interest rates a full two to three percent higher than similar rates in New Zealand and more than five percent of what they would be in Australia or other western countries even in a credit squeezed situation the world now finds itself in.
The Cooks have also not been able to attract major investments in the hospitality sector from the world’s bigger players such as international holiday chains.
This may well be because of the country’s land lease laws that restrict lease periods to sixty years.
While much of the Pacific has legislated their lease terms to extend to 99 years or more, such a proposed move in the Cook Islands has been a political hot potato, with no government wanting to rock the boat.
Cook Islands Chamber of Commerce President Steve Anderson that this was certainly an issue with international investors in the hospitality industry who were used to longer lease periods.
“And there is no legislation to change this that is forthcoming,” he said. A slightly complicated unit titles law that was passed in 2005 also did not help the situation, according to property experts.
The other big problem that the heavily human resources intensive tourism industry is facing is a problem that also haunts the country as a whole: depopulation.
Unlike other Pacific Islanders, Cook Islanders have the right to live and work in New Zealand and by extension Australia on being treated as New Zealand citizens and many young people choose to leave its shore in search of a better and more prosperous life.
The government has run several incentives to lure people back such as free shipping of their effects if they want to return permanently, but according to Government sources, no more than a dozen people have availed of this facility.
As a result, the hospitality industry is filled with people from other Pacific islands, notably ethnic Fijians and Indians from Fiji besides Samoans and Tongans.
There also is a growing number of hospitality workers from other parts of the world like Africa and Asia.
Prime Minister Marurai and Deputy Prime Minister Terepai Maoate both said that depopulation was one of the biggest problems faced by the country.
Among other incentives planned to bring people back from overseas (there are an estimated 80,000 Cook Islanders living overseas against a resident population of just 11,000) are to scale up education resources and enabling New Zealand student loan-holders to work in the Cook Islands.
The country needs to urgently take proactive steps to step up investment in the tourism sector which is otherwise booming by all counts especially since it is an industry that accounts for 67 percent of the country’s GDP.

—By Dev Nadkarni

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Sugar sanctions extended
The European Union has extended for another six months its Fiji sugar sanction.” This means that Fiji will not receive amongst other things, the $300 million promised by the EU for the restructure of its ailing sugar industry. A statement issued by the EU said the decision has been adopted following the “violation by the authorities of key commitments Fiji made to the EU, as well as further regressive developments such as the abrogation of the Constitution, human rights violations and a further substantial delay in holding elections.

World airlines face losses
World airlines face losses of US$27.8 billion (A$32.26 billion) for 2008 and 2009 as the global economic downturn takes a heavier toll than the September 11 attacks, industry association IATA has warned, according to AFP.  That is larger than the losses of US$24.3 billion (A$28.2 billion) the industry lost in 2001 and 2002 after the attacks of September 11, said Giovanni Bisignani, head of the International Air Transport Association (IATA). As the economic crisis put the brakes on travel, losses booked by airlines around the world reached US$16.8 billion ($A19.49 billion) in 2008. IATA hiked its loss forecast for 2009 to US$11 billion (A$12.76 billion) from the US$9 billion (A$10.44 billion) forecast earlier, while a US$3.8 billion (A$4.41 billion) deficit was predicted for 2010.

ANZ takes over ING business
The ANZ Bank has taken over the Australian and New Zealand operations of ING, in a deal that could further tighten competition in the Australian banking and insurance sectors. In a deal worth US$1.6 billion, ING will sell its life insurance and wealth management stakes from a current joint venture with the ANZ, making ANZ the sole owner. The agreement does not include the online bank ING Direct or ING’s investment management, wholesale management or real estate operations in Australia.

$9.5m unauthorised purchase
Fiji’s Military Forces made unauthorised purchases of almost $9.5 million (US$4.8 million) from Lotus Garments in 2006 while $20,000 (US$10,000) in overpaid lodging allowances was left unrecovered and salaries of discharged officers continued to be paid, according to the latest report of the Public Accounts Committee. The report, based on financial activities in 2006, said the unauthorised purchases from Lotus Garments were authorised by a senior military officer without any reference to the Major Tenders Board. FMF also breached Finance Instructions 2005 when it consistently made payments in 2006 on photocopied local purchase orders, the report said. “Recovery measures for the overpayment had been instituted but suspended in 2007 for no apparent reason,” the report said.

Tourism to turn the tide
Tuvalu is turning its devastating annual high tide into a festival to attract tourists, according to Radio Australia. The island chain, which at its highest is just four metres above sea level, will hold its first King Tide Festival in February 2010. Tourism officer for the Tuvalu government, Fakasoa Tealei said sea level is an issue that threatens Tuvaluans. “At the same time we are holding festivals and music, games and activities and we want people to see the impacts of sea level rise especially climate change.”
A researcher at Melbourne’s Victoria University, Terry DeLacy, said this sort of ecotourism is something many Pacific Islands countries are looking at introducing.
“What they’re doing in Tuvalu is a wonderful opportunity because tourism brings real export earnings, real dollars and real money into these communities and gives great opportunities for development.”