Fiji’s central bank is projecting the country’s economic growth to climb back into positive territory next year, after revising this year’s historic contraction to negative 19 percent from an earlier estimate of negative 21.5 percent.
“Domestically, the magnitude of this year’s economic contraction is expected to be smaller than initially anticipated, whereas next year’s projected recovery largely hinges on the opening of international borders and the resumption of travel,” the Reserve Bank of Fiji said in its November Economic Review released this week.
“In 2021, economic growth is expected to range between 1.6 percent and 8.0 percent given the substantial uncertainties around the reopening of borders for quarantine-free travel and appetite for tourism activity.”
Performances across major sectors of the economy – some already poor before global lockdown early this year – have plunged further and remain dismal as the coronavirus pandemic enters its ninth consecutive month since it was declared a pandemic by the World Health Organisation in March this year.
“Sectoral performances continued to be well below 2019 levels in the first ten months of the year,” RBF noted.
Partial indicators for consumption, a major economic driver, returned gloomy signals.
Net VAT collections, new consumption lending, new vehicle registration, second hand vehicle registration and electricity consumption were all significantly reduced over most of the year, indicating a prevailing weakness in consumer spending.
Tourism, another major GDP component and still in hiatus internationally, declined by 80.7 percent cumulative to October.
In the investment area, two major indicators – domestic cement sales and new investment lending – both declined by 11.6 percent and 16.6 percent respectively in October, compared to the previous month.
“Cumulative to October, commercial banks’ new lending for building & construction purposes declined by 24.9 percent. In the same period, domestic cement sales declined (-11.6%), mainly underpinned by weak demand,” RBF said.
Increased caution by the banks and other credit institutions, who now prefer less risky lending, has not only led to a general reduction in lending to both private business entities and individuals, it has also created a liquidity glut in the market.
In August and September, excess liquidity as denoted by the banks’ demand deposits (BDD) stood at over F$1billion (US$0.48b) each month, gradually easing in October to $912.9m (US$440m) and $860.5m (US$414m) at the end of November, mostly attributed to money moving out of the country.
Interest rates, according to RBF, were generally lower compared to 2019.
“However, risks to the financial sector remain as the ending of moratoriums offered by financial institutions to COVID-19 affected customers could raise the existing levels of non-performing loans,” it warned.
In the job market, supply remained weak and according to the RBF Job Advertisement Survey, there was a 64.3 percent decline in vacancies in the year to October, compared to a decline of 1.4 percent in the same period in 2019.
“This was underpinned by reduced recruitment intentions across all major sectors of the economy,” it said.
Amid the bleak scenario, personal remittances have been pivotal in buoying both the deflating economy and consumer confidence.
“Personal remittances rose by 7.3 percent to F$521.0 million (US$251m) in the first ten months of the year. For the month of October alone, personal remittances totalled a record F$69.0 million (US$33.2m), an increase of 29.5 percent over the previous month and an increase of 58.7 percent over October last year. Overall, remittances have performed well above expectations and contributed positively to foreign reserves,” RBF said.
While the numbers look good in terms of the central bank’s two key roles of keeping foreign reserves adequate and inflation low, it has been on the back of lower exports and lower imports, reflecting lower production and consumption demand from within a weak domestic economy.
Foreign reserves stood at F$2.2 billion (US$1.06b), sufficient for 7.7 months of retained imports, while annual inflation rate was at -2.9 percent in October.
The Solomon Islands Chamber of Commerce is working with the local Human Resource Practitioners Network to develop an employer guide to managing workplaces during COVID-19. Development of the guide comes as uncertainty continues with the arrival of positive cases into Solomon Islands through repatriation flights.
“It was evident that HR practitioners need clear government policies or guidelines on key labour and HR related issues such as repatriation, allowances and many more,” Chair of the HR Practioners Network, Nancy Palmer says.
“A contingency plan is needed which includes a nation-wide matrix that communicates the level of risk the country is on which helps in the management of people and resources.
“There is a need for HR advisory services, mentoring and counselling services to address associated mental health issues,” she adds.
Soltuna, which employs 2000 Solomon Islanders, says the dilemma is how to pay workers when a lockdown shuts operations.
“In the case where community transmission of COVID-19 has occurred and we go into lockdown of more than four weeks, how are we going to pay the employees?” said HR Manager Bela Simiha.
“Apart from the annual leave there is sick leave but the question remains if its legal to do this while workers cannot go to work due to a lockdown.
“That is why we need to have some guidelines and directives from Government because it is also unacceptable to tell workers to go on leave without pay,” she said.
Post-COVID-19 propositions for various sectors of the economy currently abound. Credit to those who are churning out these fine ideas for public consumption. One in particular, by Dr. Transform Aqorau: ‘Imagining a new post-COVID-19 international economic order (NIEO) for the Pacific Islands’ is essentially regional in essence and in application. Dr. Aqorau refers to it as ‘a single custom and development union’, or alternatively, ‘a single economic and development union’.
His article goes on to describe this NIEO for the Pacific Islands. In the lexicon of regionalism, Aqorau’s NIEO is essentially regional economic integration, with a degree of specificity on extractive industries, structured on the basis of a free trade agreement, and which has progressed to a customs union, common market and economic union. But it goes beyond that to include advanced regional integration measures to coordinate policies beyond economic, including the coordination of institutions through a regional parliament, for example.
Professor Biman Chand Prasad had earlier suggested something similar: a ‘Pacific community and Pacific Parliament.’ It is this regional architecture that is the face of regionalism and necessarily the counterpart to the rest of the world. This thus earns its ‘NIEO’ lexicon in Aqorau’s perspectives.
But all this rings a loud bell. The regional leaders, way back in 1971 at the first ever meeting of the then South Pacific Forum, were also deeply immersed in imagining the various solutions to the challenges they faced. Then, the unprecedented challenges for the five Pacific Island Countries (PICS) related to their newly independent state. A solution, they imagined, was ‘the possibility of establishing an economic union for the area.”
‘The area’ in this specific instance can be deduced from the formulation of the leaders’ decision as trading between and amongst the five PICs, ‘whose senior officials were to meet within three months’ to progress the establishment of an economic union; and officials from Australia and New Zealand were to join this task by way of promoting ‘trade and economic cooperation in the region.’
The sense of creativity and adventure that characterised the decision-making above is worthy of notice. It all came about notwithstanding the two-caucus approach to conferencing that existed then. This two-caucus approach, however, disappeared the following year (1972) on Australia’s initiative. It remains to be seen whether this structural re-organisation to merge the two unequal groups was responsible for the dilution of the natural impulse to bridge the socio-economic gaps and inequality that existed then and has continued to frustrate the Pacific Island Forum’s membership and its inherent unity.
Dr. Aqorau is correct in acknowledging that the idea behind a ‘single custom and development union’ or ‘single economic and development union’ (SCDU) is not new. “What might be novel,’ he says, “is the idea of integrating our economies to have a SCDU…….” The latter is so because Pacific regionalism has not faithfully committed itself to progressing the idea. Many factors have come into play.
The question to be asked, therefore, is what has happened to this bullish concept of an economic union that was envisaged some 49 years ago. The events of Pacific regionalism over the decades are revealing and instructive and from them we can learn to better strategise to avoid the mistakes of the past.
It took nine long years for the South Pacific Forum (SPF) to make the first move towards an economic union. In 1980, the SPF opted for a preferential, non-reciprocal trade arrangement to establish the foundation for an economic union. Such a preferential arrangement was considered with greater compliancy at the time by the global trading system. The dichotomy of SPF membership, resulting from Australia and New Zealand’s privileged positions as developed countries vis-à-vis others, played a pivotal role as well.
The idea of a Free Trade Agreement (FTA) amongst the PICS as basis for an economic union was still over a decade away.
Australia and New Zealand thus agreed to establish the preferential South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA). This was signed in 1980 and came into force in 1981.
SPARTECA was unidirectional. PICs’ exports were provided market access in Australia and New Zealand. Rules of Origin (ROO) were devised for the conduct of trade. The agreement however lacked provisions and resources to support and promote the supply side of the PICs’ export trade. Thus in 1984, SPF noted the decline in PICs’ exports under the agreement. In the following year, SPF queried the relevance of SPARTECA. Later in 1988, SPF noted PICs’ problems of production capacity and the inadequacy of the agreement’s ROO.
Fiji was factoring all these issues in its approach to regionalism. So much so that Fiji’s delegation to the 1993 Leaders’ meeting opted to propose a SPARTECA-look-alike agreement to the rest of the PICs. This, however, did not see the light of day. Had that progressed, it would have been interesting to note its formative impact on economic union at the time.
Fiji, furthermore, took advantage of its close bilateralism with Australia and New Zealand to negotiate changes in the SPARTECA Rules of Origin. This consequently boosted the development of Fiji’s garment industry at the time.
Sometime later, however, further negotiations to expand to capitalise on the same ROO proved negative. The global trade scenario had changed somewhat. The catchphrase of ‘free trade’ prevailed over preferential trade. Australia and New Zealand were thus prevailed upon to advise PICs that SPARTECA (and its ROO), had outlived its time.
In the late 1990s, it was back to basics in considering a basis for an economic union. SPF members negotiated an FTA: the Pacific Regional Trade Agreement (PARTA). This was to be an intra-regional trade agreement, including Australia and New Zealand. The idea for a FTA just for PICs as the basis for the development of an economic union did not get the nod at the time. It was to come later, however, when PARTA was discarded. Did political economy considerations of SPF’s dichotomous and differentiated membership get in the way? Did geopolitical considerations cloud rationality in this instance?
When it came to signing PARTA, the PICs rebelled, unhappy with their treatment under the agreement, and refused to sign. PARTA’s provisions lacked the trade and trade rules concessions that would persuade Pacific Island trade ministers to readily commit to the agreement.
This predicament was resolved when SPF discarded PARTA and quickly negotiated the Pacific Island Countries Trade Agreement (PICTA) – an FTA for PICs only, and the Pacific Agreement on Closer Economic Relations (PACER) – an economic framework agreement between the PICs and Australia and New Zealand. PACER then gave rise to PACER Plus, a FTA between twelve PICs and ANZ. This is finally to come into force with Cook Islands’ ratification. But its 16 years of negotiations diverted much energy and intellectual competencies from the task of properly establishing the economic union envisaged for PICs in 1971.
In the meantime, PICTA came into force after it was signed in 2001. However, in 2020, only seven members (50 per cent of membership) are implementing the agreement. The envisaged economic union remains a dream. Professor Chand’s advanced regional integration scenario of a regional parliament will remain on the ‘to do’ list for the time being. Much was discussed on these advanced regional integration projects in the early 2000s during the formulation of the Pacific Plan. However, little or no progress eventuated due to claims they were ill-conceived and lacked buy-in.
Yes, it is time for new normal. Post-COVID-19 demands all that. But history still has a role to play. Pacific regionalism is best advised to occasionally cast its eyes back at its own history and re-evaluate events, and itself, from the perspectives particularly of political economy and geopolitics. The Blue Pacific should not become a cliché. It should learn from George Orwell: “Who controls the past controls the future. Who controls the present controls the past.”
The author is a former Fijian Ambassador and Foreign Minister and runs his own consultancy company in Suva, Fiji.
The need to survive and keep a national asset afloat is taking a heavy toll on Solomon Airlines.
In an open letter to stakeholders this week, Solomon Airlines CEO Brett Gebers outlined a number of measures the company was taking in order to keep the national flag carrier going but admitted things had become so tough that each day was “now a case of survival”.
“The truth simply is, that with over 60 percent of the company’s revenue vanishing overnight and fixed costs remaining, there is a problem – and the daily reality for Solomon Airlines is now a case of survival, a dire situation which has required some drastic action.
“Regrettably, with operations severely reduced, we ultimately had no choice but to reduce our workforce through retrenchments to match the requirements of what will be a smaller airline for some time to come. We are now operating with a smaller workforce on reduced pay, and some staff are working on a job rotation basis – month on, month off to share available work, and remain ready for an increase in business,” Gebers said.
With no clear sign of borders reopening in the foreseeable future, the airline has had to rely on Government and other partners to remain above water.
“At this juncture, like airlines everywhere, Solomon Airlines has minimal cash reserves, and we are indebted to those we owe money to and are deeply grateful to have very good working relationships with our suppliers and creditors who are working with us to keep us in business. The future is unclear and our survival depends upon Government support and the intermittent revenue we raise as we wait to reopen Solomon Islands borders and begin regular operations again.”
In May, the airline received a cash injection of SBD20million (US$2.48million) in the form of a soft loan and grant from the Solomon Islands government’s SBD309million (US$38.25million) COVID-19 stimulus package.
Gebers stressed the need to preserve the company as a strategic national asset despite the tough market conditions brought on by the coronavirus pandemic.
“For an archipelago nation dependent upon international air access, it is vital to ensure the survival of the national carrier,” he said.
“Solomon Airlines is critical to economic recovery, and to future economic development. We are also an instrument of government, capable of providing essential domestic and international services in times of crisis or emergency.
“Without a national airline, there would be limited control over air access to, from, and within the Solomon Islands. There would be limited control over air travel and cargo pricing and scheduling, no easy medical travel, airmail or express cargo. Without a national airline, there would be a permanent loss of locally-based aviation, tourism, and skilled jobs,” Gerbers added.
The scenario is a far cry from the sure progress made by the company early this year when it welcomed the arrival of its new Airbus A320 in March after months of searching for the right aircraft. Tourist numbers were trending upwards and several years of progress had culminated in a seven percent growth in tourists flown last year, according to Gerbers.
Other milestones included the reopening of Munda Airport as an international gateway to the Western Province in March 2019, the refurbishment of its Twin Otter domestic fleet and modernising its reservations system.
Solomon Airlines was also instrumental in the establishment of the Solomon Islands Tourism Infrastructure Development Fund (SITIDF)—largely funded by the New Zealand government—which provided qualified local tourism operators with interest free loans to develop facilities and upgrade accommodation.
“As we all know business has cycles and we were prepared for a slower rate of growth in 2020 but like all airlines, we did not expect the devastating travel restrictions imposed by Governments and the consequent collapse of the travel industry,” he said, adding that the pandemic had forced the airline to stop all scheduled flights to Australia, Fiji, Vanuatu, and Kiribati.
Revenue however has begun trickling in again with the now weekly A320 cargo flight between Brisbane and Honiara and the limited, strictly controlled repatriation flights for Solomon Islanders overseas wishing to return home.
“We are continuing approved repatriation flights and charters as well as constantly reviewing our current finances and potential future operations,” said Gerber.
“We can still see an exciting, valuable future tourism development for the Solomon Islands and that requires a national carrier. Aviation and Tourism must work hand in hand as we navigate an era that will require further endurance, extra care, gradual restoration, promotion and protection of air services, and travel opportunities to, from, and within the Solomon Islands,” he added.
COVID, climate and oceans were high on the agenda, as foreign ministers and officials from around the region met online on 14 October, for the 2020 Forum Foreign Ministers Meeting (FFMM).
This year’s ministerial summit focussed on the COVID-19 crisis and post-pandemic recovery; actions to address the ongoing challenge of climate change; policy on oceans and the impact of sea level rise on maritime boundaries; and finalising an agenda to place before the virtual meeting of Pacific Islands Forum leaders, likely to be held in early November.
Each year, a Forum Officials Committee meets to discuss the draft agenda for the annual Forum, and thrash out initial draft language that can square the circle over sensitive issues. In 2015, a Forum Foreign Ministers Meeting was added to the list of regional meetings, designed to free up more time for Presidents and Prime Ministers to talk freely amongst themselves at the annual leaders’ summit.
Opening the online FFMM, Pacific Islands Forum Secretary General Dame Meg Taylor noted the success of regional co-operation in the early days of the pandemic: “Using available regional mechanisms such as the Biketawa Declaration and the Boe Declaration, we were able to achieve a world first with the establishment and operationalisation of the Pacific Humanitarian Pathway on COVID-19, our regional response platform which has been able to move around 47,000 kilograms or 466 cubic metres of medical and humanitarian supplies through our region.”
The regional response to COVID-19 initially prioritised the distribution of medical supplies, testing kits and technical assistance. But Forum member countries, especially those without any confirmed cases of coronavirus, are increasingly looking at the social and economic damage caused by border closures and disrupted trade and tourism.
Tuvalu’s Foreign Minister Simon Kofe chaired the ministerial summit and spoke to journalists after the meeting. He highlighted “the need to address the disproportionate effect of the COVID-19 crisis on vulnerable groups, including persons with disability, the elderly and women and girls - an issue faced by the full Forum membership.”
One ongoing challenge for smaller island states is to organise the return of citizens who have been working or studying abroad. Kiribati and Tuvalu are seeking assistance from the United Nations and neighbouring countries to bring home seafarers and seasonal workers who must transit through regional travel hubs like Auckland, Nauru or Nadi. The Tuvalu Foreign Minister recognised that many of his own nationals have found it hard to return home and “hundreds of i-Kiribati seafarers are amongst those in limbo as they were at sea, awaiting repatriation home and they’ve been stuck for many months.”
The FFMM proposed further discussions on a regional quarantine facility and travel bubbles to allow the transit of affected workers.
Simon Kofe stressed that developing countries need economic support during the recovery, but also ongoing medical assistance: “Ministers highlighted the need for cooperative, multilateral approaches to allow equitable access to trusted and certified COVID-19 tests, treatments and vaccines and ensuring their accountable and transparent procurement and distribution.”
Dame Meg Taylor confirmed that access to vaccines was a crucial next step in the regional response: “Our governments have been working very closely with different groupings to make sure that the Pacific secures vaccines. We had a very strong commitment from the Australian Prime Minister during this meeting that Australia would make sure that as they access vaccines, they would ensure that the Pacific was also able to access that vaccine.”
At a time of geopolitical contest in the region between China and the ANZUS allies, the Forum Secretary General diplomatically noted that Australia was not the only potential source for vaccines: “The leaders - all of them, hopefully - will be emphasising that we get our fair share of the vaccines and this is not just through Australia and New Zealand. If there are opportunities for vaccines from elsewhere that have been cleared, I know there is some of our countries that are working with different groupings to ensure that those vaccines will be available.”
The foreign ministers discussed a common statement “Protecting the health and well-being of the Blue Pacific”, to be presented to leaders and then to the forthcoming Special Session of the United Nations General Assembly on COVID-19 in December.
In her opening speech to the meeting, Dame Meg Taylor stated: “Notwithstanding COVID-19 and whether there is a vaccine today or tomorrow, we will continue to face a more pressing challenge, the existential threat of climate change and its related impacts.”
The Republic of Marshall Islands (RMI) was the first Pacific country to lodge an updated Nationally Determined Contribution (NDC) under the Paris Agreement on Climate Change, and has been calling on fellow Forum members to put forward more ambitious NDCs.
After the FFMM, RMI Minister of Foreign Affairs and Trade Casten Nemra said: “The Pacific region reaffirmed at ministerial level the determination to uphold the Paris Agreement and to deliver new, more ambitious nationally determined contributions in this fifth anniversary year of the landmark international accord. Amid the COVID-19 pandemic, new climate ambition in the Pacific is indispensable to our building back better.”
Secretary General Taylor acknowledged that “for some countries, coming through with NDCs may pose some internal challenges,” but said the FFMM had reaffirmed the regional policy adopted at last year’s Forum Leaders Meeting in Funafuti: “The ministers reaffirmed their support for the ‘Kainaki II Declaration for Urgent Climate Action Now ’ and that is as important this year as it was last year.”
Marshall Islands is currently a member of the UN Human Rights Council (UNHRC), and is using this position to leverage greater action on climate change. At the FFMM, Foreign Minister Nemra obtained regional support from his counterparts to campaign for a UN Special Rapporteur on climate change and human rights. Fiji is currently another island member of the UNHRC, and backed this initiative in the meeting.
Nemra explained: “In endorsing the creation of a dedicated new UN Special Rapporteur on climate change and human rights, the Pacific region will remain at the forefront of ambitious new actions to uphold rights threatened by the climate emergency facing all societies. We look forward to working with the entire region and the international community, as well as within the UN Human Rights Council, to secure this vital new mandate for overcoming the climate crisis by next year.”
This year’s 26th UNFCCC Conference of the Parties in Glasgow (COP26) was deferred because of the pandemic, but there are still regional and global efforts to increase ambition before the meeting, to be held in late 2021. The outcome of November’s Presidential election in the United states will have a major impact on the Paris Agreement, but Pacific island nations are also looking for greater climate action from their Kiwi neighbours, following Saturday’s elections in New Zealand.
Just days after the FFMM, the major victory of the NZ Labour Party in national elections will impact regional as well as domestic policy. Under Prime Minister Jacinda Ardern, Labour now holds a majority in its own right. The elections saw the political demise of former Deputy Prime Minister and Foreign Minister Winston Peters, a long-standing figure on the national and regional stage. Peters’ NZ First party failed to meet the 5 per cent threshold to be represented in Parliament and his departure from the former governing coalition removes a constraint on New Zealand’s climate ambition.
This was highlighted the day after the NZ election, with Fiji Prime Minister Voreqe Bainimarama welcoming Jacinda Ardern’s victory in a tweet: “Proud to see my friend @jacindaardern score a historic victory. With a full embrace of a #netzerocommitment by 2050, this was also a landslide win for the climate. Your friends in Fiji are ready to keep moving with our work to make the Pacific and our planet a better place.”
The 2019 leaders meeting in Funafuti saw close collaboration between Bainimarama and Ardern, leaving Australian Prime Minister Scott Morrison isolated in his opposition to more urgent, ambitious targets on greenhouse gas emissions and reduced use of fossil fuels.
Forum communiques usually include enough wiggle room to allow members to paper over their differences on climate policy, but the FFMM’s reaffirmation of the Kainaki II Declaration places the Morrison Government in a difficult position. Kainaki calls on parties to the Paris Agreement “to formulate and communicate mid-century long-term low greenhouse gas emissions development strategies by 2020. This may include commitments and strategies to achieve net zero carbon by 2050.”
The Morrison government has refused to adopt such a strategy, even though a broad coalition of Australian organisations – from environmental groups to the National Farmers Federation and Business Council of Australia – have supported the objective of net zero emissions by 2050. Despite the recent adoption of a “technology road map” on climate, Morrison may face increasing pressure at this year’s Forum leaders meeting over Australia’s lack of ambition on emissions reduction.
Dame Meg Taylor suggested that attempts to water down a Forum consensus on climate action would not constrain island nations in the lead up to COP26: “What we really need to do is to ensure that the Kainaki II Declaration is the basis for our discussion. However there was discussion and acknowledgement that there are other groupings too like the PSIDS, AOSIS and also the Higher Ambition Coalition that many of our member states - particularly the island countries - do belong to. They are going to push hard to make sure that the commitments under the Paris Agreement are met.”
Beyond climate, the Forum Foreign Ministers discussed regional oceans policy, despite the disruption of Blue Pacific advocacy during the UN Year of the Ocean. With Palau scheduled to host a regional oceans summit in December, the Forum will consider establishing a subcommittee to continue work on defining legal maritime boundaries.
At the meeting, Australian Foreign Minister Marise Payne announced that the new ‘Pacific Fusion Centre’, currently operating from Canberra, will be based in Vanuatu. The centre will collate information from security and fisheries agencies across Pacific Island countries to provide more comprehensive “real time maritime domain awareness.”
Online leaders’ summit
The 2020 Forum leaders meeting was originally scheduled for August in Vanuatu, to coincide with the 40th anniversary of independence. However health and travel restrictions in the COVID-free nation led to the postponement of a face-to-face meeting. Since then Prime Minister of Tuvalu Kausea Natano, the current Forum Chair, has been negotiating with other leaders to finalise a date for a virtual summit, with a restricted agenda.
Beyond key agenda items of the post-pandemic recovery and climate policy, this year’s meeting must make a decision on the appointment of a new Secretary General for the Pacific Islands Forum Secretariat, as Dame Meg Taylor ends her second term of office next January.
Speaking after the FFMM, Tuvalu's Foreign Minister Simon Kofe said that Prime Minister Natano was still working to finalise a date for the online summit, which should be decided within days: “The process will be determined by the leaders. But in terms of dates, we are looking at November. The majority of members have expressed their preference for the first week of November.”
Five Micronesian leaders have threatened to withdraw from Forum activity if their candidate for Secretary General, RMI’s Gerald Zackios, is not appointed to the post. But Simon Kofe believes that the issue will be resolved, noting: “It's something that the leaders will look into. We are certainly very concerned about the threat from the Micronesians to pull out from the Forum.”
Summing up a successful meeting, Kofe said: “It’s been an extraordinary year this year. We are coming to the end of 2020 and I would say that we faced a number of challenges this year and there are more challenges ahead of us. But as the Pacific, we can draw on our culture and our values to be able to maintain our unity and our resilience through these testing times.”