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Solomon Islands Country Report Solomon Islands June 2007 The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 26 Red Lion Square The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road WC1R 4HQ New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7576 8000 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7576 8500 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2007 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Solomon Islands 1 Contents Solomon Islands 2 Summary 3 Political structure 4 Economic structure 4 Annual indicators 5 Quarterly indicators 6 Outlook for 2007-08 7 The political scene 10 Economic policy 10 The domestic economy 11 Foreign trade and payments The region 12 Summary 13 Outlook for 2007-08 16 The political scene 17 Economic policy and the domestic economy List of figures 5 Solomon Islands: foreign trade 5 Solomon Islands: foreign reserves 7 Solomon Islands: gross domestic product 7 Solomon Islands: consumer price inflation Country Report June 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 2 Solomon Islands Solomon Islands June 2007 Summary Outlook for 2007-08 Reconstruction efforts after the tsunami of April 2nd 2007 will lead to a net improvement in western provincial services and infrastructure over the longer term. The governments of Australia and the Solomon Islands continue to fight for control of the resources of the Regional Assistance Mission to Solomon Islands (RAMSI), but a Pacific Islands Forum review due in July should set some useful boundaries and canvass an exit strategy. Despite healthy growth, the economy rests on unsustainable receipts from logging and international aid. Gold mining and palm oil production are the most likely candidates for diversification in the medium term. The political scene The tsunami of April 2nd killed 52 people and displaced thousands in the country’s western provinces, generating a supply of emergency aid from international donors alongside reconstruction and regeneration programmes. The relationship between RAMSI and the Solomon Islands government remains tense as the prime minister, Manasseh Sogavare, tries to limit the mission’s freedom of movement and set a clear timetable for its withdrawal from the Solomon Islands. Economic policy A former governor of the Central Bank of the Solomon Islands has stated that the standard of economic reporting is not good enough to hold the government to account and ensure that sensible economic policies are followed. Growing tax receipts and a balanced budget are encouraging signs of credible financial management. Tax revenue in 2007 is outstripping budget estimates, and will probably be double the level of receipts in 2006, at SI$845m (US$110m). The domestic economy GDP growth is forecast by the IMF at 6.4% in 2007, up slightly from 6.1% in 2006. Although healthy in global terms, it is the least that should be expected from an economy that is 20% smaller than it was ten years ago (before the collapse of the country’s major industries) and which relies on international aid for two-thirds of its income. Foreign trade and payments The Solomon Islands has been deepening relations with a number of countries, such as Iceland and Cuba, that are outside the circle of its usual trade and development partners. Taiwan has agreed in principle to accept hundreds of guest workers each year, potentially constituting a valuable source of remittance income. Editors: Hilary Ewing (editor); Duncan Innes-Ker (consulting editor) Editorial closing date: June 1st 2007 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report June 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 Solomon Islands 3 Political structure Official name Solomon Islands Form of state Constitutional monarchy The executive UK-style cabinet, led by the prime minister, who is chosen from and by parliament Head of state Queen Elizabeth II, represented by a Solomon Islander governor-general, currently Sir Nathaniel Waena National legislature Unicameral, 50-member national parliament, elected for a four-year term Local government The islands are divided into eight provinces and one town council (Honiara) Legal system English-style system; a series of lower courts leads to the Court of Appeal National elections Elections were held on April 5th 2006. The next elections are due in 2010 National government In May 2006 an alliance of parties under the banner of the Grand Coalition for Change formed a government under Manasseh Sogavare, the leader of the Social Credit Party. In practice parties do not represent enduring policy positions, and have fluid membership reflecting constantly shifting political alliances Main political parties The People’s Alliance Party (PAP); the Association of Independent Members (AIM); Socred; the Christian Alliance Solomon Islands (CASI); Lafari Party; National Party; Solomon First Party; Democratic Party; Labour Party; Liberal Party; United Party Prime minister & minister for public service Manasseh Sogavare Deputy prime minister, minister for agriculture & livestock Toswell Kaua Key ministers Commerce, industries & employment Peter Shanel Communications, aviation & meteorology Patrick Vahoe Culture & tourism Bentley Rogosamani Education & human resources Derek Sikua Energy & mines Mark Kemakeza Finance & Treasury Gordon Darcy Lilo Fisheries & marine resources Nollen Leni Foreign affairs, external affairs & immigration Patteson Oti Forests, environment & conservation Mark Kemakeza Health & medical services Clay Forau Soalaoi Home affairs Bernard Ghiro Infrastructure & development Stanly Festus Sofu Justice & legal affairs Samuel Manetoali Lands & survey Leslie Boseto National reconciliation & peace Sam Iduri Planning & aid co-ordination Steve Abana Police & national security Isaac Inoke Provincial government & constituency development Japhet Waipora Public service Joses Wawari Sanga Central Bank governor Rick Hou Country Report June 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 4 Solomon Islands Economic structure Annual indicators 2002a 2003a 2004a 2005a 2006b GDP at current prices (SI$ m)c 1,537.3 1,737.5 1,995.7 2,244.8 n/a Real GDP growth (av; %)c -1.6 6.4 8.0 5.0 5.3 Consumer price inflation (av; %)d 7.1 10.3 9.1 7.0 7.6 Population ('000)e 440.5 451.5 460.1 470.7 n/a Exports fob (US$ m)c 58 74 97 103 n/a Imports cif (US$ m)c 65 67 72 144 n/a Current-account balance (US$ m)c -16.3 2.9 32.3 -32.3 -51.9 Reserves excl gold (US$ m)c 17.5 36.0 79.0 94.6 98.2 Total external debt (US$ m)c 152 161 161 162 164 Debt-service ratio, paid (%)c 10.3 9.3 5.9 7.2 5.2 Exchange rate (av; SI$:US$)f 6.749 7.506 7.485 7.530a 7.600 a Actual. b Economist Intelligence Unit estimates. c IMF, Country Report. d National Statistics Office.e Asian Development Bank. f IMF, International Financial Statistics. Origins of gross domestic product 2004a % of total Electricity, gas & water 17.5 Forestry, logging, sawmilling 15.7 Finance 14.9 Retail & wholesale trade 9.7 Transport & communications 9.1 Manufacturing 8.9 Other services 7.6 Principal exports fob 2005b SI$ m Principal imports cif 2005b SI$ m Timber 517.0 Machinery & transport equipment 386.0 Fish & fish products 67.1 Mineral fuels 324.6 Cocoa 56.8 Food & live animals 291.0 Copra 16.6 Basic manufactures 169.9 Main destinations of exports fob 2005b % of total Main origins of imports cif 2005b % of total China 41.5 Australia 25.2 South Korea 13.2 Singapore 24.8 EU 8.7 New Zealand 6.0 Thailand 6.9 Fiji 4.1 Philippines 4.5 Japan 3.7 Singapore 1.5 China 3.7
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