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The Political Economy of Economic Reform in the Pacific

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The Political Economy of Economic Reform in the Pacific Pacif ic Studies Series The Political Economy of Economic Reform in the Pacifi c Edited by Ron Duncan Pacif ic Studies Series The Political Economy of Economic Reform in the Pacifi c Edited by Ron Duncan © 2011 Asian Development Bank All rights reserved. Published in 2011. Printed in the Philippines. ISBN 978-92-9092-313-8 Publication Stock No. RPT113292 Cataloging-In-Publication Data. Duncan, Ron (ed.) The political economy of economic reform in the Pacific. Mandaluyong City, Philippines: Asian Development Bank, 2011. 1. Political economy. 2. Economic reform. 3. Pacific. I. Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB), its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. Cover photo by Luis Ascui. Note: In this publication, “$” refers to US dollars. Asian Development Bank 6 ADB avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, please contact: Department of External Relations Fax +63 2 636 2648 [email protected] Printed on recycled paper iii Contents Foreword iv Abbreviations v List of Contributors viii 1 The Political Economy of Economic Reform—by Ron Duncan 1 2 An Overview of the Research on the Political Economy of Reform in the Pacific—by Ron Duncan 15 3 A Political Economy Analysis of the Customary Land Tenure Reforms in Papua New Guinea—by Charles Yala 33 4 Telecommunication Regulatory Reforms and the Credibility Problem: Case Studies from Papua New Guinea and Tonga—by Siope V. ‘Ofa 63 5 Political Economy and Championing Reforms in the Cook Islands and Samoa—by Emele S. Duituturaga 95 6 Presidential Perspectives on Political Economy in Micronesia—by Giff Johnson and Ben Graham 115 7 Governance Reform in the Public Sector in Pacific Island Countries: Understanding How Culture Matters—by Roderick Duncan 139 8 Achieving Revenue Reform in the Pacific: Taking Revenue Policy and Administration Advice from Intent to Reality—by Margaret Cotton 163 9 Island Parties: How Has Political Instability Impacted on Regulatory Quality in the South Pacific?—by Aaron Batten 191 10 Timor-Leste: Change, Stagnation, and Questions of Political Economy —by Rod Nixon 227 11 How Pervasive is Clientelist Politics in the Pacific?—by Ron Duncan and Graham Hassall 265 12 The Political Economy of Logging in Solomon Islands—by Matthew Allen 277 13 The Atrophied State: A Supply-Side Perspective on Politician “Slush Funds” in Western Melanesia—by John Fraenkel 303 14 Aid, Dutch Disease, and the Pacific—by Jonathan Gouy 327 15 The Political Economy of Sugar Rents in Fiji—by Satish Chand 345 iv Foreword In late 2009, the Asian Development Bank (ADB) launched a new Pacific Approach, a framework for its role in the development of its 14 Pacific developing member countries (DMCs). The Pacific Approach requires a high level of understanding of the political economy of each DMC. For its assistance to be most effective, ADB should have a good appreciation of how economics, politics, and culture interact within each country. This publication, prepared as background for the Pacific Approach, comprises a set of studies by researchers who examine the political economy of the Pacific DMCs within different disciplinary frameworks. Some studies look at why economic reform attempts are, or are not, successful. Others investigate how politics, economics, and culture interact to discourage change, lead to poor governance and growth, or encourage corruption. The project is set within the context of the recent global interest in understanding the political economy of economic reform in developing countries. It confirms many of the conclusions that have been drawn from that research and provides additional insights on the political economy challenges of economic reform. The report points to ways in which ADB and other development partners can use this knowledge to provide more effective assistance to the Pacific DMCs. The studies reported here were undertaken under the leadership of Ron Duncan, emeritus professor, Crawford School of Economics and Government, The Australian National University, Canberra, and were supervised by Steve Pollard, principal economist, Pacific Department. Robert Wihtol Director General Pacific Department v Abbreviations ACP African, Caribbean, and Pacific ADB Asian Development Bank AMP Aliança para Maioria Parlamentar (Alliance of the Parliamentary Majority, Timor- Leste) APODETI Associação Popular Democrática Timorense (Timorese Popular Democratic Association) ASDT Associação Social Democrata Timorense (Timorese Social Democrat Association) AusAID Australian Agency for International Development BAPPEDA Badan Perencanaan Pembangunan Daerah (Indonesian Regional Development Planning Board) CAVR Comissão de Acolhimento, Verdade e Reconciliação (Commission for Reception, Truth and Reconciliation, Timor-Leste) CCLD Committee on Customary Land Development (Papua New Guinea [PNG]) CEO chief executive officer CFA Central Fiscal Authority (Timor-Leste) CLRC Constitutional and Law Reform Commission (PNG) CNRT Concelho Nacional da Resistência Timorense (National Council of Timorese Resistance) CPA country performance assessment (ADB) CPIA Country Policy and Institutional Assessment (World Bank) CSR Colonial Sugar Refining Company (FIJ) DFID Department for International Development (United Kingdom) DLPP Department of Lands and Physical Planning (PNG) DOC Drivers of Change (DFID) DPEIDC Department of Public Enterprises, Information and Development Cooperation (PNG) DSG district support grant DVL determined value of logs EC European Community EMC Economic Ministerial Committee (PNG) ERP economic reform program ESI estimated sustainable income EU European Union F$ Fiji dollars FAS freely associated states F-FDTL FALINTIL (Forças Amadas de Libertação Nacional de Timor-Leste)—Forças Defesa de Timor-Leste (East Timor Defence Force) FRETILIN Frente Revolucionária de Timor-Leste Independente (Revolutionary Front for an Independent East Timor) vi Abbreviations FSC Fiji Sugar Corporation Limited GATS General Agreement on Trade in Services GDP gross domestic product GMM generalized method of moments GSP Generalized System of Preferences ha hectare HATAC High Administrative, Tax and Audit Court (Timor-Leste) HOMs heads of ministries HRPP Human Rights Protection Party (Samoa) IFC International Finance Corporation IAD Institutional Analysis and Development IEG Independent Evaluation Group (World Bank) IPBC Independent Public Business Commission (PNG) ILG incorporated land group ICCC Independent Consumer and Competition Commission (PNG) ICT information and communication technology IGR institutional and governance review IMF International Monetary Fund JDP-BPC Joint District Planning and Budget Priorities Committee K kina km kilometer LPV limited preferential voting m meter MFN most favored nation MP member of Parliament NIE new institutional economics PAE politician-allocated expenditure PIC Pacific island country PNG Papua New Guinea MAF Ministry of Agriculture and Fisheries (Timor-Leste) MAFF Ministry of Agriculture, Forestry and Fisheries (Timor-Leste) MED Ministry of Economy and Development (Timor-Leste) MOF Ministry of Finance (Timor-Leste) NCRT Congresso Nacional de Reconstrução de Timor (National Congress for Timorese Reconstruction) NCP National Coalition Partnership (Solomon Islands) NEC National Executive Council (PNG) NLDAG National Land Development Advisory Group (PNG) NLDP National Land Development Program (PNG) NLDT National Land Development Taskforce (PNG) NLS National Land Summit (PNG) NLSCC National Land Summit Coordinating Committee (PNG) NLTB Native Land Trust Board (Fiji) NRI National Research Institute (PNG) NGO nongovernment organization Abbreviations vii NZ$ New Zealand dollars NZAID New Zealand Agency for International Development ODA overseas development assistance ODI Overseas Development Institute OECD Organisation for Economic Co-operation and Development OLIPPAC Organic Law on Political Parties and Candidates (PNG) PASS People Against Switching Sides (Samoa) PFTAC Pacific Financial Technical Assistance Centre (Fiji) PNTL Policia Nacional de Timor-Leste (Timorese National Police) RAMSI Regional Assistance Mission to the Solomon Islands RCDF Rural Community Development Funds (Solomon Islands) RDTL República Democrática Timor-Leste RIF reduction in force SI$ Solomon Islands dollars SIAC Solomon Islands Alliance for Change Sida Swedish International Development Cooperation Agency SIDS small island developing states SPS Special Preferential Sugar (Agreement) SSR security sector reform SUNGO Samoan Umbrella of NGOs TCC Tonga Communications Corporation TCU Timber Control Unit (Solomon Islands) UDT União Democrática Timorense (Timorese Democratic Union) UNITECH University of Technology (PNG) UNPG
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