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Country Report Solomon Islands December 2006 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 over 50 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 © 2006 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 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2007-08 8 The political scene 10 Economic policy 11 The domestic economy 12 Foreign trade and payments 13 The region 13 Summary 13 Outlook for 2007-08 List of figures 6 Solomon Islands: foreign reserves 6 Solomon Islands: foreign trade 8 Solomon Islands: gross domestic product 8 Solomon Islands: consumer price inflation Country Report December 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 2 Solomon Islands Solomon Islands December 2006 Summary Outlook for 2007-08 The prime minister, Manasseh Sogavare, has upset relations with Australia. China could replace Taiwan as the Solomons! political and economic ally. Despite policy reforms, growth will not pick up until the political situation stabilises. Tourism stands to become a major industry if this can be achieved. The political scene Anger over a series of issues has led to a breakdown in relations with Australia. Australia has been infuriated by the protection offered to a lawyer, Julian Moti, wanted in connection with an underage sex scandal, and Mr Sogavare!s offices have been raided. Two contentious clauses in the report of an inquiry into the Honiara riots of April 2006 have been removed following pressure from Australia. Mr Sogavare has expelled Australia!s high commissioner, Patrick Cole, and has tried to coerce the head of police, Shane Castles, into resigning. Despite calls for its removal, the Australian-led international security force (RAMSI) will remain in the Solomon Islands. Economic policy Recent political instability has stalled policy reform and deterred inward foreign investment. Senior figures have acknowledged that the withdrawal of RAMSI would have serious economic implications. The government is looking to Taiwan to make up any shortfall in funding that arises from its spat with Australia. There has been some limited progress on reducing corruption, but Australia has again warned that aid could be cut. The domestic economy An Australian company, Airservices Australia, has been implicated in a case involving the misdirection of A$2.12m (US$1.6m) in airline over-flight fees. Visitor arrivals have suffered as a result of the country!s recent political tensions, and Australia has raised its travel advisory status for the country. Foreign trade and payments The Solomon Islands! trade deficit has worsened with Australia and New Zealand, but improved with China and Japan. The EU has provided a grant to be distributed to non-state organisations to encourage improved operational transparency. Editors: Graham Richardson (editor); Robert Ward (consulting editor) Editorial closing date: December 1st 2006 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report December 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 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 Following the April 2006 election a government based around the former government, incorporating the People!s Alliance Party (PAP) and the Association of Independent Members (AIM), was installed, led by former deputy prime minister Snyder Rini of the AIM. However, rioting led to the collapse of the Rini government within the month. A new administration based around the former opposition and led by former prime minister, Manasseh Sogavare, of the Social Credit Party (Socred), was installed in May 2006 Main political parties The PAP; the AIM; Socred; the Rural Advancement Party (RAP); the Lafari Party; the Christian Alliance Party; the Democratic party; the National Party; the Liberal Party; the Labour Party Prime minister & public service Manasseh Sogavare (Socred) Deputy prime minister Job Duddley Tausinga (RAP) Key ministers Agriculture & livestock Toswell Kaua Commerce, industries & employment Peter Shannel Communications & aviation Patrick Vahoe Junior Culture & tourism Bently Samuel Education & human resources Derek Sikua Energy & mines Mark Kemakeza Finance & treasury Gordon Darcy Lilo Fisheries & marine resources Nollen Leni Foreign affairs Patteson Oti Forests, environment & conservation Job Duddley Tausinga 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 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 December 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 4 Solomon Islands Economic structure Annual indicators 2002a 2003a 2004a 2005a 2006b GDP at current prices (SI$ m)c 1,528 1,588 1,775b 1,990 n/a Real GDP growth (av; %)d -2.4 5.6 5.5 4.4 4.5 Consumer price inflation (av; %)c 9.3 10.0 7.1 7.4 n/a Population ('000)c 440.5 451.5 460.1 470.7 n/a Exports fob (US$ m)c 58 74 97 102 n/a Imports cif (US$ m)c 65 67 72 144 n/a Current-account balance (US$ m)c -4 27 67 n/a n/a Reserves excl gold (US$ m)e 18.25 37.20 80.58 95.42 n/a Total external debt (US$ m)c 152 161 160 n/a n/a Debt-service ratio, paid (%)c 7.8 6.4 6.4 n/a n/a Exchange rate (av; SI$:US$)e 6.749 7.506 7.485 7.530a 7.600 a Actual. b Economist Intelligence Unit estimates. c Asian Development Bank. d Central Bank of the Solomon Islands. e IMF, International Financial Statistics. Origins of gross domestic product 2004a % of total Agriculture 7.0 Mining -0.2 Manufacturing 8.9 Electricity, gas & water 17.5 Construction 3.2 Trade 9.7 Transport, communications & finance 24.0 Principal exports fob 2005a SI$ m Principal imports cif 2005a 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 2004b % of total Main origins of imports cif 2004b % of total China 28.2 Australia 25.3 South Korea 15.7 Singapore 23.8 Thailand 15.7 New Zealand 5.3 Japan 9.7 India 4.8 Philippines 5.1 Japan 3.9 Vietnam 3.1 US 1.9 a Central Bank of the Solomon Islands. b Asian Development Bank. Country Report December 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 Solomon Islands 5 Quarterly indicators 2004 2005 2006 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr Prices Consumer
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