ReportNo. 11351-EMP PacificIsland Economies: 'TowardEfficient and SustainableGrowth (In Nine Volumes) Volume8: WesternSamoa - CountryEconomic Memorandum

Public Disclosure Authorized March8, 1993 CountryDepartment III EastAsia and PacificRegion

FOR OFFICIALUSE ONLY Public Disclosure Authorized

yie i fri d . o ma . otherwise Public Disclosure Authorized Public Disclosure Authorized

d_c withoutWord Bank auth rizat'on WESTERNVSAMOA

CURRENCY EQUIVALENTS AJvNALAvjwmos

1981 WS$1.00 = $0.9649 1985 WS$1.0 = $0.4557 1989 WS$1.00 = $0.4408 1990 WS$1.00 = $0.4330 1991 WS$1.00 = $0.4171 1992 WS$1.00 = $0.4096 FISCAL YE4R July 1 - June 30 MAIN ABL . ATIONS AND ACRONYMS ADB - Asian DevelopmentBank DP7 - DevelopmentPlan 7 DLSE - Departme of Lands, Surveys, and Environment DTCI - Departmentof Trade, Commerce,and Industry EEC - European EconomicConmnunity EEZ - ExclusiveEconomic Zone EIEPA - EnterprisesIncenives & Export PromotionAct EPC - Electric Power Corporation FAO - (UN) Food and AgricultureOrganization GATT - General Agreementon Tariffs and Trade GDP - Gross DomesticProduct MCH - Maternal and child health NEMS - NationalEnvironmental Management Strategy NGO - Non-governmentorganization NPF - NationalProvident Fund NUS - National Universityof Samoa OECD - Organizationfor EconomicCooperation and Development PMD - Produce MarketingDivision PSIP - Public Sector InvestmentPolicy SCPL - Samoa CoconutProducts Ltd. SFP - Samoa Forest Products Ltd. SLC - Samoa Land Corporation SOE - State-ownedenterprise SPREP - SouthPacific RegionalEnvironment Programme UNDP - United NationsDevelopement Programme UNESCO - Umted NationsEducational, Scientifc and Cultural Organization USP - Universityof the SoutliPacific VAGST - Value Added General Sales Tax WHO - World Health Organization WSTEC - Western SamoaTrust Estates Corporation WSTI - Western SamoaTechnical Institute COUNTRY DATA Land Area: 2,934 sq km Sea Area: 130,000 sq kmn Population: 160,000 (1991) GNP per capita: US$930 (1991) Capital City: Apia Populationof Capital: 32,000 CONTENTS

Page No.

Executive Snmay ...... v

1 Recent EconomkDevelopmens ...... I

A. Itroduction ...... 1 B. EconomicDevelopments, 1987-92 ...... 2

2 Development Opporiinwies and Challenges ...... 9

A. Growth Prospects and Challenges ...... 9 B. A Frameworkfor Private Sector Development ...... 11

3 Publc Sector Management ...... 21

A. introduction ...... 21 B. Public Service Refom ...... 21 C. Public EnterpriseReform ...... 22 D. Public Sector InvestmentProgram ...... 23

4 Human Resource Development ...... 27

A. Human ResourceRequirement for Growth ...... 27 B. The Labor Market for SkilledManpower in Western Samoa ..... 27 C. EducationSector Performanceand Finance ...... 29

Thisreport was preparedby a WorldBank mission which visited Westem Samoa in July 1992. The mission memberswere HilarianCodippily (Chief of Mission),Lily Hale, KariBookin, John Caldwell, Xan Vongsathom (IMP), DouglasAdkins (consultant), and PeterJohnston (consultant). A draft of the reportwas discussedwith Governmentofficials in February1993.

i Volume8: WesternSauoa D). HumanResource Strategy and SomeIs ...... sues 32 B. (Ot SelectedEducation Isues ...... 33 F. HealthCare 33 G. HealthCare ReformPriorities 34 H. Womenin Development.35

S. Gowth andthe EnWronment.37 A. Improvingthe Sustainabilityof the GrowthProcess .37 B. EnvironmentalIssues and InternationalStrategies .37 C. EnvironmentalPlanning and Isitutional Development 39

6. Mediwn-Tem Povspects .. 41 A. A Medium-TermGrowth Scenario .41 B. ernal FinancingReqiements 44

Statasti Appendix . . .49

map

TABLE Iv ThxT

1.1 Growth,Investment and Savings,1987-1992. 3 1.2 Key MacroeconomicBalances, 1987-1992. 4 1.3 Summaryof Cental GovenmentFinance, 1987-1992. 5 1.4 Monetaryand Price Developments,1987-1992. 6 1.5 SummaryBalance of Payments,1987-1992. 7 2.1 InterestRates, 1990-1992 .17 3.1 Actualand ProjectedPublic Investment Prcoram, 1987-1994 24 3.2 SectoralAllocation of PlannedInvestment, 1992-1994 .25 3.3 Sourcesof FinancingRequirements for PSIP, 1992-1994 26 4.1 WesternSamoa: Labor Force Statistics, Censusesof 1976and 1986.28 4.2 Shortagesin SelectedPublic Service Specialties, 1992 .29 4.3 Enrollmentin RegularSchool Systems, 1991 .30 4.4 WesternSamoa: Government Current Education Expenditures1992-1993 .32 6.1 Medium-TermProjections, 1993-2000 .42 6.2 ExternalFinancing Requirements and Sources,1993-2000 44

Vol& Westen Samoa ii RIGuES iN TEXT

1.1 Structure of Production, 1992 ...... 2 1.2 Real GDP Growth, 1987-1992 ...... 3 6.1 WesternSamoa: Extenal Assistance,1991/92 ...... 46

il Vd1., & WesternSwea Western Samoa

EXEcVT1VESUMMARY

i. WestemrnSamoa comprises two maui 22 percent of GDP in 1989 to about 36 percent of islands-Upolu and Savai'i-and seven small GDP in 1991-92. Consequenly, the overall islands, widtha total land area of 2,934 square balance of thecentrl government moved from a kilomets. The country has an exclusive economic surplusof 1.0 percent of GDP in 1989 to a deficA zone (EEZ) of some 130,000 square kilometers. of 13.4 percentof GDP in 1992. The impactof the Western Samoa'spopulation is currendyestimated cycloneson the balanceof paymentswas equally at about 160,000, but an estimated 100,000 severe. The extemal current accountdeficit rose Samoans now live abroad in New Zealand, sharplyfrom the equivalentof 1.2 percentof GDP Austalia, and the UnitedStates. Agricultureis the in 1989to levels of 26.9 percentof GDP in 1991, mainstayof the economy,accounting for about 40 and 28.2 percent of GDP in 1992, reflecting a percentof GDP; the major cash crops are coconut, significantdrop in -port earnings (principaUy taro, and cocoa. The mamnfacatringsector is coconut based products and taro) and a sharp relaively small,accounting for about I Ipercent of increase in imports of consumer goods and GDP. In the service sector, govemment constructionmaterials. The excessdemands arising dministrationaccounts for about 15 percent of from the effectsof the cyclonescaused inflation to GDP. Tourist-relatedservices have also begun to rise from 6 percentin 1989to 15 percent in 1990. developin recentyears. Although inflation fell by 1.3 percent in 1991 owing to tight monetary policy and increased Recent Econom lDevelopments avaflabilityof local agriculturalproduce, it rose againto an estimated8.5 percentin 1992following ii. Following the economic reforms the effectsof CycloneVal. implementedsince 1983-84,supported by external assistance, strong toist receipts and private iv. In Western Samoa, the major remiances, WesternSamoa's economy had begun challenge for the Government today is to to recover in 1989, with a real GDP growth of rehabilitateinfrastructure and the productionbase 2 percent. Cyclone Ofa hit Western Samoa in to levels sufficientto support recovery from the February 1990 and Cyclone Val, the most devastaingeffects of CyclonesOfa (1990)and Val destmcdvecyclone o hit Western Samoa in 100 (1991)and sustainableeconomic growth thereafter. years, stmck in December1991. It reversedthe A rehabilitationprogram, however, would only be rehilitation effortssince Ofa, and causedthe loss a preconditionfor tappingWestern Samoa's growth of several lives as well as damagesestimated at potential, which lies principally in agricultum, US$300million to infastucture and the country's tourism and small and medium-scaleindustry. productionbase. Mainly as a result of the two Even during the pre-cycloneyears 1987-89,GDP cyclones, as well as the economic recession in growth had averagedonly 1.0 percet per year, WesternSamoa's major tradingpartners, real GDP indicatinga numberof underlyingimpediments to (at factor cost) declined at an average rate of growth in each of these sectors. Realizing the 4.4 percentper year in 1990-92. growth poial in these sectors wil depend on improvingthe enablingenvironment for the private iii. Meanwhile, the sharp increase in sector to play a lead role in the economy,human goverment expenditu for cyclonerehaitation resourcedevelopment and a supportiverole by the caused public investmentto rise from a level of

v Veo. & Vea.n Samoa public sector for sustainableeconomic growth and trade and paymentrestricdons, and price Instability preservingWestern Samoa's physical environment. will be crucial for attracting long-term commimentsof prtvateimnestment, boti local and DelopmentOpposuites awd Chalenges foreign. In this respect, the managementof the exchange rate regime, trade and payments V. Agriculture is the leading sectr in arrangements, and montary policy is enraly Western Samoa, widhproduction dominated by a sound. The main macroeconomicissues of concern combinationof semi-subsistencerootcrops (e.g. are the fiscal deficit before grants (18 percent of taro) and garden vegetables, together with GDP) and the extenal current account deficit productionof copra, cocoa and timberfor export. beforegrants (28 percentof GDP)arising primarily The sharp fall during the 1980s in the prices to from cyclone rehabilitationexpendiures. Such traditional Pacific Island export crops has tudes are unsustainableand would lead to stimulatedproducers to increaseproduction of non- large drawdownsof reserves,unless action is taken traditionalcommodities such as coconutcream for to: export markets. Niche-basedagricultural export developmentholds considerable potential, although * improve central government revenues improved marketing and quality control will be throughimplemention of the Value Added neededin order to diversifyfurther. General Sales Tax (VAGST) and tax collection efficiency in the Customs and vi. Tourism holds some potential for InlandRevemie Deparuments; Westen Samoa. High air access costs and a limied supply of quality accommodationsand * carry out monthlybudget review meetings to services have hindered growth in this sector, ensure tat deparental expendiures are despitethe fact that the naturalresource endowment withinageed ceilings,that no new positions of the country,with its uniquePolynesian cultures, are created, and that wage restrai is unspoiledwaters, and uncrowdedbeaches, would enforced; make it ideal for a host of recreationalservice activities. * limit cyclonerehabilitation expenditures to the criticalminimum investments needed to vii. Manufacturingand niche industries get the economyon a path of recovery;and also have a role toplay in Westen Samoa. Food- processing ad assembly type or light * monitormacroeconomic developments on a manufacturingare the two largest sources of regular basisusing standard macoeconomic employment in the economy. Handicraft indicators. productionand other formsof nicheindustries play an importantrole in providing employmentand ix. Environment for Private Sedor skills and in developing market contacts. In Deelepmena. There are a numberof issues that Western Samoa, manufacturingfirms have also WesternSamoa has to resolveif it is to achieveits been establishedto take advantageof proximity stated objectivesof sustainableeconomic growth. (and preferential tariff treatment) to the South As in several other island economies,the man Pacific market (e.g. Yazaki automotivewires). problemsrelate to low productivityin agriculure WesternSamoa requires only a very smallnumber relativeto wagerates; the shortageof professional of successfulprivate investmentprojects to make manpower,particularly in the areasof management, remendous gains in growth, employment and engineering,and other professionalfields; the land incomegeneration. Most likely, these will be in tenure system;excessive domestic consumption of various niche-typeactivities which, by nature, are remitancesvs-a-vis savings and investment;and an noted for shifting frequendy and for being underlevelopedfinancial market. pracdcallyimpossible to predict. In any event, the success of such ventures will depend on global x. The main elements of a strategy to trading afrangements. Thus, the relianceon such enablethe private sector to play a greater role in industres as long-termsources of employmenthas acceleratingeconomic growth shouldinclude: to be approachedwith caution. * raising productivity of the traditional A Frameworkfor Peivae Sector Development farmiing system through technological improvements.This will call for a greater viii. Macroeconomic Stability. The farmingsystems orientaion in researchand maintenance of a stable macroeconomic extension,and actions to counter pote environmentfree of foreign exchangeshortages, threats to the system's environmental

Volme & WesternSam"a v sustinabity, particularlythe Inceasing use the coopemadonof the maas, the churches, and dherbcides andthe steay encroachmenof non-govermnt orgnizations would be crucial m cultivaion into the uplandforest areas; imprving the delivery of services at the villge level. * speeding the process to lease the former WSTEClands, currently held by the Samoa xii. lhe Public ServiceCommission has Land Coon,forlargescale production prepared a Human ResourcePlan for the Public eiter for exportsor for cate breedig; Service. The Plan revealedthat about 39 pement of the total workforceare pardally qualified for * broadeningof land leasing prces to their positions,and over 36 percentof established allow any Samoanto lease land (insteadof positionsare currnty vacant. This clearlyshows only by the matais at present), as . need for saegic humanresource development to recommendedby the Committeeto review improvethe development, recruitment and retention the Alienaton of CustomaryLand Act; of qualifiedpersonnel in orderto improveprovision of services. The Plan includesrecommendations * adoptinga two-fold approach to help for changes in the Public Service to: eliminate develop new markets, to move towards overlappingand duplicatedactivities and functions; higher qualitystandards in several existing increasemanagement accountability; promote more export commodities,and to develop new effectiveutlization of personnel;give performance markets through a more systematic incentiveswith more clearly definedcareer paths; identificationand promotioneffort and the and reduce the overallsize. The Government,as applicationof strict quarantineand quality stated in its developmentplan (DP7), intends to control standards; downsize the Public Service with a focus on personnel quality rather than quantity. %ome * encouragingprivate sector involvementin restructuringis alreadyunderway ,ud needs w be tourism by publicizing the hotel sites implemented. identified in the tourist developmentplan and assistng investorsin securingleases of xiii. Western Samoa has 18 public neededlands; enterprises of which 10 are fully government owned. In the otiers, Governmentowns 25- * developing attractive tour packages in 80 percentequity. A numberof public enterprises cooperationwith airlines;and covercommercial type operationsas, for example, coconutproducts, iron and steel,computer sevices, * ensuring the speedy processing of and Rothmans. The Government is moving investment approvals (both local and towards a more business-likeapproach to runnng foreign) and a decision regarding each the Public Eneprises and is committed to application(where ful informationhas been acceleratinga programof privatization. provided),within a 4-weekperiod; xiv. The major challenge for the Pablic SectorMwaement Governmenttoday is to restore inmstructure to a level sufficientto supportthe recoveryprocess and xi. As the growthmomentum in Western sustainableeconomic growth thereafter. The Samoashifts to the privatesector, it wil be ealy rehabilitation of power supply, water supply, importantfor the publicsector to reassessits role in telecommunications,and roads wouldbe crucial to the developmentprocess and recast its functions support agriculture, manufacturingand tourism and organizationsin a manner supportiveof the growth, and would need considerable donor overall developmentprocess. As a start, a leaner assistance. However,the public sectorinvestment but more efficientpublic service(civil service) and program (PSIP), as currently formulatedfor the a lower degreeof involvementof the publicsector three year period 1992-96,amounts to a massive in commercialactivities are imperative. There is WS$392 million reflecting only the on-going also a need for the public sector to re-examineits projects and immediaterehabilitation needs. Its overaUscope and sweep of activitieswith a view size appears too large even on an anmnualbasis-- towards establishing a more manageable and which could reacn about 33 percent of GDP. A efficientpublic sector. This becomesincreasingly PSIP to reflect the highest priority rehabilkadon importantas the public sector shiftsaway from an projectsneeded to movethe economyto a recovery emphasis on implementing capital investments path shouldbe formulatedin a manner consistent towardsa greater focus on operatingand managing with thn country's macroeconomicframework in infrastructureand social servicesystems. Securing terms ot size, compositionand financing.

vi Voklme& WesternSuaoa xv. In pardtlar, the PSJP needs to be Giventhe fiscal costai whichwould preude prioritized and carefiqi phased over the increasesin curen expenditurefor educadon, a developmert plan period, kg io account major effort would be needed to secure the possible limits on domesticwesource availabiity cooperatonof villagecommunities, churches, and owingto the economicimpact of the two cyclones. non-goverment organizadons in supporting Donor financng of localcosts couldhelp ease this educationreform. Even with a larger shae, and cosurintL The speedy in of the certainly without it, substantial progrss wil Govenment's program to privatize public require major increasesin the strategiccoherence enterprises would also help raise additional and internalefficiency of the wholesystem. resources. xviii. Someof the neededreforms are: vi' Human Resoure Deveopu:ent muchgreater allocationof resourcesto curriculum development, student evaluation, and teache xvi. The availabilityof trainedand skilled training; (ii) a major increasein expendituresfor manpower will be a major factor in the educational materials for teachers and pupils, sustinability of economic growth in Western includingimported and localy developedtexts and Samoa. Even in the short run, growth is being library resources;(iii) acquisitionand maintenance inlibited by a very tight labor market for persons of adequateequipment for scieoceand vocational with post-secondaryqualificaticns. Technical educationat secondaryand post-secondarylevels positions in government and the ptivate sector are and establishment of specialist ceers; and (iv) often filled through technical assistance and improvedcost recovery for health services and a expatrate recruitment. At the same time, large shift of emphasis from curative to preventive numbersof qualifiedWestern Samoans continue to services. emigte to New Zealand,Austria and American Samoa. The brain drain is unlikelyto stop in the Susabe Growthand de Environaent fute becauseof the insuperablewage differential and the large Samoan immigrant populations xix. In the past, WesternSamoa's naura overseas. A strategy for dealing with Western environmentwas preservedthrough a combination Smaoa's manpower problems needs to be of traditionalover-sight of commonproperty and implementedalong the followinglines: usagerights, a finely-tunedand ecologicallysound subsistenceoriented agriculturlt system, very slow * frst, continueto use expatriatemanpower increasein population,and the lack of a great deal for highpriority positions when Samoansare of pollution-intensivecommeca and industrl not available; activity. Still, despite the relatively modest demands placed by the economy on the natral - second, improve retention of Samoan resourcebase, resourcemanagement has emerged professionalsthrough a varietyof measures, as an area of concern. In the rural areas, the such as bondingand improvedremuneration introductionof more commercial,cash-crop based and workingconditions; and farmingsystems has reslted in site-specificerosion and groundwatercnaton. In the coastal * third, increase the quality, quantity and regions, a combinationof over-fisbing,improper relevance of the human capital output of waste disposal,and unsoundfishing practices bas WesternSamoan post-secondary educational resultedin destuction of mangroveswamps and a institutions. The weak quantitativeand depletion of the fish stocks. In the cities, English-languageperformance of primary inadequate sewage and solid waste disposal school graduatesautomatically makes their mfrastructurehas resultedin severe water quality performancein secondaryschool inferior. problems,to the point at whichcontned progress Restrictedentry in senior secondaryschool in public health is placed at risk. And, in the contributes to inadequate numbers of forests, past practices of over-loggingand high studentsseeking specialized credentials. The rates of fuelwoodconsumption, when coupled with lack of focus in the Government'spost- the destructivetendencies of recenthurricanes, have secondaryexpenditures uses resourcesbetter increasedthe urgency attached to replandng and spentelsewhere. plantationmanagement programs. xvii. Basically,a significantimprovement xx. The Governmentis aware of these in the outputof humancapital by WesternSamoan constraintsand has acted swiftlyand promptlyto educationalinstitutions will entailimprovements in containenvironmental damage on a great mnmberof quality and efficiency throughout the structure. fronts. Further progress could be made in this voloue 8: Western Samoa viU regardby: (i) improvingcoordination, institiona em , i l i of the Enisae management,and public poicies relatingto urban Incetives and Export PromotionAct (EIEPA), water supplymanagement; (ii) shiftig the focus of i of the tourism developmentplan, agrwil research and extensiontowards more and speedier processing of private investment eco-friendlyproduction systems, while openingup proposals; (c) human resource development new lands to production outside Upolu; (iii) strategiesare implemented;and (d) more efficient tighteningenforcement of regulationsprohibiting use is madeof extenal assistance. coastal pollutionand unsound fisheriespractices; and (iv) building environmentsl screening xxiv. Basedoncyclone rehabilitation efforts proceduresinto the early stagesof projectdesign so currendyunder way, the economyis projectedto as to avoid the ypes of resource-degradation recover with a real GDP growth averaging problemsthat have occurredin the Afulilohydro- 3.4 percentper year during 1993-95and gradually electricproject. increasingto about 3.6 percentper year in 1996- 2000. This would permit an improvementin per xxi. In the future, as customarycontrols capita consumptionof about 1.0 percent per year recede and as the economy becomes more during 1996-2000,compared to a projecteddecline commercially oriented, strains on the natural of 1.7 percent per year during 1993-94. The resource base are bound to increase. At present, economicgrowth would result from maintaining Government'scapacity to respondto enviromenal investmentat around 28 percent of GDP during concernsis limitedby a lack of trainedmanpowei 1993-200). This high level of investmentreflects and, despite considerableprogress on the planning the amountsneeded to rehabilitatethe productive front, by a regulatory capacity inadequate to secter and relatedinfrastucture for the promotion proactvelyoffsetenvironmental problems. Greater of tL-;j ivate sector; it also reflectsthe fact iat it cooperaton betweenvillage communities,NGOs, has a torem.incomponent of about60 percent. The the Department of Lands, Surveys and projectedrate of investmentdependsonmaing Environmtent,and internationaldonors will be a nationalsavings rate at an averageof 12.1percent neededto upgradethe regulatoryframework and to of GDP during 1996-2000, which should be ensure that staff capabilites in these areas are feasible given the projected rate of GDP growth improved. and gradualimprov,,nent of domestc savings. xxii. The greatestdanger from in&dequate xxv. The effects of CyclonesOfa and Val resourcemanagement is that Western Samoawill, have cut the volumesof major export crops by an by depleting its coastal and cultural resources, estimated 32 percent in 1992. It is clear that reduccthe nation'salready narrow range of options exports of tree crop products will be severely for future growth and development. Improving affected,and that surplusfood productionis likely pi,llic awarenessof the environmentand building to be divertedfrom export to domesticmarkets. At upon traditionalsystems of controland respectfor the sametime, importvolumes are projectedto rise the sanctity of the natural eco-system should sharply due to the related emergency and condnue to be accorded a high priority in rehabilitationrequirement. Although some of Government'sefforts to promotegrowth and socio- these importswill be financedby remittanceflows, economicdevelopment. the currentaccount deficit is projectedto remainat about 23 percentof GDP. Barringfurther shoccs, Medin-tem Prospe(.. it shouldbe possibleto reducetLU current account deficit to a target of 12 percent of GDP over a xxiii. The analysis of Western Samoaes period of five years. Overall, the volume of medium-termprospects presented in this report exports of goods and non-factor services is illustrateshow the economymight evolve over the projected to grow by 10.3 percent per annum next eight years dependingon the extentand speed through 1995. Importrequirements are projected with whichthe key recommendationsof this report to fall back in 1994 and grow more slowly than are adopted. It illustrateshow, barring external exports in later years. Higher receipts from shocks, the economymight recover over the next tourismand intereston reserves,together with a two to three years and move towards a path of constantreal (1992) level of remittanceinflows, sustainableeconomic growth, provided (a) the could help keep the current account deficit at macroeconomicframework is improvedthrough a manageablelevels. progressive reduction of key macroeconomic imbalances; (b) the enabling environment for xxvi. Totalexternal financing requirements private sector developmentis improved through are projected to rise from an annual average of measums such as broadening of land leasing US$66.8million in 1989-92to US$76.3million in

ix Volwme& Westm Samoa 1993-95,decreang to a projectedUS$69.1 million beforegradually rebuilding to reach 5.6 monthsof during 1996-260D.This tend reflectsthe gradu Impor by the end of the decade. However,past phasingout of reconstuctionactivity, with private experiencesuggests that the reservelevel can easily remttances remang the maj fmanciig item. be eroded by unexpectedcnges in the ms of New commitmentsof projectgrants and loansare trade or the impact of weather on agricultural projected to reach a peak in 1992 and 1993 and production. With remittanceslikely to remainflat then to remainfairly stableat about US$8.9million in nominalterms, and no correctivepolicy action, per year in loans and US$20 millionper year in the current account deficit could widcn sharply. grants in later years. Althoughthe debt service And, in the absence of additional fiunaning, ratio has reachedonly about 10 percentof exportof reserves could fall to less than three months of goodsand non-factorservices, it could rise rapidly imports by the end of the decade. For these unless a cautious borrowing policy is followed. reasons, it is essentialthat the Governmentkeep The scenaio presentedillustrates that if all loans reservesas a contingency,rather than drawingthem are providedon concessionaltens, the publicdebt down as a developmentresource. Trnerisks in the service ratio should fall steadilyto an averageof balanceof paymentsalso reinforcethe priority for 7.7 percent in 1993-95and 5.2 percent in 1996- fiscal and monetay restrain, strengthen export 2000. incentives,and improvingthe enablingenvironment for privatesector development. xxvii. The projectionsindicate that external reserveswill fall belowfive months of importcover

Volume8: Western Samoa x 1: Recent Economic Developments

A. INTRODUCTION is almostuniversal. 1.1 Western Samoa comprises two main 1.3 Western Samoa gained independencein islands,Upoiu and Savai'i, and sevensmall islands. 1962, followinga period as a UnitedNadons trust The country has a total land area of 2,934 square territory administered by New Zealand. kilometersand an exclusiveeconomic zone of some Parliamentaryelections are held every five years. 130,000 square kIlometers. The capital city of The right to vote, previouslyrestricted to about Apia is located in Upolu; at least 20 percent of 20,000 village chiefs (the matais) and 2,000 WesternSamoa's populationof about 160,000live registeredvoters in Apia, was extendedto universal in Apia. Becauseof large net emigrationflows (3- suffragein early 1991. The holderof a matai ttle 6,000 per annum since 1984),' populationgrowth is the elected head of an extendedfamily (aiga). has been low in recent years. It is estimatedthat The mataishave had nearlycomplete auithority over there are now at least 100,000 Samoansliving the use of customary land, which accounts for overseasin New Zealand,Australia and the United about 82 percent of land holdings in Western States (includingAmerican Samoa). Many of the Samoaand 80 percent of agriculturalproduction. migrantsare males aged 20 to 30, who have sought This system of land tenure is enshrined in the employment abroad. Consequently, Western Constitutionand it providesthe frameworkfor the Samoa faces a high dependencyrate (81 percent) operationsof the Landsand Tides court. Underthe and a growingshortage of labor. Althoughmost of presentlegal system, only thosewith matai tide can the migrantsbecome permanent residents overseas, lease land. Thus, the ineligibilityof otherpotential they maintainstrong culturalties to WesternSamoa investors(without title) to lease land is a constraint and transferfunds back to their families. In 1992, to agriculturaldevelopment. recorded remittances totaled US$40 million, significantlymore than receipts from exports and 1.4 Agriculture is the mainstay of the aid combined. Actualremitances in cash and kind economy, and is estimatedto account for about were probablysubstantially higher. 40 percentof GDP (see Figure 1.1). The recent agriculturalsector review conductedby the Bank 1.2 There are no official nationalaccounts concludesthat agriculture'scontribution to GDP is estimatesin Western Samoa and it is difficultto significandyunderestimated, particularly in the measure the value of subsistenceactivities. Based value of home consumptionand domesticsales of on Bankstaff estimates,per capitaGNP was about taro and koko Samoa. It also appearsthat exports, US$930 in 1991. Throughdie extendedfamily especiallyof traditionalfoods to expatriateSamoans network and social services provided by the and exports to American Samoa, are also Government, basic needs are generally well underrecorded. satisfiedand most socialindicators are at reasonable levels. AlthoughWestern Samoa has few doctors, 1.5 The major cash crops are coconut, taro the coverageof basichealth services (including the and cocoa (including koko Samoa). Copra immunizationprogram) is good. As a result, infant productionand exportshave declined because of the mortalityis low and life expectancyhigh relative to poor returnto labor, and bananaexports have been the comparatorcountries. Abouttwo thirdsof the greatlyreduced by disease. On the otherhand, taro populationhas accessto safe water. Mostchildren and kokoSamoa have probablyexpanded at a faster receive nine years of basic educationand at least rate than indicatedby officialdata, due to an threeyears of highschool education. Adult literacy

I Vo"ume8: WesternSamoa Figure 1.1: WESTERNSAMOA: STRUCTURE OF PRODUcTIoN,1992

Other Distribution ScsServices 106 10 Ut.il6es -a Construction3.6X ManufacturIng 10.711 Communicolons3.8E

Goverrment15.11I

Agriculture (excluding subsistence) 1411

SubsistenceAgriculture 26% expandingexport market among Samoans overseas. tourist receipts and private remittances,Western The manufacturing sector is relatively small, Samoa'seconomy had begun to recover in 1989, accountingfor about 11 percent of GDP. Most with a real GDP growth of 2 percent (see Figure productionis for the small domesticmarket and 1.2). But since 1990,economic performance has based on importedinputs (e.g., beer, cigarettes). sufferedmajor setbacksfrom the devastatingeffects Importantexceptions are coconutcream, which has of CyclonesOfa and Val, as well as the economic becomea major export item in recent years, and recession in Western Samoa's main trading automodve wire harnesses exported by an partners. Real GDP at factor cost declinedat an Australiansubsidiary of YazakiCompany of Japan. averagerate of 4.4 percentper year during 1990- The largest componentof the service sector is 92. Cyclone Ofa struck Western Samoa in governmentadministration (about 15 percent of February 1990, causing extensive damage to GDP). Tourist-relatedservices have also become agricultureand economicand social infrastructure. more important in recent years, following As a resultof Ofa, real GDP at factorcost declined investmcutsin airport and hotel facilites. in 1990by over 7 percent. By late 1991,increased agriculturalproduction of quick yieldingcrops and 1.6 As with all small island econonies, constructionactivity were leading the way to Western Samoa is highly vulnerableto external recovery. Less than two years after Ofa. Cyclone shocks. This vulnerabilitywas all too evidentin Val, the most destructivecyclone to hit Western the destructioncaused by CycloneOfa in February Samoain 100 years, struckduring December6-9, 1990and CycloneVal in December1991. Damage 1991, reversing the rehabilitationefforts since was widespread on both main islands; large CycloneOfa and causingthe loss of severallives. mnmbersof people were rendered homelessand several villages were completely destroyed. 1.8 The agricultural sector (including Schools,hospitals, and water and power supplies subsistenceagriculture), which had accountedfor were all severely affected. The Governmenthas about half of GDP at factor cost in the late 1980s, esimated the damage caused by CycloneVal at suffered heavy losses. The initial loss of aroundUS$300 million. The roadsystem sustained productionsustained by tree crops was estimatedat damage at around US$14 millionwhile ports and 80 percentfor coconuts,90 percentfor cocoa, and sea transportsuffered an estimateddamage of US$8 100 percent for bananas. These losses were million. As describedbelow, the most seriousda- compoundedby those of other sectors owing to mage was causedto the country'sproduction base. damageto infrastructure.The coconutsubsector in particular-a dominant subsector in the econom:-is expectedto take five years for full B. ECONOMICDEVELOPMENTS 1987-92 recovery,limiting potential industrial production of goodslinked to suchcrops. Consequently,Western 1.7 Economic Growth. Following the Samoahad to importcoconuts for the first time in economic reforms implementedsince the mid- 1992. Real GDP at factor cost declinedby only 1980s, supported by external assistance, strong 1.6 percentin 1991,reflecdng partial recovery that

Vokra & WesternSamna 2 Flgue1.2: WESN SAMOA: REAL GDPGROWTH, 1987-92 4

i4

1987 1988 1989 1990 1991 1992 year, but is estimatedto have fallenby 4.3 percent primarilydue to remittances,which continued to be in 1992, with the external current accountdeficit the most significantsource. The fal in national widening to about 28 percent of GDP. savingsin 1991 and 1992 to less than balf of the Rehabilitation efforts commenced rapidly, but 1990level reflectsthe increasinglynegative trend macroeonomicpolicy tighteningwill play a critical in domesticsavings. While remittancessurged role in restoring macro stability and generating followingCyclones Ofa and Val, they may remain growth. Conequey, economicactivity in 1990- constant in the short term owing to the slow 92 has been dominatedby rehabilitationmeasu recovery from the global recession affecting folowing Cyclones Ofa and Val, including Samoanearngs oveseas, primarilyin Austalia, substatial inflowsof foreignaid and reminaces to NewZealand, and the UnitedStates. Aftera sharp assistrehabilitation efforts. increasein 1990, net factor incomehas also been declininggradually. Externalaid, generallyhighly 1.9 Investmentincreased significantly in 1990 concessional,has been a stabilizingforce and a and 1992, owing mainly to increased capital main source for public investment financing, expendiurefollowing Cyclones Ofa andVal (Table comprisingabout 68 percentof capitalexpenditure 1.1). Domestic savings have been consistently in 1991and 47 percent in 1992. negativeover the past 10 years, with consumpdon exceeding GDP by about 15 percent in 1992. 1.10 Labor and Employment. As of Nationat sainpgs have been positive, however, December1991, private sector employmentwas

Table 1.1: GRowrTH,!NvFswM ANDSAVINGS, 1987-1992 (inpercent)

1987 1988 1989 1990 1991 1992 (est)

GDP Growth (at factor cost) 1.2 -0.1 2.0 -7.4 -1.6 4.3 Agriculture -3.5 -5.4 8.6 -15.2 -4.0 -10.6 Industry 9.7 7.2 -13.8 -5.0 -8.0 0.3 of whichManufacturing 1.6 1.6 -8.2 -9.0 -16.0 -7.9 Services 3.2 2.6 4.3 2.2 4.8 0.2 Investment (% of GDP) 27.1 26.2 26.4 34.4 40.5 42.0 DomesticSavings (% of GDP) -6.4 -4.6 -3.7 -0.2 -10.6 -14.6 NationalSavings (% of GDP) 22.8 20.9 25.3 30.7 13.6 13.8

Scrce: StatisticalAppendix Tables 2.1 and2.2. 3 VYolms& weu San Table 1.2: KEYMACROECONOMIC BALANCES, 1987-92 (in peren of GDP)

1987 1988 1989 1990 1991 1992 (est.)

CurrentAccount Balance 4.3 -5.2 -1.2 -3.7 -26.9 -28.2 Exportsof GNFS 21.9 28.6 32.2 30.6 26.2 31.3 Importsof ONFS 55.3 59.3 62.3 65.1 77.3 87.9 Net FactorServices 1.0 0.6 1.5 3.5 2.8 2.1 PrivateTransfers 28.2 24.9 27.5 27.3 21.4 26.2 Equals: CentralGoverMe Balance -3.3 -0.5 -3.6 -12.6 -16.5 -18.5 PublicInvestment 22.4 22.2 21.6 31.1 36.0 36.6 NationalSavings 19.1 21.7 18.1 18.5 19.5 18.1

Plus: PrivateSector Balance /a -1.0 -4.7 2.4 8.9 -10.4 -9.7 PrivateInvestment 4.7 4.0 4.8 3.3 4.5 5.5 NationalSavings 3.7 -0.7 7.2 12.2 -5.9 -4.2

Source: StatisticalAppendix Tables 2.2 and 5.1. LaIncludes public enterprises. about 12,590 (66.6 percent of the workforce), 22 percentof GDP in 1989 to 31 percentin 1990 registering a 30.5 percent employmentincrease after CycloneOfa and has since remainedat the over the same time the previous year and a higherlevel, while government savings have grown 10.6 percent increase over the previous quarter. at a muchslower pace owingto increasesin current The jump is primarily attributed to the Yazaki expenditures.In the privatesector, investmenthas Company's operations in Western Samoa (see experiencedvery little growth while natonal private pam. 2.13). Yazaki provides the most private savings dropped steeply to negative levels with sector employment in the country-about increasinglynegative domestic private savingsand 4.7 percentof the total at the end of 1991, which a fall in remittancesin 1991. Althoughcentral had increasedrapidly to about 1,500 employeesor governmentsavings increasedin 1991 and 1992, 11 percent of total private sector employmentby they were insufficientto compensatefor increased the end of 1992. Public serviceemployment was centralgovernment capital expenditure and the drop about 6,323 (33.4 percentof workforce)including in privatesavings. Together,these resultedin large those in casual employment.Emigration of skilled current accountdeficits in 1991 and 1992. labor remains a concern, though more Samoans may begin to return due to a recently reinstated 1.12 Pubfic Finance. Rehabilitationneeds servicebond and to tighterimmigration policies and followingthe cycloneshave led to a sharp increase recession in countries with large Samoan in public expenditure since 1989, putting populations. considerablepressure on the cental government budget. In 1991, capital expenditure and net 1.11 MacroeconomicBalances. Table 1.2 lending to government agencies reached about showsthe derivationof the externalcurrent account 37 percent of GDP compared to 28 percent in deficitfrom internal balances. WesternSamoa has 1989. Current expenditurehas also increased continued to experience significant macro continuously,from about 19 to 24 percentof GDP imbalances due in part to the escalation of between 1989 and 1991 (Table 1.3). However, governmentexpenditure for cyclonerehabilitation larger expenditureshave not been fullymatched by efforts. Public investmentincreased sharply from increasedrevenues, which rose to 42 perent of

VobIme8: WesternSamoa 4 Table 13: SUMMARYOF CENIRALGOVERNmENT FIANCE, 1987-192 (In percentof GDP)

1987 1988 1989 1990 1991 1992 (est.)

Totalrevenue and grants 47.0 48.5 48.2 50.5 50.0 51.1 Totalrevenue 33.3 36.1 35.5 37.3 41.9 41.4 Tax revenue 25.2 24.6 25.9 27.2 32.0 32.3 Nontaxrevenue 8.1 11.5 9.6 10.1 9.9 9.1 Grants 13.7 12.5 12.7 13.2 8.1 9.6 Expenditureand net lending 44.3 42.4 47.2 53.8 61.0 64.5 Currentexpenditure 17.0 16.5 19.2 20.5 23.9 24.6 Capitalexpenditure 27.3 25.9 28.0 33.4 37.1 39.9 and net lending Overallbalance 2.7 6.2 1.0 -3.4 -11.1 -13.4 Domesticfinancing -4.9 -7.0 -2.1 -5.3 -5.5 5.9 Ext. finance/Capitalexp. _/ 71.4 67.7 63.9 70.2 68.4 47.0

Source: StatisticalAppendix Table 5.1. al Externalfinance includes grants and net loandisbursements.

GDP in 1991, reflecting the steep increase in Ofa, interestrates reachedabout 17 percent. The import duties. The latter resulted from increased CentralBank loweredthe rate to 12 percent on a import requirementsfor food and basic needs as temporarybasis to aid recovery. In early 1991,the well as for constructionmaterials as a consequence CentralBank tightened credit guidelines, requesting of the two cyclones. Assistancefor reconstruction commercia banks to restrict lendingto a set level from Samoansliving abroad has also contributedto and engage in direct lending to productiveareas higher import duty revenues. Transfersto public rather than for consumptionpurposes. With enterpriseshave decreasedin recent years as the inflationdropping to zero towardthe end of 1991 Governmenthas embarkedon a gradualpolicy of due to tight monetarypolicy and increased food privatization,first divestingenterprises shich were supply,monetary policy was relaxed. Immediately demanding relatively high levels of government after the lowering of interest rates, Cyclone Val support and would operate more efficientlyin a struckWestern Samoa, drawing substantial foreign market environment. Consequently, despite aid into the countryand increasingliquidity. To improvedperformance in the mid-1980s,the overall facilitate rehabilitation after Val's extensive fical balance changed from a surplus of about damage,the CentralBank initiatedan emergency 6 percentof GDP in 1988to a deficitof 11 percent credit arrangementscheme from end-Decemberto of GDP in 1991 and is estimatedto have reached April, allowing banks to lend outside required 13 percent in 1992. The deficit has been fully guidelines for reconstruction purposes only, financedby foreign aid in the form of both grants provided that total lending did not exceed the and concessionalloans. deposit-linked credit expansion formula of September 1991 (which allowed banks to lend 1.13 Money and Credit. In the pre-cyclone 75 percent of longer term deposits and a lower years, net extemal inflows exceeded the central proportionof shorterterm) by over 12 percent. governmentdeficit and had enabledthe Government to increaseits depositswith the bankingsystem (see 1.14 While tight monetary policy has been Table 1.4). Since 1990, fluctuationsin moneyand designed to attain price stability in the face of credit have been generatedby the impactsof the extensiverehabilitation and aid flows, it has also cyclones and guided by Government'sefforts to limited growth in lending-resulting in excess control consequentinflation. Soon after Cyclone liquidity. In early 1991, commercial banks

5 VeIi & Western Samoa Table 1.4: MONErARYAND PRICE DEVELOMNS, 1987-1992

1987 1988 1989 1990 1991 1992 - - ~~~~~~~~~~~(est.}I Broadmoney (WS$ m) 80.7 87.0 101.5 121.0 118.7 120.2 (Changeas a percentageof broadmoney) Domesticcredit -21.5 -22.8 -17.5 -1.2 -8.1 1.4 Public(net) -28.5 -26.7 -17.8 -16.2 -11.6 -5.2 Private 9.7 9.1 2.8 16.5 3.7 6.7 (percent) Deposit rates Savings 7.5 7.5 7.5 7.0 5.5 4.0 Timedeposit, 6 monthsa/ 12.0 12.0 12.0 9.5 8.0 6.5 Inflation(% p.a.) 4.6 8.7 6.2 15.1 -1.3 8.5

Source: StatisticalAppendix Tables 6.1, 6.3 and6A. wIRates for term depositsin excessof WS$20,000and all ratesfor termsover six monthsare negotiable. dcouraged large depositsof longmaturity because through food shortages by niaking a domestic of the slightlyhigher interestrates they were paying supplyavailable and checkng price increases. on depositsrelative to the rates they werereceiving on reservesat the CentralBar.f In responseto this 1.16 The minimumhourly wagein the private situation,the Central Bank began issuingits own sector ree from WS$0.40 per hour in 1980 to securitiesto the commercialbanks to invest their WS$0.6, in 1986, and to WS$1.00in 1991. The excess liquidity. The Central Bank's strict public sector minimumwage was set at WS$0.35 regulationson financialmarkets reflect the concern per hour in 1980, rising to WS$0.55in 1985 and that unleashingexcess liquidity would fut inflation matching the private sector minimum wage at as weil as the concern that 'stop-start lending" WS$1.00per hour in 1991. The averagepublic would cause a loss of confidencein the system. sector salary has increased by 20 percent since The maximumtarget for expansionof broadmoney 1989,from about WS$6,200 to US$7,400per year. supplywas 12 percent for 1992. The steadyescalation of Government'stotal salary and wage bill to about 46 percent of current 1.15 Prices and Wages. While fiscal and expenditure or 11.5 percent of GDP in 1992 has monetary policy kept inflation down to around prompted Govermnent, inter alia, to develop 6 percent in the late 1980s, domesticinflationary initiativesto reduce the overall size of the civil pressuresdue to Cyclones Ofa and Val have ad- service and to base future generalsalary increases verselyaffected the economyand competitiveness. on the rate of inflation. CycloneVal's effects, and the consequentshortage of produce and increase in money supply with 1.17 Balanceof Payments. In the pre-cyclone lendingfor reconstructionactivity and aid inflows, years, the current accountdeficit (before grants) have impededthe steadycontrol of inflation. The had declinedto a level of 1.2 percent of GDP by consumerprice index increasedby 15 percent in 1989, reflectinggood exportperformance, as wel 1990, then fell by 1.3 percentin 1991mainly due as strong tourist receiptsand private remittances. to recovery in domesticfood production. Inflation Since 1990, however,the balanceof paymentshas easedthroughout 1991 due to icreased availability been increasinglycharacterized by wideningtrade of local agricultural produce as well as tight and current account deficits (see Table 1.5), monetary policy. Inflation is estimated at around reflecting the cot, ry's vulnerability to 8.5 percent in 1992 due primarilyto higherprices uncertaintiesranging from world commodityprice for local food productssuch as bananas,breadfruit, fallsto cyclonesand associateddomestic production and taro. The governmentban on taro exports, disasters. One consequencehas been a deteriora- parially liftedmid-year, helped sustainthe country tion of the current accountdeficit to the equivalent

Voiame 8: Western Samoa 6 Table 1.5: SUMMARYBALANCE OF PAYMNTs, 1987-1992 (an US$mllions)

1987 1988 1989 1990 1991 1992 (est.)

Tradebalance -49.6 -59.5 -62.6 -71.7 -87.3 -105.8 Exports,f.o.b 11.8 15.1 12.9 8.9 6.5 5.7 Imports,c.i.f. 61.3 74.6 75.5 80.6 93.8 111.5 Services(net) 7.6 16.6 22.8 26.5 17.3 24.2 of which Export Processing -- - - - 0.1 2.6 Privae transfers,net 36.4 35.5 38.2 39.8 31.0 39.3 Currentaccount balance -5.5 -7.4 -1.6 -5.4 -39.0 -42.3 ExternalGrants 17.7 17.7 17.6 19.2 11.7 14.4 Publicloan disbursements (net) 3.0 1.0 2.7 12.1 20.7 8.2 Other -1.1 1.7 -7.0 -10.6 4.6 12.3 Overallbalance 14.1 12.9 11.7 15.3 -2.0 -7.3 Memorandumitems: Currentaccount balance/ GDP(percent) -4.3 -5.2 -1.2 -3.7 -26.9 -28.2 Grossofficial reserves 28.2 41.2 52.8 68.1 66.1 58.8 (in monthsof imports) 5.5 6.6 8.4 10.1 8.5 6.3

Source: StatisticalAppendix Table 3.1.

of 28 percent of GDP. At the same time, the Diversificadonof merchandiseexports bas been overallbalance shiftedfrom a surplusof US$11.7 graduallypicking up momentum,with automotive millionin 1989 to an esimated deficitof US$7.3 wire harnessesand coconutcream boosting exports million in 1992. The merchandisetrade deficit, anda fledglinggarment industry in the development which increasedby 69 percentbetween 1989and process. Taro and bananashave nearly reached full 1992,has been partily offsetby a combinationof recovery followingCyclone Val, with taro being workers remittances,official transfers and highly exportedagain followinga partial lift of its export concessional loans, and to a lesser extent by ban in mid-1992and bananas expectedto be in tourismearnings. surplusby the last quarter of 1992. However,the outlookfor copra and cocc--utoil exportscontinues 1.18 While export growth in traditionaltrade- to be dim for a minimumof two years. After ableshas continuedto decline,the overallincrease increasing steadily from 1987 to 195), travel in export earnings in 1992 is attributableto the receiptsdecreased by about23 percentin 1991but YazakiCompany's export processing of automotive arc expectedto pick up again, withplans to further wire harnesses. Importdemand also increasedas a develop the tourist industry advancingwith the result of a shortageof basicgoods and construction constructionof new higher scale hotels along materials due to the two major cyclones. While coastal areas of Upolu and the purchase of the initial factors leading to the trade deficitsof the TusitalaHotel, in Apia, by Japaneseinvestors. 1980s includedweak primary commodityprices, WesternSamoa was unableto take advantageof the 1.19 Debt outstanding and disbursed has partialrecovery in 1992of worldprices for coconut climbedfrom about 62 percentof GDP in 1990to oil, copra, and cocoa due to the devastatingeffects 78 percentand an estimated81 percentin 1991and of Cyclones Ofa and Val on agricultural 1992,respectively. Althoughthe debt serviceratio production. Western Samoa has actually been has reached only about 10 percent of exports of importingcoconuts to meet the export demandfor goods and non-factor services due to the highly its relatively high value coconut cream, as the concessionalterms of most of Western Samoa's reducedlevel of domesticaUlyproduced coconuts is debt, it could rise rapiddlyto unsustainablelevels being used first to meet subsistence needs. unlessa cautiousborrowing policy is followed.

7 Volume8: Western Sam ENDNoTES

I These numbers are basedon total arrivals and departures as recordedby the ImmigrationOffice. Assuming net arrivals by foreigners are close to zero on average, they provide an Indicationof net migration by Samoans. There is probablyalso some unrecordedemigration to AmericanSamoa.

2 Based on World Bank Atlas methodology.

Volme & WesternSamoa 8 2: DevelopmentOpportunities and Challenges

2.1 As the aboveanalysis indiates, the major systemshave developedover the centuries,and are challengefor the Governmenttoday is to restore closely linked to the Western Samoan social infrtructure and the prtuction base to levels system. They are fundamentallyagroforestry sufficientto supportrecovery from the devastating systemsbased on root crops, which are grown effects of the two cyclones and sustinable under coconutsand other trees and intercropped economicgrowth thereafte. Thus, the immediate with a variety of other crops and livestock,with tasks are to rehabilitate power supply, water interaittent fallow period. Traditienally,these supply, telecommunicationsand roads to support farm systemshave needed few purchased inputs, the direcdyproductive sectors. Restorationof these and can meet a family'sbasic consumptionneeds servicesto an adequateIt, -, would only be a pre- withmuch less laborthan production systems based condition for tapping Western Samoa's growth on cereals. At the same time, the Governmentis potal, which lies principally in agriculture, concemed about the envionmental impact of tourism, and small and medium-scaleindustry. forestry/land-useissues and has begun addressing Even during the pre-cycloneyears 1987-89,GDP them (para. 5.5). growth had averaged only 1.0 percent per year, indicatinga numberof underlyingimpediments to 2.3 The agriculture sector has suffered in growth in each of these sectors. Reahizingthe recentyears, mainlyowing to the followingfactors: growthpotential in these sectorswill dependon the opportuities availableto the private sectorto play (a) the dramaticfall in world marketprices a lead role throughan enablingpolicy environment. for Western Samoa's major agricultural Thus,high priorityneeds to be givento maintaining exports, such as copra and cocoa. nacroeconomicstability, improvingcompetitive- Although these price movementshave ness, and p:ovidingan enablingenvironment for been partly offset by adjustmentsin the private sectordevelopment. The latter wll require value of the Tala, farmers now face specificmeasures such as improvingland leasing historicallylow farmgateprices; procedures,clearly defining the incentivesavailable to private investors,and implementinga speedier (b) the high levels of real wages relative to investmentapproval process. productivityin the rural sector, whichare sustainedby the high wage rate in the formal secor, large inflows of A. GRowrf PROSPECTSAND CHAuLENGEs remittancesand a high level of foreign aid; and 2.2 Potea for Agdrcukr DevelopmeK Agricultre is the leading sector in the Western (c) the devastatingeffects of CyclonesOfa Samoaneconomy, accounting for about45 percent and Val. of GDP, about 85 percent of goods exports, and 60 percentof employmentin 1989-beforeCyclone 2.4 These factors, combinedwith rather low Ofa. Its mainsubsectors are coconut,taro (a local yields, have meantthat there is little incentiveto root crop),fisheries, bananas, cocoa, and livestock. produce the traditional export crops. Other These, together with forestry, constitute the contributoryfactors are the traditionalland leasing agricltural sector in WesternSamoa. Production system which limits access to land by non-titled is primarilyin the hands of smallholders,with few persons, emigration of labor to the Pacific rim larger farmers or goverrment estates. Farming countries,and Samoa'ssmallness and remoteness.

9 Vgaue& WesterSwn 2.5 Withthe prospectof oninued declinesin the export of logs has been banned and major world market prices and rising wage levels, reforestationprogram was undertakenin the 1970;, WesternSamoa has littlehope of regamingits hold on the basis of the conceptof sustainableyield. If in the copra, coconut oil, or bulk cocoa markets. this reforestationprogram, swvportedby foreign However,there is scopeto exploitthe upper ends aid, is strictlyimplemented. ' orestrysector will of the market,such as coconutcream and syrup or be in a positionto play a mn,.- substantialrole as fine-and-flavorcocoa, which can realize higher an export industryin the future. prices in specialistmarkets. For example,in the case of coconut cream, three factories had been 2.8 In sum,agriculture, forestry, and fisheries operatingin WesternSamoa prior to the cyclones, have significantpotential in Western Samoa if an and it becamethe largestsingle merchandise export enablingframework is providedfor realizing this (Tala 6 million or 27 percent of merchandise potentialwhile enforcing enviromnental safeguards. exports)in 1990. At the sametime, thereare good In addition,there is the need to provie adequate prospectsfor Westem Samoato export high-value support-infrastructure, training, extension horticulturalproducts. If markets can be found, services,marketing, and credit facilities. prospectsfor the exportof theseproducts are good, but its successwi1l depend on muchbetter quality 2.9 Potenal for Tourism.Western Samoa is control, attentionto quarantinerequirements, and endowedwith a warmtropical climate, a numberof regularity of supply than Samoan farmers have beach sites (22 were identified in the Tourism providedin the past. DevelopmentPlan 1992-2001),a varietyof natal attactons such as water falls, varied forest types, 2.6 The fisheries sector has some scopefor an interesting marine environment, and a expansion, although Western Samoa's Exclusive spectcular terrain of ruggedmountains and steep EconomicZone is reladvelysmall and does not gorgesowing to its recent volcanc origin. These, possessrich stocksof tuna. Whie there is some together with its unique Polynesian culture, potentialfor deep-bottomfishing on distant offshore reflected in its arts, music and dances, historical banks, the scope for further expansionof near- sites, and the hospitablecharacter of the Samoan shore fisheriesis limitedsince, over a large part of people, make tourisma sectorwith someuntapped these areas, fish resources have been heavily potential. As of end-1991,there were about 490 depletedfrom over-fishingin the past and from the roomsin 23 commercialaccommodation units. Of use of illegal fishingmethods. The Governmentis these, over 90 percent were concenatd in the concemed about the environmentdamage caused Apiaarea. The majorityof the hotelsare smalland and it is likely that there would be greater substandard, which makes them difficult to surveillanceon near-shorefishing. Plansto further promote. The two major hotels located in Apia develop the fisheries sector emphasize the offer reasonablefacilites to business and other development of small-scale artisanal fisheries, individualtravellers. But Westem Samoa lacks mainy to supply domestic reqiemenu and to major beach resorts to appeal to a wider spectrum reduce the heavy dependenceon imports. The of the vacationtravel market. sector's potendallies with the exploitationof deep- waterareas, bothfor deep-seabottom fish and tuna. 2.10 The Faleolo Inernational Airport can Steps have already been taken to establishdeep adequatelyservice tourism and othertraffic for the water fish aggregaftingdevices (FADs) and to foreseeablefuture. The seat capacityoperated into provideassistance to fishermanto makelonger trips Apiaby the nationalair carrier and foreignairlines over greater distances. Possibilitesalso exist for is adequateto meet current demand. However, mariculturesuch as oyster farmingand giant clam over the medium term it will be necessary to cultivation,although the economicviability of such expandthe air routenetwork to gain accessto new project needsto be established. markets with higher frequencyof services. Also the three domesticairports, Fagali'i, Maota, and 2.7 About80,000 hectares in WesternSamoa Asau, (of whichthe last was destroyedby Cyclone are under forest cover. Timberexports have only Ofa in 1990)need to be upgradedto cater for more played a smallpart in total exports,pardy due to frequentopemations by smallaircraft. meeting local demand for sawn timber and Lel and, more recendy, due to considerationsof 2.11 Western Samoa's road network is environnt protection.In Savai'i, whichcontasi-s adequateat present to provideaccess to important over two thirds of the country's forest cover, touristdevelopment centers and sites and to scenic commercially exploitable forests will be fully routesfor sightseeingtours. Thisis particularlythe depleted if the recent rate of depletionremains case in Upolu, where three cross-island roads unchanged. Sincedeforestation is a seriousthreat, enhancethe varietyof feasibletour itineraries. The

Velaw 8: Wes*erSama 10 Governmentneeds to assign prionty to taeing shifting frequently and for being pratically saIprimary nationalhighways, within the resources impossibleto predict. In any event, the successof availablefor the public sectorinvestment program. such ventures will depend on global trading arrangmlentssuch as GAiT-which, if concluded, 2.12 Tourist arrials peaked at around54,000 wil have the effectof graduallyreducing tariff and in 1989, but have since steadilydeclined to about non-tanff barriers and the-eby generatng more 39,000 in 1991. This declineis mainlydue to the competitionand a reduction in the value of recessionin the source markets such as Australia preferental access. Technologicalchanges in and New Zealand and the effects of the two production processes may also impact on the cyclones in 1990 and 1991. However, only viability of assembly type industries. Thus, 34 perment of all visitor arrivals were for relianceon such industriesas long-termsources of leisure/holidaypurposes.' The majority of the employmenthas to be approachedwith caution. visitorscame for businesspurposes or for visiting friends and relatives. The Govermment'stourism developmentplan has identifiedfive main reasons B. FRAMswoRK FOR PRIVATE SECTOR which explain the failure to achieve greater DEVELOPMENT penetration of the leisure/holidaytUrvel market: first, the inabilityto provide the necessay tourist Macroeconomi Stbiliy product range, e.g. beach resorts to attract major poial markets; second, the lack of sufficient 2.14 The maintenance of a stable macro- international standard accommodationfacilities; economicenvironment free of foreign exchange dbird.inadequate marketing and promotion;fourth, shortages, trade and payments restrictions, and inadequateair access in terms of seat capacityand price instabilitywill be crucial for attractinglong- promotional fare structures; and ffth, the termcommitments of privateinvestment, both local devasting effects of cyclonesin 1990 and 1991. and foreign. In this respectthe managementof the exchangerate regime,trade and paymentsarrange- 2.13 Manufacturing Sector Potential. ments, and monetarypolicy is generally sound. Manufacturig and niche industriesalso have some Exchange rates are determined daily using a potental for creatingnew employmentand output managed float approach, based on a weighted in WesternSamoa. Food processingand assembly basketof the currenciesof Austalia, New Zealand, type or light manufacturingare the two largest the US, Germany and Japan-Western Samoa's sources of employment in tL; economy. In principal trag partners. The main macro- Western Samoa, mAnufacturingfirms have been economicissues of concern are the fiscal deficit established-basedon their comparativeadvantages beforegrants (18 percentof GDP) and the external of relatively low wage rates (about WS$1.25 at currentaccount deficit (28 percentof GDP)arising entry level),proximity to the SouthPacific market, primarily from the effects of the two cyclones. and preferential tariff treatments. A notable Deficits of similar orders of magnitude would example is the factory set up recendy by an continueif capital expenditues are incurred on a Australian subsidiary of the Yazaki group to major cyclonerehabilitation program, rather than assemble automotive wire harnesses for the on criticalminimum investments needed to get the Australian and New Zealand car manufacturing economyon a recoverypath. Suchmagnitudes are markets. Employingover 1,500Western Samoans, ussmle and would lead to large drawdowns this is a unique industrywhich blends traditional of reservesaccumulated during the years of good handicraft kills, manual dexterity and Samoan economicperformance. Thus, as elaboratedbelow group participation in assembling imported (paras.3.13 et seq.), more efforts are required in automotivewires into harnessesrequired for the limiting the size, composition,and fnancing of electical systems in cars. Apart from foreign public sector investments consistent with the exchangeearnings and employmentgeneration, the macroeconomicframework. development of skills through assembly-type industries is an important benefit. Handicraft 2.15 Notwithstandingincreases in capital productionand other niche industrs also play an expenditure,the 1992/93budget aims to reduce the importantrole in providingenmlo.yment and skills fiscal deficit through a significant increase in and in developingmarket contacts. WesternSamoa revenue and a decrease in total expenditureas requires only a very small number of successful shownbelow. private investmentprojects to make tremendous gains in growth, employment and income generation. Most likely, these will be in various niche tpe activitieswhich, by namure,are notedfor

I] Voxlme8: West. Swun FY91/92 FY92/93 CPI, exports and inports, externaldebt, exteral (In Talamillion) reserves) for the current year or quarters as TotalRevenue 146.7 156.4 appropriate,and reviewthese on a quarterlybasis. TotalExpedture 248.3 223.4 Envroment for PrivateSector Development Fiscaldeficit (before grants) 101.6 67.0 Fiscaldeficit'GDP (%) 29% 18% 2.19 Private sector growth has been slow relative to that of the public sector over the last 2.16 The achievementof these targets for decade.3 However, in terms of contributioiito 1992/93would be diffcult in the face of cost and GDP, private sector accounted for WS$179.8 wage pressmes, but necessaryfrom the standpoint million in 1990, almost twice that of fte public of reducing macroeconomic imbalances to sector. This is party due to the nature of the manageablelevels. As announcedin the 1992/93 economy,where 80 percentof the populationlives Budget, the Governmentneeds to implementthe in the rural areas in what is predomiantly a followingmeasures on the revenue side over the subsistenceeconomy. Agriculure, which has short term: traditionallyprovided about half of the country's GDP, together with manufacuringand tourism, * improve tax collection efficiency in the makesup mostof the privatesector activities. The Customs Department through stricter pnvate sector provided 12,590jobs at the end of examinationof privateimports and ensuring 1991,accouiuting for 66.6 percentof the totalwork that the requiredimport duties are paid; force and 72 percentof total gross payroll. * improvetax collectionefficiency in the Inland 2.20 The Govenmmenthas taken a number of RevenueDepartment by internalreallocation measures recendy to reverse the slow growth of staff resources to monitortax payments patternof the privatesector in the past, and to tap and the recoveryof tax arrears; and its potential for achieving sunainable economic growth. A number of public cororadons have * implementthe Value Added General Sales beenprivatized and effortsare stillcontinuing. The Tax (VAGST) on goods and services EnterprisesIncentives and Export PromotionAct beginning1994. (EIEPA)has recentlybeen passedby Parliamentto incorporatemeasures that would facilitateforeign 2.17 Monitoringon the expenditureside is also investmentand tounsm development. A tounsm required to reduce these imbalancesover time. developmentplan for 1992-2001has been adopted. Monthlybudget review meetingsproposed by the The plan calls for an investmentof about WS$138 Govemmentneed to be carried out to ensure that miltion over the coming decade. Private sector departmental expenditures are within agreed contributionto this developmentis estimated at ceilings,to discouragethe creationof newpositions 88 percent. The total investment of WS$138 in the public service, and to devise more cost milion does not includegovernment investment in effective ways of securing goods and services. general infrastructurevrojects such as airports, Unlessthis is donethe large fisal deficitcould fuel roads, telecommunications,etc. It also excludes inflation, increasedomestic bank borrowing,and technicaland developmentassistance in tourismto reduce WesternSamoa's externalcompei tiveness. be fundedby variousextenl sources granted to Wage restraintwould also be crucialto maintaining the country. macroeconomiccompetitiveness. 2.21 Recognizingthe vulnerabilityof reliance 2.18 Macreconomic monitoringis deficient on a few crops, the Government has recently sincekey indicatorsare not computedby the autho- adopted measures to promote agricultural rities and reviewedon a regular basis. Indeed,the diversification, light manufacturing, foreign most importantaggregate, i.e., the GDP, is not investmentand tourism. As mentionedabove, the estimated by the authonties owing to lack of EIEPA which is now in force wil streamline manpower.2 Urgent technicalassistance is needed procedures for foreign investment, shorten (a) in the short term, to use availableproduction processingtime, and provideadditional incentives. data and derive estimatesof GDP and (b) in the A series of tax reforms,aimed at rationalizingthe medirm term, to carry out the neededsurveys for tax structure by broadening the tax base while belter estimationof GDP. These, together with simultaneouslyreducing effective income tax rates, other maceconomic aggregates,could be used to is also in the pr' ess of formulation and derive key indicauars(such as fiscal deficit/GDP, implemention. extnal cwrrentacmulGDP, broadmoney/GDP,

Volume& Westn Samoa 12 2.22 There are a numberof issuesthat Western land tenure system. Samoahas to resolve if it is to achieveits stated objectivesof sustainableeconomic growth. As in 2.25 The above-mentionedcommittee has severalother 1slandeconomies, the main problems submittedits recommendationsto the Cabinetfor relateto: low producdvityin agriculure relatve to review. Simultaneously,the Governmentneeds to wagerates; the shortageof professionalmanpower start the folowing: (a) an education camnpaign partcularly in the areas of management, through semnars and meedngs to better inform engineering,and other professionalfields; the land people of the value of land use for commercial tenuresystem; and an undevelopedfinancial market puposes, the environmentalimpact of land misuse, which continue to hamper private sector and generalland valumaonsystem; (b) publish the development. Fortunately, Westem Samoa proceduresfor land registaion and encouragethe provides a relatively stable polidcal environment villages to start the process; and (c) provide and low wage rates reladveto those ia the Pacific additionalstaffmg for the Landsand Titles Court rim countries,4 backedby a labor force that bas an and training of staff on legal matters relating to aptitudefor learningand a Goverment that is very handlingof land disputes. supportiveof foreigninvestment, all of whichhelp boostthe competitivenessof the country. 2.26 Labor. The shortage of professional manpoweris a major constraintto private sector 2.23 Land. One of the major impediments development. In Western Samoa,entrepreneurial facingpotendal investors is the issue of land lease. skills are scarce. A lack of managerial,technical, In WesternSamoa, 82 percen of land is customary professionaland admisratve skills is pervasive. owned, 8 percent governmentowned, 5 percent While the low wage level is an incentive for owned by WSTEC and the Samoa Lands investors,it also works adverselyin keeping the Corporation,and 5 percent is freehold. Problems work force in place. Domesticcompetition and the encounted by investors include protracted more lucrative conditionsoverseas have posed negotiationsfor land settlement,unresolved land problemsto localrecruitment. The extendedfamily disputes, and unrealistic demands for increased culture of Samoans has sometimes t_nded to rents by indigenouslandowners. The traditonal discouragepeople from working for a livingdue to culture, where landownershipis extendedto all the regular remittancesreceived from relatives members of a given aiga-or extendedfamily- abroad. Both factors have compounded the could explainmuch of the originsof the problem. shortageof professionalmanpower in the county. As most land titles are not registered (only One approachto alleviatethe situationwould be to 10 percentare .ogistered),boundary demarcations restructure the domestic pay scale to make it often become the source of disputes between sufficiently competitive to auract and retain villagesthat are usuallydifficult to resolvedue to professionalmanpower while at the same time the lack of land title documents. To further avoidingdisturbance to the existng generalwage complicatethe problem,the Landsand TitlesCourt level which is an international competitive suffers from understaffingand lack of staff with advantage. legal experienceto handle cases efficiently,thus delayingthe resolutionof cases. 2.27 Trade Poliy. The trade regime in Western Samoa is relatively free of restrictions. 2.24 Whilethe inalienabilityof customaryland There are no particularimport or export bans, and need not be changed,the land leasingsystem needs no import licensing requiems except for immediateattention and resolution. To this end, firearms and liquors. Exchangepermits by the the Governmenthas already taken some positive CentralBank are more for record purposesrather actions. First, the Governmenthas taken steps to than for controls. Also, there are no non-tariff accelerate the leasing of former WSTEC lands barriersto trade nor exportduties. currendy held by the Samoa Lands Corporation. Second, a committeewas set up in 1992 to look 2.28 Western Samoa has adopted a single into the land problemand reviewthe Alienationof tariff, or the Harmonized System of Taritf, CustomaryLand Act.5 One of the recommended following the Customs Cooperation Council amendmentsis to give the right to anyonein the conventionin Brussels. The tariff scheduleranges village to lease land insteadof only the matai, or from 0-60 percent with effective average rate at chief. The Governmentis alse encouragingall 35 percent. At the lower end, the schedule villagesto register their land witn the Court. At includesa list of exemptitems such as books and the same time, the Government has been materials for education, goods donated for emphasizingthat aUlamendments aim to facilitate distributionby charity organizations,goods for better utization of land, rather than to changethe diplomaticand UN offices,food itemsup to a value

13 Volume8& Westenr Saoa of WS$2SOfor returningSamoan citizens, and raw tax on all companies,domestic and foreignalike, to materis and capital equipmentitems exempted simplifytax collections-whichcould help attract under BIEPA. But the proceduresfor releaseof foreign compni to locate in Western Samoa. goods at the Customs need to be made more The resulting loss of tax revenues could be offset transparent and stricdy adhered to, for elimination by liftin tax exemptions granted to individuals and of lengthydelays. to specificsectors such as agriculture. 2.29 Tax Poliy. The Governmentderives its 2.31 Regulatary Environment. The tax revenue from a very narrow tax base as all Government has been uAing efforts towards incomesfrom agriculture are exempted. A narrow streamlininginvestment procedures and reducing tax base and tax exemptionsof farm incomeshas the processingtime of tax exemptionapplications led to a low incometax collection. Heavyreliance throughthe renly updatedEIEPA. For instance, on importduties, however,has led to a relatively composidonof the Boardfor tax exemptapproval high level of tariffs in WesternSamoa. The excise has been simplifiedand excludescabinet members tax also acts as a disincentivefor the privatesector. whose presence was required in the past. The The major source of tax revenue is international advertisementfor no-objectionrequirement in the trade, which yieldedabout 60 percentof total tax newspaperhas also been canceled. These steps revenue on average over the last few years. have cut the processingtime significandy. Income tax contributedless than a quarter of the total tax revenue. The principalincome taxes are 2.32 A clear standard applicationprocedure leviedon companiesand individuals.Company tax needsto be set up to avoid possiblediscrimination differentiatesbetween resident companies,which among applicants. WhileGovernment's intenion pay 39 percent,and non-residentcompanies, which to encourage business ownership of indigenous pay 48 percent. Individualincome tax is charged nationalsis a legitimateconcern, the seuing of the on a slidingscale froma minimumof 10 percentto exactpercenge of local and foreignownership as a maximum of 45 percent. Anotlier major tax a criterionfor businesslicense approval appears to which is becomingincreasingly imnportant is the inhibit the Government'sefforts in encouraging 10 percenttax on the valueof goodsand servicesin foreign investment. Ownership criteria for a hotels, restaurants, and entertainmentsemukcs. businesslicense is currendyset at 51 percentlocal Other taxes includetax on dividendsand intest, and 49 percent foreign. A more flexible airport tax, stampduty, and businesslicense fees. arrangementneeds to be allowed especially if The latter, amountingto WS$200,is imposedon all foreigninvestors are unableto finda sutable local individualsand companiesintending to operatea businesspartner. businessin WesternSamoa. In sum, the overalltax rates are too high and tax revenuesare derived 2.33 Amongthe labor regulationsin Western from a narrow base-both of which need to be Samoa is the minimumwage regulationwhich is addressed. currendyset at WS$1.00per hour. Private sector generally pays a higher than minimum wage. 2.30 In an attempt to rationalize its tax Majorityof them sta :d with the mmum wage structure, the Governmentis in the process of and raisedthe levelto WS$1.25after two to three launching a tax reform. The tax bill has been monthsof employment.Other regulatons included approved by the Cabinet and is awaiting fial the annual and sick leave, public holiday and Parliamentaryapproval. Major elementsof the severancepay. Employersare obligedto contibute reform include the broadening of the tax base a corresponding5 percentof wageto the National through a Value Added Goodsand ServicesTax Provident Fund and 1 percent for accident (VAGST) to include levies of 10 percent on all insurance. There is no explicitprovision for health goods sold while simultaneouslyreducing the insurance requiremnt although the employers incometax rates. The rationalefor such a scheme usuallyshoulder the medicalcost whichis currently is to spread the tax burdento a wider population relativelylow. The arrangementfor health care and to reach those with high agriculturalincome paymentsshould be made more explicitto provide without having to face the unpopularity of greater security for both the employees and introducingnew income tax measures. Careful employersalike. Somekind of contingencyfund or planningand publicity/educationalprograms would insurancescheme may provide needed funds in case be needed to implementthe VAGSTcommencing of emergencies. January 1, 1994, but taxation of subsistence agriculturemay encounterinitial difficulties which 2.34 A furtherlabor regulationissue concerns need to be addressedover time. The Government the employmentof expatriates. Currently, all shouldalso considerthe charge of a single lower expatriateemployees are required to apply for a

Vokme & WesternSamoa 14 work perit before commencing employment. newspaper for three weeks has been Effortsshould be madeto facilitatethe processand dropped;and add to the transparec of procedres. (c) it simplifiesthe compositio of the Incentive Phen al Poldaes Boardto a few offidals in contrastto a large board which previously included cabinet 2.35 Mawesof P?eoatn. The establishment ministers, and it expedites the approval of the Depament of Trade, Commerce, and processof tax-exemptapplications. Industry(DTCI) and the new EnterprisesIncentives and Export Promotion Act (EIEPA) have been 2.38 DTCI has undertken several overseas aimed at promotig and facilitang private sector missionsrecently to promoteWestern Samoa in the and foreigninvestment by consolidatinginvestment areas of trade, foreigninvestment and tourism. To procedures at the so-called "one-stop-shop". encourage private sector participation, these Effortsso far have beencoentrated in promoting promotional trips have included private sector incentivesin BIEPAwhich included the following: reprseadves under a cost-sharingscheme with the Government. Three new units under DTCI (a) incometax holidayof up to a maximumof have either been set up or are in the process of 15 years; doingso. Theseare (a) Trade and MarketingUnit (b) a subsequenttax rate of 25 percent on (b) Small BusinessAdvisory Unit, with possible assessableincome for exportindusties; and funding from New Zealand; and (c) Investment (e) completerelief from all customsand excise PromotionUnit to be assistedby UNDP. duties on import of buildingmaterials, raw materialsand capitalequipment. 2.39 One of the problems voiced by most private sector enterpries is the lack of overseas 2.36 The income tax holiday has been contactsand informationon export markets. The inreased from 10 to 15 years in the new Act to Tradeand MarketingUnit is designedto help these provide a greater incentive for investors. The industriesbuild-up overseas contacts and export Governmentneeds to be cautious,however, of such markets and to help locate buyers. The Smal over-extensionof incentivesat the expense of its BusinessAdvisory Unit will help identify viable fiscalwell-being. The value addedto the economy projects, assisting in the preparation of a pre- and employmentgeneration brought by the new feasibilitystudy and in tappingpotential sources of investmentshould be compared against revenue t^nancing. The InvestmentPromotion Unit wiUl loss. Moreover,while a fiscal incentiveis a major focub-n promotionalworks such as launchingtrade element in atrting new investment,it is not the fairs overseas, the preparation of promotional only consideration in the investment decision- materials,organing semars andtraiing courses makingprocess. Otherfactors, such as regulatory for local personnel. The key to success is the environment, trade regime and labor force continmationof theseefforts in a systmatic way as adequacyand infrastucture support also play an opposedto the current practiceof relying only OD importantrole in the process. A good exampleis the availabilityof resources. the Yazakicase where other elementssuch as the short processing time, low start up cost7 and a Foregn Inveshn Promodion stablepolitical situation in WesternSamoa were the crucial decidingfactors. 2.40 The one-stop-shopconcept which aims at facilitatinginvestment processing procedures for 2.37 The new Act has the advantagesover the investorsis non-existent. At present, investors existingone as follows: have to applyfor a businesslicense and exemption from taxes under EIEPA separatelyat the Inland (a) it streamlines processing procedures: tax Revenue Deparmnt and DTCI respectively. holidayunder the existingAct is conditioned Furthermore, companies hiring expatriate upon compauy'sprofit not to exceed twice employeeshave to apply for a work permit and the total investment. In this sense, the resident permit for each expatriateat the Labor Governmenthas to monitor the company Departmentand the Foreign Affairs Department profit every year which is very time separately. consuming. Underthe new Act, tax holiday is granted withoutsuch condition; 2.41 While govermmentefforts have been concentrating in streamlining tax-exemption (b) it shortensprocessing time: the requirement applicationprocedures, attenton shouldalso focus for the no-objectionadvertisement in the on simplifyingthe applicationprocedures for a

15 Vome & WerisSamoa business license which at present is very becomingmore visible. In 1991, its lendingshare cumbersome. The Govemmentmay considerthe in ihe marketrnacbed 30 percent,as comparedto setting up of a unit in Inland Revenue with 40peentofthetwocommercialbanks,20percent responsibility for business license processing. of the DevelopmentBank, and 10 percent of Althoughthe efficiencyof the Unitmay pose oter miscellaneoussources. problems, governmentefforts can be directed to assistthe Unit in acquiringthe necessaryskills for 2.45 The financialsystem is charactnzed by speedy processing. Simultaeously, the a substantialliquidity overhang. This was partly a Government should review the list of resultof a sizablebalance of paymentssurpluses in departments/agenciesinvolved in the approval of the past and partly due to insufficientdemand for licensesand eliminateas many steps as possible. financingof bankableprojects coun,led with lending restrictionsimposed by the Central Bank, limiting 2.42 The Governmenthas also secured the commercialbank lending for consumptionloans. assistanceof the followinginternational agencies in To reduce the excess liquidity,the Central Bank calrying out its investment promotion objectives: first introducedtasury bills that were placed with SouthPacific Trade Comnissionin Sydney,Forum nonbankfinancial institutions in late 1990. Starting Secretariatin Fiji, SouthPacific Trade Office in in April 1991,the CentralBank began the issuance Auckland,and MarkeingAdvisory Services (under of its own securites to provideanother avemnefor the Austalian Departmentof Trade)in Sydney. It surplus fund investment. However, further is also currently actively pursuing some trade restrictionswere introduced.First, the subscription relation with USA. Through contacts with the was restrictedto commercialbanks only. Second, USAID, a Memorandumof Operation is in the the amountof subscriptionwas limitedto their free process of being finalized which will spell out liquidityat the end of the month. In order to detailedcooperadve efforts for the two counties. providethe CentralBank with greater flexibilhtto regulateliquidity, the CentralBank of SamoaAct Finacial Sector is currentlyin the process of being amendedto make the securitiesavailable also to the non-bank 2.43 Like other Pacific Island countries, public. Western Samoa has a surprising degree of institutionaldiversity withminits finance sector, 2.46 Inter Rate and Lending Poiies. In comprisingseveral bank and non-bankfinancial WesternSamoa, where the financialsystem is rela- institutions. The two commercial banks, the tively underdeveloped,the use of indirect instru- DevelopmentBank and the Nationa ProvidentFund ments for monetarycontrol is almost impossible. (NPF) are the most activeplayers in the fiancial Both the interest and lending rates are direcly market. In addition, an off-shore center was regulatedby the CentralBank. The currentceiling establishedin 1988 and started operationm 1989. for commercialbank time depositsis 7.5 percent. It has received, togetherwith tounsm and foreign Depositsare composedof savingsand time deposits investment,great promotionalefforts launchedby with rates ranging from 4 percent to 7.5 percent the Government. Although small in size as whilethe lendingrate for commercialbanks was set compared to other Pacific off-shore centers, its at 12 percentin August1992 (see Table2.1). Lend- revenue amountedto WS$70,000in FY92 after ing is guidedby a CentralBank's credit expansion only three years of operation, as compared to formulawhich effectivelycontrols the amount of US$1.5 million earned in the Vanuatuoff-shore loan a commercialbank is allowedto extend. center with almosttwenty years of operation. 2.47 Supervision. The two commercialbanks 2.44 The role of the DevelopmentBank in the are controlliedand supervisedby the CentralBank provisionof credit has been somewhatrestricted. under the Central Bank Act of 1984 while the This is in part becauseits credibilityto the puolic Development Bank and other non-financial has declined in the last few years, due mainlyto institutionsare supervisedby the Treasury. The financial losses and large defaulted loans. In commercialbanks are requiredto comply with a addition,its ability to expandits capital base has reserve ratio of 25 percent of all required liquid been limited, since it derivesmost of its funding assets or in effect a 6 percent of total deposits. through the government. The DB is currently While the reserve accountearns no interest, all undergoing managementrestructuring and loan excess funds are required to be deposited with portfolio reviewand clean-upprocess. The effort CentralBank earning an interestof 3.5 percent-a should be continuedwith the objectiveto regain rate lower than what the commercialbanks are public confidenceand to be able to carry out its paying their depositors. Other statutory mandateagain. The NPF's role in the marketis requirementsinclude the submissionof balance

Vohue 8: WesternSemoa 16 Table 2.1: INTESR RATEs,19O1992 (per anmum)

Denosit rates: 21.11.90 29.11.91 27.08.92 Savingsdeposits 7.0 5.5 4.0 Timedeposits: I month 7.5 6.0 4.5 3 months 8.5 7.0 5.5 6 months 9.5 8.0 6.5 12 months 10.5 9.0 7.5 24 months 10.5 9.0 7.5 Lending rMts: Commercialbanks 9.0-15.0 9.0-13.5 12.0 DevelopmentBank of WesternSamoa 8.0-12.0 8.0-12.0 8.0-12.0 NationalProvident Fund 10.0-12.0 10.0-12.0 10.0-12.0 PublicTnrst (for housing) 13.0-16.0 12.0-15.0 12.0-15.0 WSLAC(for housing) 9.5-11.0 9.5-12.5 9.5-12.5 HousingCorporation 10.0 12.0 12.0

Source:Central Bank of SamoaBulletin, March 1992. shees and other reports based on IMF guidelines facility was not successfulbecause the 2 percent such as intereststructure and terms, major deposit subsidy by the Central Bank appeared not to holders, classificationof loans by terms and provideenough incentive for commercialbanks to sectoraldistributiou of loans. attract the potential exporters. Like any other borrower, many smal export venmres do not 2.48 Cmt Polcy. Accessto credit has been qualify the loan security requirements of the cited as one of the major impedimentsfacing the commercialbanks. smallindigenous investors who have good project proposals but do not possess property that could hunacure for Devek pmen serve as collateral for a loan. While there is at times a lack of bankable projects or reliable 2.50 Further development of agriculture, entrepreneurs,at other times, commercialbanks tourismand manufacturingwill cruciallydepend on have tuned down good projectproposals owing to the restoration of power supply, transport bo.rer's inabilityto provideacceptable collateral infrastructure,telecommunications and watersupply as security for the loan. Legislationhas been servicesto adequatelevels and further investments tabled in Parliamentthat would allow the Central in these sectorsthereafter to supportmedium-term Bank to provide partial guarantee for small growth. investors. A risk-sharig scheme should be consideredso that the risk will be spreadamong the 2.51 In the electricitysector, the total installed Centrni Bank, the commercial bank, and the capacityin the Upolusystem is about 16.45 MW of investors,together with chargingof fees from the which 8.27 MW is from hydroelectricplants and investorsfor setting up a fund which could help the balance 8.18 MW is from diesel generation. insure against defaults. In the case of foreign The total installedcapacity in Savai'i is 1.67 MW, investorswho cannot offercollateral, consideration provided entirely from diesel generation. The may be given to using guaranteesfrom reputable electricity sector was badly affected by both foreignbanks as securityfor borrowing. cyclones. Thus, the urgentneeds in the sector are (a) the reconstructionof power generation and 2.49 The ExportFinance Facility was setup by distibution systemsto restore an adequateelectric Central Bank to provide credit to exporters at services; (b) completionof the ongoing Afulilo reduced interest rates with interest subsidy (at Hydroelectric Project, including fmancing of 2 percent) provided by the Central Bank. The cyclone damage and cost overruns estmated at scheme was aimed at encouaging expors by US$6.6million, to ensurethat thiscritical facility providingthem capital fundingat lowerrates. The is completed in a timely manner; and (c) the 17 Volae 8: WestrnSamoa istutional stengt of the Eletric Power were damaged during Cyclone Val. Medium and Corporationto improve its ability to operateand long-termneeds for the potts and airports will be maintainesng andplanned facilities. The ability determinedas part of regulardevelopment planning to improveoperadonal efficiency will also depend for Westen Samoa. on progressive increases in cost recovery through further tariff increases.' 2.55 In the telecommunicationssector the highest priority needs involve (a) the repair and 2.52 Over the mediumterm, emphasisshould replacementof key communicationsfacilities to fail on the institutionalstenngthening of the Electric ensure links withinthe countryand to the outside, Power Corporation(EPC) which is essential to and (b) the expansionof the network within the providesupport for other developmentsplanned by country necessary to provide communicationsto the EPC. The institutionalstrengthening involves support economic recovery and growth. This pI-vision of expatiate staffpositions via a possible program should be completed with the medum term twinningarrangement. These should commence with priority given initially to reestablishing prior to other developments.Other elements of the efficient telecommunicationswith intemational medium-termprogram include sudies into the communicationsnetworks as well as limited feasibiliy of additionalhydro power instllations improvements to assure an efficient local and a pre-feasibility study into wind power telecommunicationssystem.This work will require possib , the replacement of significantlengths of cable and somereplacement equipment for microwavestatons 2.53 As regardsroads and coastalprotection, and exchanges. The expansionof the network the urgenttasks are the repair of cyclonedamage to should follow, including the insalla of an priority roads and associaed works and the additionalexchange and supplyof a radio telephone constructionand upgradingof other high priority systemto providecommunications for some of the road sections and coastal protection. In the remoteareas of the country. immediate term the focus should be on ensuring adequate road access for both islands and to modify 2.56 The highest priority needs in the water existigd road contracts to include the repair of sector are (a) the repair of cyclonedamage to rural cyclone damage works under those contracts. and urban water systemsand (b) the initiationof a Under the emergencywork performedby PWD schemeof insttutionalstrengthening of the sector immediatelyafter the cyclone, rudinentaryaccess and planming,design and implementationof water to all areas was opened although roads in some supply schemes. The immediate needs in the sector areas, such as the East Coast road on Upolu and are for the reinsement of existng rural and urban the southcoast road betweenSalani and Samusuon watersupply systems. Thiswill completethe work Upolu, remainin a poor condition.The immediate alreadycommenced by the water section of PWD program should initially concentrate on the in reinforcingthe existingdistrict and PWD supply provisionof basic accesswith other medium-term schemesto providea rehableclean water supplyto pnorities focussing on the provision of coastal most areas of Savai'i and Upolu. protectionand road sealingworks. 2.57 The balance of medium-term needs 2.54 Over the medium-term,investments are involves addressing the issues of institutional needed in projects for road upgrading and strengtheningof the water sectionof PWDtogether improvementsto providebetter standardsof access withassociated issues of cost recovery,operational, and to completemaitnance workson major roads and maitenance capabilities. Legislation has to preservethe value and conditionof tbese assets. already been prepared for the establishmentof a This will include some bridge works and coastl Water Authority. Implementationof new and protectionwork in additon to the road works for upgraded water supply schemes should be Apia urban streets as well as the main rural undertdken only after appropriate project highways. Also, some immediatework, with preparationand sufficientprogress is achievedon Japaneseassistance, has been proposedfor the port relevantinstitutional development programs. facilitiesat Apia, wherebreakwaters and wharfs

Velme & westernSamoa 18 ENDNOTES

I Source: Western Samoa Visitor Survey 1990/91. TourismCouncil of the South Pacific (TCSP).

2 GDP estimates in this report were computed by the mission on the basis of 1989 estimates of GDP by indus origin in the first regional economic report, subsequentindicators of sectoral output and price developments.

3 Private sector's contributionto real GDP grew less than 1 percent per year while that of the public sector grew by 7.1 percentper year in real terns between 1982to 1990. (Source: IMF, WestemSamoa 1990Staff Report).

4 Minimumwage in Westn Samoa is WS$1.00per hour or US$0.41/hras comparedfor instan to Vanuatu at Vatu 82.5 per hour or US$0.76/hr.

5 The Committee includes the Attorney General, Secretary of Finance, Secretary of Trade, DireMtorsof Agricultureand Registrarof Lands etc.

6 Other tariff rates are as follows: 5% - essenials, frozen food, can fish, raw sugar, poultry, muttonand other basic food items; 10% - flour, refined sugar; 20% - machinery 35% - raw materils, dmber, aluminum,etc. 50% - fmishedproducts (such as television); 60% - luxury items, bee -vine.

In addition, an excise tax is also imposed on imported or domestic manufacturedgoods including the following: 8%-10% - pick-up trucks and trucks; 20% - refrigeator, stoves, washing machines,etc.; 45% - perfumery,TV sets, beer, liquor; 50%-70% - passengervehicles of 2000 cc. to 3000 cc.

The buildingfor the factorysite was leasedby the governmentand providedfree of chage; trauing cost was low since Yazakiused some of the expatriateSamoaos in their Australianfactory to train the local workers.

8 This sectiondraws extensively from, WorldBak, CycloneVal Inastructue RehabilitationNeeds Assessment Report, prepared for the Governmentof Western Samoa, June 1992.

19 Velaeob& wester Sa 3: PUBLIC SECTOR MANAGEMENT

A. INRoDucTioN service had more than doubled, to 3.865 employees, and the public service wage bill 3.1 As in other developing countries, amountedabout 48 percent of current expenditure improvedmanagement of the public sector will be or about 10 percentof GDP. a key challengefor the decade to come. As the growthmomentum in WesternSamoa shifts to the 3.3 At prese, the publicservice is organized private sector, it will be equallyimportant for the into 24 departments and ministries. The pubhicsector to reassessits role in the development Governmentis cognizantthat the presentstrucure, process and recast its functionsand organizationin which essentially reflects a Westminster type a fashion supportiveof the overall development model, has not been adaptedto meet the economic process. As a star, a leaner but more efficient and socialdevelopment needs of the country. It is public service (civilservice) and a lowerdegree of recognmzedthat most departmentsare over-staffed involvementof the public sector in commercial withskills that are not required,while critical skills activitiesare imperative. This raises imporant needed to carry out analytical work, formulate issues of public service reform and privatization policy, implement development programs, or strategy. There is also a need for the public sector provide social servicesare deficient. iMoreover, to re-examine its overall scope and sweep of responsibilitiesare not clearly defined, as a result activitieswith a view toward establishinga more of whichoperational efficiency continues to be low. manageable and efficient public sector. This becomesincreasingly important as the publicsector 3.4 The Putlic Service Commission, with shifts away from an emphasis on implementing assistancefrom New Zealand,has prepareda plan capital investmentprojects toward a greater focus to reformthe public service. The key objectivesof on operatmgand managinginrstucture and social this plan are to down-size the public service, service systems. Given the current level of eliminateoverlapping functions, improve efficiency, involvementby the matais in villagecommunities, iner alia, through more effective utilization of by the churches, and by non-governmentl qualified personnel, and provide greater organizationsin the conductof activities,a strategy managementaccountability. to secure their cooperationwould be crucial to improvingthe deliveryof services. 3.5 As envisagedin the plan for reforming the public service, the Government needs to develop an implementationprogram with the B. PUBLUCSERICE REoR foUowingelements: 3.2 Following several decades of * reduce the number of departments and administrationby New Zealand,the WesternSamoa ministries by eliminating over-lapping PublicService was establishedin April 1950under functions and combining activities in a the supervisionof a PublicService Commissioner, manner that would serve the development appointed by the Governor General of New objectivesof WesternSamoa; Zealand. By the timeof independencein 1962,this supervisoryfuncton was carried out by a three- * examine the structure of each new depart- member Public Service Commission,and by the ment or iniisvtrywith a view to identifying end of 1964, there were 18 departmentsand 1,760 non-ritical vacanciesand eliminaing these staff members, including 64 expatriates, in he withinthe next to or three years; Public Service. By 1990 the size of the public

21 Volme 8: Westen,SMuoa * improve the retention of qualified staff 3.9 The financialpositon of a number of through higher rmneraion and icnives, entp in which Govenmnt has held sham using a part of the savings geneated by has been consistendy weak, with significant downsizingthe public service;and reductons in net equity and with bank overdrafts pmeeei the approvedlimit for the group. Poor * privatzw deparmems where appropiate, to management, priate purchasingand pricing reduce governmentoverheads. policies,political i , outdatedaccounting and reporting systems, deficient financial 3.6 Implenation of the above reforms accoabilit, and inadequateboard supervision needs to be carried out, focusingin particularon and managementcontol over asset have all been the overall strucure of the public service and the factors in the weak performance of troubled deparmental structuresand stfmg. spellingout eterprises. Additionally,a consequenceof donor the functions and responsibilities,assessing the provisionof managementsalaries and equipment staffingrequements, fittig existng personnelinto has been a non-commercialperspective taken by new positionswhere needed, developingtraining Government, boards and management. The programs, and devising incentives to retain Governmentrecognized that unaddressedconflicts qualifiedstaff. between commercialgoals and social policy was resulting in a need for contnuous subsidies,and began a programof divestiturein 1987. CGPUBLIC ENTRPSE RBORU 3.10 Theprivatization strategy has focussedon 3.7 While ste-owned enterprises have performance,with Government first divestingitself operatedin nearly all sectorsin WesternSamoa in of enterpriseswhich would operate more effectively the past, the Govermment'sprivaizaton strategy in a competitivemarket envirmn, and then has significanly reduceu active Government concentn on those which have incurred involvementin many of these areas since 1989. continuouslosses and causedthe greatestdrain an There are cuently 10 wholly-owned state govemment resources. Five state-owned enterprises. These are the Electric Power enterpriseshave beenfully privaized, withone new Corporation,Western Samoa Shipping Corporation, one, the SamoaLand Corporation (SLC), fomed in SamoaShipping Services, Polynesian Airlines, the 1990 with a mandateto lease or sell WSTECland DevelopmentBank of Western Samoa, Western to the privatesector. WSTEChas been downsized SamoaTrust Estates Corporation (WSTEC), Samoa to one plaion (10,000 acres), with 18-20,000 LandCorporation, Samoa Coconut Wood Products, acres now under SLC, wbich is forbiddenby its Samoa Coconut Products, and the Agrcultural charter from workingthe land itself. Government Store Corporation. Govemmentis also a joint has chosen to parily privadze, contractout, or pterlshareholder in several other corporations: lease particularoperations rather than to privatmze WesternSamoa Breweries,New Samoa Industry, fully in some cases. The Copra, Cocoa, and Samoa Forest Corporation, Computer Services Produce Markein Boards have atl been Limited,Bank of WestemSamoa, Samoa Industrial dismanted, creating a more competitive Gases, Rothman's,and SamoaIron and Steel. environmentand reducingthe level of Govemment support necessitatedby iappropriate price and 3.8 Government first became involved in export corols and consequent losses. This several of the aboveactivities in order to stimulate restrctuing is expected to have a significant commercialdevelopment at a time whenthe private positiveimpact on the country'seconomy. sector was relatively inexperienced and undeveloped.In somecases, investors encouraged 3.11 Althoughthe Governmentis committedto the Governmentto be a minoritypartner in an privatizationof public enterprises, progress in effort to gain credibilityand fmancialassistance implementig a privatzation program has been from overseas donors. The New Zealand-funded rather slow. However,with technicalassistance, PacificIsland Industrial Development Scheme and the Govenmmenthas begun ta accelerate the the Australian-fundedJoint VentureScheme helped privatizationprogram, focusing first on the leasing financeseveral operations. Otheroperations such of WSTECland, andsecond on the privatizationof as timbermilling and animalfeed enterpriseswere the above-mentionedenterprises. acquired by Government due to insolvency problems,while WSTECwas formedwhen estates 3.12 With the targetedoperations now soldor were transferredto Goverment ownershipat the in the process, the portfolio of state-owned termination of the German Administrationin enterprises has improved. Possibilities for WesternSamoa. divestitre in the next year includeSamoa Cocomnt

VoIme & weumrnSamoa 22 ProductsLtd (SCPL), Western Samoa Breweries, is to stimulate growth in tourism, and the Bank of Western Samoa. SCPL, a once resource-basedmanufacturi, and low- prfiable eerpris, has becomean extremelybigh wage export processing where loss venturedue to the sharp fail in the worldprice opportunities for private sector for coconutoil in the 1980sas well as to the impact involvementare substantial. of the cyclones on coconut production in the country. Althoughits sales exceed total sales of (d) P1*wy Sector R Major other state enterpdses combined, PolynesianAir effort will be made to improve labor has also sustainedlosses and may be sold to the productivity and explore new niche private sector as well. Despite efficiencyand export markets. mangement problems,there are presendyno plans to privatize water, power or tlecommunications 3.14 The Instionad Framework. Starting enterprisesin the near future,although restructuring with the present plan period (1992-94), the may occur. Governmentis moving in a new direction, i.e., from comprehensiveto strategicplanning. In the past, governmenteffort has been directed mainly D. PMUrC SECTORINVESTMEN PROGRAM towardmo g individualdevelopment projects. The DP7 focuseson macroeconomicpolicy and the 3.13 GovernmentObjectives. Development implementation of the Government's stated expenditurein Western Samoa has constituteda developmentstrategy. The maindocument that sets large share of overall governmentexpenditure. out the developmentstrategies, objectives, and Throughoutthe 1980s,it consistentlyamounted to policiesis the DevelopmentPlan (DP7), whichis an equivalentof 22-30percent of GDP, reflecting, complementedby an associated Public Sector in large part, infaucture constuction. The InvestmentProgram (PSIP). The fnal autority to objectivesof the Governmentfor DP7 (1992-1994) approvethese documentsrests with the Cabinet. are to accelerateeconomic growth throughpolicy changeswhich emphasize private sector growth and 3.15 Belowthe Cabinet,the highestdecision- foreign investment. The strategiesfor economic makingbody is the CabinetDevelopment Commit- development in the DP7 period could be tee (CDC)with the NationalPlanning Office (NPO) summarizedas foltows: actingas its Secretariat.In additionto the planning function,NPO is responsiblefor ensuing that PSIP (a) Consoldation of Past Invesahens. In as a whole,as well as individualinvestments, is in order to make more effective use of accordancewith national and sectoral priorities. existingprojects rather than creatingnew NPO is also in charge of providmg monthlyor ones, focus will be placed on quarterlyreports to CDCon the progressof project maintenance activities, institutional implemention with inputsfrom the line ministries strengthening, and human resource and departmentswhich are the execudngagencies. development. New projectswill also be However,due to the shortageof technicalpersonnel rigorously scrutinized to ensure that and experienced staff in both NPO and line recurrentcost implicationsare fullytaken ministries, the quality of reports is often into account. inadequate. The effectivenessof the monitoring systemhas thus not been fully realized. (b) ffcency Improvements.Emphasis will be placed on human resource develop- 3.16 In July 1992,NPO was transferredfrom ment in general. In particular, the the PrimeMinister's Department to the Treasuryto effectivenessof the educationsystem will improvecoordination of govermmentpolicies and to be improvedat all levels; publicservice ensurethat Government's development plans would training and manpowerplanning will be be realistc in terms of the funding resources undertaken. Strong encouragementof availableto Government.The key to the successof private sector involvementin performing the whole plamungand implementationprocess is economic activities will be provided to strengthenthe institutionalcapacity of NPO and through improvementsin the enabling other agenciesinvolved. The Govenment should environment. ensurethat trainingprograms are in place and that they are being carriedout systematically. (c) Employment Creation. Major contributionsto employmentcreation are 3.17 Size of the Investment Prgraom The expected from agriculture and private totalpublic investment program for 1992-1994was sxtor development. Governmentpolicy estimated at WS$392 million, averaging about

23 Vofume& Wesrn Samoa Table 3.1: AcTuALAm PRoInCrEDPuDLIC INvLTEsr PROGRAM (1967-1994)

Actual Estimated/Projected 1987 1988 1989 1990 1991 1992 1993 1994

PSIP(WS$mil.) 64 59 68 105 114 131 131 131 GDP (WS$mil.) 274 296 315 337 348 366 397 436 PSIPas % of GDP 23 20 22 31 33 36 33 30

Source: DP7, March1992; and staffestimates.

WS$131 million per year. This amount is focusedon recoveringthe lossesfrom the cyclones substantiallylarger than any past annual public and in settng the stage to carry out its long term investmen (see Table 3.1).1 Of the total of developmentobjectives. WS$392million, ongoing projects alone accounted for 54 percent. Together with the immediate 3.20 The transportsector receivedthe highest cyCionerehabilitation projects, they accountedfor share,amountig to WS$121million or 31 percent 82 percent,which the Govenmentpresented as the of the program. Of this amount, WS$112milion critical minimum investment. The balance of represents the critical minimum investment. In I8 percentare the immedia pipelineprojects. additionto the extensivedamage from the cyclones, the sectorhas alsosuffered from a lack of adequate 3.18 Consideringthe large size of the program mainuteancework in the past whichaccelerated the and the fact that 46 percentof fundinghas not been road network'sdeterioration. The objectiveis to identified, Governmentmay have to reduce the provide a good road network in support of program fnrther in cases where fundingshortfall economic activity. To this end, the planned remains. Implementationcapacity also poses investmenttakes into account the rehabilitation, constraints. In any event, somecutbacks on public improvement,and maintnace needs of the road investmentseem inevitablesince feasiblelevels of system as well as port and wharf facilities. gross investment (public and private) for the Infrastructure maintenance has been accorded economy as a whole are projected at around increasingatention; the road maintenancebudget 34 percent of GDP dung 1993-95(Table 6.1). has been raised by almost 40percent, from Admittedly, most projects related to cyclone WS$3.29million in 1991 to WS$4.55million in rehabilitationare of an urgent nature, and the 1992. However, from the standpointof asset recovery of the economyis dependentupon their managemet, the Public Works Department implementation. However, given the limited estimatesa mmnimumrequirement on the order of resourcesand capacity, the Governmenthas to be WS$7 millionto maintainthe road systemin good more realistic in assessingpriorties and make use condition.2 Further attention is required in the of the available funding more effectively. For institudonal strengthening of the Department instance, some projects may be rephased or responsiblefor the constction, maintenance,and postponedbeyond this developmentplan period. At supervisionof civil works. Training and staff the same time, Government should seek developmentare not only vital for immediate undersning from the donorcommunity and seek rehabilitationwork, but criticalin carryingout the increaseddonor financingof local costs. human resource development objective of Government'slong term developmentstrategy. 3.19 Compositionof the Program.Table 3.2 presents the sectoral breakdownof total planned 3.21 The powersector sustained heavy damage investment. The sectoral allocation of the from the cyclones. Most notably,the transmission expendiuresreflected, in part, the extentof damage and distribution systems of the Electric Power to the sector which required immediaterehabili- Corporation(EPC) sufferedsevere damage, with tation. In the short run, Govemrnment'seffort is widespread uprooting of poles, breaka;e of

Veia 8: Weaun Sanmoa 24 Table 3.2: Sw& RAL AocATION OF PLANNEDINVEsrET, 199-94

Critical Mim. Total Planned Invmt. Invmt. (WS$mil) (WS$mIl.) %

Agriculture,fiies & Forestry 27.3 33.2 8.5 Roads/Coasl Protection/Seaports 111.5 121.1 30.9 Telecommunications 24.7 35.6 9.1 Power 109.5 111.1 28.4 WaterSupply and Sanitation 6.8 19.8 5.1 Education 41.5 41.5 10.6 Health 25.8 29.8 7.5 Total 347.1 391.5 100.0

Source: Westen Samoaauthorities. insulatorsand conductors, and spd and downed ferdlizers,and credit to support the rehabilitaion cables. To reconstu the sector, an allocationof schemesof the farmersis also of utmosturgency. WS$111million is planned for investmentduring In the long run, the objectiveis to increasecrop 1992-94. The amount represents28.4 percent of productionand rural income. Thiswill necessitate the total program, of which about WS$109.5 the orientation of the extension and research million is for the critical minimum investment. strateies to focus on the development of an Major projects include the rehabiltaton of the integrated approach to the traditional farming Aflilo Hydroelectric project and the rural system. Efforts should also focus on the electrificationproject, both of whichare currently developmentof high value new crops for niche under development,and a planned institutional export markets. The strengthenng of the developmentproject The completionof these AgricultureDepartment is of high priority as it is projectsis of vitalimportance to meetfuture energy the key agency which undertakessector planning demand, to provide opporunmiiesfor promoting andpolicy advice for the developmentof the sector. industry ad tourism, and in the long run to improve life in the rural areas. The pipeline 3.23 The telecommunicationssector receives project, which amountsto WS$1.6 million, will WS$36million, or 9.1 percent of total investment focus on institutional strngthnn aspects to for the 1992-94 period. The sector provides facilitatethe futureimplementation of the projects. communicationlinks which are critical to the In particular, the managementand institutional businessworld. The strategy in the sector is to capabiity of EPC will be strenened to assist in continueto upgradetelecommunications technology improvingthe corporation'sfinancial performance. to ence the relative competitivenessof export The possibilityof conraactingthe managementand activities. In the short run, effort will be operationof power stations to the private sector concentraedin underakng the irmdiate cyclone should be pursued as this wil help improve the rehabilitationprojects. financialpositon of EPC. 3.24 The proposedinvestment program for the 3.22 Despite their being the most heavily water supply and sanitation sector amounts to damaged sectors, investment in agriculture, WS$19.8 million, or 5.1 percent of the total fisheries, and forestry amountsto only WS$33.2 investmentprogram. The immediateshort term milion, or 8.5 percent of the total investment objectiveof thesector is to improveand restorethe program. The most urgent task in the agriculture water supply system damaged by the recent sectoris the early reconstructionof the facilitiesof cyclones and which suffered from lack of the AgricultureDepartment so that it can effecdvely m e . The medium-termobjective is to assist farm rehabilitationthrough the provisionof upgrade the national water supply system to research and extensionservicc.. The adequateand faciliate access to potable water for the entre timely supplyof vital seedlings,sto. chemicals, population. In line with the tourism development

25 VIme 8: WesternSama Table 3.3: SOURCESOF FINANCING REQumEm4s FOR PSII, 1992-94 (WS$ Mi)

Funding Government External Shortfall Total

Agriculture,Fisheries and Forestry 3.3 15.7 14.2 33.2 Roads/CoasaProtectionl Seaports 17.8 20.5 82.8 121.1 Telecommunications 0.5 22.7 12.4 35.6 Power 6.2 77.2 27.7 111.1 WaterSupply & Sanitation 3.0 2.4 14.4 19.8 Education 13.2 21.3 6.9 41.4 Health 1.4 5.5 22.4 29.3 Igjgj 45.4 165.3 180.8 391.5 12% 42% 46% 100%

Souce: WesternSamoa Authorites. planfor the Apiaarea, pPline projectsinclude the and 12 percentby Government,leaving a funning Apiasewerage project and the furtherupgrading of gap of 46 percentof the total program (see Table the Apia water supply. 3.3). Governmentfinancing covers mostly the countermart funds for projects from donor 3.25 The provisionof educadon and health assistance,with the exceptionof the rehabilitation accouns for 10.6 percent and 7.5 percent of health facilitieswhere, apartfrom government espectively of the proposed PSIP. The focus fmancing,external funding is still being sought. Witninthe educationsector is the developmentof hiumanresources through improving the education 3.27 The financinggap is large and represents systemand the quality of teachers and through almosthalf of the total investmentprogram. This upgradingvocational and technicaltaining. In the poses a big challenge for the Goverment in health sector, short-term focus is on the seekingthe necessaryfiuding. As for domestic reconstrutionof healthfacilities in differentparts resources,Goverment's share of WS$45 milion Of the country. The long-termobjectives are to has already taken the substantial part of its develop healithprograms related to the controland developmentbudget. It is difficult to identify eliminationof both communicableand non- furtherresource availability within the Govemment. communicable diseases, and to improve the quality Under such a scenario, the PSIP may have to be anddelivery of health care-both preventiveand reducedto a level whererequiremet are satisfied curativeservices. with identified sources of financing. The Governmentwill be faced with the challengeto 3.26 FM=dig Reqvpreen. The public selectthe most urgentand viableprojects that will sector investmentprogram finaing requirements support its developmentobjectives and economic are estimated at WS$391.5 million, of which growth witha view to makng the opimum use of 42 percentwould be financedby externalsources externalassistance.

ENDNOTES

It shouldbe noted,however, that the annualamount is onlyan averagefor the three years, as a breakdownof the expediture by year is currnly not available.

2 SeeWorld Bank, Pacific Idands, Tranport Sector Study - Westen Samoa.

Vo & WestenSam" 26 4: Human ResourceDevelopment

A. HuMANRESOURCE REUR&VENM FOR accessdimension, because the two-fifthsof 14-year- GROWTH olds who &aopout are even more educationally disadvantagedthan thosewho stay in. 4.1 AlthoughWesten Samoais endowedwith a good physical resource base with potal for 4.4 Third, there are too few well-tained economicdevelopment in domesticfarming, niche techncims X the countryto satsfy currentdemand exportagriculture, ocean fishing,and tourism,' the for tradesmen, junior accountn, primary country's preponderant resource is its people, teachers, and other technicians,and this shortage embeddedin a strong, adaptablescial structure intensifies as more sophised methods and and linked to large emigrantcommunities in three equpmentare becominginternationally required in induwtialcountries. These humanresources form service and industrial activities. Such people a strongpotentia base, but unlessthe qualityof its shouldform the backboneof Governmentand other human resource development is substily serviceorganizations, and their absencecontributes improved to overcome three major shortfalls, to poor performancein many institutions. The economicdevelopment is likely to stall at or near shortage is pardy due to the general educational the presentlevel. qualityproblem just referred to and pardy due to the failure to provide sufficient secondary-level 4.2 First and most visible is a shortage of voational places, in the contextof emiration. high-leveltechnical and managerialpersonnel in the Govermmentand oher large pnvate organizadons 4.5 ColTecting these fundamental human- in Wester Samoa. For instance, in the public resource shortfalls will requiremajor, increased service, only 25 peren of the positionsare filled goverment commitmentand finance, as well as by qualifiedstaff and 39 percent flled by partially donor assistance, with the most fundamental, qualified staff, while 37 percent of the positions quality-affecting reforms taking effect only remainvacant. Also, as noted earlier, while some graduallyover a decade or more. At the same of the vacancies are non-critcal and could be tme, there are short-term and medium-term abolished after due process of review, shortages policiesthat can by themselvesmake a considerable persist in the areas of economic management, dent in WesternSamoa's human resource problems. engineering, accountancy,business management, Just as the eventualcomparative-advantage winners medicaland educationalservices, and a wide range in the economy are hard to predict, so are the of middlelevel tecal skdls. specificnumbers of each occupationthat will be needed. Rather, the favored thmst is toward 4.3 Secondand fundamentl, a large number reformsthat will enableeducational institutions and of pupilsin the countryare not adequatelyequipped labor markets to provide the country's human in the basic ma cs, science, and English- capitl needswith some flexibility. language skills necessay for them to absorb effectively further training in the technical, tehing, a management specialdes now R THE LABOR ARKET FOR SKII1ED importantfor the economy. This qualityproblem MANPOWERIV WESTERNSAMOA oiginates in prmary education and leads to difficult-to-correct deficiencies at both the 4.6 The basiclabor force structure of Western secondaryand tertiarylevels. It is also has a major Samoadid not change much in the decade before 1986 and has probablynot changedin the period

27 Voebee& Weste Saum Table4.1: WESRN SAMOA:LABOR FORCE STATISCS, CENSUSESOF 1976 AND1986

LaborForce Employment Category 1976 1986 Category/Occupation 1976 1986

LaborForce 37,414 45,S01 SelfEmployed/Unpaid 24,693 29,651 Female(%) 17 19 Employees 12,721 15,984 Female(%) 37 PublicEmployees (%) 42 Industry: % % Agriculture 61 64 EmployeeOccupation: % % Maufacturing/Mining 2 3 Professional/Technical 27 34 Electricity/Gas 1 2 Administrative/Manageral I I Construction S 0 Clerical 13 13 Trade/Tourism 6 4 Sales 6 11 Transport 5 3 Service 9 8 Finane 1 2 Agricultural 11 4 Comm'l/SocialServices 18 21 Production 32 27 simce. Most people work in semi-subsistence In addition, 37 percent of total established agrilture or in Governmentand other service positionsrequiring these quaificationsare vacant. industries (Table 4.1). Women are not Similarly,in positionsrequring certainengineeig acknowledgedin the 1986Census as being in the or technicalqualifications, 65 percentof occupants subsistencelabor force, but they are nevertheless are not qualifiedand 32 percent of total positions stngy represented in paid employment, are vacant. Expatiates manned52 percentof the comprisng 37 percent of the total employeesand positionsfiled by staff with a bachelor'sdegree in 45 percent of professional, technical, and engineeringand one third of positionsrequiring a administrativeworkers. technicalcertificate. These data are indicativeof the Government's budgetary constraints in 4.7 There is litde questionthat in the short providing adequate incentive, to hire qualified run, Western Samoaneconomic growth is being professionalsin key posi.ions. Taking the public inibited by a very tight labor marketfor persons serviceas a whole,there werevacancies in 1991in ith post-secondaryqualifications at the salaries various occupatona categories, as follows: offeted. Technicalpositions in Governmentand the professional and semi-professional11 percen, private sector, partcularly in the former, are often technicaland vocational24 percent, and clerical filled only through technical assistance and 22 percent. A full analysiswould reveal an actual expatriaterecruitment. At the same time, large skills situaton that is even worse than these data mnmbersof Western Samoanswith qualifications indicate,since the requiredbachelor's or certificate continueto emigrate to New Zealand, Australia, qualificatLansare insufficientfor top positionsin American Samoa, and the United States. many fields, and certin additional needed Immigrationopportuniies have recenty lessened technical specialties in health, computers and somewhatin New Zealand,the largestdestination, environmentalareas-to mentiona few-have not but it is too early to tell how much medium-term yet been providedfor in the establishment. impactthere will be. Even if it slows,emigration of qualified Samroansis unlikely to stop in the 4.9 While shortagesin the private sector in future becase of insuperablewage differentials the professional,technical, and managerialfields betweenWestern Samoa and the industrialcountries are also experienced,they are likely to become and the large, already stable Samoan immigrant acuteif tourismand niche exportagriculture grow communitiesthere. as expected, if privatization of government industrial and transport activities proceeds as 4.8 In the public service, two-thirdsof key planned, and if computerizaon of most formal non-vacant positions requiring qualificationsin activitiestakes place. accountng, management,economics, or law (i.e., a bachelor's or a certificate)are filled by persons 4.10 Becauseformal employment in the private who do not have those qualfications(Table 4.2). sectoris smallcompared to that in the Government,

Volme & Waesn Same 28 Table 4.2: SHORTAGES IN SHIEI PuC SERVICESPma S, La1992

Not Fomaly ToWl Total OccupantFormally QuaUfiedor OccupationalCategorylAuthorized Occupied Cualifd for tion Partially P 31ions Requrd Qualification Poswions Posidons Lacal ExpatriateL Qualifid Vacam Columns (1) (2) (3a) (3b) (4) (5) (4) + (5)

Accounti aement/ (Persons) BconomiWsLaw Bachelor's 200 122 37 6 79 78 157 Certficate 83 57 13 0 44 26 70 Total 283 179 50 6 123 104 227 % of OccupiedPostions 100.0 27.9 3.4 68.7 % of Total Poitons 100.0 63.3 17.7 2.1 43.5 36.7 80.2

Eng_erng/Temieal Specaties Bachelor's 28 21 4 11 6 7 13 Cetifficate 96 64 10 5 49 32 81 Total 1?4 85 14 16 55 39 94 % of OccupiedPositotis 100.0 16.5 18.8 64.7 % of Total Positions 100 68.5 11.3 12.9 44.4 31.5 75.8

Trade Certia/Typing 185 112 62 0 S0 73 123 % of OccupiedPositions 100.0 55.4 0.0 44.6 % of Total Positions 100 60.5 33.5 0.0 27.0 39.5 66.5

TOtlW Bachelor's 228 143 41 17 85 85 170 Cetificate 364 233 85 5 143 131 274 Total 592 376 126 22 228 216 444 % of OccupiedPositions 100.0 33.5 5.9 60.6 % of Total Positions 100 63.5 21.3 3.7 38.5 36.5 75.0

/a Not inchludingmedicine, taching, and areas adequatelysuppL;ed. lb Table assumes that expatriatesare qualfied (no indicationin source).

Source: Human Resoure Plan for the PublicService, Public Servke Commission.May 1992,Table 40. those firmsexperiencing shortage have needed only exptriae team, educationalqualifications for its to bid talent away from the Governmentby setting 1,500-strongWestern Samoan work force did not an appropriatewage differential. Accountantsfor appear to be imporant, as the assembly-type business service firms and teachers for private operationscalled primarily for rnamal dexterity. schools,for example,are typicallyrecruited in this Thus, continued foreign investmeni in labor- way. Nevertheless, there are severe shortages intensiveassembly operations may not, by itself, across the economy in a few occupations, place major stress on the marketfor sildls. particularlyaccountants, some trades, andtechnical specialties. In this respect, the quality of the courses m these areas, run at the National C. EDUCATIONSECTOR PERFORMANCE AND University of Samoa and the Universityof the FINANCE South Pacific (USP) extension, needs to be reviewed. Entrepreneursand managersare also it 4.11 Enrollment. The most prominentfacts short supply in the private sector, but the about Western Samoan education are close-to- phenomenonis morecomplex than simplya lack of universal primary education, but a very small qualifications,involving as it does incentivesand contingentin highereducation. On an approximate the Samoancultural context. At the new Yazaki basis, the enrollmentratio for year 10 (typicallyage wire hamess operation, aside from a very small 14) is 71 percent(Table 4.3). Each successiveyear

29 Voksme 8: Western Samoa Table 4.3: ENROLuLMaEIN REGmLARSCHOOL SYSVMOS 19l

(;pvMMMs Private Tota U9ual Year1 YearI Approx. YarU Age at Number Equal Num % Equal Number Enrol. Enrollment Enrolled 100 Enrolled Private 100 Enroled RatioLi

1 5 3,672 1oo 16 too 4,383 97 2 6 3,605 98 618 1S 87 4,223 94 3 7 3,702 101 646 is 91 4,348 97 4 8 3,900 106 713 1S 100 4,613 103 5 9 4,583 12S 658 13 93 5,241 116 6 10 3,768 103 622 14 87 4,390 98 7 11 3,782 103 640 14 90 4,422 98 8 12 4,376 119 774 IS 109 5,150 114 Subtotal s1S 36!770 &fthrSondarv 9 13 2,769 75 1,448 34 204 4,217 94 10 14 1,921 52 1,288 40 181 3,209 71 11 15 1,467 40 1,340 48 188 2,807 62 Subtotal 6.157 4.07 40 lom3

12 16 638 17 1,216 66 171 1,854 41 13 17 278 8 441 61 62 719 16 Subtotal 9 7

UlDersitY PrentaratovYear (NUS) 14 18 122 3 0 0 0 122 3 T1.o11 22 496

Ia Reliableatrition rates are not available,but stablecohorts for the relevat years(mosdy in the 4,300-4,700 range)make this a goodapproximation. Sources: EducationalDepartment; National Universdty of Samoa. brings a large drop in the ratio, to 62 percent(for childrenat all agelevels. Sufficientsupport has not 15-year-olds), 41 percent (for 16-year-olds), been provided to ensure the quality of teacher 16 percent(for 17-year-olds),and finally3 percent training and educational materials, while the for the universitypreparatory year (18-year-olds). flexibility of management to make decisions Less than 10percent of 14-17-year-oldsnot regardingthese remainlimited. It is euagng enrolledin the regularschool system are enrolledin to note that a programsupported by New Zealand vocationalprograms in trades, nursing, teaching, has begunto addressthese issues. and maritimestudies. Roughlyequal numbersof boys and girls are in schooluntil years ages 16 and 4.13 The quality deficits start in primary 17, when the femaleproportion declines somewhat. school-taught in the vernacularfor the intial 3 Census data on educational attainment (1986) years-and cumulatethrough to the point wherethe record a mere one-halfof one percentof the 25-29 pupils leave the educational system. Littde age group (residentat the time in WesternSamoa) internatonally comparableassessment has been as havingundergraduate or graduatedegrees. done, but the UNESCOPacific Islands Literacy Levels Project in 1991 shows year-6 Westem 4.12 Q&aly. Seriousquality deficiencies exist Samoanchildren performing well belowthe average in the educational skdlls of Westem Samoan for nine Pacificisland countries. Only 56 percent

Volme 8: WesterSaame 30 of Westn Samoanchildren achieved "low pass" (2 should not be consi%lred a post-seonday on a scale of 5) in Englishliacy, comparedwith instion for the foreseeablefitue, despiteplans a nia-countryaverage of 82 percent,and compared to transformit into a post-secondarypolytechnic, to 87 percent for the ninecountry average, only since60 percen of its entns havecompleted only 71 percent of the Western Samoan children Year I I(Age IS) and anotier 30 percentYear 12 achieved this minima score in numeracy. Most (Age 16) with inadequateacademic performance. telling of a general educationaldeficit, Wester A significantfeature of the WSTIcurriculum is a Samoa's scores were the poorest of all nine program of mathematicsremedtation in the first countrieson the nationallanguage paper. By Age year. At thisjuncure, WSTIlacks the management 17, the cumulative educational deficienciesof and budgetaryflexibility to respond to emerging WesternSamoan children were so disablingthat in needs. 1991 only 7 percent of the small, already hughly selected Year-13 contingent (16 percent of the 4.17 Post-SecondaryEdncation. The main cohort) obtained scores on the internationally post-secondary programs in Westem Samoa coWarable Pacific Senior Secondary School (full-time-equivalent 1991 enrollments in Certificate to qualify them for entry into the parentheses)are NUS' UPY program(122). other universitypreparatory year (UPY) at the National NUS programs(201). the Universityof the South Universityof Samoa(NUS). PacificExtension Center (n.a.2),a teacherscollege (379), a nursingschool (69), and a marinetraining 4.14 Pupil/parentmotivation for educationis center (50). Wester Samoan students enrolled said to be generaly high, so the primary reasons abroad in 1991 were supported by private for poor qualityoutcomes appear to lie withinthe scholarships(196), Equityand Merit Scholarships educational system. These include inadequate (28) and bilateral scholarhips (265). Of these, teacher preparation, high teacher turnover, female stdents averaged46 percent. In addition, inadequate support for curriculum development, the University of the South Pacific programs severe lack of texts, scienceequipment and other enrolled 113 full-time-equivalentstudents from learningmaterials, and (duringthe last two years) WesternSamoa (mostly in Fiji but includinga small the devastationto facilitiesand equipmentcaused number at the agriculture campus in Western by CyclonesOfa and Val. Thus, more resources Samoa), and there were some 207 overseas need to be allocatedto curriculumdevelopment, awards3 outside of Fiji uider bi- or multilateral studentevaluation, and teachertraining, as well as scholarshipprograms in 1991 (most sponsoredby for scienceequipment. governmentdepartments). An unknownnumber of other studentsaftended universities abroad on self- 4.15 Vocational Educaton. Vocational securedfinance. 4 education remains weak and unrelated to needs. Mostsecondary school leavers, a large majorityby 4.18 Educaonal Expendits. Considering age 16, return to villabe life and small-scale the importanceof human resourcesfor the future agrcture. Yet few schools,if any, have useful developmentof the country, and fiscal constraints instruction in agriculture, its scientific under- which would preclude any increase in current pinning, or its businessaspects. There is also expenditurefor education,a major effort would be inadequate provision fer home economics and needed to secure the cooperation of village industrialarts in most public schoolsand virtually communities, churches, and non-government no computer instruction. Some private schools organizations in supporting education reform. have greatervocational content, and there are three Without it, a significantpart of the educational smallprivate programs,two on Upoluand one in reformprogram will not happen. Such additional Savai'i, providing training in trades for school support could be used to meet expenditurefor dropouts. educationalmaterials for teachers and students, includinginported and locally-developedtexts and 4.16 The main vocationalinstitution has been library resources. Thus, major changes in the Western Samoa Technical Institute (WSTI), educationalstrategy, management, and performance whichhas recentlybeen formedinto a Polytechnic. will be necessaryto sLpplementthe limitedinput It mainly offers one-and two-year full-time from Government. programsin a rangeof tradesand secretarialskills, followed in some cases by up to two years of 4.19 In the 1992-1993budget (see Table4.4), apprenticeship,and mostof its entrants(about 350 the Government expects to move in several full-time first-year students) are from those favorable directions: the share of education preventedfrom continui. 1, on in the regular school expenditurein the total budget is slated to rise systemafter failingnational school exams. WSTI marginally, from 18 percent to 19 percent; in

31 Volume& WesteOnSamoa Table4.4: WESN SAMOA:GOVENM CURENT EDUCATION ExENDTURES1992-193 (WS$'000)

1991-1992 1992-1993 1992-1993 Approved Budget Budget Change Estimates Estimates 1991/92to 1992193 Amount % Amount % (1992WS$)-/ 1992WS$ % GovernmentSystem Personnel 12,856 87,9 12,736 82.2 11,722 (1,134) -8.8 OperatingSupplies 298 2.0 380 2.5 350 52 17.4 LocalTraining 50 0.3 65 0.4 60 10 19.6 Travel/Accommodation 172 1.2 280 1.8 258 86 49.8 Office/PlantExpenditure 853 5.8 1,550 10.0 1,427 574 67.2 StudentAllowanes/Food 250 1.7 331 2.1 305 55 21.9 Other 140 1.0 155 1.0 143 3 1.9 Total 14,619 100.0 15,497 100.0 14,263 (356) -2.4 Grants 1,000 6.4/b 650 4.0/b 598 (402) -40.2 TotalEducation 15,619 17.8Lg 16,147 18.8/c 14,861 (758) -4.9 TotalGovernment 87,584 100.0 85,794 100.0 78,963 (8,622) -9.8 LaDeflated using Consumer Price Index for theyear ending QI/1992. /b Percentof TotalEducation. & Percentof TotalGovernmet Source:Approved Esdmates of Receiptsand Payms, ParliamentyPaper1992 No. 11. inflation-adjustdterms, expenditureon supplies suggestsit now encounterslittle difficulty-as a and trainingis to increaseby 18percent and that on private firm has the flexibility of recruiting plant by 67 percent (to some emergencycyclone relatively few cxpatiates at ineationally repairs); finally, personnel costs as a share of competitivesalaries. government education system expendtures are slated to declinefrom 88 percentto 82 percent. If 4.21 Second, localization strategy should these expenditurechanges continue on a trend, the concentrateon increasingthe supply of Samoan setting would be there for major educational professionals in Western Samoa. Active reform. recruitment should be carried out in Samoan communities overseas. Retention should be inproved througha variety of measures,such as D. HUMANRESOURCESMATEGYAND SOM bonding,directing of scholarshipmoney to regional iSSlES institutions, and improved remuneration and working conditions. Public service remuneration 4.20 First, as a very small country with a for Samoan specialistsshould be negotiableand major brain drain, Western Samoacannot hope to competitive,when required.5 Since scholarships run its Governmenteffectively without retaining have had only a partal successcreating talent in adequatenumbers of its qualifiedpersonnel (with Western Samoadue to recipients' high failure to improved incentives) or importing specialized return withcredentials and stay,6 there is a need to talent. It shouldconsider the importof specialized enforce contractual arrangements applicable to talent to be an importa element of its human scholarsand focus scholarshipson a narrow range resourcesstategy. Technicalassistance programs of specific skills required by the country. are often a useful way of finaing specialist Considerationshould be givento the conversionof manpower,but they shouldnot be reliedupon-as the value of scholarshipsinto loans, in the event at present-as the predominantsource of supply. scholarsopt to leave without completingagreed Although costly, such recruitment would serviceperiods. Also, specificin-service training presumablyaim to solve even more costly public shouldbe vastly expanded, improved in quality, sector performance problems. As to foreign and open to secondary school graduates. The recruitmentby the private sector, recent evidence major educationalprerequisite for this kind of

Vobine8: WesternSamoa 32 trainig (as well as for academicsuccess abmoad) is 4.25 Seconday-vel vocational education improved primay, scondasy academic and needs reorientation. Strengthening primary seondary vocational educadon. The major education-by focing on languages and educationalpush thereforeshould be at theselevels mathematics and by introducing science radherthan in higher education. concepts-would lay a foundation for future training. At the junior secondary level, more 4.22 Third, the alocation of resources of schools should concentrateon general education. higher education should be increased only Followingjunior secondaty education, a limited moderaely and efforts shouldbe made to recover number of skills-orientedschools could focus on costs as much as possible, because resourcesare direcdymarketable skldls. Establishinga program demonstrablymucb more productiveelsewhere in at WSTI for 14-year-oldsand consideringtuition the system. Continuingpresent practie, almostall grants for private vocational programs would university students should study abroad, or by providemore appropriate training opporunitiesfor distanceeducation in extensioncenters, exceptfor that age bracket. These reforms should be those few cases (elementaryteachers, accountant supportedby an updatedAppreniceship Act. and some others) where economiesof scale are great enough to mount quality, cost-efective 4.26 Althoughprimary eduction is already programsin WestemSamoa. The major exception virually universal,it shouldbe made compulsory would be Samoan language, culture and history and fnmcial disinentives to poor children's studies, where internationalprograms are clearly atendance shouldbe reduced. The major costs not substitutable. NUS' IPY shouldbe financed associatedwith increasedaccess at the secmndary mainly by cost recovery (a major departurefrom level wal! require some combination of cost presentpractice); student financial aid shouldcome effectiveness,wost recovery, and increasedbudget. not from the Deparmunentof Education,but out of the budgetsof sponsoringagencies; it shouldbe on 4.27 DuringJuly 1992,donors held discussions a loan basis as much as possible. Under this with the Governmenton assistance to Western strategy it is hard to see why scarce educational Samoato reconstructschool fiities damagedby funds should be allocated to WSTI to provide the two cyclonesand to upgradeschool buildings, expensive, university-level enginring studies furniture,and equipment. Assistancefor teaching when these can be providedmore cheaplyat USP and learning materials, staff development,and and elsewhere. technicalassistance are also part of the proposed developmentplan. The WorldBank is preparingan education sector revicw which addresses sector E. OTHERSELECTED EDUCATION ISSUES development needs, focusing in particular on quality improvementand cyclone rehabilitation 4.23 Rapid and sustined improvment in the requirements. qualty of primary and secondary educaion can be achievedby a combinationof measures. Priority must be given to teacher upgradingprgwm- F. HEALTH CARE especiallyin math, science,and English-as well as to curriculum reform, provision of leaming 4.28 Health indicatorsin Western Samoa are materias, and primay pupil evaluation. Finally, relaively good in comparison to other Pacific for secondaryschools, cost effectivenessshould be Islandstates. WesternSamoa has one of the lowest the deciding factor in whether to continue the infant mortalityrates at 25 per 1,000 live births, present systemor eliminatethe junior secondary and life expectncy is relativelyhigh at 65 yearsfor grades. femalesand 63 years for males. These favorable attributes can be attributed to progress made in 4.24 A rapid rise in real salaries for those combatinginfectious diseases, providing potable performing satisfactoiy in training programs drinldng water and sanitation facilities, and would increase teacher motivation and reduce implementinga highly effective immunization turnover. Becauseof the magnitudeof the finance program. required, raising teacher salaries by itself would necessitatean increasededucation budget, which 4.29 Withthe near-eradicationoemost serious would in turn require the support of the village infectious diseases, the morbidity pattern in communities,churches, and NGOs. Increased Western Samoa has shifted to reflect a high efficinc and cost recovery can provide a large incidenceof 4festyle-relateddiseases. Important share of the resources for other aspects of health concerns include a high incidence of educationalreform. 7 obesity,8dental caries, hypertension,diabetes, and

33 VdeI & WesternSam" a host of coronary and respiratory problems. externalaid was to developthe NadonalHospital. Smoking is also common among the male Salariesutlize 54 percentof total health spendin population. The traditionalSamoa diet has been and pharmaceuticalsanother 19 percent. Nearly bypassedin favor of consumptionof high-fatsalted 60 percent of total healti sector outlays are for meats and sugar-richproducts. Likewise,alcohol expensesrelated to the operationof the National abuse has become quite common; alcohol Hospitalin Apia. Only a qu%rterof healthsector consumptionIs also cited as atn importantcausal spendingis for rural-basedcare. factor in Western Samoa's relativelyhigh rate of youth suicides. 4.34 The presenthealth care financingsystem is ill-suitedto meet the needs of Western Samoan 4.30 Governmenthealth servicesare operated society. A low fee schedule for curative care by the Departmentof Health, which overseesthe results in a very low rate of cost recovery for 290bed NationalHospital and 13 health districts. curative services. In contrast, the high fees Each district has a simplehospital, and a series of chargedby women'scommittees for healthcare in health centers which oversee a large number of the rural areas serve to discouragethe poor from rural clinicsknown as subcenters, Whilein theory usingprimary care health facilities;high primary the system is designed for vertical referral, the care fees also drive patientsto skip first-linecare relatvely unfetered access of patients to the services and use more expensive curative care NationalHospital leads to a significantvolume of services(at littledirect user cost). Pharmaceuticals self-referral. are paid for by the item, rather than by the course- of-treatment,encouraging patients to take less than 4.31 AlthoughWestern Samoa has beenable to the full course of medicines. Insuranceschemes maintain an adequate supply of doctors (donor- are used by onlya smallsegment of the population, financed,including United Nations volunteers), the and then to offset the costs of health care in New coutry has experiencedgreat difficlty in retaining Zealandand other overseascenters. qualified Samoandoctors, particularlythose with specializedtraining. There has been no increasein the numberof practcing Samoandoctors during the G. HFALTHCARE REFoRmPwoRmEs last decade, despite the significantnumbers that have been sent for trainng in Fiji, Papua New 4.35 Health Expendihtre Polcy. Western Guinea, New Zeland, and Australia. UN Samoa has made extremely good progress in volunteerscontinue to forman importantpart of the eradicatingthe most seriousinfectious diseases, but medical ranks, while Samoan doctors, sent for such progresscould easily be reversedif plimary training at public expense, gravitate towards care and preventivehealth care programsare not pracdcein the wealthierPacific rim economies.9 providedmore budgetary support. There is the very real danger that growing outlayson high-cost 4.32 Nurses and traditionalhealers form the curtive health care will squeeze out resources backbone of the Western Samoan health care required for ongoing, high-priority efforts in system. In 1990,a total of 257 nursesand between immunizadon,maternal and child healthcare, clean 400-600 traditional health practitioners were water, and sanitation.The small share of health employedin Western Samoa. The latter category spendingallocated to preventaiveand primary care would include midwives, spiritualists, and programs,combined with the recent fall in overall herbalists, all of whom make a significant healthsector oudays, could well be a preludeto an contributionto front-linemedical care. erosion in the foundation of Western Samoa's healthcare system. In settingpriorities, the share 4.33 Ihsaiag. Since 1985, the Department of public sector spendingto preventative/primary of Health's share of total public expenditureshas care should be signir nmtlyincreased relative to declined from 10-15percent-which had been curativecare, and ex. efforts shouldbe made to maintined since 1973, to 6 percent in 1991 and buttressWesten Samoa'swell-established rural and 7 percent in 1990. In additionto practicallyall districthealth care system. At the same time, the capital spending,donors financenearly 30 percent overallerosion in totaloudays to healthcare should of recurrentcosts in the health sector. The three be checked;health care spendingon the order of largest donors in the health sector have been 10-15percent of total governmentoutlays would France, New Zealand, and the World Health not be inappropriate for a nadon of Western Organization. A total of 14 differentbiateral and Samoa'sincome and healthattainment status. multilateralorganizations provided assistance to the health sector averagingWS$4 millionper annum 4.36 Manyof the more seriouslifestyle-related during the period 1988-1991. More than half of diseases can be prevented through behavioral

Ve 8 Wes*m Sma 34 modification.A highpriority shouldbe attachedto the reconstructionprogram should be used to helth educationand awarenesscampaigns. Given identify areas in which health centers can be the very high incidenceof obesity, and the great consolidated.This wouldprovide an opporunityto number of health problemsassociated with over- increaseutilization rates and savecapital costs. eatng and alcohol abuse, more direct means of behavioralmodification may needto be considered. 4.39 Stfflng. The Departmentof Healthhas Possibilitiesinclude high rates of taxation on announcedits intentionto focussupport for training health-damaginggoods such as cigarettes,alcohol, of doctorson the Fiji Schoolof Medicine,where and high-saltor high-fatimported meats. Another the programsare more relevantto the needsof the option is to excludefrom the public healthserice Pacific Island MemberCountries. This is to be individualswho fail to heed appropriatemedical commendedand mayhelp reducethe brain-drainof adviceregarding the need to alter behavior. trainedSamoan doctors to the Pacificrim countries. In the long run, however,it will be the economic 4.37 Cost Recovery and Health Care demand for physicians that will detennine the Fuacing. As the morbidity profile of the number of locally trained medical personnel that Western Samoan population shifts in favor of remainin the country. Giventhat this demandwill lifestyle related diseases and as live expectancy likely be quie small for some time to come, the inrleases, demand for curative health care services health system should not expect to record much is bound to rise at a rapid pace. Already growth in theranks of doctors. Govermmentis spendingfar too muchof its limited health care budget on curative services,and there 4.40 Nurses present an opposite problem. are signstat donor assistance-animportant source There is everyindication that WesternSamoa may of financing-may recede. Cost recoveryefforts record an over-supplyof trained nurses over the for curativeservices will need to be improved,both next few years. Excess nmrsetraining capacity to offset likelyreductions in externalsupport and, could well be utilizedfor nationalsof other Pacific more importanty, to help ration demandfor costly MemberCountries. curativecare services. Actionson several fronts wil be needed to provide a sustainablefinancing stucture for healthcare services: H. WOMENDN DEVELOPMENT * fee schedulesfor hospitalbased care will 4.41 Distinctionsdrawn on the basis of gender need to be revisedupwards to reflect the are relatively less common in Western Samoa true costs of curativetreatment; comparedto other PacificIsland nations. Female participationrates in the labor force are relatively * cost-recovery efforts for drugs and high, educationalaccess for women compares medical tests should also be improved, favorably with that of men, and women occupy but with special provisions made to high positions in the public service. Also, the protectthe poor and the very young;and number of reported crimes against women is relatively small. Still, the role of women in * contingencyplans should be drawn to economicactivity is constrainedby condnuedhigh identifypublic sectorresources that could ferility rates and short birth spacing intervals. be used to offsetthe impendingdecline in This, in turn, can be directlyattributed to the lack donor supportto the healthsector. of supportprovided by the Govemrmentfor family planing effortsin WesternSamoa. 4.38 CaWl Wors*. A large numberof rural healthcare centers anddistrict health facilities were 4.42 Familyplaning programsare subsumed destroyedby CycloneOfa in 1990and CycloneVal under the more general heading of maternal and in 1991;plans exist now to rebuild manyof them. child health (MCH) care programs in Western Beforethey were destroyed,many of thesefacilities Samoa. Together,these programs account for less were relatively expensive to staff and maintain than 1 percent of total health sector spending. becausethey werebuilt by the localcommunities at Contraceptiveprevalence is not known with any a very high standardand had a relativelylow utili- certainty, but is estimatedby Ministryof Health zation rate. Governmenthas recendy announced sourcesat less than 20 percentof the targetpopula- that it will staff and supportonly those new health tion. Ferility rates remainvery highand the com- facilitiesthat it has approved at the time of con- binationof large familiesand short birth spacing struction. Thispolicy should be rigorouslyadhered intervalscontributes to healthrisks for women. It to so as to avoid taking on board high recurrent also limits women's ability to participate in the cost healthfacilities in remoteareas. Furthermore, labor market. The lack of a promotionalattitude

Voie & Weni SW"oa 35 towards familyplanning programs limits women's efforts and improvedavailability of contaceptive optionsrerdin familysize andchfld spacing. To technology. In rural areas, greate involvementof providewomen wih greateroptions, and to reduce women'scommittees in familyplanning programs health related problems associated wih high shouldbe promoted. The women'scommittees are fertlity rates, a higher level of public support already an active force in femalehealth care and shouldbe providedto familyplanning efforts. This could play an important role in facilitatng will reqre a combinationof educationaloutreach improvedreproductive decision-making.

ENDNOTES

Labor-intensiveexport manufacturing may be an additionalpotential major area of economicdevelopment but is not includedin this list, sinceits physicalresource requirements are modest.

2 Totalfll timeequivalent extension enrollment at the USPis about 1,000.

3 Including40 for certificateor diplomaprograms.

4 Oneestimate of the totalnumber of WesternSamoan students in Australiaand NewZealand in 1991is 292 (WorldBank, Pacific Regional Post-Secondary Edcaton Study,Report No. 10522-EAP,1993).

5 The PublicService Commission needs to developeffective pay negotiaton capability. Inter alia, it needsto be able to evaluatecompensation in the internationalmarket for speciaists.

6 PublicService Commission estimates that 60-70percent of scholarshipawardees, 80 percentof those in technicalspecialties, fail to comeback with a degreedue to failurein academic programs and/or emigrtion; manywho do returnsubsequently emigrate. Lookingat the largergroup of postsecondarygraduates, one estdmateis that 70 percentof WesternSamoa;s have emigrated(World Bank, 'Pacific RegionalPost- SecondaryEducation Study," 1992).

7 Totalcost recoveryin educationin 1991was only WS$535,000.

In Apia, 75 percet of al femalesand 57 percentof all maleswere classified as obesein 1991,one of the highestrates worldwide.

9 At end-1990,there were a total of 52 doctorsin WesternSamoa, of which31 were Samoanand 14 expatriates.A totalof 7 doctorswere in privatepractice.

Vobw & WestonSmn 36 5: Growthand the Environment

A. LPROVINGTHE SuSTAiNA ULnOF THE 1985, the rsource was expected to last only a GROWTMPROCESS dozen years; this was before CycloneVal which seriouslydamaged over 40 percen of remamig 5.1 Sustainedgrowth in Samoa dependson chnable indigenousforest and completedthe improved protection and management of the destructionof the plantationforests broughtabout nation's watershedsand the coastal environment, earlier by CycloneOfa. both land and marine. On Upolu, deforestation, soil erosion, decreasinggroundwater quality, reef 3-3 Waterhed Managementand Land Use. degradation, amd to some extent the decline of Streamflows are the mam sourceof piped waterm once-rich coastal fisheries can be traced to Samoa and these are directly affected by the inappropriateland use whichalso lowers resilience conditionof watershedarea. There is no effective to cyclone-induceddamage. The same issues are magement of any of the five main watersheds present to a lesser degree on Savai'i. It is (four on Upolu; one on Savai'i) resultng in encouragingto see the current developmentplan mdiacrimae land clearing for agriculture and (DP7) includeas major policies"expansion of the serious soil erosion. The issues include: (a) in area under forestry, land use planning and the practice a lack of effectiveland use policy plus enforcementof a nationalenvironment management incentivesto abusethe land;' (b) someagri:ultural strategy"all of whichneed to be taken seriously. practices which have an impact on long-term Agricultureis the mainstayof the Samoaneconomy productivity;and (c) expandingherbicide use in and is expectedto remainthe key to growthin the newly-cleatedsteep areas. Contol on the use of 1990s. It is importantto enhance the long-term herbicides is under active considerationby the producivityof alreadycleared land and to enforce Government. The Government's intention to existing laws which prohibit forest clearancein facilitate land development by non-matais is watershed and catchment area. positive but could possibly exacerbate the already steady ecoachment of cultivation into steeply slopingland, unlessthe land leasingarrangements B. ENVIRONMENTAL ISSUES AND specifically controls this aspect. INTERtVENTONSTR47hGIES 5.4 Heavyfloodmg in Apia in 1989led to an 5.2 Forestry and Agritre. Most of innovative FAO Pilot Watershed Management Samoa'sremaining indigenous forest is on Savai'i. Project which is attempting to manage the In August 1990, there remained nearly 80,000 Vaisiganocatchment area whichprovides much of hecares of indigenousforest on the islandr of the city's water supply and some hydropower. which 17,000 hectares were considered However, there has been increasederosion and commercial, minus 30 percent if proposed reportedlya !°percent inrese in steep landunder catchmentprotection and reserves were established. cultivationsince then. The very rapid dechne in There is no rehabilitationof logged forests which forest coverageof the watershedm the past two have longbeen regardedas secondaryto agriculture years (65 percent before CycloneOfa; 45 percent and a hindrance to agricultural production. after CycloneVal) is largelyattributable to the two Between1977 and 1991,about 50 percentof forest cyclones and subsequentpermanen cleaing in had been cleared,with nearlyone-third of the total damagedareas. Clearingand large-scalefarmmg for loggingand two-thirdsfor agricultureand other continuein someareas whereforestry staff empha- purposes. With clearanceaccelerated from about ongoingsize the FAO necessity project to seeksmaintain to address tree cover.this issue. The

37 Volme 8: WesternSamoa 5.5 The Govenmentis addressingthe serious key issues as identfid by WHO are: (a) proper forestry/land-useissues through a tboroughforest closingand sealingof the present site includinga sector assessmentand policy review supportedby dike to containrefuse and to prevent leachingand New Zealand; it is expected to emphasize scavenging;and (b) linig the new site to preent sustanable use, forestprotection, reforestation and groundwater contminion. A South Pacific clearly defined individual and collective RegionalEnvironment Programme (SPREP) study responsibilities.A draft report2 has recommended on hazardouswaste (unspentpesticides, PCBs in that cyclone-damagedplantations be considerably old transformers,dry leaningsolvents, timber scaled down with funds diverted to multi-use treatmentchemicals, oil, metals, hospital wastes. communityforestry and waershed management.It etc.) was under preparationin 1992, Most Apia is suggestedthat this be supportedalong with an wastesincluding raw untreatedsewage seep into the expansion of FAO's watershed management groundand eventuallyflow into the shaPowlagoon approach and a long-term sustainable forestry which has poor natural circulation and then policy coordinated with agricultual procedures northwestwithin the reef past Vaiusu Bay towards whichmaintin soil fertility. Fale'olo. This increasingpollution contributes to coral reef death, eutrophication,declining fish 5.6 Bidversiy. WesternSamoa supports at populations,and possiblyfish whichare less safeto least 775 nativevascular plants of which30 percent eat. The Govermmentis addressingthese issues are found nowhereelse. There are more native through plans for a piped sewerage system for floweringplant genera than in any other part of Apia, prmary treatmentand dischargeinto the sea Polynesia. There are 21 butterflyspecies and 11 beyondthe reef. However, this wil not include speciesof reptile. Of the 46 or so bird species,10 industrialeffluent from the Vaiteleindustial area are found nowhereelse and 9 are threatened. The and it may be someyears before seawaterquality unique and ancient tooth-biled pigeon (the sole improves. member of an endemicgenus) and the Mao are amongpotentially threatened avifauna. They and 5.8 poleuWater Qualy. Nationwide,only the SamoanWhite Eye are confinedto unmodified 50-60p icent of the populationhave access to safe rainforestwhich is a diminishinghabitat. AUthree drinkingwater. A newlyheavily-subsidized urban local bat species are also consideredthreatened. water supply system for Apia was completed in Althoughreforestation can reducepressures on the 1990 and etensive peri-urban/ruralworks are tropicalrainforests, they cannotbe replacedwhen plannedwith EEC assistance(7 millionecu). The lost and must be protectedif these speciesare to mainsupply sources are the Vaisiganoand Fuuasou survive. There are onlyseveral protected terrestriai rvers, bothaffected by deforestationwhich reduces areas in WesternSamoa, the largestof whichis the dry-weatherflows and increasessiltation. Wateris 'O le Pupu-pu'enational park on Upolu, and one untreatedbut filteredand the qualityis reasonable. marinereserve. The former have beenplagued by There is a confuing combinationof donors(at least cyclones,fires, land disputesand insufficientfunds ADB, EC, PAO, Gennany, UNDP and WHO) for management. Two non-governmentforest addressing various aspects of watershed reserves,Falealupo and Tafuaon Savai'i, are being managementand urban and rural water supply. preserved in the face of economichardship and The key water supply issues are extremely high logging pressures under long-termleases signed consumption and wastage,3 poor institutional between the land-owners and environmental developmentwithin the PublicWorks Department, organiztions. Althoughvarious issues have been lack of a suitable legal framework4 for water imperfectlyresolved, this method may offer the management,and poor overall coordinadon and best hope of protectingSamoa's remaining natural plannig both within the govemmentand among forests and may also providelessons for the rest of donors. Whilethe actions to upgradeboth water the region. quality and sewage treatment are commended, nationalwater policy, increasedcharges related to 5.7 Urban Waste Disposal. Solid waste the costs of supply,and institutionaldevelopment collectionand managementin Apia is poor with are requiredto avoidwasting funds. numerousillegal dump sites and an approvedopen dump in a mangroveswamp at Vaitoloawhich is 5.9 Fisheries and the Near-Shore fly-infestedand scavengedby pigs and dogs. The EAvronment. Western Samoa has the smallest Departmentof Lands, Surveys and Environment inshore ExclusiveEconomic Zone (EEZ) of any (DLSE)is currendyidentifying the magnitudeand PacificIsland country so that the inshore resource sources of solid waste, is developinga waste is especially important for artisanal fisheries. managementpolicy, and a new inlanddump site is However,the inshorereefs and lagoons of north expectedto be in operationin March 1993. The Upolu,the largestarea of lagoonin Samoaand the

Vome & WesternSamoa 38 main fish nursey habitat, have beet heavily thoughlargely untested, legal powes. There are exploited for years with considerableanecdota no requirements yet for environmeital impact evidenceof decliningyields of fmfishand s ish. assessments but these are expeted to be DP7 reportedthat the in-shorefishing is thoughtto intoduced. There are two active local be in an advancedstage of ecologicalcollapse. A environmentalNGOs in Apia (the Siosiomaga comprehensive1991 FAO survey reportedthat the Societyand FaasaoSavai'i), whichare involvedin deline is extremly seriousdue to the combinaon enviromnentaleducation and habitatprotection/eco- of overfishing,loss of mangroves,chemical runoff, tourism. Both NGOs work closely with the siltation from soil erosion, raw sewage disposal, Governmentand have participatedactively in the nutients, coral mining,new techniquesand fishing processof developingan environmentalstrategy. with dynamiteand poison. About half of Samoan householdsfish every week and dependupon fish 5.12 Legal Framework. The Lands and as a primary sourceof protein. The resourcemay EnvironmentAct of 1989 consolidatesmuch of bave been depleted beyond recovery. The Samoa's law pertainingto environmentalmatters Government is not adequately addressing this and provides a broad umbrella for resource althoughconsideration is beinggiven to revivinga protection, enviomen management and UNDPIFAOprogram to promote offshore fishing pollution control. However, exing legislation withmotorized vessels and fish aggregationdevices pertainingto watershedmanagement is inadequate to relive the pressureon inshore resources. It is and has not been enforced. The WaterAct of 1974 recommendedthat this be done. controlsthe releaseof pollutantsinto the sea but it is alsonot enforced. A legalreview underway with 5.10 EierV. There has been criticismof the SPREP assistance is expected to recommend Afulilo hydropower project, curreny under specific changes in legislation for water consucton, becauseit floodsa biologicallyunique management,sewerage, and solid waste diposal. ighlands swamparea. Althoughan environmental The Governmentis encouragedto amendlegislation impact assessment was carried out, it was to provide DISE and others the power neededto considered inadequate by the DLSE, which bettermanage environmental mattrs. commissioned a second more critical study. Further generadng capacity is expected to be 5.13 Natonal Envnironwnd Mangement reqired within several years,3 some of which Stutegy (NEMS). The NEMS is being prepared could be hydro (Upolu) or biomass-fudiled with UNDP support through SPREP. Although (Savai'i), both environmentallysensitive. In the progresshas been delayeddue to CycloneVal, it is fe there shouldbe early dialoguebetween the now expectedto be completedby early 1993 and electrc powerand environmentalauthorties andan submittedto Cabinet by June 1993. Unlike a opportunty for iput from the public. numberof othr countriesin the region, Samoa's NEMSis largelya local effort: initialsubmissions from governmentdepatments will be edited by C. ENVIRONMENTAL PLANNING AND Samoanconsultants working with the government INSTIUTIONAL DEVELOPMENT and a numberof NGOs. The extent to whichthe NEMS will be an integral part of development 5.11 Envronntal Insditions. There are policyand investmentdecision-making is uncertain. six local professionalstaff augmentedby several However, it is encouraging that the expatriatestaff and short-termconsultants in the Interdepartmentaltask Force has aready reviewed Divisionof Environmentand Conservationof the the World Bank's guidelinesfor Environmental DLSE, which functions under the Ministry of Action Plans which will be incorporatedinto the Lands,Surveys and Environment.The Divisionof NEMSreport and approach. Environmentand Conservationis responsiblefor environmentallegislation and has substantial,

39 Voume 8: Wenste Sanoa ENDNOTES

There is a customary incentiveto clear land which can then be claimed as pan of entitlementswhich can be passed on to desendants. In some areas, such clearingto establishtidtle is said to be quite aggessive.

2 'Western SamoaForestry Policy Review: Forest PolicyStatement and Forestry SectorOutlook and Strategy,' draft of October24, 1992.

3 Apia's consumptionis 700 liters/capita/dayand is unmeteredalthough 10,000meters are reportedlyin stock within PWD.

4 In 1985 FAO drfted a Water ResourcesAct, in 1987/88UNDTCD reviewed the draft and suggestedan alterative, and in 1991 FAO proposedbroader 'Watershed Protectionand ManagementReguadons'. None have been approved.

See 'Western Samoa,Issues and Optionsin the EnergySector', WorldBank/PEDP report 10441-EAP,Annex K, July 31, 1992.

Vomea& Westeson" 40 6: Medium-Tern Prospects

6.1 WesternSamoa's medium-tem prospects related infrastucture for the promotion of the are presened to illustratehow the eco-amy might private sector; the foreign component of this evolve over the next eight years dependig on the investmentis likely to be about 60 percent. The extent and speed with which the key projectedrate of investmentdepends on mainudning recommendationsof this report are adopted. The a nadonalsavings rate at an averageof 12.1perent most likely scenario oudined here does not of GDP during 1996-2000, which should be represent a forecast per se, considering the feasiblegiven the projectedrate of GDP growth, country's vunerabiity to external shocks ranging and graual improvementof domesticsavings. from commodity price declines, cyclones and domesticproduction disasters to global recession 6.3 Sourceso Growth. Duringthe 1990sthe affecting growth, private remittancesand gramts. main sources of growth are assumed to be an Rather, the scenario ilustrates how, barring ncrease in volume in agriculture (coconut and external shocks, the economymight recover over coconut products, taro, fresh fruits, and the next two to tbree years and move towards a vegetables),tourism, manufactring(light assembly path of sustainableeconomic growth, provided(a) andtextiles), timber and fisheries.A moreefficient the macroeconomicframework is improvedthrough management,supported by additionalinvestments, a progressive reduction of key macroeconomic should enable production of coconut to recover imbalances; (b) the enabling environment for substatally. The provision of sufficient term private sector developmentis improved through finance and the gradual removal of power and measures such as broadening of land leasing transport constraints should engender further arrangements, implementation of EIEPA, increase in output in the productive sectors in implementationof the tourism developmentplan general. Privatization efforts and foreign and speedier processing of private investment investmentsshould stimulate greater output. The proposals; (c) human resource development timberindustry offers somepotential, provided that strategiesare implemented;and (d) more efficient adequateactions are takento exploitsuch resources use is made of exten assistance. on an environmentallysustainable basis. 6.4 Agflul re. Agriciture has traditionally A. A MEOIuM-TM GROWTHSCENARO been the leadinggrowth sector in the economy. The Governmentis nowplacing stong emphasison 6.2 Based on cyclone rehabilitationefforts growth including agricultural diversification, currentdyunder way, the economyis projectedto particularlyafter CyclonesOfa andVal in 1990and recover with a real GDP growth averaging 1991 which wiped out the substantal growth 3.2 percent per year during 1993 and 1994 and poteti of the sector. The objective of graduallyincreasing to about 3.6 percentper year agriculturalstrategy is two-fold: The Government in 1996-2000. This wouldpermit an improvement is cognizantthat to move the economyto a steady in per capita consumptionof about 1.0 percentper growth path, one could not rely solely on a few year during 1996-2000,compared to a projected traditionalagricultural products as the major source decline of 1.7 percent per year during 1993-94. of foreign exchangeearners; hence, a need to The economic growth would result from exploreother potentialniche agdcultual products maintaininginvestment at around 28 percent of such as taro. Thus, the challenge facing the GDP during 1993-2000(Table 6.1). This high Govemment in this sector is to increase level of investmentreflects the amountsneeded for productivity for agricultural products with the rehabilitationof the productive sector and comparativeadvantage and to tap new export

41 VoIaiw& WestemSSmoa Table 6.1: MEUM-TERMPRECrONS, 1993-2000

Estimates --- Projections-- 1989-92 1993-95 1996-2000

Growthrate (percentper annum) GDP(at factorcost) -2.8 3.4 3.6 Agriculture -5.3 5.7 3.8 Industy -6.6 2.6 5.8 Services 2.9 2.8 3.6 Consumption 8.0 0.0 2.0 GrossInvestment 19.4 -5.0 -4.1 Exports(GNFS) 8.9 10.3 7.9 Imports(GNFS) Al 16.4 -0.7 1.9 COsumerPrices 7.1 5.7 5.0 RatiosQ GDP (pernt) Gross Investment 35.8 34.0 25.0 DomesticSavings -7.3 -15.6 -7.5 NationalSavings 20.8 9.2 12.1

Curent account/GDP(percent) -15.0 -22.7 -12.3 DebtService/Exports (percent) /b 10.2 7.7 5.2 DOD!GDP(percent) 68.2 104.9 84.7 Net foreignassets (mos. of impoits) 8.3 7.2 5.2

Source: WorldBank staff estirates. A/ Includesimports for exportprocessing industries 1993-2000. k/ As percentof exportsof goods(including those of exportprocessing industries 1993-2000) and nonfator services.

markets. Goverment should also play tie advantageof niche market opporunities, as they facilitating role of providing the nesary appear, in the Pacificrim countries. infrhstrcual support and help private sector organizationsin promotingand identifyingmarkets 6.6 The main elements of the strategy to overseas. realize Western Samoa's agricultural potential shouldconsist of: 6.5 Westem Samoa should build upon its stren8ths. The traditional farming system is * raisingproductivity of the traditionalfarming efficient,producing most of the population'sstaple system throughtechnological improvements. food requiements with little purchasedinputs and This wiUlcall for a greater farmnngsystems modest labor inputs. The country can producea orientation in research and extension, and wide range of crops, and is unusualwithin the actions to counter potnt threats to the Pacificin stil havingland under estatesthat could system's environmental sustainability, be used for large-scaleproduction. The farming particularlythe increasinguse of herbicides community is well educated, and has shown a and the steady encroachmentof cultivation willingnessto innovateand respondto new market into the uplandforest areas; opportunities. Finally,by its geographicposition and climate,Western Samoais well placedto take * a speedierprocess to lease the formerWSTEC

VoQme 8: WestenSaMoa 42 lands, currently held by the Samoa Lands (b) to target tourism srtegy towards attcing Corporation,for large scdeproduction either well-knownhotel chainsto set up resors; for exportsor for cattle bmeding; (c) to encouragetourism developmenttowards * broadeningof land leasingprocedures to allow catering to specific markets (e.g. Japanese any Samoanto lease land (insteadof only by tourists,eco-tourism); and the mataisat present),as recommendedby the Committee to review the Alienation of (d) to develop attractive tour packages, in CustomaryLand Act; and cooperationwith airlines,charter groups and tour operators. * a two-fold approach to help develop new markets: move towards higher quality 6.9 The Governmentis aware of the above standards in several existing export issues and in many cases has already started to commodities, and develop new markets tackle the problems. t'e challenge is for the througha more systematicidentification and govemmentto cary out its plans in a systematic promotioneffort and the applicationof strict fashionand on a sustainble basis. This requiresa quarantineand qualitycontrol standards. seriouscommitment on the part of the government and its abilityto mobilizeactive participation of the 6.7 Toeisun Given Western Samoa's privatesector and foreigninterest. tourismpotential,i.e., tropicalclimate, beaches and naMal atactions, the most significantsegment of 6.10 Manawfachaig. Major manufacturing the market still has much potential for further items include beer, cigarettes, coconut cream, development. Government is committed to coconut oil, etc. Despite its slow growth as a developingthis growthpotendal through a seriesof sector,manufacturing has becomea major focusof actions: A Ten-YearTourism DevelopmentPlan attentionby the Govermentas it believesthat the 1992-2001completed in April 1992with the helpof sector has a great potential. in particular, theTourism Coun of the SouthPacific would be Government's objective of agricultural adoptedfor the comingdecade. The Plan provides diversificationhighlights the importance of the developmentstrategies for the sector, recommenda- manufacting sector as an avenue for growth. tions and guidelinesfor implementation,financing Items with growth potential include the coconut requirements,economic and financi analysisand cream for export. Growth of coconut cream the promotion strategy. In addition, the already showed a relatively good performance Governmenthas launched a publicity campaign record over the last few years, i.e. its production abroad. The major policy objectives of the value increasedfrom WS$3.4 million in 1987 to Governmentin the tourism sector as stated in its WS$5.6million in 1990,or an annualgrowth rate SeventhDevelopment Plan are: of over 18 percentin three years. (a) to developtourism as a meansof diversifying 6.11 The Governmentis alsoencouraging low- the economy through developing and wage export processing industries to locate in improvinglinkages with other sectorsof the WesternSamoa. Already,a garmentfactory to be economy, the objectives of which are to financedby Chinese investorsbased in US and generateemployment, to provideopportunities Hong Kong is due to be establishedsoon, with a for activelocal participation and thus increase similar factory in the pipeline. To further local income;and encourage foleign investment, the Government recendy undertooksome rationalizationmeasures (b) to enhanceand preserveSamoa's rich cultural such as the establishmentof the Departmentof heritageand beautifulnatual scenery,both of Trade, Commerceand Industry(DTCI) in October which are the basis for tourist attractionand 1990 to replace the Department of Economic the kmyto a sustainabletourism growth. Development.With the exceptionof the plannig function which was transferred to the Prime 6.8 Among the measures needed to be Minister'sDepartment, the new departmenthas all implemented in this sector, following are of the operationalfunctions of the old departmentbut partcula urgency: with particular emphasis on trade and industrial developmentaspects. (a) to encourageprivate sector involvementin tourismby publicizingthe hotel sitesidentified 6.12 Other rationalizationmeasures included in the tourist developmentplan and assisting the consolidationof the EnterpriseIncentives Act investorsin securingleases of neededland; and the Industrial Free Zone Act into the new

43 Vokow8: Westn Samoa EnterpriseIncentives and Export PromotionAct environment and improving the enabling (EIAPA)in 1991, the establishmentof the Small environment for private sector development. Industies Center at Vaitele and a finaial unit Overall,the volumeof exportsof goods and non- trust to take up equity in industrialenprise. The factorservices is projectedto grow by 10.2 percent unit will be used to mobilizedomestic savings for per annumthrough 1996. Importrequirements are investmentand serve as a vehicle for the sale of projectedto fall back in 1994and grow slowerthn Government-ownedshares to the public. exports i later years. Higher receipts from tourism and inuest on reserves, togetherwith a 6.13 Extenal Trade. The effectsof Cyclones constant real (1992) level of remittanceinflows, Ofa and Val are expected to cut the volumes of could help keep the current account deficit at major export crops by 32 percent in 1992. It is manageablelevels. clear that exports of tree crop products will be severelyaffected, and that surplusfood production is likely to be diverted from export to domestic B. EXTERNAL INANCINGREQUIREMAT markets. At the same time, import volumesare projected to rise sharply due to the related 6.14 The balanceof paymentsprojections can emergency and rehabilitation requimnts. be reorganized to show external financing Althoughsome of theseimports will be financedby requirementsand sources (see Table 6.2). Total additionalremittance flows, the current account requirements rise from an annual average of deficitis projectedto remainat about23 percentof US$66.7million in 1989-92to US$76.3million in GDP. Baring furthershocks, it shouldbe possible 1993-95,decreasing to a projectedUS$69.1 million to reduce tfie current accountdeficit to a target of during 1996-2000. This trend reflectsthe gradual 15 percent of GDP over a period of five years. phasingout of reconstcion activity,with private Exportvolumes are expectedto reboundstrongly in remittancesremaining the major financingitem. 1995 and 1996. Over the mediumterm, export New commitmentsof projectgrants and loans are developmentwill continue to be constrainedby projectedto reach a peak in 1992 and 1993 and rising labor costs and the country's distancefrom then to remainfairly stableat aboutUS$8.9 million markets. However, these disadvantagescan be per year in loans and US$20million per year in reduced by maintaininga stable macroeconomic grantsin lateryears. Provisionhas alsobeen made

Table 6.2: EXTRNALFINANCING REQUREM s ANDSOURCES 1993-2000 (LUS$ illion per anmm at curret prices)

Estimates - Projections-- 1989-92 1993-95 1996-2000

Requfnent 66.7 76.3 69.1 Merhandiseimports / 90.3 129.5 161.3 Merchandiseexports -8.5 -27.6 -49.7 Principalrepayments hl 3.2 3.0 3.5 Interestpaymets hi 1.2 1.9 2.2 Oter servicepayments (net) -23.9 -29.8 -46.4 Changei net foreignassets 4A -0.7 -1.8 Sources 66.7 76.3 69.1 Privateremittances 37.1 34.3 37.5 Extal grant 15.7 20.4 20.0 Publicloan disbursements 14.1 20.9 8.9 Othercapital (net) -0.2 0.7 2.7

Source: WorldBank staff estimates. I/ Includesimports for exportprocessing industries 1993-2000. h/ On public debt.

VOda & W*eew Sama 44 for emergencyand rehabilitationassistance in 1993 reconsuction efforts and coniing assistan is and 1994. Because all loans are provided on being provided, for example, in the educaon coessona terms, the public debt serce ratio sector. NGOs are also active in enviromental falls steadilyto an averageof 6.5 percentin 1993- protection. 95 nd 4.5 peren in 1996-2000. However,the projecteddisbursement of the ADBand BiB loans 6.18 Volunteerworkers in Samoacome mainly and IDA credits rases the publicDODIGDP ratio from Japan and the United States Peace Corps. to 105percent during 1993-95, falling to an Japanmaintainssome40-S50aidworkrsin-owunty, averageof 85 percentduring 1996-2000. with most in the public works, utilities, and industrysectors. Volunteersfrom traditional donor 6.15 The projections indicate that extnal counties are relatvely smallin nmber and there reserveswill fail belowfive monthsof importcover is potentialto make more use of these resources, beforegradually rebuilding to reach 5.6 monthsof particularly the older and more experienced importsby tne end of the decade. However,past professionalpersonnel willingto work for short experiencesuggests that the reservelevel can easily periodsoverseas. be eroded by unexpectedchanges in the terms of trade or the impact of weather on agricultural 6.19 Churchgroups have been instrumentain production. There is also a risk that remittance supportingvillage development and in assistingwith inflows will fall in real terms, becauseaccess to emergencyrelief in the wake of natural disasters. overseas employmentis reduced' or as second- Their strength lies in the support given to generationSamoans lose their cultural ties. With secondaryeducation, where nearly two-thirds of remittancesfiat in nominalterms, and nocorrective the studentplaces are providedby private schools, policy action, the current account deficit could which are predominantly church-based. widen shatply. With no additional financing, Communitycontribution to the schoolsystem varies reserves could reduce to less than three months somewhat,from the provisionof buildings(with imports by the end of the decade. For these teachers and educationmaterials suppliedby the reasons, it is essentialthat the Governmentkeeps Govemment),to virally fullyfunded institutions. reservesas a contency, rather thandrawing them down as a developmentresource. The risks in the 6.20 Total aid through agreed government balanceof paymentsalso reinforcethe pnority for donorprograms, !ncluding offshore expenditure, is fiscal and monetaryrestaint, strengtheningexport estimated to be about 40 percent of GDP in icentives andimproving e enablingenvironment 1991/92. Cyclone rehabilitationneeds and the for privatesector development. limitedcapacity of taditional donors to expand their assistanceprograms have shaped the sector 6.16 Exernal Assitanc. External aid is distnbutionof assistanceand changedthe balance providedthrough official and non-fermalchannels. in aid sources. Bilateraldonors' share of total aid Officialexternal assistance 2 to WesternSamoa has fell to about 50 percentin 1991/92. Whileoverall almost doubledover the last few years with the bilatral aid has increasedin real terms there has commencementof new activitiesand donor support been a greater willingnessby the Governmentto for cyclone rehabilitation. While additional access concessionalloan funds from multilateral assistancein responseto recent cycloneshas been sourcesto meet larger projectneeds as well as for provided through nongovernmentorganizations the requirementsof cyclone rehabilitation. This (NGOs)and churchgroups, the overallnet transfer has, however,led to a substantialincrease in the of assistance through these sources is relatively workload of government aid and project small, except in the education sector, and to a administrationpersonnel. lesserextent in health. Potentialexi ts to use these channelsmore extensively. 6.21 Aid allocationfor infrastructurein these officialprograms has morethan tripledover the last 6.17 Littlereliable data is availableon the full three years and now absorbs over 40 percent of extent of aid providedthrough informal assistance total aid (Figure 6.1). The sector was already organizations,but there would seem to be ordy a expanding,prior to the two recent cyclones, Ofa limited long term involvementby NGOs in the and Val, which further exacerbated needs. country. In part, this may be attributableto the Programs have mairly been focused in a small strong traditionalsocial customsstill practicedin number of large projects in roads, ports, the community,the level of and access to social telecommunicationsand power. Extensivecyclonic services, and the support available through the destruction has imposed a higher demand on manychurch organizatons. NGOs,however, have resourcesfor a sector that was alreadyin need of been active in assisting with Samoa's cyclone new investmentand a highermaintane budgetto

45 Volume& WesternSamoa Figue 6.1: WESIERNSAMOA: EINMAL ASSISmANC - 199192(a

Intaw~~~~~i

23'

Pr*dudt* Sodor

(a) Bankdaf" esira.,. (b) tnaig odmard and .cpat_ w k4v.ffki* rtcmUl@f*tnt IIaYlZ@lO ifMdor ,taC4II^ provide an adequte level of infastucte to 6.23 It is recognizedthat available external service economic development. High levels of assistance is not being fuly used, and steps have assistanceare expectedto continueover the next been take to addressthis, but much has yet to be two to three years with projects concenaed in done by both Governmentand donors. A clear roads, ports and coastal protection, fhnded by indicationof macroeconomicpolicy, development ADB,Australia, Japan and the WorldBank. Also, strategy,and sectorpriority programs is essentialto a major rural water supply project has been help ensureefficient coordinationof Government foreshadowedfor EEC's Lome IV program. and extenally funded assistance programs. It would be useful for Governmentto review the 6.22 The social servicessector's shareof tot rangeof aid coordinationmechnisms availableand aid, not includingchurch and NOG transfers,has to develop an approach that would minimize remainedrelatively constant at around 12 percent. unnecessarytasks on adminisave personnel,yet Educationabsorbs almost 80 percentand is mainly provide an effective informationexchange. The fmundedby bilateraldonors with over 75 percentof success of the coordinationeffort depends very the largest donor's programalocated for overseas much on the lead role of Governmentin this student training. Aid is also provided for process. ufpgradingprimary and junior secondaryschools. Substantal assistancehas been made availableto 6.24 Investmentplanning remains relatively the sector in the wake of the recent cyclonesand weak and should be strengthenedto provide a further assistanceis possibleonce Governmenthas strategicallybased prioritzed investmentprogram. considered the recommendationsof a recent A strategicplanning approach was adoptedfor the educationsector review. Direct aid expenditurein preparationof the last developmentplan but with the healthsector is very low and is typicallyaround mixed success and it was not helped with the 5 percentof total aid, althoughit will be higher in disruptioncaused by Cyclone Val. For strategic the short-runas facilitiesare repairedover -'nst- planning to be successful,the process must be cycloneperiod. A major agriculturedev ~ent interaLized and gain a greater commitmentby loanto assistrestructuring the sectorfrom the ADB deparental managersto the processand outcome. has been the main element in assistanceto the At the post-cycloneCountry/Deatme Partners directlyproductive sector overthe last three years. meetingin July 1992, it was clear that although Assistancehas also been providedunder STABEX some sectorswere well covered there was a need in 1992 (from the 1989 applicationyear) and a for the plan to draw in more equallyal sectors. further large inflowis expectedin 1993. Forestry was also targetedby donorsbut sufferedseverely in 6.25 Aid coordinationwithin Government has the last cycloneand any further assistancemay be been problematicalto both donors and to the redirected to community forestry, watershed Government'sown eff^-r;. The recent move to managementand institutionalstrengthening. bring the Planning Unit within the Treasury Departmentwill help overcomethese difficuldties

Vohme & Western Swxoa 46 but the Unit needsto be staffedso as not to impose loan funds, as opposed to grants, taking into additional burdens on already over-sbttched account headvantages of moredet responsibility Trasuy offiis. Adequatelyresourced, the Unit for developmentactivity as opposedto the financial shouldbe betterplaced to revwpnorities andlink and addioal managementcosts. It wil be the planning and budgetg process. The weak essentialto ensurethat th funds are allocatedto link, however, is that responsibility for aid high priority projects consistent with Western adminiratibn remainssplit betweenTreasury and Samoa'sdevelopment sategy. ForeignAffairs. It may be pnxdentto convenea working group of officialsfrom each depqarent 6.27 Rapid expansion in the Public Sector which could be given responsibility for aid Investment Progam has further limited the coordination. Better coordinationand improved availability of project cutrpar and created planningwould help in prsenting well developed additionaldemands on local cost financingduring projects to donors in a more realistic PSIP project implementationand opaion. To some frameworkand assistin movingaway from a "wish extent activities can be designed to take these list" of proposals. constaints into accountif it is acceptedthat longer term developmentbenefit may be reduced. As 6.26 The two recent cyclones, Ofa and Val, discussed in a recent World Bank report3 to have resulted in a sharp increasein expenditure ma,linze the economiclife of major infrastuctr under Western Samoa's developmentprograms. projects and to make more efficient use of aid This level of activityis not likelyto be justifiedor resources,greatr anton needs to be given to sustainablein the longerterm, and attentionneeds asset managementand adequate recurrent cost to be given to selectng an appropriatemix of aid financing. Both aspects need to be taken into sourcesfor the mediumterm. A balancedapproach accountduring the planningand designstage of all shouldbe taken to the possile longer term use of publicinvestment activities.

ENDNOTES

In 1988,more than4,000 Samoansemigrated to New Zealand. An annualceiling of 2,000bas now been set, althoughin practicethis is unlikelyto be metdue to reduceddemand for unskiledlabor in NewZealand.

2 AS reportedin the min text, eteal assistanceiclues all formsof aid expendiureby donorson thir programsin WesternSamoa. On this definiton,expenditue includesoverseas training, payments to managingagencies and other direct payments by donorsas wellas incountrycosts. Measuredon thisbasis, aid flowsare greaterthan thoserecorded in the nationalbalance of paymet.

3 WorldBank: PacificIslands Transport Sector Study, Report No. 10543-EAP,1993.

47 Veoune8: Wesr Sea StatisticalAppendix Contents

Popuaton and Public Employment

1.1 Populationof WesternSaoa, 1981,1986 & 1991 1.2 GovernmentEmployees & Salaries

Naional Accownt

2.1 GDP by Industril Origin,1982-92 2.2 GDP by Expenditure,1982-92

Balance of Payments

3.1 Balanceof Payments,1982-92 3.2 MerchandiseTrade Indices, 1982-92 3.3 MerchandiseExports, 1982-92 3.4 Destinationof Exports,1982-92 3.5 Originof Imports,1982-92

External Debt

4.1 ExternalGrants, 1982-91 4.2 ExtemalPublic Debt and DebtService, 1982-92

Public Finances 5.1 CentralGovermnent Budget, 1982-92 5.2 CentralGovernment Revenue, 1982-92 5.3 Cental GovernmentExpenditure, 1982-92

Banking System and Plces 6.1 MonetarySurvey, 1982-92 6.2 FinancialSystem Structure, 1985-91 6.3 InterestRates, 1983-92 6.4 ConsumerPrice Index, 1980-92 Towism 7.1 VisitorArrivals by PrincipalMarkets, 1984-91

49 Vo*W: Weste Sma Table 1.1: POPULATIONOF WESTERNSAMOA - 1981,196 a 1991

1981 1986 1991 /a Age Group Male Female Total Male female Total Made Female Total

All Ages 81,027 75.322 156.349 83,370 74,038 157,408 84,679 75,183 159,862

00-04 years 12,095 10,771 22866.0 11,898 10,211 22,109 05-09 11,991 10,857 22.848 11.273 9,750 21,023 10-14 12,438 11,087 23,525 11,733 9,980 21,713 15-19 10,919 9,977 20,896 11,479 9,656 21,135 20-24 7.868 7.132 15,000 8,502 7,295 15,797 25-29 4,968 4,705 9,673 6.040 5,523 11,663 30-34 3,412 3,450 6,862 4.385 4,232 8,617 35-39 3,043 3,122 6,165 3.172 3,193 6,365 40-44 2,986 3,014 6,000 2,953 2,976 5.929 45-49 2,564 2,594 5,158 2.722 2,674 5,396 50-54 2,476 2,419 4.895 2,510 2,381 4,891 55-59 2,087 1,868 3,955 2,151 1.932 4.083 60-64 1,459 1,421 2,880 1,805 1,586 3,391 65-69 944 932 1,876 1,169 991 2,180 70-74 605 637 1,242 724 691 1.415 Over75 678 940 1.618 839 943 1.782 Not Stated 494 396 890 15 24 39

Source: Departmentof Statistics, Census. I la Preliminarycount. Distributionby age group was not available as of February1993. Table 12: GOVERNMENTEMPLOYEES & SALARIES/a

Totalsalaries Averag safy Employees (TaD 000) (rsatpesa)

Depattment 1989 1991 1989 1991 1989 1991

Agdculture,Forestry & Fisheries 257 292 1,420 2,010 SS27 6.885 AttomeyGenerai 14 15 220 244 15,742 16,271 Audit 15 23 172 224 11.498 9,734 Broadcasting 32 29 273 273 8,525 9.427 Customs 45 43 352 400 7.824 9.293 EconomicDevelopment 24 - 258 - 10,653 - Education 1,785 1,817 10,161 12,631 5.892 6,952 Forign Affais 23 24 569 294 24.757 12,247 Health 855 859 4.678 5.167 5,469 6,015 InlandRevenue 55 58 381 476 6.558 8,202 Justice 71 74 641 839 9,029 11,340 Labour 15 17 144 184 9,610 10.798 Lands& Enmronment 71 84 479 80 6.753 9,518 Lands&TidesCourt 43 45 315 393 7,333 8,731 PostOIRce 231 259 1,371 2,116 5,936 8,168 Public Sevice CommIssion 29 37 350 548 12,070 14,817 PubicTrust 11 .. 137 .. 12,457 PublicWorks 241 311 1,479 2,234 6,137 7,184 PdmeMinistees 89 105 530 840 5,955 7,998 Statistics 31 35 188 252 6,015 7,191 Trade,Commerce & Indut - 22 - 277 - 12,569 Trnspo*t 40 61 304 574 7,600 9,402 Treasucy 122 106 818 1,040 8M687 9,815 Women'sAffalts - 6 - 68 - 11.323 Youth,Spofts&CutturalAffars 12 17 137 216 11,428 12.720

Total 4,111 4,339 25,352 32,098 6,167 7,398

Source:Deparment of Statisticsand Pubic Serice Commission.

/a Excludescasual employees. Table2.1: GDP BYINDUSTRIAL ORIGIN. 192492 (retlamoflon)

1962 1983 1984 1985 1986 1987 1988 1989 1 1991 1992P

At currentprices

Subsistence 37.3 43.7 47.4 51.6 57.9 58.7 625 Agticulture, 662 75.3 68.7 71.9 forestry& fishig 26.6 32.7 39.8 42.9 435 442 43.6 ManufacturIng 53.3 40.5 42.1 38.7 13.9 21.3 29.0 32.0 28.9 31.1 36.5 323 31.9 29.4 29.8 ElectrIci 4.3 5.9 8.7 8.6 8.0 9.0 11.0 Construction 1A 123 15.4 16.0 1.6 3.9 2.0 2.9 4.1 7.0 9.8 5.7 7.1 7.4 10.1 Distdbution,rest & hotels 9.4 11.4 132 15.7 18.8 202 Transportation 22.4 25.6 30.3 30.7 2"8 4.7 5.4 6.6 7.0 5.1 5.6 5.1 52 6.7 8.3 10.5 Otherserices 10.9 13.0 14.8 16.5 17.5 18.7 20.8 Govemment 223 26.3 28. 29.4 152 16.3 17.5 19.4 24.5 24.9 28.4 31A 38.5 37.7 41.9 GDPat FactorCost 123.9 153.8 179.0 196.6 208.3 29.A 240.3 253.4 266.9 2662 277.1 Net IndirectTaxes 24.8 30.7 372 45.8 44.7 542 555 612 69.8 GDP at MarketPdoes 81.5 88.7 148.7 184.3 2162 242.4 253.0 273.6 295.8 314.6 336.7 347.7 365.8

At 1982pdoes

Subsistence 37.3 37.9 37.9 37.6 39.6 36.0 38.0 40.3 37.6 34.6 Agriculture,forestry & fishing 32.4 26.6 27.5 26.9 25.8 29.5 27.7 25.1 282 20.3 21.2 17.4 Manufacturing 13.9 15.8 15.4 182 18.8 19.1 19A Electrcity 17.8 18.2 13.6 12.5 4.3 4.4 4.6 4.9 52 5.5 5.9 62 5.8 6.5 6.5 Construction 1.6 4.1 2.0 2.9 3.8 5.9 7.4 42 Distrbution, 4.8 4.6 5.7 rest.& hotels 9.4 9.8 102 11.0 12.5 12.9 13.1 142 Transportaton 14.6 15.0 13.0 4.7 4.8 5.4 5.4 4.9 5.4 5.6 5.7 5.9 Other servicos 6.8 7.5 10.9 11.1 112 11S 11.7 12.0 12.1 12.5 11'2 13.1 13. Goverment 15.2 16.3 15.9 16.8 14.9 15.1 15.8 162 GDPatConstantFactorCost 16.4 17.1 18.1 123.9 131.7 129.5 134.1 140.9 142.6 142.4 145.3 134.5 132.4 126.7 Net IndirectTaxes 24.8 26.3 26.9 312 30.2 35.2 32.9 35.1 35.2 40.5 GDPat ConstantMarket Pdces 40.6 148.7 158.0 156A 165.3 171.1 177.8 175.3 180.4 169.7 173.0 167.3

RealGrowth 6.3 -1.7 3.6 5.1 1.2 .0.1 2.0 -7.4 GDP deflator(1982=100) -1.6 *4.3 100.0 116.6 1362 146.6 147.8 153.9 168.8 174.4 5!D1201.0 218.7

Source:Staff estimates. Table2± GDPBY EXPENDITLIRE, 1982-92

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992p

At currentprices

GDP 148.7 184.3 216.2 242.4 253.0 273.6 2958 314.6 336.7 347.7 365.6 Imports(GNfS) 63A 87.6 107.5 129.5 126.7 151A 175.5 196.0 219.3 268.8 321tA Exports (GNFS) 21.4 41.6 50.0 59.4 53.3 59.8 84.5 1012 102.9 91.0 114.5 Expenditure 190.7 230A 273.7 312.5 326.4 3652 386.7 409.5 453.1 525.5 572.6 Consumption 157.8 190.4 214.3 252.4 266.7 291.1 309.3 326.4 337.3 384.7 419.1 - Private 147.0 165.9 185.9 219.6 230.4 252.3 266.7 271.6 274.1 306.6 333.5 - Govemment 10.8 24.5 28A 32.8 36.3 38.6 42. 548 632 78.1 85.8 Grossinwsment 32.9 40.0 59.4 60.1 59.7 74.1 77.4 83.1 115.6 140.8 153.7 - Private 5.7 6.9 10.3 10.4 10.1 12.9 11.7 15.0 11.1 15.6 20.0 * Govemment 27.2 33.1 49.1 49.7 49.8 61.2 85.7 68.1 104.A 1252 133.7 Domesticsavings -9.1 46.1 1.9 -10.0 -13.7 -17.5 -13.5 .11.* -0.6 -37.0 -53.3 - Prvate -26.6 -22.6 -28.3 *50.9 -52.8 89.8 -77.6 468.7 43.0 -104.7 -119.3 * Government 17.5 16.5 302 40.9 39.1 52.3 64.1 56.9 62.4 67.7 66.0 Net fator income -1.7 -1.8 -3.0 -3.8 -2.3 2.6 1.6 4.7 11.9 9.8 7.7 Net currenttansfers 22.5 31.4 37.8 53.1 63.5 772 73.6 86.6 92.0 74.4 96.0 Nationalsavings 11.7 23.6 36.7 39.2 47.8 62.4 61.9 79.6 103.3 472 50.4 GNP 146.9 182.5 2132 238.6 250.7 2782 297.1 319.3 348.6 357.5 373.5 ONY 169.4 213.9 251.0 291.6 3142 353.4 371.2 405.9 440.6 431.6 469.

Source: Table3.1 and stdaestimates. Table3.1: BALANCEOF PAYMENTS.192492 "18 nUon)

1962 1983 1984 19865 198 1967 1988 1969 1990 1991 199ip Merchandiseexports (ob) 13.5 17.B 16. 10.1 1OS Mecihandiseimports (cii) 1t.6 16.1 12.9 S.9 0.5 6.7 -49.9 -48.8 -50.7 -614 -47.1 481.3 -74.6 -75.5 480.6 -93.6 *111.t Tradebalance -. 4 -31.0 -32.1 -35.1 -36.8 -49.8 -69.5 -62.8 -7t.7 -87.3 -106.8

Non4actotsevices (net 1.6 1.1 - Travelreceipts 0.9 3.9 3.8 6.4 15.8 20.7 21.3 .. 4.7 4.7 13.2 21.1 - Export ocing 6.6 6.6 9.5 15.9 20.1 20.8 15.8 ...... 16.4 - Otherreceipts ...... 4.4 4.0 .. 0.1 28 - Payments 3.8 4.8 7.0 9.7 11.6 15.1 .. -. 1 -7.6 -8.6 15.6 322 -9.6 -10.0 49.6 -10.9 -14.4 -18.3 -20.1 Resourcebalance -34.8 -29.9 -31.3 -311. -32.8 -432 -43.7 -41.9 -50.4 -74.1 484.7 Facor servces(net) -1.4 -1.2 -1.6 -1.7 -1.0 - Ree 1.2 0.6 2.1 6.2 4.1 32 .. 0.1 0.3 7 1.2 3.4 2.9 - PublIclnterest paynents -1.1 -1.0 4.6 6.7 6.5 5.4 -IMFcharges -1.4 -1.7 -1.4 -1.3 -1.3 -1.1 -1t2 -0.3 -0.3 -0.5 -0.6 -1.2 -tA - Oher payments -0.7 -0. -0.4 -0.3 -0.2 -0.1 0.1 .. .. -0.1 -0.1 -0.1 0.3 -0.4 -1.0 -0.1 -1.1 -0.7 Privatetransemrs (net 18.7 20.4 20.6 23.6 29.4 30.4 35.5 382 39.8 31.0 39.3 Currentaccount balance -17.6 -10.7 -12.4 -9.3 -5.4 -5.5 -7.4 -1.6 -54 -39.0 -42.3 Officialtransfers (noe) 14.3 17.0 13.4 11.4 - Extenl grants 15.3 16.9 17.0 16.6 18.1 10.4 14.3 17.7 13.8 11.6 13. -Othe 16.1 17.7 17.7 17.6 192 11.7 14.4 -0.7 -0.4 -0.4 -0.8 -0.8 -0.7 -0.6 -1.1 -1.3 -1.3 Pubic loandlsbursefn"t(net) 5.2 1.9 7.0 - Gross -t.5 -iS 3.0 1.0 2.7 12.1 disbusents 7.0 4.7 10.2 20.7 82 * Princpalrepayments 2. 2.8 6.0 4.2 6.0 15.4 23.6 -1.7 -2.8 -32 -4.0 11.6 -4.3 -3.0 -3.2 -3.3 -3.3 -2.9 -3.4 Other(net) a -0.8 -52 4.8 1.6 3.1 0.3 2A. 4.1 -9.5 6.9 13.6 Useof netforeignassets -1.1 -3.0 -1. -2 -11.3 -14.1 -12.9 -11.7 -15.3 2.0 7.3 Netforeign asset (endof perbo -3.9 -0.9 0.5 2.8 14.1 26.2 41.2 62.6 68.1 68.1 68.9

Source:Central Bank of Samoa.IMF andWord Banksal estimates,and Wowd Bank Debtwor RPPotig Steenm. la Includespriab capitalilbws. vaaion changes.and erofs &emissons. Table32 MER D8SETRADE INDICES, 19642 (1962'100)

1982 1983 1984 1965 198B 1987 1968 1989 1990 1899 t92p

Valuela

Expods/b 100.0 132.3 142.4 115.5 798 872 1143 98.3 67.3 49.9 45.6 Inports 100.0 97. 101.7 102.7 94.4 t230 149 151.3 161.6 168.0 28.

Volume

Expots/b 100.0 124.7 94.8 110.8 114.0 104.3 104.3 97.8 72.0 53.8 Import 100.0 tO2-4 109.4 118.8 110. 1282 1383 131.6 142.4 169.4

Unitvalue /a

Expors /b 100.0 106.1 150.5 1042 70.0 836 109. 100.5 934 829 1mpods 100.0 95.5 2.9 8.5 85.4 95.9 107.6 114.8 113.5 111.0

Termsoftrade a/ 100.0 t1t.1 161.9 120.5 6z20 72 101.7 87S a2"3 83.7

ource:Cnl BSankof Samoa

/a In tems of US Dollars. lb Excludesre4export. Table33: MERCHANDISEEXPOrtS. 1982-92

1912 1983 1984 198S 1986 1987 t98 te t99D199 tQ e

Vau (Us$= 13,481 17,806 18,584 16,132 10,508 11,775 15,102 1284 8.85 8473 5,70 Copa 2,2 908 0 425 469 31 948 1,427 477 - - Coprameal 317 437 322 250 294 357 447 2 162 - - Coconuiti 3,419 7.200 11,278 69893 2,927 4,117 5,622 3,080 1,0 9 - Coconutcremn G1S 778 899 83 1,283 1,46B 1,883 2,245 2414 2,0 - Cocoa 818 O99 1,229 1,0 1,425 1,237 66 945 217 3 - TWeo 1,808 1,540 1,4S8 2,279 1,939 2394 2,502 2,578 1,518 280 - Ebnanas 238 284 15 12 17 19 12 15 1 4 - limber 1,055 351 684 364 265 187 521 8D - Veneer 261 306 177 75 215 17 - FnaujIce 140 312 267 447 143 02 25 33 8 Beer 543 546 472 172 125 221 309 390 373 354 - Cklartes 303 329 314 249 308 291 329 306 254 2E8 - OCierexpo.s 704 582 659 89S 5S9 487 1.116 994 1.181 522 - R.efpoats 9S9 1252 771 1.86 518 859 801 579 458 224 - Voklue(MelOWtn Copra 10.538 4,884 2.,79 3,350 570 3;282 5.944 2400 - _ Copra mald 393 500 4,29 5,96 .152 5.170 5S281 3.058 2,15 - - Coconutol 8,037 12,297 10.651 10,928 11,552 1,527 10.330 6C92 S,188 35 - Coconut a 589 924 923 1lX02 1.166 .. 176 1,557 - Coco0a 782 2,157 662 590 S 852 474 605 220 2 - TWarOCMon"es) 140 110 137 220 188 224 191 264 128 212 - limber COWbdAl) 2627 1,409 1,724 1,277 612 309 9S5 112 18 7 Unitvalue (S$/mnr ton)

CopMa 221 190 .. 155 142 55 293 244 199 t1,45 - Copra nmea 80 84 75 42 48 69 85 94 73 - - Coonut ON 425 590 1,9 S37 233 357 544 490 348 262 - Cocenuteamn .. 1,528 1,387 1.368 1,463 t1,59 1.5l2 1,413 - cocoa 1.062 1,413 1,884 1,807 1.612 1,474 1,2B9 1,588 s8e t;B45 - Taro Mcase) 13 14 11 10 10 11 13 10 12 14 - linteJ 6t0 bdLft) 401 249 397 285 433 604 546 531 50S w58 -

Source:Cental Bnk of Samoa. Table3.4: DESTINATION OF EXPORTS,182O M%Oftota

19182 1983 1984 1985 1986 1987 1988 1989 1990 1991- 1982p

Pacfc 542 47.4 46.5 57.1 66.5 71.7 63.4 62Sz 75.8 92.9 893

New Zealand 27.1 25.4 21.6 29.7 30.3 37.0 27.5 34.5 33.5 49.1 5&6 AusraNa 9.8 12.7 14.1 17.5 21.3 19.5 165 8.7 11.3 23.0 13.8 AmedcanSamea 5.3 6.8 8.0 8.0 9.3 7.1 9.5 21.3 13.8 12.8 Other 17.3 4.0 4.0 3.9 6.9 5.9 12.3 9.9 9.7 7.0 9.1

Norlh Amerka 28.6 31.3 38.1 31.5 9.3 13.3 4.7 9O0 5.8 7.1 10.7

UnitedStates 28.6 31.3 38.1 31.5 9.3 13.3 4.7 9.0 5. 7.1 1Q7 Canada 0.0 0.0 0.0 0.0 0.0 0.0 0. 0.0 0.0

Europe 8.9 12.3 142 9.9 242 14.9 29.8 27.9 182

Germany,Fed. Rep. 5.8 10.2 3.3 8.3 21.3 14.9 29.5 23.2 18.2. UnitedKlngdom 0.1 1.9 6.9 0.0 0.5 0.0 0.0 1.1 Nethedands 1.0 0.0 4.7 1.6 20 0.0 0.3 3.6 Olher 0.0 02 0.0 40.C 0.4 0.0 0.0 .0.0

Asia 10.3 9.0 0.5 1.5 0.0 0.1 21 0.5 02 jawan 7.9 3.6 0.5 1.5 0.0 0.1 0.4 0.4 02 Oe 2.4 5.4 40.0 -0.0 0.0 40.0 1.7 0.1Q

Total 100.0 100.0 100.0 100.0 100.0 100.0 10. 100.0 100.0 100.0 100.0

Source:Central Bank of 8amoa. Table 3.5: ORIGINOF IMPORTS,1982-92 (%Of totaO

1982 1983 1984 1985 1986 1987 1988* 1989 190 1991 1992p

Padcl 58.1 582 48.3 68.9 63.8 592 43.6 40.7 49.7 69.3 72.1

NewZealand 31.0 282 222 32.8 35.9 412 302 34.8 37.3 38.3 Au*alia 37.3 21.4 26.0 9.1 20.1 27.6 186 13.3 5.9 12.4 22.0 24.5 AmodeanSamoa 0.1 0.1 0.1 0.1 0.1 0.0 na na na 1.9 1.5 FIP 5.5 3.8 14.8 16.0 0.0 0.0 na na na 6.5 Othe 8.5 0.1 0.1 0.1 0.1 0.0 0.0 _ _ .. 0.6 0.3 Noth AmeIca 9.8 14.1 5.9 3.8 6.2 5.6 13.5 18.9 9.3 10.3 6.0 UnitedState 9.7 14.0 5.9 3.8 62 5.6 13.0 18.8 9.3 10.3 6. Canada 0.1 0.1 0.0 0.0 0.0 0.0 0.5 0.1 00a Europe 42 4.9 8.3 3.9 10.6 10.3 19.8 23.3 232 4.7 2.1 Germany,Fed. Rep. 2.1 2.4 1.6 12 7.4 3.5 6.6 10.9 10.8 1.9 1.1 United ingdom 1.6 1.0 2.6 1.6 1.9 5.9 12. 11.6 4.6 o0 0.3 Nethderands 0.1 1.1 0.1 0.3 0.2 02 0.6 0.9 7.9 1.7 Othw 02 0.4 0.4 2.0 0.8 1.1 0.7 ...... 0.5 0.5 Asia 27.8 22.1 41.3 23.1 19.6 24.9 2.6 6.7 5.1 14.7 19.4 Japan 11.9 10.5 9.0 13.9 12.3 12.8 2.6 6.7 5.1 9.5 10.6 Singapore 5.7 5.7 17.5 2.0 1.6 3.6 na na na Other 1.5 0.8 10.0 6.5 14.8 72 5.7 8.S ...... 3.7 8.0 Other 0.3 0.1 02 0.3 .0.0 40.0 20.5 10.4 12.6 1.0 0.4

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10. 100.0

Source:Central Bank of Samoa,U.N. Trade Data System, and IMF.Directon of TradeStatdics.

'Data for 1988W90Isdedved from the U.N.Trade DataSystem. Table 4.1: EXTERlNALGRANTS,1982-91 (US$ millon)

1982 1983 1984 1985 1986 1987 t98 1939 1990 1991

Ptotoc gmrnts 13.7 16A4 12.8 tt1.7 12.1 13.8 15.2 15.4 16.3 9A NowZeahntd 2.4 2.5 30 3.4 1.41.8 2.2 2.7 Austdie 22 23 5.0 7.3 5.0 4.1 1.2 4.2 5.2 3.6 EOF 3.7 2.2 1.7 42 1.9 0.7 0.0 OB 0.1 Cennafny, 02 1.2 Fed.Rep. 0.5 0.1 0.9 0.4 1.2 1 1.3 Japn 1 t 0.6 27 1.3 0.2 0.2 42 42 6.0 72 5 Netherands Q.1 0.1 02 02 0.0 0.0 5^ ~~~UNDP 00 0.0 0.0 0.0 1.2 0.7 0.9 0. 0.1 OA. 0S 1.1 9 ~~~~Other 0OA 0.3 0.1 0.3 0.8 0.4 Q1 OA 1.3 0. 0.5 t.O Cash& ¢ommodll grants 0.6 1.3 02 0.2 4.0 3.9> 2S 22 2.9 4.2 EEC (STAE) 0.6 1.3 0.0 0.2 3.9 3.9 2.3 Olher 21 20 3.1 0.0 0.0 0.9 0.0 0.1 O 0.2 0.1 0.9 1.1 Totalgrawt 14.3 17.7 13.8 11.8 16.1 17.7 17.7 17. 192 13.6 OfwhMh: Expendituresabroad la 22 2.3 1.6 1.B 1.7 2.3 21 25 1.S 2.0

Soume:Centrna Bank andTauqy Depatment

/a Indludesexp.ndEture on scholaships and consultanles forwhich dreot paymentsare made by donors. Tae 42: EXTERNALPUBLIC DEfTf AND DEBTSERVICE '982U92 (US. '009

1982 1983 1984 1985 l986 1987 198 889 190 1991 1992p

Debtoutstandg & disbursed 60,311 80,317 64,184 84,619 65,80 71,07 71,165 71,866 90,972 112,948 121,187

Mulateral loans 43,703 46,590 51,89 53,742 55,788 59,967 59,832 61,283 61,078 103,761 112,984 BSlateral loans 11,731 10,782 8,072 7,659 7,067 9,528 9,488 0,20 ,S542 7,942 7391 Private rdlts 4,877 2,965 4,150 3,245 2,405 2,312 1,845 1,374 1352 1245 812

Grossdisbursements 6,972 4,722 1027 2,470 2,776 6,018 4,182 5000 15,349 23,637 11J,54

Mulfilateraloans 5,819 4,213 7,254 1,452 1,827 3,499 3,090 3,986 14,999 23,357 11,318 S11>ltrslsns 1,154 509 973 1,018 949 ,10 1t,092 1,014 350 280 276 PiMo credlort 0 0 2,000 0 0 0 0 0 0 0 0

Intermstpayments 1,140 1,C05 1,359 1,688 1,413 121 1,291 1,099 1,196 1,194 t,406

Multeatral loans 233 359 420 456 537 624 674 641 739 883 1,146 Bilateralloans 380 305 789 843 613 480 464 341 375 231 199 Prvatecredtors 527 341 150 387 283 167 153 117 82 80 61

Pdncipalrepayments 1,745 2,845 3,24, 3,961 4,316 3,001 3,Z 3,310 3,255 2,923 3355

Muldialendloans 417 587 968 1,308 1,498 1,812 t,976 1,834 2.229 2,t88 2,035 Bilater loans 335 729 2,262 1,644 t,896 789 845 1,07S 1,028 735 827 Pivat credtors 993 1,529 17 999 924 400 399 400 0 0 433

Totaldebt seAce 2,885 3,850 4,606 5,639 5,729 4,272 4,511 4,409 4,451 4,117 4,761

MuHlilabtaloans 600 946 1,388 1.768 2,033 2,436 2,660 2,475 2,S88 3,071 3,241 Blaeral loans 715 1,084 3,051 2,487 2ss50 1,29 1,309 1,417 1,401 966 I,m Privatecreditors 1,520 1,870 167 1,386 1,187 567 552 517 62 s0 404

Source:Wodd Bank,Deblor Repoting System. Table5.1: CENTRAL QOVERIMENT BUDGEt, 1982.82 (ralemmlon)

I 1982 1983 1984 1985 1986 1987 8988 1989 1990 1991 1992p

Rewnue 28.3 41.0 0.0 73.7 75.4 91.1 106.7 111.7 125.6 145.7 151.6 Tax 23.9 34.1 49.9 59.5 60.8 69.0 72.7 81.5 91.7 111.3 118.3 Non-tax 4.4 6.9 .49.9 142 14.0 22.1 34.0 302 33.9 34.4 33.3 ExWnalWants 14.3 26.3 25.3 2B.5 30.0 37.0 36.9 39.9 44.3 28.0 352 STAEXt 0.7 2.0 0.0 0.3 8.8 8.3 4.8 4.7 4.7 0.0 0.0 Olho commodity 0.0 0.0 1.7 0o0 0.1 0.0 0.4 0.2 20 0.7 0.7 Protect 1b.6 24.3 23.6 282 27.1 29.3 31.7 35.0 376 27.3 34.5 Expenditure 59.4 608.0 82.9 91.0 93.3 107.8 108.7 128L. 173.6 208.4 22" Current 31.7 29.0 33.6 41.3 4a7 46.4 48. 60.5 06.9 8e2 89.9 Deelopment 27.7 390 49.3 49.7 49.6 612 57.9 68.1 104.8 1252 133.7 Nettonding la 2.8 1.3 12.7 11O.7 11.3 1t36 18. 19.9 7. 3.6 122

Treayw advances(nOt \b .. .. 5.9 8.5 7.1 8.9 7.3 9.8 3.5 -t.9 0.1 Capil accounts .. .. 6. 22 42 4.7 11.3 10.1 4.1 5.7 12.1

Oveallbalance -19.6 .2.0 -70.3 -1.5 6.8 7.5 183 3&1 -11.4 -38. .49.1

Financedby

Extemalbonowing (neQ 82 32 3o 1.7 21 6.1 2.3 3.0 292 57.0 270

isbursments .. . 5.5 5.6 6.8 t1.6 8.3 10.6 38.1 65.7 338 Repaymnt .. .. -25 4.? -. 5 40 -7.0 .6.s.1 .0.1 Domes fiancing (net 11.4 -12 67.3 402 89 -13.5 -2.6 4.7 -17.8 19.1 21.4

Bankhtusystm .. 8.4 8 -15.4 -18.0 -21.5 15.4 44 .30.11 Nonbanklo .. .. 58.9 s6 6.5 4.5 0.9 8.7 -4A 11.0

Source:Treasury Depadent & staffestimaees. /a inludes netloans and advance lo publicenterbss, capitadsutedplons & landpurches. hbChange In net bfeign ast hodis of theTa_y. /a includeslong-em beasuty bonds & a esidualitem. Table52: CENTRALGOVEM JMENT REVEUE, 198292 (Talamion)

1982 1983 1984 1985 1988 1987 1988 1989 1o0 199t 1892p

Incometax 8.4 11.0 12.7 13.7 16.0 14.9 172 21.3 21.9 30.2 30.1

Taxeson goods & sees 3.5 3.9 7.0 9.8 10.8 13.1 13.8 16.1 16.8 18. 19.1 xise tax 3.5 3.9 .9 9.7 10.6 12.1 12.7 14.5 15.2 16.5 18.5 - Domestic .. .. .O 8.0 9.0 9.8 10.6 12.2 12t 13.4 128 - Import .. .. 1.9 1.7 1.8 23 21 2.3 3.0 3.1 37 Goods& seloes taox 0.0 0.0 0.0 0.0 0.1 0.9 1. 1.3 1.3 1.8 2I Businesslicense .. .. 0.1 0.1 0.1 0.1 0.1 0.3 3..3 0.5 0.5 Taxeson intematonaltrade 11.8 18.5 29.3 35.1 32.4 40.8 412 44.1 62.6 61.9 68.7 Importduties 11.0 17.5 27.9 32.5 30.4 38.7 38.7 41.8 49.7 592 68.0 Exportlvy 0.2 0.3 0.3 1.3 0.7 0.8 0.7 .6 0.7 0.0 0.0 0.1 Foregn eoxhangeby 0.6 0.7 1.1 1.3 1.3 1.5 1.8 1.7 22 2.7 2.7 Othertaxs 0.2 0.7 0.9 0.9 1.6 02 0.5 0.0 0.4 0.4 0.4

Totaltaxrevenue 23.9 34.1 49.9 59.5 608 69.0 72.7 81.5 91.7 1113 113

Nontaxreenue 4.4 8.9 8.7 14.1 14.7 22.1 34,0 302 33.9 34.4 33.3 Fees& sevice chages 1.8 2.0 2.6 2.7 2.6 3.4 3.5 4.0 4.6 5.7 5.8 Departmententerpdsos 1.5 32 2.2 4.7 5.8 7.5 9.7 8.4 7.3 8.9 132 Rents,royaltes & Interest 0.5 1.3 28 32 4.8 8.9 19. 15.3 10.6 14.5 Oter a 0.6 0.4 1.1 3.5 1.5 2.3 1.8 25 11.4 5.4 4.4 Totalrevenue 28.3 41.0 58. 73.7 75.4 91.1 1083 111.7 1258 145.7 151.6

Soure:Tasu8y Departent & sa esmate. /a Includessales of gomrnmntsupplies. Table5.3: CENTRAL GOVEFNMENT EXPENOlR. 1 92 (ralemlbn)

1992p 1982 1983 1964 1985 198S 1987 1988 1989 1990 1991

46.4 488 60.5 68e 8632 69.9 Currentexpenditure 31.7 29.0 33.6 41.3 43.7 16.7 17.7 23.1 23.5 26.9 39 33.6 37.6 41.8 Salatdes&wages 13.3 14.A 562 4.4 3.0 4.5 6.5 6.3 6.3 6.5 5.7 S.7 5.7 Interestpayments 3.6 2.9 31 3.5 3.2 2.6 Etermal 4.1 3.5 3.7 2.4 2J8 2.6 2.9 2.8 2.6 2.2 2.0 1.7 - omesic 16.4 16.2 22.9 29.6 40. 43.8 Othfer/a 15.4 9.7 10.4 17.3 14.3 61.2 57.9 68.1 104.8 1252 133.7 Developmentexpenditure 27.7 39.0 49.3 49.7 49.6 17.9 15.7 20.3 17.9 23.4 31.1 32.2 65S5 Domesftallyfinanced /b 8.9 7.1 12.8 33.6 5.2 7.6 12.9 5.6 6.8 11.6 8.3 9.7 36.1 65.7 Project4oanfinnced 29.3 31.7 35.0 37.6 27.3 34.5 Prolect-grantfinanced 13.6 24.3 23.6 262 27.1 107.6 106.7 128.6 173.6 208.4 226 Totalexpendture /c 59.4 68.0 82.9 91.0 93.3

Source:Treasury DOepaitmt & staWfestmates. la Dedvedas a residual;mostly purchaes of goodsand sevces. lb Datafor 1984onward nclude govenmnent payments of impoetduties. lc ExcludesNet Treasury advaces and Capital accounts. Table 6.1: MONErARYSURVEY, 198242 (Talamumn)

Alendofpedod 1982 1983 1984 1965 1986 1987 198B 1989 1990 1991 1992

Net bosgn asset. -25.9 -1.3 12 6.4 31.1 56.8 88.4 121.0 158.5 1619 1599

TrsWy ...... -15.7 -86 3.7 18.8 27.8 436 542 58D Cetra Ban*of Samoa ...... 18.1 32.0 44.1 59.4 87 103.3 1039 979 CommsUIl banks .. .. 4.0 7.6 9.0 102 1OS 11.5 39 4.0 Domestc cre 57.9 48A 50.3 54.9 43.9 30.3 11.9 3.4 4.S -14.3 -2.7

Gowmment ( 31.5 22.0 21.1 20.4 4.9 -13.1 34.6 -50.0 48.5 460.5 -m8.7 Pubi enbtpdse 12.3 10.5 10.1 12.1 12.3 10.5 62 4.1 2.8 2.3 22 Pvabt sector 14.1 15.9 19.1 22.4 26.7 328 402 42. 59.3 63.8 71.8

81OtherHms -0.8 46 -8.7 -9.3 -11.8 6.3 413.3 -162 33.0 -2.9 -27.1

Broadmoney 312 41.5 42.8 52.0 632 80.7 87.0 101.5 121.0 118.7 1202

Money 18.5 16.S 18.6 19.5 21.6 28.7 30.3 332 47.3 42.9 38i.

C nny ous e banks ...... 6.4 92 10.5 10.? 12.5 12.9 14.0 10.6 Demad deposts ...... 11.1 12.5 182 19.5 20.7 34A 29.0 279

Quasmnone 14.7 25.0 242 32.4 41.5 52.0 56.7 68.3 73.7 75.8 81.7

Savi depost ...... 7.9 9.9 11.9 12.8 14.9 17.6 18.6 21.4 Ti depo ...... 245 31.6 40.1 44.0 5&4 56.1 572 60.3

Source:Central Bank of Samoa. TIbla 6± FINANCLLSYSTEM STRICTUSE. 1965-91

End . pu4d 1995 1916 1987 1981 tS1 1t990 1991 1965 1994 19117 186I 1S68 199 t991

TX-t 12.0 9.9 64 30 1.3 0.4 0.4 14B 4.6 4) -15s. -232 42J 41.9

CaaaIBa*cIb a t14.3 16.5 20.4 222 25. 29.4 28.7 53 0.9 0.9 I5 tA 2.7 1.0

CaMusid =3 35.4 37.0 3S.0 352 3St.3 5.3 31.1 3.3 42.7 430 i14* 4$* 54.7

SdW _eumhnu 26.5 27J 2t) 27.7 22 26.5 27.4 23. 27. 32.3 33.1 S33 38.4 40.7 Pr_dcmuckdoi* 7.1 7.6 6.1 S.3 7.0 0. 7.9 7. 6S 10.4 10.5 10t 11.4 14.0 ador ua ua do 39.5 382 36.2 3Jl 37. 32.5 356 49.0 542 58.7 70.5 77.9 4 0.1 W.*

I Pu&*tfiFnd 13.6 1t2 1.6 19.0 17.6 15.1 16.9 21.2 220 212 296 30.4 322 36.5 0O_w llmmemcdW.lMnbW s a 12.6 12A 12* 12. 12.4 10.4 102 21.9 24.3 29.1 .0 37.6 36.1 33.7 tNI P luuaio 3.4 3.0 2. 2.6 8.0 2.7 2.5 0.4 t S 1.6 1.4 1.4 2.0 23 _8m 1m1Us_CDA.uin Cop. 2.4 2.4 25 2. 2. 2 2 2* 1. 2A 2* 3.4 3.9 4.3 4.3 PiMsTAMntO10cm 1.7 1.5 1.J 1.3 1.1 0.9 0.9 2.4 2.S 2.6 2.6 2.7 2.5 2.6 PO"hbOumSk*OU* 0.3 0.7 0.S 0.7 1.0 0* 11 1.3 t1.3 14 1. 1 1.5 26 94ount "mdw lb 0.4 1.1 1.5 3.7

TOM 100.0 100.0 1008 1009 100.0 10090 100* 186* 100* 1009 100.0 100* 186* 100*

AhutkT,ab n 200B 235.5 27.7 3056. 363.5 472.2 475.1 t13.4 112. 100.2 114.1 114.7 130.5 126)

Gami: C _dIASO Sa.

U,. nmtbadL A The tI1_ Coo-MaUanhGodbwudimopeianh inMay1IND. Table6.3: INTEREST RATES, 1983-92 (%per annum)

Asfrom Feb83 Feb85 Mar86 Sep86 Jan87 Nov88 Nov90 Nov91 May92 Aug92

Depositrates

Savngsdeposits 8 7 7.5 7.5 7.5 7.5 7.0 5. 5.5 4.0 nimedepoits /a - I month 10 10.5 10 9.3 9.3 7.5 6.0 6.0 45 - 3 monfhs 14 12 12.5 11 10.3 10.3 8S 7.0 7.0 5. - 6 months 15 13 13.8 12.0 12.0 12.0 9.5 8.0 8.0 6.5 - 12 month. 17 15 15 -- Neogoable - 10.5 9.0 9.0 7.5 -24 months 17 15 13.8 - Negotiable - 10.5 9.0 9.0 7.5 Lancingrates

Commercialbanks/b 14-20 15.18/c 15.19 14.175 14.17.5 14-17 9-15 0-13 9-13 12 lh DevelopmentBankofWestemnSamoa 8-17 10-1t1d 10-16 8-1610 8.16 8-16 8-12 lo 812 8-12 8-12 NationaiProWdentFund 8-17 10-17 10t17 10-17 10-17 10-17 10-12 10-12 10.12 10-12 PublioTnist&WSLAC housng) 10-12.5 12-15 12-15 12.15 12.5-16f 12-16 13-16 12-15 12-15 12-15

Source:Central Bank of Samoa.

/a EffectiveSeptember 15 1986, the ratesfor term deposits In excessof WS$20,000 and all ratesfor terms over6 months weroe opened to negotation. /b EffectiveSeptember 15 1986, a penaltyrte of 19%to becharged on amounts In excessof greedovet imits. /c FromSeptember 1 1985to March161986,21% for Importflnancing. Id FromMarch 1 1985, lo FromOctober 1 19868. nfiFrom July 1 1987. 1/ FromFebwary 1, 1990. lb TheInterest rates for both term loans and overdrafts were changed to 12porcent At the sametime, interest rates on af timedeposits for sumsIn excess of$50,J00 were allowed to benegotiated, but subjectto a mWinmumrate of 45 percent Tabb0.4: CONSUMERPOICE INDEX, 19102

Parodomp Weghb 10980 1981 1982 1983 1984 1985 1966 1987 198B 1989 t950 1991 192 a

hice (1980D100)

Food 58u 100.0 12Q2 145.6 167.6 182.3 200.2 213.1 219.1 239.4 2465 296.4 272.1 3054 C nfoobmw 4. 100.0 123.8 141A 168.6 195.2 2103 2282 235.3 249.4 2882 283 2926 298.8 Housing& householdops 1. 1100.0 135.2 1629 184.5 209. 219.4 224.1 227.0 239.4 2539 2795 3095 31Q0 Transpostcawmialloms, 9.0 10O. 112.2 1280 149.8 1520 160.5 159.1 168.8 187.3 209.0 227.5 264.3 274.7 I _madansaw 15.0 100.0 114.7 124.6 151.4 19S.6 220.4 238.5 268.4 300.3 33.6 361.6 380.6 412.6 hnpoetoonuIFntI 50.3 100.0 171.4 201.2 217.4 216.9 210.3 228.1 25.3 29.4 278.9 2851 (D gmups) ANgroups 100.0 100.0 120.5 1426 168.4 185.7 20Z6 214.3 224.1 243.6 25B8 298.0 294.1 320.1

Annualchanges(%

Food 2.2 21.1 151 8.8 9.8 64 2.8 9.3 .0 20.2 8.2 100.0 Cbotn & fooe 23.8 14.3 19.2 1S.8 7.7 8.5 3.1 0.0 7.5 5.7 32 2.1 lHawin& hotueholdaps 352 20.5 13.3 13.6 4.7 2.1 1.3 &5 6.1 10.1 10.7 02 Tanapod&ommumlcations 12.2 14.1 17.0 1.5 5.6 49 6.1 4.9 24.9 8.8 16.2 3.9 mbellanous 14.7 8.6 283 24.9 12.1 8.2 12.5 11.9 11.1 8.4 S.3 8.4 l1alm" colbPenwt 17A 81 .02 0.3 65 10.2 72 3.5 2.2 (angOoup) ADgfoups 20.5 t83 16. 116 9.1 5.6 4.6 8.7 62 15.1 -1.3 8.

Souroe O _pamutd Swtdas la hiragemmarysepternim. 1992. Table 7.1: VISITORARRIALS BY PRINCIPALMARKETS, 1984.91

1984 1985 1988 1987 1988 1989 1990 1991

AmedcanSamoa 15.529 17,399 20,371 16,530 16,839 18,806 17.798 9.665 Other Pacific 2,930 3,260 3,720 4,069 4.271 4,537 7,382 4,223 New Zealand 8.174 10,114 11,730 13,694 13,567 13,070 8,634 8.362 Australia 5,589 5,004 4,608 4,591 4,668 7,397 4.272 6,044 UK 428 292 312 318 408 417 1,242 448 Germany 937 734 985 1,125 1,367 1,289 1.030 1,685 Other Europe 1,030 1,161 997 1,162 1,243 1,538 2,242 1,293 USA 3,969 4,299 5,466 5,673 5,124 5.343 3,211 4.307 Canada 336 249 386 356 362 357 333 331 Others 1,496 1,417 1.133 1,147 1,249 1,240 2,000 2.951

Total 40,440 43,919 49,710 48,665 49,088 53,994 48,154 39,309

Soutce: Depatment of Staistics. WESTERN SAMOA _~~~~R \~ ^ oVoltP4t~ ~ ~~~~~~~~~~i.u~n EI n P.t 0040009 Groi)r *.an 400

1000-low199 It "--p ~~~~~~~~~~~~~~0-999

0 Tovwn.

SOUTH PACIFIC OCEAN

Apolimo Island 3 Lsuvu

cA~~otnaM t7fcn0 M

OCEAN

"~ I SOUi2H PACIFIC

/ A S0O*JA 5 140wa.tfOifd dOfr 1;~~~~~~~~~~~~~~~~~hD t*^ f4Dw 100 i OtTh.dos..0.,4teOn4X CEA4