BTE Publication Summary Christmas Island Regional Analysis: Report prepared for the Indian Ocean Territories Review Subject Special Report Series This Report presents the results of the BTE's regional analysis of Christmas Island. It covers key social and economic features, factors affecting economic Date development, the outlook for individual areas of economic activity, and economic sustainability. A related BTE report provides a regional analysis of the Cocos (Keeling) Islands. A to Z Search Results Print Exit GO BACK Bureau of Transport Economics CHRISTMAS ISLAND REGIONAL ANALYSIS December 1998 Commonwealth of Australia 1999 ISSN 1440-9607 This work is copyright. Apartfrom any use as permitted under theCopyright Act 7968,no part may be reproduced by any process without prior written permission from the Commonwealth available from Auslnfo. Requests and enquiries concerning reproduction and rights should be addressedto the Manager, Legislative Services, Auslnfo, GPO Box 1920, Canberra, ACT2601. Other enquiries tothe Bureauof Transport EConomics, GPO Box 501, Canberra ACT 2601, Australia. Telephone (international)+61 2 6274 6846,fax +61 2 6274 6816, email bteQdot.gov.au httD://www.dot.aov.au/uromams/bte/btehome.htm Published by Bureau of Transport Economics, GPO Box 501, Canberra ACT 2601, Australia. Indemnity Statement The Bureau of Transport Economics has taken due care in preparing these analyses. However, noting that data used for the analyses havebeen provided by third parties, the Commonwealth givesno warranty to the accuracy, reliability, fitness for purpose,or otherwise of the information. FOREWORD This report presents the results of the BTE's regional analysis of Christmas Island. It covers key social and economic features, factors affecting economic development, the outlook for individualareas of economicactivity, and economic sustainability. A related BTE report provides a regional analysis of the Cocos (Keeling)Islands. The regional analyses of Christmas Island and the Cocos (Keeling)Islands were prepared for the Indian Ocean Territories Review. The primary purpose of the Review wastoundertake an assessment of the long-term economic sustainability of theIndian Ocean Territories andto identify options and recommend future funding arrangements for the Territories. The Review was conducted jointly by the Department of Transport and Regional Services and the Department of Finance and Administration. The Christmas Island regional analysis was prepared by Kym Starr (project leader) andJoshua Gordon. Greg Harper Director Bureau of Transport Economics Canberra December 1998 .. 111 CONTENTS ... FOREWORD 111 ... SUMMARY Xlll CHAPTER 1 INTRODUCTION Approach Outline of the report Acknowledgements CHAPTER 2 GEOGRAPHY AND SOCIAL OVERVIEW 3 Geography and climate 3 Population 3 Legal and institutional framework 7 Infrastructure and facilities 10 Social indicators 13 CHAPTER 3 ECONOMICOVERVIEW 15 Major economic activities 15 Income and expenditure 20 Taxes and charges 22 Subsihes and allowances 23 Transport services 24 CHAPTER 4 FACTORSAFFECTING ECONOMIC ACTIVITY AND DEVELOPMENT 27 R esources available 27 available Resources V External demand conditions 32 Competitive position 32 Economic management 39 Community attitudes to change 41 Assessment 42 CHAPTER 5 OUTLOOK FOR EXISTING AND POTENTIAL ACTIVITIES 43 Phosphate 43 Tourism 44 Satellite launching . 47 Public sector 48 Commercial fishing 49 Horticulture 49 Services forAsia 50 Military uses 51 Other activities 52 Assessment 52 CHAPTER 6 ECONOMIC SUSTAINABILITY 53 Approach 53 Commonwealth funding 55 External remittances 56 Investment income 57 External salesof goods and services 57 Assessment 60 CHAPTER 7 PROMOTING DEVELOPMENTAND SUSTAINABILITY 63 Air transport 63 Land 65 Infrastructure 65 Promotion and co-ordination 66 Synergies 67 vi Role of the public sector 68 APPENDIX 1 MEETINGS ON CHRISTMAS ISLAND 71 REFERENCES 73 vii FIGURES Page 2.1 Maps of ChristmasIsland 4 3.1 Major areas of economic activity on Christmas Island 16 4.1 Factorsaffecting economic activity and development 28 6.1 ChristmasIsland: major funds flows 54 ix TABLES Page 2.1 Age distribution of population onChristmas Island and in selected communities, 1995 6 2.2 Household composition on Christmas Island and inselected communities, 1995 6 2.3 Provision of major serviceson Christmas Island by public sector agencies, November 1998 8 2.4 Accommodation arrangements on Christmas Island and in selected communities, 1995 11 2.5 Ownership of dwellings on Christmas Island, September 1998 11 3.1 Estimates of employment by sector and organisation on Christmas Island, September 1998 17 3.2 Profitability and selected feesfor Christmas Island casino, 1993/94 to 1996/97 19 3.3 Social security payments to Christmas Island residents, 1996/97 21 3.4 Sources of household income on Christmas Island and in selected communities, 1995 21 3.5 Passenger arrivals and inbound freight at Christmas Island airport, 1993/94 to 1997/98 26 xi SUMMARY Christmas Island is one of Australia’s Indian Ocean Territories. It is located about 2 600 kilometres from Perth, 900 kilometres from the Territory of Cocos (Keeling)Islands and 360 kilometres from Java. SOCIAL ASPECTS Christmas Islands population was 1 900 persons at the last census in 1996. It has subsequently declined to 1 600 persons or less as a result of a major fall in the level of economic activityon the island. The community on. Christmas Island is multi-cultural. The ethnic profile is Chinese 65 per cent, Malay 20 per cent and European 15 per cent. Around 80 per centof residents have a first language other than English:There are significantsocial and cultural links toCommunities in Asia and Western Australia. The health of Christmas Island residents is generally comparable to average levels on the mainland. Unemployment is unofficially estimated at 10-15 per cent but there is also significant underemployment, particularly in the small business sector. Almost100 per cent of Year 10 students proceed to study Years 11 and 12 on the mainland, and many of these students subsequently attend a tertiary institution. The Commonwealth has an objective of aligning conditions and standards on Christmas Islandwith those ofcomparable communities in the rest of Australia. It has therefore funded a major program of capital works to upgrade infrastructure and facilities, with expenditure of more than $100 million since 1991/92. AREAS OF ECONOMIC ACTIVITY In recent years the major areas of economic activiw on Christmas Island have been phosphate mining,tourism, the public sector, and contracting and services. There has been a substantial reduction in the overall levelof economic activity overthe last 12 months, particularly reflecting a decline in tourism. ... XU1 Phosphate mining provides 133 full-time and 65 part-time jobs on the island. Revenue from phosphate sales, mainlyinvolving markets in Asia and Australia, increased to almost $44 million in 1997/98. Tourism was a major source of income and employment on Christmas Island until 1997/98. The resort/casino employed over 300 people prior to its closure in April 1998. Tourism activitiesin other areas, such as diving and fishing, have also declinedand are currently at low levels. The other private sectoractivities on Christmas Island are contracting and various services, which often involve work for the public sector. They provide an estimated 180 full-time jobs and 160 part-time jobs. Many small businesses on the island have reported sales declines of 30-40 per cent over the 12 months to September1998, reflecting thereduction in tourism and a lower population. The Commonwealth funds a wide range of services and infrastructure on Christmas Island and also has a significant operational role. In addition, it provides some explicit subsidies (eg for air services).Many State-type functions are delivered for the Commonwealth by Western Australian agencies under service delivery arrangements. Public sector agencies, which are mainly funded by the Commonwealth, have around 210 full-time employees and a small number of part-time employees on the island. In addition, a significant proportion of private sector employment, in areas such as contracting, involvesCommonwealth-funded activities. FACTORS AFFECTING ECONOMIC OUTLOOK Future prospects for Christmas Island's' economywill be affectedby the resourcesavailable, external demand (particularly conditions inAsia), the competitive position of the economy, economic management and community attitudes to change. Christmas Island is located close to Asia, has an attractive natural environment, contains significant phosphate deposits, has a low crime rate and is free of major tropical diseases. However, the population is relatively small, there are constraints on access to land, and the cost structure is high. In addition, transport services are limited. Infrastructure is good in some areas (eg the hospital) but below general mainland standards inother areas (eg housing). The major opportunities for further economic development on Christmas Island involve private sector activities. Projects will be viable and contribute to long- term economic development only if they are well-suited to the island's resource base, canoperate within the constraints such as high transport costs, and do not require long-term assistance.The Commonwealth has a role in areassuch as the provision of an appropriate framework for private sector activities and policies in specificareas (eg land release). xiv Tourism will not develop on a significant