Solomon Islands
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Country Report Solomon Islands December 2005 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2005 The Economist Intelligence Unit Limited. All rights reserved. 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Solomon Islands 1 Contents Solomon Islands 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2006-07 8 The political scene 9 Economic policy 11 The domestic economy 12 Foreign trade and payments The region 13 Summary 14 Outlook for 2006-07 16 The political scene 17 Economic policy and the domestic economy List of figures 6 Solomon Islands: current receipts of foreign exchange, 2004 6 Solomon Islands: consumer price inflation 8 Solomon Islands: gross domestic product 8 Solomon Islands: consumer price inflation Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 Solomon Islands 3 Solomon Islands December 2005 Summary Outlook for 2006-07 The most likely outcome of the next general election, expected in March 2006, is another coalition government led by a few veteran politicians, whose main focus will be on inducing fickle allies to stick together. Substantial funding from the Australian government will continue to support the repair and reconstruction of government institutions and the economy, which were crippled by the two-year civil war in Guadalcanal that followed a coup in 2000 by militants from the island of Malaita. Funding from the EU, New Zealand, Japan, Taiwan and other donors will also support the Australian-led Regional Assistance Mission to the Solomon Islands (RAMSI), which is expected to remain in place for many years. The economy will continue to recover, supported in part by foreign investment in tourism, timber-milling and palm oil production. However, landowner hostility could frustrate the planned reopening of mines, while overlogging poses a serious threat both to the environment and to the timber industry’s long-term future. The political scene Some new parties have appeared on the political scene in recent months, and dormant ones revived, ahead of the next general election. The fisheries minister has resigned after causing the government considerable embarrassment by supporting Japan’s bid to relax the International Whaling Commission’s (IWC) curbs on whaling. Several other cabinet ministers have also been replaced. Economic policy The Australian government has agreed to fund some crucial infrastructure improvements. A Japanese mining firm is likely to be given the go-ahead to begin prospecting for nickel and cobalt. The domestic economy The central bank estimates that real GDP rose by 5.5% in 2004. Tuna landings fell in the 12 months to August 2005, although tuna prices were significantly higher than in the year-earlier period. Palm oil exports will resume in 2006, which is earlier than expected. A new business centre has opened in the capital, Honiara. Foreign trade and payments Foreign reserves reached a new high of SI$669m (US$89m), equivalent to 5.5 months of import cover, at the end of September 2005. Editors: Kate Allard (editor); Kil Dosanjh (consulting editor) Editorial closing date: November 29th 2005 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 4 Solomon Islands Political structure Official name Solomon Islands Form of state Constitutional monarchy The executive UK-style cabinet, led by the prime minister, who is chosen from and by parliament Head of state Queen Elizabeth II, represented by a Solomon Islander governor-general, currently Sir John Ini Lapli National legislature Unicameral, 50-member national parliament, elected for a four-year term Local government The islands are divided into eight provinces and one town council (Honiara) Legal system English-style system; a series of lower courts leads to the Court of Appeal National elections December 5th 2001; the next election is due in early 2006 National government After the armed takeover of the capital, Honiara, in June 2000 and the forced resignation of the elected government, an administration led by a former finance minister, Manasseh Sogavare, was installed by a highly questionable parliamentary vote. Pressure from lenders and aid donors forced a new election in December 2001, when Sir Allan Kemakeza’s People’s Progressive Party won 16 seats and formed a coalition with 13 independents Main political parties The People’s Alliance Party (PAP); the People’s Progressive Party (PPP); the Association of Independent Members (AIM); the Solomon Islands Alliance for Change (SIAC); the Liberal Party (LP); the Solomon Islands Labour Party (SILP) Prime minister Sir Allan Kemakeza Deputy prime minister & education Snyder Rini Key ministers Agriculture & livestock Enele Kwanairara Commerce, industries & employment, tourism Trevor Olavae Communications, aviation & meteorology Simeon Bouro Finance Peter Boyers Fisheries & marine resources Mathias Taro Foreign affairs & trade relations Laurie Chan Forests, environment & conservation David Holosivi Home affairs Nelson Kile Infrastructure & development Alfred Sasako Lands & survey Siriako Usa Mines & energy Frank Pulo National unity, reconciliation & peace James Tora Planning & reform Fred Fono Police, national security & justice Augustine Taneko Central Bank governor Rick Hou Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 Solomon Islands 5 Economic structure Annual indicators 2001a 2002a 2003a 2004a 2005b GDP at current prices (SI$ m)c 1,436 1,528 1,588 1,705b n/a Real GDP growth (av; %)d -9.0 -2.4 5.6 5.5 3.8 Consumer price inflation (av; %)c 7.7 9.3 10.0 7.1 6.0 Population (‘000)c 476 490 508 521 n/a Exports fob (US$ m)c 47 58 74 97 n/a Imports cif (US$ m)c 82 65 67 72 n/a Current-account balance (US$ m)c -33 -4 27 67 n/a Reserves excl gold (US$ m)e 19.34 18.25 37.20 80.58 n/a Total external debt (US$ m)c 162.7 180.4 185.7 n/a n/a Debt-service ratio, paid (%)c n/a n/a n/a n/a n/a Exchange rate (av; SI$:US$)e 5.278 6.749 7.506 7.485 7.52 a Actual. b Economist Intelligence Unit estimates. c Asian Development Bank. d Central Bank of the Solomon Islands. e IMF, International Financial Statistics. Origins of gross domestic product 2002a % of total Agriculture 47.7 Mining n/a Manufacturing 4.1 Electricity, gas & water 1.8 Construction 2.3 Trade 10.4 Transport, communications & finance 10.1 Principal exports fob 2004a SI$ m Principal imports cif 2004a SI$ m Timber 468.2 Food & live animals 101.5 Fish & fish products 132.1 Mineral fuels 174.8 Cocoa 40.4 Machinery & transport equipment 64.5 Copra 25.5 Basic manufactures 48.4 Main destinations of exports fob 2004a % of total Main origins of imports cif 2004a % of total China 28.2 Australia 25.3 South Korea 15.7 Singapore 23.8 Thailand 15.7 New Zealand 5.3 Japan 9.7 India 4.8 Philippines 5.1 Japan 3.9 Vietnam 3.1 US 1.9 a Asian Development Bank. Country Report December 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 6 Solomon Islands Quarterly indicators 2003 2004 2005 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr Financial indicators Exchange rate SI$:US$ (av) 7.519 7.508 7.491 7.472 7.478 7.499 7.503 7.514 Exchange rate SI$:US$ (end-period) 7.513 7.491 7.479 7.463 7.502 7.508 7.51 7.513 Deposit