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Pacific Islands: Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa COUNTRY REPORT Pacific Islands: Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa 3rd quarter 1997 The Economist Intelligence Unit 15 Regent Street, 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 EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. 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 Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 e-mail: [email protected] e-mail: [email protected] e-mail: [email protected] Website: http://www.eiu.com Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202 DIALOG (USA) SilverPlatter (USA) Tel: (1.415) 254 7000 LEXIS-NEXIS (USA) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.171) 930 6900 Copyright © 1997 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1366-4093 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary The region 5 Outlook for 1997-98 6 Review Fiji 10 Political structure 11 Economic structure 12 Outlook for 1997-98 13 Review 13 The political scene 14 The economy New Caledonia 18 Political structure 19 Economic structure 20 Outlook for 1997-98 20 Review Solomon Islands 24 Political structure 25 Economic structure 26 Outlook for 1997-98 26 Review Tonga 28 Political structure 29 Economic structure 30 Outlook for 1997-98 30 Review Vanuatu 32 Political structure 33 Economic structure 34 Outlook for 1997-98 34 Review EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 2 Western Samoa 37 Political structure 38 Economic structure 39 Outlook for 1997-98 39 Review Other Pacific Islands 41 Cook Islands 41 Federated States of Micronesia 42 Nauru 43 Quarterly indicators and trade data List of tables 15 Fiji: consumer prices 15 Fiji: foreign trade, Jan-Mar 43 Fiji: quarterly indicators of economic activity 44 Solomon Islands: quarterly indicators of economic activity 44 Tonga: quarterly indicators of economic activity 45 Vanuatu: quarterly indicators of economic activity 45 Western Samoa: quarterly indicators of economic activity 46 Pacific Islands: direction of trade 46 Pacific Islands: main commodities exported List of figures 12 Fiji: gross domestic product 12 Fiji: Fiji dollar real exchange rate 15 Fiji: foreign trade 15 Fiji: current-account balance 26 Solomon Islands: gross domestic product 26 Solomon Islands: Solomon Islands dollar real exchange rate 30 Tonga: gross domestic product 30 Tonga: Tonga dollar real exchange rate 34 Vanuatu: gross domestic product 34 Vanuatu: vatu real exchange rate 39 Western Samoa: gross domestic product 39 Western Samoa: Tala real exchange rate EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 3 September 8, 1997 Summary 3rd quarter 1997 The region Outlook for 1997-98: Economic growth is likely to continue to be slow for most countries in the region. However, the longer-term situation will improve if the South Pacific Forum states maintain their new commitment to structural reform. Review: The economic ministers of the Forum countries have signed up to an action plan for structural reform, good governance and trade liberalisation. A confidential Australian briefing paper has deeply offended sensitivities in the region. Fiji Outlook for 1997-98: Parliament’s approval of a reformed constitution is a strongly positive development for the investment climate, although serious problems still lie ahead. Review: Parliament has approved the new constitution which reduces com- munal discrimination and provides for multiparty government. A cabinet re- shuffle has brought in the Fijian Association. Inflation was easing down again at mid-year. The trade gap widened sharply in the first quarter but robust tourism earnings pushed the current account into surplus. Sugar production is likely to be close to the 1996 level this year. The privatised shipyard is still looking for a partner. New Caledonia Outlook for 1997-98: The change of government in Paris has set back pros- pects of an early consensus for the referendum next year. Review: The new French premier has sent a special envoy to report on the northern smelter problem. Resolution has been made more difficult by the retention of the current CEO at Eramet, who opposed the ore-swap sought by the Kanak parties. Tourism is booming, but export earnings were down in the first half of the year. Solomon Islands Outlook for 1997-98: The new administration faces a difficult task in tack- ling the government cash crisis. Review: The former opposition leader has been voted prime minister by the newly elected parliament. The UNDP is to aid malaria control. The Gold Ridge project has been challenged in court. Tonga Outlook for 1997-98: Prospects for economic growth continue to be highly constrained. Review: The crown prince has warned that pro-democracy campaigners will “get what they deserve”. Inflation continues at around 2%. The tourism min- ister has proposed a more culturally sensitive form of accommodation for visitors. EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 4 Vanuatu Outlook for 1997-98: Despite persistent political instability, the momentum is being maintained for consensus-based economic reform. Review: The government coalition has been reshaped. The national “summit” on the comprehensive reform programme was held in June. The ombudsman has ruled against the ex gratia payments to MPs made in 1993 and has recom- mended that the current finance minister be dismissed. Western Samoa Outlook for 1997-98: Economic growth will ease down after the sharp re- covery of 1995-96. Review: The country’s name has been changed to Samoa. A passport racket has been revealed. The economic recovery was slowing in the final quarter of last year. The surplus on the balance of payments rose in 1996 despite the wider trade gap. Other Pacific Islands The recession in the Cook Islands appears to have bottomed out. The ADB has provided funding for fisheries management in the Federated States of Micronesia. The Nauru parliament has set up a company to manage the phosphate mining rehabilitation funds. Editor: Graham Richardson All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 EIU Country Report 3rd quarter 1997 © The Economist Intelligence Unit Limited 1997 The region 5 The region Outlook for 1997-98 Short-term growth Few of the islands can look to any surge in economic growth in the next prospects remain modest— 15 months. Instead, most, with the notable exception of Fiji, will see their economies growing in line with population increases. This reflects in part the mixed prospects for the prices of the agricultural commodities and primary materials which these small economies produce in exportable quantities. Prices of edible oils will overall be weakening because of improvements in supply and some consumer resistance to the recent high price levels. Copra prices are expected to weaken in both 1997 and 1998, while prices of coconut oil are forecast by the EIU to fall by 9.1% in 1997 and then to flatten out in 1998. Palm oil prices will be down sharply next year after this year’s slight increase. By contrast, cocoa prices are forecast to rise strongly this year and next (by 9.1% and 12% respectively) because of the shortfall in supply. Nickel, the one min- eral the region produces in significant quantities, has generally bright price prospects because of recovery in demand. But the positive impact is confined to one country, New Caledonia. In general the mining sector remains at a low level of development. Only Fiji is producing gold in any significant quantities, and it is this sector which is currently underpinning GDP growth. Despite the generally sluggish prospects on the export earnings side (except for niche prod- ucts produced in small quantities), the region will benefit from the forecast weakening in oil prices as Iraqi exports resume in the final months of 1997. The fragile economies of the region will therefore remain highly vulnerable to trends in world demand and supply which they cannot influence, and their generally poor resource endowments and relatively high costs mean they are not well-placed to benefit from the ongoing process of economic globalisation.
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