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Evidence from the Solomon Islands

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Evidence from the Solomon Islands The Peace–Economy Nexus: Evidence from the Solomon Islands Luke Forau A thesis in fulfilment of the requirements for the degree of Doctor of Philosophy School of Business The University of New South Wales December 2015 THIS PAGE IS INTENTIONALY LEFT BLANK i ii iii Abstract An increasing body of research has recently focused on economic strategies for sustaining peace in post-conflict societies. One strand of this literature investigates the nexus between peace and economic growth. However, economic contributions of peace to the economic recovery in a post-conflict society have not been explicitly emphasised in the current debate. Furthermore, the empirical measurement of peace remains contentious due to its theoretical underpinnings, which stem from the definition of peace which refers to the ‘absence of personal and structural violence’. This engenders two continua in the definition of peace – negative peace (i.e. ‘absence of personal violence’) and positive peace (i.e. ‘absence of structural violence’). A definition of this kind partially measures peace if one evaluates only one continuum. There is scope for an alternative. The legitimate peace measured by a peace perception index or PPI offers such an alternative. This thesis investigates the economic contributions of peace to the recovery in a post-conflict economy based on the PPI, with particular reference to the Solomon Islands. It explores the role of peace on the recovery in the economy and examines the extent to which this recovery helps to sustain peace in the long-term. Two theoretical frameworks were employed to empirically evaluate peace. Firstly, at a microeconomic level, a partial equilibrium framework, using household level data, was employed to analyse the impact of peace on (household) income. The findings showed that a one percent improvement in the level of peace associates with a 1.4 percent increase in (household) income. The result also finds that peace transmits to income both directly and indirectly, with the latter coming through foreign and domestic investments. Secondly, at the macroeconomic level, a computable general equilibrium (CGE) framework was applied to analyse the impact of peace on the economy. Simulation results reveal that in the short-run, peace contributed 1.7 percent to GDP and the trade balance, and 2.6 percent to employment. The majority of other sectors of the economy also experienced increases. The CGE simulation also shows that the boost to the economy through the recovery in the private sector improves peace by 1.3 percent. Therefore, this thesis argues that peace is necessary for the growth of enterprises; at the same time improvement in the economy is important for the long-term sustainability of peace – thus the thesis is that there is a strong nexus between peace and economic growth. iv Journal article under peer review Forau, L. and Chand, S. (2015). ‘Measuring peace using household-level data from post-conflict Solomon Islands’. This article will be published in the 2016 September issue by the Journal of Conflict, Security, and Development, and has already been peer reviewed. v Acknowledgements I would like to acknowledge the invaluable assistance rendered to me during the course of my studies. First, I am profoundly grateful to my mentor and supervisor, Professor Satish Chand, for the support, guidance and constructive feedbacks all throughout the course of this thesis. Thank you so much Satish. God bless you. Of course, any errors and shortfalls in this thesis are solely mine. I also extend my gratitude to the School of Business’ administration for providing me with the necessary support to successfully complete this study. Thank you too to the Australian Government for providing me with a scholarship. I am also indebted to the Central Bank of Solomon Islands (CBSI) for supporting my study; the staffers of the Economics, Research, and Statistics Department, thank you for providing the necessary data. To the landowners of the Guadalcanal Plains, in particular the Guadalcanal Plains Resources Development Association (GPRDA) and the Guadalcanal Plains Resources Development Company Ltd (GPRDCL), thank you very much for allowing me to conduct my fieldwork in your communities. Thank you especially, to Brian, Clerrie, and Emily for helping out in my fieldwork. I also extend my sincere gratitude to Mr and Mrs Reuben Tovutovu, for facilitating and supporting my fieldwork. I am also grateful to Roger Benzi, former GPPOL General Manager, and other GPPOL officers for granting permission and their time to interview them. Also to the staffers of the Prime Minister’s Office; Ministry of National Unity, Reconciliation and Peace; and Director Foreign Investment Division, thank you all for your time. I also wish to extend my appreciation to the St Philips O’Connor Parish members for the fellowship and support you have rendered to my family. God bless you all. To my officemate, colleague and friend, Tarek Rana, thank you so much for being around to share our experiences. It would be remiss of me not to acknowledge my extended family. They were (and still are) part of my upbringing, and I am grateful for they are also part of my life. Thus, I extend my utmost sincere thanks to my one and only dear brother and sister-in-law (Sae Rangitisa) and the Children, Sae Nukumotiti, and my dear sisters Agnes and the late Patricia (aka Nau Nukuomai). Fakapere lasi atu kia kotou katoa pereuamaa. Also, I vi extend my gratitude to koko’o Rosina (aka Tole) and Robert, and aunty Bronnie for their continuous support. More importantly, a very humongous thank you to my loving and caring parents, Pama Nukutauia, for raising me and be the kind of person I am today. Finally, but not the least, this journey would not have been completed without the continuous and unswerving support of my dear family. They are part of me, and have stood by my side, both in good times and bad times. My heartfelt and sincere gratitude to my loving dear wife, May O. Forau, and our dear children Hellen, Luke Jr, Roseanne, Emily, Nester, and Peter. Indeed, there is nothing more rewarding than having you guys by my side. I love you all. This thesis is dedicated to my loving wife and children, my dear parents, my brothers and sisters, and to the rest of my extended family. Glory Be to God. Amen. Luke Forau (Pae Teafangamao) vii Table of Contents Copyright and Authenticity Statements ........................................................................................ ii Original Statement ........................................................................................................................ iii Abstract ......................................................................................................................................... iv Journal article under peer review ................................................................................................... v Acknowledgements ....................................................................................................................... vi Table of Contents ........................................................................................................................ viii List of Figures .............................................................................................................................. xv List of Tables ............................................................................................................................. xvii List of Abbreviations .................................................................................................................. xix CHAPTER 1 ............................................................................................................................. 1 INTRODUCTION ........................................................................................................................ 1 1.1 Introduction ....................................................................................................................... 1 1.2 Motivation – The Research Problem ................................................................................ 1 1.3 Objective and Methodology .............................................................................................. 5 1.4 Main contributions ............................................................................................................ 6 1.5 Outline of the Thesis ......................................................................................................... 6 CHAPTER 2 ........................................................................................................................... 10 LITERATURE REVIEW: ECONOMICS OF POST-CONFLICT PEACE............................... 10 2.1 Introduction ..................................................................................................................... 10 2.2 Post-Cold War era ........................................................................................................... 11 2.2.1 Most conflicts have economic bearings ......................................................................... 11 2.3 Theory of peace: defining peace ..................................................................................... 13 2.3.1 Counter arguments regarding the theory and definition of peace ........................... 14 2.4 Measuring peace ............................................................................................................. 17 2.4.1 Negative
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