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Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa COUNTRY REPORT Pacific Islands: Fiji New Caledonia Solomon Islands Tonga Vanuatu Western Samoa 2nd 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 8 Review Fiji 11 Political structure 12 Economic structure 13 Outlook for 1997-98 14 Review 14 The political scene 15 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 27 Review Tonga 29 Political structure 30 Economic structure 31 Outlook for 1997-98 31 Review Vanuatu 33 Political structure 34 Economic structure 35 Outlook for 1997-98 36 Review EIU Country Report 2nd 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 Kiribati 43 Marshall Islands 44 Nauru 46 Quarterly indicators and trade data List of tables 8 The region: world commodity price forecasts 10 The region: tourist arrivals in the South Pacific 16 Fiji: tourism statistics 16 Fiji: foreign trade 16 Fiji: government financial accounts 17 Fiji: consumer prices 46 Fiji: quarterly indicators of economic activity 47 Solomon Islands: quarterly indicators of economic activity 47 Tonga: quarterly indicators of economic activity 48 Vanuatu: quarterly indicators of economic activity 48 Western Samoa: quarterly indicators of economic activity 49 Direction of trade 49 Main commodities exported List of figures 6 The region: net disbursements of ODA to Pacific Islands 13 Fiji: gross domestic product 13 Fiji: Fiji dollar real exchange rate 16 Fiji: tourist arrivals 16 Fiji: government revenue and expenditure 26 Solomon Islands: gross domestic product 26 Solomon Islands: Solomon Islands dollar real exchange rate 31 Tonga: gross domestic product 31 Tonga: Tonga dollar real exchange rate 35 Vanuatu: gross domestic product 35 Vanuatu: vatu real exchange rate 39 Western Samoa: gross domestic product 39 Western Samoa: Tala real exchange rate EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 3 May 22, 1997 Summary 2nd quarter 1997 The region Outlook for 1997-98: Donors will increasingly focus on policy coordination so as to enhance the efficacy of their aid. A positive indicator for the region is the conclusion by a major review of the Australian aid programme that it maintain its focus on the Pacific Islands. The overall price outlook for the region’s export commodities is sluggish. Review: Fiji, the newest member of the MSG, has urged more action as a bloc. International funds have been pledged to support regionwide projects on the environment, foreign trade and investment, waste management, and external relations. The tourist industry overall was picking up last year, but trends varied widely between countries. The ADB is to set up a venture capital fund for its member countries in the region. Fiji Outlook for 1997-98: The constitutional review process is moving to a criti- cal stage, with parliament now considering the proposal approved by its sub- committee. Agreement on this compromise deal would greatly enhance economic growth prospects, which are already good, with a forecast of an increase in GDP of around 3% in both years. Review: The draft constitutional amendment bill has been tabled in parlia- ment. It proposes opening out the system to non-indigenous Fijians as from 1999, and so will be opposed by hardline nationalists. GDP growth picked up to 4.7% in 1996, with gold mining the most dynamic sector. The fiscal balance deteriorated markedly last year because of a bank bailout by the government. Inflation edged up slightly in the first three months of the year. A cyclone in March damaged the sugar crop. Emperor Gold Mines has doubled its prod- uction target for 2000. Fiji TV’s monopoly has been removed. New Caledonia Outlook for 1997-98: With the prospect of an end to the dispute over nickel supply to the planned northern smelter, the momentum of political progress should be restored. Economic prospects remain good. Review: Further intervention by the French government has opened a way to the resolution of the nickel supply dispute, and talks have resumed between the two sides. Inco has set out its plans for a new nickel smelter, involving investment of US$840m. The 1996 census results show that the Melanesian community is declining in significance. Hotel expansion is planned in the capital. The longline fishing fleet is to increase, geared to the Japanese market. Solomon Islands Outlook for 1997-98: The general elections in September are unlikely to produce a government committed to the drastic spending cuts needed to solve the deep budget crisis. GDP growth will continue at around its recent 4% rate, on an essentially unsustainable basis. Review: GDP growth slowed in 1996, but was still a high 6%, driven by the continuing increase in timber output. The Central Bank governor has attacked EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 4 the government’s “unbridled expenditure policy”. The contract for the country’s first mining venture has been signed. Tonga Outlook for 1997-98: Economic growth will continue on a narrow and vulnerable base. Review: Maintenance spending is losing out to rising personnel costs in the budget. The terms for squash exports to Japan have been agreed, with new quality criteria. Squash export volumes and earnings registered a partial re- covery last year. A cyclone in March caused damage on two islands. Vanuatu Outlook for 1997-98: The formalisation of the coalition agreement holds out the prospect of the greater political stability which will be needed to put through economic reform. GDP is likely to continue its recent 2-3% annual growth. Review: The three partners in the government coalition have signed a docu- ment setting out institutional structures for their cooperation. GDP rose by 3% in 1996. Western Samoa Outlook for 1997-98: Improved cocoa output should underpin economic growth, while structural economic reform is set to deepen. Review: Proposed amendments to the constitution include reduced inde- pendence for the chief auditor. GDP growth continued at a high rate in 1996, at 7%, reflecting the momentum of recovery after 1994’s disasters. Polynesian Airlines has extended its network to Melbourne. Other Pacific Islands The paring back in the public administration will bring a severe contraction in the Cook Islands economy this year. The acting president of FSM has now been sworn in. A voluntary retirement scheme, supported by ADB, aims to cut the public workforce by one-fifth. The ADB is providing funds for a major sanitation project in Kiribati. The contract has been signed with a Japanese company for the upgrading of Betio Port. The president of the Marshall Islands, who held the post for 17 years, has been succeeded by his cousin. ADB
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