Kiribati Response

Australian Aid for Trade Enquiry

1 | Page

BACKGROUND

1. acknowledges strong partnership and commitments by through regional and bilateral aid-for-trade related programs which supports Kiribati 20-year development plan (KV20) and its Trade Policy Framework.

2. Kiribati notes the ongoing regional programs through PHAMA Plus, Pacific Trade and Invest (PT&I), Private Sector Development Initiative (PSDI), Pacific Financial Inclusion Program (PFIP), Oceania Customs Organization (OCO). PACER Plus initiatives are also expected to form part of the Trade and Investment programs in the region.

3. Kiribati a signatory to PACER Plus trade agreement is expected to strengthen its Trade and Investment relationship with Australia through implementation of PACER Plus trade agreement and broader trade related development assistance as guided by the Development and Economic cooperation Chapter of PACER Plus.

4. Kiribati underscores PACER Plus trade agreement as an opportunity to deepen its engagement with Australia in regards to Trade and Investment Development. The linkage between PACER Plus and development strategies and policies will be instrumental in ensuring that trade contributes to economic growth, employment and sustainable development

5. Kiribati analysis in regards to the existing programs is explained below.

a) Ensuring Inclusive Trade and Private Sector Development in Small Island States through SMEs Empowerment

6. While there is ongoing initiative through Pacific Trade &Invest to support Trade and Investment, experience and feedback from the private sector affirms that PT&I significantly focuses on initiatives suitable for export ready businesses. Unfortunately, the number of export readiness businesses are insignificant, given the level of business development in Kiribati as compared to other relatively bigger economies in the region.

7. Kiribati Aid for trade support requires an SMEs support programme tailored to promote the development of new startups and strengthening the capacity of the existing Cooperatives with the view of improving productive and supply capacity to support trade and investment. Such approach will assist SMEs to gradually graduate into Export-ready businesses and could be future supported by Pacific Trade & Invest programmes.

8. An Aid for trade support programme for SMEs should recognize the unique context of small states like Kiribati. It should appreciate the role of the SMEs that indirectly contributes to exports

2 | Page

through the development of Tourism value chain i.e. through the supply of fisheries, coconut and marine related products to the hotels and restaurant. 9. An SME support programme should also recognize the role of SMEs in fostering regional and global value chain through supply of raw materials for processing. For instance, SMEs in Kiribati supply raw materials to Kiribati Fish Limited (KFL), which is one of the major exporters. There is also need to recognize the contribution of SMEs, that may not be export ready, but support women economic empowerment programmes, contributing to income and livelihood generation.

10. A consideration should be made towards establishing Trade and Business Support A tailored programme that contributes to the programme or Facility that appreciates the development of SMEs especially those in the uniqueness of the Small Island States in order productive sectors like fisheries, tourism, to stimulate the development of an inclusive coconut is key to generating employment, trade and private sector. Such support income and livelihood in the Small Island States programme should target the implementation of initiatives aimed at fostering the evolution of new startups and strengthening the capacity of the emerging SMEs including women economic empowerment programmes in the key productive sectors where Kiribati has comparative advantage.

11. Trade and Business Support programme for SMEs in the context of Kiribati and linked to the resources where Kiribati has comparative advantage would provide a sustainable development approach towards creating wider employment opportunities and income for I-Kiribati hence reducing the level of unemployment as envisaged in the 20 year vision development plan. Such approach will complement the ongoing labour mobility schemes given that not all I-Kiribati are able to participate in the overseas employment schemes. b). Improving Market Access through PHAMA Plus Program

12. Kiribati notes there has been an Aid-for-Trade market access program under PHAMA Plus. Such programme is currently active in few countries like , PNG, , , and however, in February 2020 Kiribati welcomed a PHAMA Plus scoping mission to Kiribati to identify potential areas to support particularly in line with the National Quality Policy.

13. Kiribati highly appreciates that DFAT has considered the request for extending the programme to Kiribati in the spirit of PACER Plus and trade development objectives. It is noted that PHAMA Plus is soon coming to an end in 2022 and therefore proposes the need to consider having a long-term program that accommodates the uniqueness of microstates like Kiribati noting the interest to benefit from aid for trade initiatives in the region. This will assist Kiribati to address Sanitary and Phytosanitary (SPS) issues during the implementation of PACER Plus.

3 | Page

14. In addition, experience indicates that PHAMA created an enabling environment including through grants, the transition to PHAMA Plus is building on such initiatives to maintain the existing efforts established from the original PHAMA. In this regard and given the late participation of Kiribati in the PHAMA program, Kiribati seeks Australia’s consideration to widen the scope of PHAMA Plus to countries like Kiribati in order to maximise the potential development benefits associated with PACER Plus.

15. Kiribati also recommends that being a beneficiary of PHAMA Plus should not be necessarily be pegged on PACER Plus entry into force given that some of the current Beneficiaries of the programme are not PACER Plus signatories.

c. Strengthening Financial Inclusion Programme in Kiribati

16. Kiribati notes the existence of a regional programme on Pacific Financial Inclusion, which is strongly aligned with its trade and investment policy framework. The objective of the programme is to support financial inclusion initiatives including digital finance, financial education, financial regulatory framework among others that will benefit I-Kiribati.

17. While the programme is funded by Australia, , the EU and UNDP, experience indicates that the implementation has only been in , Fiji, Solomon Islands, Samoa, Tonga and Vanuatu which excludes Kiribati.

18. There is need to include Kiribati as one of the beneficiaries in the new Phase of Pacific Financial inclusion programme given that the i-Kiribati and businesses also require access to innovative and affordable financial products and services. The financial inclusion programme will complement the government efforts towards implementing its strategy towards digital economy and developing a financial system that delivers real value to low-income earners.

19. There is also need to establish a monitoring and evaluation mechanism that ensures that a percentage of resources is allocated towards supporting the interest of the Small Island States like Kiribati

d. Development of Trade and E-Commerce

20. Information, Communication and Technology (ICT) has been proven as important in promoting economic growth and development. Cross border supply of services is one of the areas that has been positively impacted through ICT. The use of electronic or digital commerce (E-Commerce) has grown in parallel to the increasing use of the internet, allowing buyers and sellers to transact in a more efficient way by eliminating barriers between market places.

4 | Page

21. E-Commerce leverages advanced technologies to influence cross border and intra-island trade. It can enable SMEs especially in small Island states like Kiribati, to access worldwide, business resources and reach new markets. The ability to electronically track and log transactions can also serve to minimize corruption, which can result from interaction between and among import - export stakeholders. E-Commerce is therefore critical to the business environment, as it leads to the integration of SMEs especially from Small Island States into the global economy.

22. The development of E-Commerce however requires an enabling business environment that guarantees access to networks and platforms that are relevant for the different stages of E- commerce process chain. Establishing an E-commerce business requires access to affordable Internet and E-commerce platforms. Undertaking international e-payments requires businesses to access third-party e-payment service providers, linked to domestic banks.

23. In view of the above, the Government has recognized the importance of ICT in promoting the development of E-Commerce. The development of ecommerce will be supported by the establishment of the submarine cable.

24. Kiribati acknowledges and values the support of DFAT through its Innovation Resources Facility in welcoming ecommerce grant proposals between 28 January to 15 March 202, this will be a major step towards improving ecommerce ecosystem in Kiribati sand supporting the recommendations in the UNCTAD E-Trade readiness assessment report https://unctad.org/en/PublicationsLibrary/dtlstict2019d15_en.pdf .

25. In order to develop an enabling environment for E-Commerce and to support the implementation of the recommendations in the UNCTAD e-trade readiness assessment Report undertaken , there is need for an ongoing Pacific Regional E-Commerce Support programme .

26. A regional programme is expected to take into consideration A regional programme will the uniqueness of the Small Island States and will be tailored always factor in the unique significantly to benefit the Pacific Island Countries, rather than context of the beneficiaries and a global programme which may not take into consideration the challenges like isolation from needs and the unique context of the Micro states. markets among others

e. Strengthening Quality Infrastructure System to support Trade development

27. A quality Infrastructure System (QIS) consists of a dynamic equilibrium of activities by public institutions, operators and users, and the interactions among these, which enable a country to achieve quality objectives. These national objectives cover both quality and safety aspects, as well as the requirements imposed in international trade.

5 | Page

28. The QIS will evolve as necessary to meet the changing needs of Kiribati. The QIS should also operate as a system, meaning that the different institutions and components should work in a coherent manner.

29. An effective QIS consists an effective policy and regulatory framework, accreditation, standardization, metrology, conformity assessment and quality promotion and use.

30. In the context of global trade, QIS must be aligned with international best practices and requirements. The setting up of and operation of an effective and credible QIS is therefore a necessity for Kiribati to participate fully in international trade. This would ensure that Kiribati implements and fully complies with Chapter 6 of PACER Plus Trade Agreement on technical regulations, standards and conformity assessment procedures.

31. Future Pacific aid-for-trade initiatives should therefore A good quality infrastructure will integrate Quality Infrastructure as a core thematic area in also complement the regional efforts order to support the implementation of the key functions of towards reducing the level of Non- Quality Infrastructure related to standardization, Communicable Diseases (NCDs) and metrology, conformity assessment, quality promotion and thus reducing the public expenditure use. on health.

f. Upscaling Business Law Reform through the Private Sector Development Initiative (PSDI)

32. Poor business environment depicted by outdated business laws which are not in line with international best practices is one of the barriers to trade and investment development. Good business environment is depicted transparent and predicable institution and regulatory environment to send signals to potential investors.

33. The government of Kiribati is committed to implementing business law reform agenda as articulated in its trade Policy and investment policy framework .

34. While there are ongoing PSDI initiatives in Kiribati in the area of business law reform, experience indicates that the number of technical assistance offered to Micro states like Kiribati in the area of business law reform over the years is lower compared to the other Pacific Island Countries.

35. It is recommended that more funding resources be allocated A monitoring and evaluation to PSDI facility to ensure that the needs of all the PICs mechanism should be established especially the micro-states are equitably addressed in the to ensure that a percentage of area of Business Law reform agenda to improve overall resources is allocated towards business climate in order to attract Investment as in envisaged supporting the interest of the in the PACER Plus trade agreement . Small Island States like Kiribati.

6 | Page

g. Mainstreaming Aid-for-Trade in Bilateral and regional programs

36. In order to maximize the development benefits of PACER Plus through broader Trade and Investment Development assistance, there is need to mainstream aid-for-trade initiatives in bilateral programs targeting productive sectors, gender and economic empowerment, women in business, domestic violence programs.

37. Trade and economic empowerment programs is expected to contribute to household income generation which would directly contribute to supporting gender equality and reducing domestic gender violence given that women will be equally economically empowered. For instance, a programme targeting empowerment of women should integrate /mainstream trade at the design stage. This will ensure that all impediments to women economic empowerment are holistically addressed across the value chain.

38. This will ensure that similar aid initiatives can also target mainstreaming of trade into productive sectors such as fisheries, coconut, and tourism value chains to ensure holistic approach in addressing barriers and impediments to trade and investment.

h. Adopting Innovative approaches to Aid-for-trade support for microstates

39. Experience from past aid-for-trade projects depicts that micro-states have been excluded in most of the regional initiatives given their unique size and context despite of their equal engagement in trade and investment initiatives in the region. Mico-states like Kiribati trades with the bigger economies. Kiribati is keen to implement innovative processes and systems to improve ease of doing business. A similar initiative can be drawn from the ongoing initiative (under PACER Plus) to establish ASYCUDA World tailored for the small island states like , Kiribati and .

40. It should be noted that ASYCUDA World had been rolled out in previous aid-for-trade programs but small island states were excluded hence an example that even small economies should not be excluded from important aid-for-trade initiatives just because of their size .

41. In the spirit of regional integration and equal participation of all PICs in the regional and global value chain, there is need to ensure that aid-for-trade initiatives supports the implementation of tailor-made programs suitable for small island states. Such innovative approaches will ensure that even the smaller island states improve their business processes and systems to enhance trade competitiveness.

42. It is recommended that new initiatives are based on needs-assessment in order to meet the needs of countries taking to account the different levels of development. For example, the recently launched Australia Infrastructure Financing Facility (AIFF) seems to focus on mega/big economic infrastructure projects which were not in line with existing national development priorities.

7 | Page

43. Future Aid for trade programmes needs to be informed by needs assessment to ensure that it takes into consideration of all the expected beneficiaries. This will ensure that every Aid for Trade programme matches the needs of the expected beneficiaries .

i. Expanding Economic infrastructure to facilitate trade

44. Trade facilitation is key to development of trade in Kiribati. It improves cost and operation efficiency, thus contributing to significant consumer welfare. Inadequate economic infrastructure however, remains to be a key bottleneck to facilitate trade especially at the border points despite of the recent surge in Volume of Trade in Kiribati. The development of economic infrastructure should consider unique challenges of inadequate land space faced by Small Island States like Kiribati to support importers and exporters at the port.

45. Future investment in economic infrastructure should consider investment in expanding Port area given the increasing volume of trade to ensure adequate container Yard for importers and exporters to facilitate trade.

8 | Page