| United Nations |
E/CN.17/1996/IDC/Misc.2 |
Economic and Social Council
Distr. GENERAL
14 February 1996
ORIGINAL: ENGLISH
COMMISSION ON SUSTAINABLE DEVELOPMENT
High-level Panel Meeting on
Island Developing Countries
22-23 April 1996
TRADE ISSUES AND DEVELOPMENT PROSPECTS OF
ISLAND DEVELOPING COUNTRIES OF THE PACIFIC
Report prepared by Mr. Peter Osborne
UNCTAD Consultant, Director, Trade & Investment Division,
South Pacific Forum Secretariat*/
----------------
* The view expressed in this study are those of the author and do not
necessarily reflect the views of the UNCTAD secretariat or of any
official administration. The designations employed and the
presentation of the material do not imply the expression of any
opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country, territory, city or
area or of its authorities, or concerning the delimitation of its
frontiers or boundaries.
CONTENTS
Paragraph
Chapter I: Trade performance of the Pacific Island Developing
Developing Countries................................. 1 - 40
(a) Overview........................................... 1 - 2
(b) Growth in merchandise exports ..................... 3 - 6
(c) Growth in merchandise imports ..................... 7 - 12
(d) Balance of trade in goods ......................... 13
(e) Terms of trade .................................... 14 - 15
(f) Growth in service exports ......................... 16 - 18
(g) Growth in service imports ......................... 19
(h) Balance of trade in services ...................... 20
(i) Public and private transfers ...................... 21 - 27
(j) Current account ................................... 28 - 30
(k) Degree of concentration/diversification
of trade in goods and trade in services ......... 31 - 35
(l) External dependence
and vulnerability of the economies............... 36 - 37
(m) Assessment of economic performance
of Pacific Island economies in
relation to trade performance ................... 38 - 40
Chapter II: Principal trade issues and prospects of PIDCs
in the context of trade liberalization ............... 41- 74
(a) Overview .......................................... 42
(b) Impact of GATT/WTO ................................ 43 - 50
(c) Erosion of preferential market access -
a catalyst for change? .......................... 51
(d) Sectoral issues for PIDCs ......................... 52 - 66
(e) Small- and medium-sized enterprises (SMEs)
and the global trading environment............... 67 - 72
(f) Trade liberalization in the Asia Pacific -
a key focus for PIDC attention................... 73 - 74
Chapter III: The scope for sustainable trade diversification
in PIDCs in the context of trade liberalization
and globalization ................................... 75-131
(a) Overview .......................................... 75 - 80
(b) Development opportunities for the exports of
goods............................................ 81 - 97
(c) Development opportunities for the exports of
services......................................... 98 -123
(d) The scope for trade diversification in
relation to the environment .................... 124-131
Chapter IV: Regional cooperation for trade development in the
Pacific: overview of successes, shortcomings
and prospects ....................................... 132-155
(a) Regional economic integration .................... 132 -136
(b) Regional cooperation in the South Pacific ........ 137 -139
(c) Subregional cooperation and integration .......... 140 -147
(d) Inter-regional fisheries cooperation ............. 148 -149
(e) Regional tourism cooperation in the
South Pacific .................................. 150 -153
(f) South Pacific cooperation in the wider
regional environment ........................... 154 -155
Chapter V: Conclusions and recommendations........................ 156-162
Chapter I
TRADE PERFORMANCE OF THE PACIFIC ISLAND DEVELOPING COUNTRIES 1/
(a) Overview
1. The Pacific Island Developing Countries (PIDCs) are characterized
economically by several key features:
~ small populations;
~ limited resource base, including natural, human and capital
resources;
~ open, trade-dependent economies - overall, exports are valued at
55 per cent of GDP while imports are valued at 67 per cent of
GDP; and remoteness from the major world markets.
2. None of the PIDCs are industrialised nations and their level of
economic development varies widely. Five of these countries are among the
Least Developed Countries (Kiribati, Solomon Islands, Tuvalu, Vanuatu and
Western Samoa).
(b) Growth in merchandise exports
3. The only PIDCs which have experienced growth in merchandise exports in
the past five years are Papua New Guinea, Solomon Islands, Tonga and the
Federated States of Micronesia, although in the case of the latter two
countries, growth has been modest. Fiji experienced export growth in the
late 1980s, but this has now levelled off. While exports grew in Nauru in
the late 1980s, they are now declining rapidly, due to the depletion of the
countryþs phosphate resources.
4. The low degree of merchandise export dependence in countries such as
Western Samoa, Tonga and Vanuatu reflects the importance of other sources
of foreign exchange earnings, including tourism and private remittances.
In contrast, in Fiji, Papua New Guinea and the Solomon Islands, merchandise
export orientation now constitute more than 30 per cent of GDP, reflecting
the increasing export orientation of these economies.
5. The composition of PIDC exports has changed during the past decade.
The increased contribution from manufactures and the decline in agriculture
are particularly evident.
6. PIDC export development continues to be highly variable. An example
can be seen in the growth and sudden decline of Fijiþs garment exports to
New Zealand. Exports grew rapidly from F$ 312,792 in 1987 to F$ 54.6
million in 1989, but by 1993, had declined to F$ 19 million.
(c) Growth in merchandise imports
7. In all the PIDCs, import dependence is high and equivalent to at least
40 per cent of GDP. Import dependence is greater in the smaller economies
such as Kiribati, Western Samoa, Tuvalu and Vanuatu where the production
base for many consumer and intermediate goods is comparatively under
developed. Following the 1987 coups in Fiji, imports increased
dramatically, but the trend has reversed slightly since 1991. Import growth
is a predominant economic feature in most Pacific island economies.
Exceptions are Vanuatu, which has experienced a decline in imports, and
Tonga and Kiribati where import levels have remained stable.
8. Imports greatly exceed exports in most Pacific island economies. For
example, since the mid 1980s, in Kiribati, Western Samoa and Tuvalu,
imports have been over 10 times greater than exports. While import growth
is stimulated by a number of factors, including high population growth
rates.
9. High population growth rates are a feature of many of the PIDCs and
are seen as one of the key development issues to be addressed in the South
Pacific in the next decade. Population growth continues to outpace
economic growth in many PIDCs, averaging 2 per cent per year. These rates
are unsustainable, particularly in the small island states, and have offset
the growth in national income that has occurred in the last decade.
Current rates of population growth are creating increasingly difficult
economic, social and environmental problems for the PIDCs.
10. Population growth trends and PIDC import growth appear closely
related. If population growth trends continue in the next decade as they
have in the past, the import dependency of a number of the PIDCs is likely
to continue, further undermining limited gains in exports, and increasing
balance of trade deficits. Unless the PIDCs can improve their economic
performance and lower high rates of population growth, they face a
continuing decline in per capita incomes and standard of living 2/.
11. The composition of PIDC imports has changed only slightly during the
last decade. The increase in service imports is the only notable trend.
12. One of the key import issues to be addressed by the PIDCs is that of
energy imports. PIDC petroleum imports account for between 6 per cent to
23 per cent of total import values, and from 10 per cent to over 400 per
cent of total export revenue in some of the small island states.
Improvements in the performance and efficiency of the energy sector would
lead to significant savings in foreign exchange.
(d) Balance of trade in goods
13. Papua New Guinea and Nauru are the only Pacific island economies which
have surplus balances of trade in goods. In PNGþs, case this has only been
achieved since 1991. Nauruþs favourable position is deteriorating rapidly
as exports of phosphate, its principal source of export earnings, are
experiencing massive decline. The Solomon Islandsþ balance of trade in
goods position has improved dramatically since 1992, largely due to log
exports. However, log exports are widely viewed as unsustainable. Fijiþs
deficit balance of trade in goods has been steadily improving in the period
since 1990. The remainder of the Pacific island economies have relatively
large deficit balances of trade in goods, and in many countries, balance of
trade figures are progressively worsening.
(e) Terms of trade
14. Pacific island economies are highly vulnerable to terms of trade
shocks. The weakening of export prices relative to import prices was a
major cause of the decline in Pacific island export earnings and balance of
payments deterioration in the 1980s. It is difficult to analyze terms of
trade in most Pacific island economies as statistics are not consistently
available. However, it can be noted that the Pacific island economies are
heavily dependent on primary commodity exports and there are often extreme
year-to-year fluctuations in the commodity terms of trade. There has also
been a long term adverse situation owing to weak prices for coconut
products and other traditional primary product exports. As an example of
the affects of commodity price fluctuations, changes in the price of sugar
accounts for 80 per cent of the variation in Fiji's export earnings.
15. A report by the World Bank 3/ found that there was a strong link
between exogenous shocks, terms of trade fluctuations and overall growth.
In an analysis of economic shocks to the economies of Fiji, Western Samoa
and the Solomon Islands in the period 1983 - 1993, it was found that terms
of trade shocks (positive and negative) can be very large, difficult to
anticipate, and of long duration. Because of difficulties in responding
through economic and trade policies, PIDCs have generally sought increased
financing through aid and private remittances. However, in some PIDCs
exchange rates depreciation has contributed to decreases in imports and
higher export competitiveness.
(f) Growth in service exports
16. Exports of services contribute more than 50 per cent of total export
earnings in the PIDCs, excluding Papua New Guinea. Trends in growth of
service exports and imports are difficult to identify because of the
paucity of data available. However, broad patterns have been determined by
a range of studies during the past several years. Fiji and Papua New
Guinea are the two largest exporters of services, although both export only
a relatively small share of their total services output. During the period
1982 to 1993, the share of services as a percentage of PIDC total exports
decreased by 1 per cent.
17. With the exception of Papua New Guinea and the Solomon Islands,
Pacific island service exports are dominated by tourism. Tourist arrivals
in the South Pacific increased by 5.9 per cent from 1992 to 1993. Annual
growth is expected to continue at around this rate for the rest of the
decade. However, the economic significance of tourism varies around the
region. In several countries, tourism is the largest single earner of
foreign exchange, generating considerably higher earnings than the value of
merchandise exports. Other countries have yet to develop tourism to its
full potential, in some cases due in part to access constraints such as
inadequate air services
18. The only detailed time series data set available for services covers
trade between Australia and Fiji and Papua New Guinea. In both cases,
service exports have declined since 1990. It can be reasonably assumed
that similar trends may exist for other PIDCs. In broad terms, most of the
PIDCs record a small services trade surplus with Australia, primarily as a
result of the regionþs importance as a major tourist destination.
(g) Growth in service imports
19. The Pacific island economies are significant importers of freight and
insurance services as a result of their reliance on overseas shipping
groups. They are also net importers of telecommunications and professional
services. Papua New Guinea and the Solomon Islands are highly dependent on
service imports, with service imports more than double the value of service
exports. In 1982 the share of services as a percentage of PIDC total
imports was 30 per cent, by 1993 this had increased to 37 per cent.
(h) Balance of trade in services
20. While the service sector varies widely among PIDCs, trade in services
is dominated by tourism, associated transportation and the finance sector.
Papua New Guinea, the Solomon Islands, Tonga and Western Samoa all have
deficit balances of trade in services, although in the case of the latter
two countries, this deficit is not substantial. In Fiji and Vanuatu,
surpluses in the trade in services account are principally due to revenue
from tourism.
(i) Public and private transfers (aid, remittances)
21. Most Pacific island economies are significantly linked with former
colonial power economies or those of nearby countries, such as Australia
and New Zealand. There are large inflows of aid from these sources. These
relationships also provide opportunities for migration, with, for example,
large numbers of Samoans and Tongans migrating to New Zealand, and
increasing Fiji Indian migration to Australia. As a result, private
remittances have become an important source of foreign exchange earnings,
particularly in the smaller economies.
22. In Western Samoa, private remittances represent the largest source of
foreign exchange earnings, and their share is growing, with a 16 per cent
increase in the first six months of 1995. Tonga and Vanuatu are also highly
dependent on private remittances for foreign exchange. In Kiribati, aid,
interest and remittances represented more than 80 per cent of GDP in 1991.
Large and increasing amounts of remittance transfers and aid in Tuvalu have
boosted growth in real GDP to around 7 per cent per annum in the period
1986 to 1990.
23. Aid has been a dominant feature in South Pacific economies since their
independence. Official development assistance averaged almost 27 per cent
of GDP during the period 1980-1992. However, there is considerable
variation ranging from 3.3 per cent of GDP for Fiji, to 56 per cent for
Kiribati. The bulk of this aid (45 per cent) is in "services" i.e.
technical assistance, or supplies "in kind" on grant terms, rather than
loans - only in the Solomon Islands and Western Samoa does the ratio of
loans in total aid exceed 15 per cent.
24. All PIDCs receive development assistance from bilateral and
multilateral donors. Major donors to the region are Australia (49.7 per
cent ), New Zealand (4.5 per cent) and Japan (22.0 per cent).
25. Aid has clearly had a very positive impact on development in the South
Pacific, according to the World Bank 4/, but does not appear to have had
substantial impact on growth.
26. This reflects both the target of aid (largely public services and
facilities) and aid utilisation. The gross allocation of ODA is not the
same as the transfer of financial resources that actually reaches a country
- generally regarded as being below 60 per cent of total ODA. This largely
results from supplies and consultant expenditure being made within the
donor country rather than in the actual recipient country. The
relationship between aid and growth issue is a controversial one. World
Bank 5/ analysts argue that large inflows of aid actually constrain
economic development or compound economic constraints. One example is the
overvaluation of real exchange rates by aid inflows raising wages and
prices. This leads to losses in competitiveness, growth in imports, and
deteriorating trade balances. The World Bank believes this problem may be
occurring in the small island states of the Pacific particularly. Large
aid inflows also tend to support growth in the public sector - often at the
expense of the private sector.
27. Development assistance has been the main source of investment
financing in the PIDCs for many years and is a large contributor to GDP in
most of the PIDCs. As noted by PECC 6/ nearly all economic infrastructure
and social services have benefited from external aid support. PECC
expresses the view that "although the effectiveness of foreign assistance
has at times been questioned, there is little doubt that aid flows have
made and will continue to make an important - and even crucial -
contribution to economic and social progress in the PIDCs".
(j) Current account
28. When official transfers such as aid are excluded, current account
deficits are a feature of the Pacific island economies. In Western Samoa,
there has been a recent widening of the current account deficit, although
the trend reversed somewhat in 1994. Fiji has moved from a current account
surplus to a deficit. In the Marshall Islands and the Federated States of
Micronesia, there has been no progress made in curbing the large current
account deficits. While the Solomon Islands has managed to reduce its
current account deficit, this has only been as a result of increased log
exports, which is not a sustainable industry.
29. Although Kiribati and Tuvalu maintain a current account surplus, when
official transfers are excluded, there is a deficit situation. The large
gap is attributable to the substantial funds Kiribati and Tuvalu derive
from official aid flows and interest earnings.
30. The current account deficits (when official transfers are excluded) in
the PIDCs are a reflection of fiscal policy, very low levels of savings and
increased consumption. As a result, official international reserves have
declined significantly in Fiji, Papua New Guinea, Solomon Islands and
Western Samoa. With the exception of a depreciation by the Solomon Islands
and the 1995 float of the Papua New Guinea kina however, exchange rates
have remained relatively stable. External commercial borrowings have also
largely been avoided except by the Marshall Islands. Containing budget
deficits will be necessary if the Pacific island economies are to maintain
or improve their external positions.
(k) Degree of concentration/diversification of trade in goods and trade in
services
31. While Pacific island economies are highly dependent on commodity
exports, several have undergone significant changes in their export base in
recent years. With the exception of Western Samoa, the coconut industry
has declined rapidly in most countries. However, natural resources
including fisheries and forestry remain important sources of economic
wealth.
32. World Bank analysis indicates very high export concentration ratios in
many of the PIDCs, with average three product concentration ratios of 80
per cent. This compares to 64 per cent for Sub-Saharan Africa and 26 per
cent for Australia. Fiji and Vanuatu are the only PIDCs to have reduced
their export concentration in the past decade. These export concentration
ratios highlight the continuing vulnerability of the PIDCs to changes in
the global environment -particularly in commodity trade.
33. In the ten years to 1993, the share of agricultural commodities in
total exports in Pacific island economies fell from 28 per cent to 16 per
cent. In 1983, manufactured exports were insignificant, whereas by 1993,
they accounted for 8 per cent of total exports. While most of this change
is attributable to developments in Fiji, other economies are also
diversifying their export mix.
34. The gradual change in export mix illustrates the ability of the
Pacific island economies to respond to unfavourable primary commodity
prices by diversifying into higher value-added products and manufactures
and finding "niche markets", despite a formidable set of constraints
typical of small island states. Even within traditional product
categories, Pacific island economies have demonstrated an ability to seize
opportunities for establishing successful new export industries, such as
garments in Fiji, squash in Tonga, logs and timber in the Solomon Islands,
veal in Vanuatu, seaweed in Kiribati, and fish for sashimi in the Federated
States of Micronesia. Recent research conducted by the South Pacific Forum
Secretariat found that good prospects also existed for a wide range of
other products, including horticultural and floriculture products, bio-
commodities, spices, furniture, handcrafts and garments.
35. Three groups of products dominate PIDC imports - foods, mineral fuels
and manufactured goods (consumer products and machinery). Services
constitute over 30 per cent of PIDC imports. The share of food in total
imports is less than 20 per cent for the larger PIDCs and is above 30 per
cent for smaller PIDCs. All PIDCs are dependent on imports of oil
products. The relationship between population growth and imports of food
and oil products is high, indicating that these imports are likely to
continue increasing in total terms for most PIDCs.
(l) External dependence and vulnerability of the economies
36. The majority of PIDCs are highly import dependent, although the level
of import dependence is not as great in Fiji, Papua New Guinea, Tonga and
Vanuatu as it is in other countries. With the exception of Papua New
Guinea and the Solomon Islands, the level of export dependence in Pacific
island economies is relatively low.
37. Countries such as the Marshall Islands, Micronesia, Cook Islands and
the other small atoll states are highly dependent on imports for essential
supplies. A 1995 foreign exchange crisis in the Cook Islands severely
compromised the availability of essential food and medical supplies because
of the high level of import dependence and the lack of foreign exchange to
finance imports. The level of international reserves in Pacific island
economies, and demonstrates the vulnerability of most of these economies
(and in particular, Papua New Guinea and the Solomon Islands) as a result
of their import dependence. There has been a recent trend towards decline
of international reserves in Fiji, Papua New Guinea, the Solomon Islands
and Western Samoa.
(m) Assessment of economic performance of Pacific island economies in
relation to trade performance
38. Economic performance in PIDCs is characterized by low and volatile
growth rates. This may be attributed to the PIDCs' vulnerability to
exogenous shocks, and other factors such as domestic instability and heavy
dependence on a narrow range of agricultural and primary products. The
World Bank 7/ found that while macroeconomic variables such as investment,
consumption, inflation and aid flows were not highly volatile, large
fluctuations existed in both export growth rates and economic growth rates.
It concluded that there is a link, working through exports, between
external shocks, terms of trade changes and economic growth in PIDCs.
39. PECC 8/ has noted that the poor economic performance of the PIDCs is
in sharp contrast not only to the regionþs intrinsic potential but also to
the performance of other island nation groups. The Caribbean islands grew
at an annual rate of 2.4 per cent, and the Indian Ocean islands at 3.7 per
cent during the same period.
40. The traditional sources of economic growth in PIDCs are primary
commodities and public investment. On the basis of economic performance
over the past decade, there is little prospect that these factors will
contribute significantly to future economic growth. New sources of growth
will be found largely in the exploitation of niche markets by producers in
the PIDCs. This will need to be accompanied by macroeconomic stability and
a favourable investment climate for the private sector.
Chapter II
PRINCIPAL TRADE ISSUES AND PROSPECTS OF PACIFIC ISLAND
DEVELOPING COUNTRIES IN THE CONTEXT OF TRADE Liberalization
(a) Overview
41. As the world economy continues to undergo rapid change, the PIDCs are
faced with an increasingly competitive environment in which they must
operate. The inevitable further integration of the world economy will
present the PIDCs with a range of challenges which will not be easily
overcome without significant structural change. There is a growing
realisation in the PIDCs that:
~ trade development is fundamental to successful economic
development;
~ they are increasingly part of the global trading environment in
which they are becoming less isolated and less protected; and
~ preferential market access to developed markets is eroded, and
has generally not been maximised by the PIDCs in any case.
42. This increased awareness has the potential to fundamentally change the
way in which the PIDCs view their economic relationship with the rest of
the world.
(b) Impact of GATT/WTO
43. As a result of the agreements of the Uruguay Round, the World Trade
Organisation has forecast that trade in agriculture, garments and
industrial goods will increase, with the net global effect estimated to be
a 12 per cent rise in both trade and incomes. Other international
organisations, such as the World Bank and OECD, agree that there will be
substantial gains for world trade, but are less optimistic on some of the
sectoral impacts. For instance, both these organisations have predicted
that prices for temperate food crops will increase, while prices for
tropical tree crops such as coffee and cocoa (exported by several PIDCs)
will decrease. This will adversely affect the terms of trade of PIDCs.
44. The PIDCs are unlikely to benefit from trade liberalization as much as
many other trading nations because of their smallness and other intrinsic
structural disabilities which render them less competitive. Nevertheless,
PIDCs should make greater efforts to benefit from the outcome of the
Uruguay Round by exploiting new trading opportunities that arise therefrom.
This will involve, inter alia, expanding their productive capacity, where
the potential exists, and improving their marketing efficiency 9/.
45. While there is strong regional support for the principles of free
trade and trade liberalization, the issue of GATT/WTO membership is one
which can only be taken at the national level. The Forum Secretariat and
other regional and international bodies (UNCTAD, Commonwealth Secretariat,
EU) have provided advice and assistance to PIDCs to assess the pros and
cons of WTO membership. The concept of some form of -regional membershipþ
of the WTO has been suggested, but this is unlikely to be realised as
membership of the WTO is restricted to individual countries, and has no
provision for regional groupings. However, a regional presence in Geneva
to facilitate interaction between the PIDCs and the WTO may be worthy of
further consideration by the PIDCs.
46. As of 31 January 1996, Fiji was the only PIDC member of the WTO. Tonga
and Vanuatu have requested to join the organization and their applications
are being considered by accession working parties. Papua New Guinea and the
Solomon Islands have observer status. Among PIDCs which were neither
members nor observers of WTO or being considered by accession working
parties as of 31 January 1996 were the Federated States of Micronesia,
Kiribati, the Marshall Islands, Nauru, Samoa, and Tuvalu. Participation of
PIDCs in the WTO will:
- allow their involvement in successive rounds of negotiations in the
GATS to stimulate efficiency, openness and growth in services trade in the
Pacific;
- expose them to processes of bilateral and multilateral trade
negotiations;
- provide them with the opportunity (albeit limited) to influence the
trade negotiating process;
- provide them with access to a mechanism to redress discrimination
by their larger trading partners and more easily participate in dispute
settlement procedures; and
- provide them with a more transparent and equitable framework of
trade rules and disciplines.
47. It is, however, important to note that, for some PIDCs, it will be
difficult to develop the infrastructure necessary to prepare schedules,
deal with negotiations, and then (if successful in accession to the WTO)
meet the reporting and compliance obligations. However, it can also be
argued that by simply being involved in the process of WTO accession, the
PIDCs will learn the mechanics of international trade, which will have
wider benefits in increasing PIDC interaction with the global economy.
48. The WTO Secretariat has noted that while the PIDCs, as developing
countries, are covered by special provisions relating to timeframes,
accession and notification procedures, they must, nonetheless, fully
understand that accession to the WTO involves commitments to make
concessions to their trading partners. However, for the smaller PIDCs -
namely Kiribati, Niue, and Tuvalu - such commitments may imply relatively
high costs.
49. The "single undertaking" principle of the Uruguay Round package is an
important consideration for the PIDCs. This principle seeks to ensure that
contracting parties are in compliance with the entire package of new
disciplines as outlined in the Final Act. This will mean that PIDCs
seeking either to accede to WTO or to maintain GATT consistency on a de
facto basis will have to assume more obligations and responsibilities
arising out of GATT Articles and also from agreements on new issues such as
Trade in Services, Investment and Intellectual Property. While provisions
for special and differential treatment for developing and least developed
countries are still important, the PIDCs will be subject to greater
reciprocity under the new GATT provisions.
50. ESCAP 10/ has identified two particularly important factors which
the PIDCs must take into account in relation to WTO membership:
~ ESCAP suggests that it will not be possible for the PIDCs to
undertake such comprehensive changes in laws and policies without
receiving technical assistance as WTO members. Even after
initial changes are made, the PIDCs are likely to fall behind as
new areas are included in the multilateral framework and new
disciplines are developed.
~ The Uruguay Round agreements extend into areas of domestic policy
making,such as domestic support for agriculture, subsidisation
etc. WTO membership will necessitate acceptance of uniform
restraints on domestic policies in PIDCs.
(c) Erosion of preferential market access - a catalyst for change ?
51. With the exception of sugar, canned tuna, tree crops and garment
exports, the erosion of preference may go largely unnoticed by many of the
PIDCs as they have generally taken little advantage of preferential access
arrangements. Despite virtually free market access under the Lome'
Convention, the PIDCs have made no significant inroads into the EU market.
In the Australian and New Zealand markets, only Fijiþs garment industry and
Western Samoaþs automotive wiring harness industry have developed through
the benefits of SPARTECA.
(d) Sectoral issues for PIDCs
52. Fiji supplies sugar to the EU under the terms of the Sugar Protocol of
the Lome' Convention. It has a quota of 163,000 tonnes, sold at the EU
intervention price, which is around two to three times higher than the
world price. In 1991 Fiji received a net transfer from the EU of $90
million per annum or 4 per cent of GDP. As a result of the Uruguay Round
it has been estimated that this price could decline by 12 to 15 per cent by
the end of the decade. Grynberg 11/ predicts this will result in a one-
off decrease of Fijiþs GDP of approximately 1 per cent in real terms. The
result will be increasing marginality for the Fiji sugar industry.
53. The Sugar Protocol of the Lome' Convention has been the mainstay of
the Fiji sugar industry since the mid 1970s. The past 20 years have seen
the industry become dependent on high prices under the protocol leading to
inefficiencies and high cost structures. Assuming that the Lome Convention
expires in the year 2000, little incentive will exist for the EU to contest
a legal challenge to the sugar protocol that might be raised by one of the
non-ACP sugar exporting countries.
54. Given that the Sugar Protocol has not yet been challenged, Fiji has
some "breathing space" to enhance the economic viability of its sugar
industry. Its choices are all hard ones - as a high cost producer it must
increase efficiency, diversify markets, diversify into new processed forms
or by-products, and in the longer term possibly diversify out of sugar
altogether. Domestic issues such as uncertainties over renewal of sugar
land leases must also be addressed.
55. The PIDCs are all exporters of tree crops, notably coconut products.
During the late 1980s, exports of coffee (Papua New Guinea), cocoa (Papua
New Guinea and the Solomon Islands), and palm oil (Papua New Guinea and the
Solomon Islands) expanded significantly. However, over the last decade,
there has been a decline in the overall contribution of tree crops to the
regionþs economies, with the copra industry in Tonga and the cocoa industry
in Fiji and Western Samoa now almost non-existent. Vanuatu is the PIDC
economy which is most dependent on copra exports, but while production has
remained stable, there has been a sharp downward trend in earnings because
of the price decline.
56. The agricultural sector has been one of the key focuses of global
trade liberalization. It is believed that liberalization of agricultural
trade will increase the prices of food and food products over the longer
term. The PIDCs, as net importers of food, therefore stand to lose (in net
terms) from higher world prices. ESCAP 12/ noted that the GATT
ministerial declaration on compensating net food importing countries is not
very specific on the extent and modalities for such compensation.
57. Given the likelihood of increasing imports (most notably food) in all
PIDCs as a result of high population growth rates the PIDCs need to secure
their interests in more specific terms with real commitments from major
trading partners. To maximise foreign exchange savings, the PIDCs need to
enhance their food import procurement and management wherever possible.
58. At the same time, liberalization in the food sector will undoubtedly
provide increased opportunities for niche marketing of PIDC food products,
particularly into the (previously) heavily protected Asian consumer
markets. PIDC success will only be achieved as a result of carefully
targeted production and marketing strategies focused on agricultural
products where real comparative advantages exist.
59. The tuna processing industry in Fiji, Solomon Islands, and soon in
PNG, is almost totally dependent on the 24 per cent margin of preference
for canned tuna exports to the European market. Grynberg 13/ found that
without this margin, the PIDC canned tuna industry would probably not
survive as all three canning industries are virtually completely dependent
on a single market - the European Union.
60. The PIDCs must try to preserve their margin of preference for as long
as possible while simultaneously making concerted efforts to increase the
efficiency of canning operations in the longer term. The PIDCs would be
wise not to assume that their tuna canning industry will continue to be
protected as a "spin off" from the EU's protection of its own canning
industry.
61. The impact of trade liberalization, particularly in Australia and New
Zealand, has already been felt by PIDC garment industries - most notably
Fiji and Tonga. Fiji's relatively young garment industry - established
through a combination of tax free zones, relatively low wage rates and
preferential access under SPARTECA - faces considerable challenges if it is
to survive the next decade.
62. The dismantling of the MFA and the phase-out of non-MFA restrictions
under the Agreement of Textiles and Clothing will eliminate quantitative
restrictions and open the sector to increased competition from low wage
Asian producers and the more efficient suppliers from the Asian newly
industrialising countries. The key issue for the PIDCs is to take
advantage of the predicted 5-10 year transition period to restructure their
export product mix, increase productivity, devote more attention to market
research, design sophistication and product development.
63. The World Bank 14/ has noted that exporters who have been induced
by the MFA to enter the production of textiles and clothing without
possessing comparative advantage in these goods are likely to suffer losses
from the abolition of the MFA. The PIDC garment industry falls into this
category.
64. The pressures placed on the Fiji garment industry from trade
liberalization in Australia and New Zealand have been a significant factor
in the decline of Fiji's trade. With SPARTECA preferences remaining
unchanged, the value of the preference to Fiji has diminished (and will
continue to do so) as tariffs against the rest of the world have reduced.
In this environment, competitiveness has become the single most important
determinant of a nation's ability to capitalise on global trading
developments. How to exploit emerging opportunities in a changing and
increasingly competitive marketplace is the key issue facing PIDC policy
makers 15/.
65. However, rationalisation of the world garment trade may also provide
opportunities for Fiji if it is able to compete on the basis of its
comparative advantage - particularly the ability to field and respond to
small orders quickly. These orders are of little interest to high volume
Asian suppliers, and can sustain the relatively higher production costs of
Fiji.
66. The garment industry is notoriously transient. Whether the industry
is willing (and is sufficiently viable) to make these changes is yet to be
seen. Historical evidence would suggest that a significant percentage of
the Fiji garment industry (particularly foreign owned companies) may simply
"pack up" and move to another lower cost location, as soon as operations
become marginal.
(e) Small- and medium-sized enterprises (SMEs) and the global trading
environment
67. With the exception of mining company operations in Papua New Guinea
and some forestry operations in Melanesia, virtually all enterprises in the
PIDCs can be classified as small and medium enterprises (SMEs) - in fact,
many are "micro" enterprises.
68. The role of SMEs in creating economic growth in developing countries,
particularly their ability to invent, innovate and adapt to changing
conditions far more rapidly than larger companies and conglomerates, is
well recognised. Badrinath 16/ notes that SMEs have demonstrated their
important role in socio-economic development in the developing countries
where they can account for as much as 90 per cent of industrial employment
and 35 to 65 per cent of exports. However, it has been estimated that only
about 5 per cent of SMEs are involved in exporting. Many international
agencies, such as the International Trade Centre UNCTAD/GATT, have placed
particular emphasis on SME development and increasing developing country
SME activity in the export arena.
69. It is the inherent flexibility of SMEs that makes them well adapted to
meet the rapidly changing needs of the global market. This has been
demonstrated by the Asian "Tiger" economies, in particular Taiwan,
Singapore, and Hong Kong, whose economic success has been based on the
ability of their SME sector to rapidly adapt to changing market conditions.
70. This success has been demonstrated by a number of successful ventures
in the PIDCs which have used their small size to fill market niches and
adapt to market needs in a very rapid way. An example is the Fiji-based
clothing company, Kalacraft Limited. Kalacraft manufactures "surf"
clothing for the Australian market, based on short production runs,
just-in-time delivery, and the ability to quickly change garment colours
and styles as the fickle Australian teenage clothing market moves from
season to season. The company's long term strategy views preferences under
SPARTECA as a "bonus" rather than a "crutch". The company competes openly
with Asian competitors and reinvests the SPARTECA "bonus" into upgrading
technology and personnel training.
71. Badrinath 17/ and Asia Pacific Economic Cooperation (APEC) 18/
view the global changes in information technology, coupled with reductions
to border and non-border impediments to trade arising from the Uruguay
Round, as offering considerable new opportunities for SME expansion. While
considerable expansion of communications systems in the PIDCs still needs
to be undertaken, access to communications and information technology in
the South Pacific is increasing rapidly.
72. The communications revolution has the potential to significantly
reduce or even neutralise some of the comparative disadvantages currently
faced by the PIDCs. It is certainly now possible for a small enterprise
based in the PIDCs to operate in the international arena without a physical
presence. The PIDC tourism industry, coffee roasters in Papua New Guinea
and the Fiji garment industry are already reaping the benefits of modern
communications to successfully market their products internationally.
(f) Trade liberalization in the Asia Pacific region - a key focus for PIDC
attention
73. Trade and investment liberalization in the Asia Pacific region, driven
by the rapid developments in Asia Pacific Economic Cooperation (APEC), have
the potential for considerable influence in the PIDCs. Since the early
1980s, the emergence of East Asia as a trading region has changed the
PIDCs' geographic pattern of trade. The PIDCs have responded to these
developments by increasing their focus towards the Asia Pacific region.
Trade and investment linkages with the APEC member economies have increased
at a rapid rate. The Asia Pacific region offers significant opportunities
for the PIDCs to diversify their international market. These opportunities
have been exemplified by: the growth in Fiji's exports to Japan - from US$
5 million in 1985 to over US$ 32 million in 1993. A similar growth pattern
has been witnessed for Tonga and Solomon Islands' exports to Japan. The
APEC economies are now the South Pacific's most important trading partners.
74. It is crucially important for PIDCs to take advantage of their
proximity to the APEC region. High growth rates have positive spin-offs to
neighbouring countries. Australia and New Zealand have both positioned
themselves to benefit from Asiaþs high growth rates and marketing opening
measures. Linking with APEC and its economies is a mechanism by which the
PIDCs can strengthen institutional and market linkages with the fastest
growing region in the world. The PIDCs can learn from the market-led
policies of the East Asian economies, which have led to their dramatic
success.
Chapter III
THE SCOPE FOR SUSTAINABLE TRADE DIVERSIFICATION IN
PACIFIC ISLAND DEVELOPING COUNTRIES IN THE CONTEXT OF TRADE
Liberalization AND Globalization
(a) Overview
ÁB The issue of trade diversification in the PIDCs has been the subject
of considerable attention for the past two decades, with the fundamentals
well known - PIDCs need to diversify both production and markets in a
manner matched to domestic and international changes. While the theory is
relatively straightforward, achieving real sustainable trade
diversification in the PIDCs remains difficult to achieve - despite the
plethora of reports and studies undertaken in the region on the issue.
76. A very short term focus on trade development planning is a major
deficiency in the PIDCs. In general, little attention has been given to
developing longer term strategies and assessing the possible external
developments, competitive changes and movements in the global environment.
Two of the PIDCs' most valuable export industries - squash from Tonga, and
garments from Fiji - are examples of success which have become increasingly
tenuous in the context of trade liberalization and globalization. At the
same time, attention to broad industry development has tended to overlook
the micro-enterprise private sector base of many of the PIDCs. More
consideration needs to be given to a "bottom up" approach to trade
diversification in the PIDCs.
77. The resource endowment of the PIDCs has meant that their comparative
advantage has traditionally rested on agriculture, forestry, fisheries and
tourism, with mineral resources playing a key role in PIDCs such as Nauru
and PNG. However, these comparative advantages may be shifting as changes
in production technology and markets induce products themselves to evolve,
making less use of land and labour, and more use of information and capital
- which the PIDCs must generally import. Assessments need to be made by
the PIDC governments to discern where their comparative advantage will lie
ten or twenty years ahead, and to then influence trade diversification by
training people, planting forests, managing fish stocks, reforming land
tenure, etc 19/.
78. Economic development based on expansion of PIDC exports depends on the
ability of the PIDCs to compete internationally. By diversifying and
adding value to exports, and substituting domestic production for
manufactured imports (where commercially practical), the PIDCs can reduce
the vulnerability of their open and shallow economies to external shocks.
As the globalization of trade continues, these structural changes will
become increasingly important.
79. External shocks will always remain a problem for the PIDCs - the key
will be the speed and flexibility with which they can deal with shifts in
the economic environment. As noted in Chapter II, the experience and
success of the Asian "tiger" economies has shown that economies with a
small and medium enterprise (SME) base have the greatest ability and
flexibility to adjust to rapid market movements. Given that SMEs
constitute almost the entire industry base in the PIDCs (with the exception
of mining interests in PNG), further development of SMEs in the PIDCs can
only assist their ability to meet changes in the global market.
80. The majority of PIDCs still maintain a very product driven approach to
marketing. This is gradually changing but the shift from product driven
strategies to a market driven approach needs to be made rapidly to enable
PIDCs to gain maximum advantage of global market developments. Matching
production capability, comparative advantage and market opportunities must
be undertaken in an on-going and precisely targeted manner, with a focus on
"micro-niche" marketing.
(b) Development opportunities for the export of goods
ÁBý In light of the unique constraints applying to the export sectors in
the PIDCs, it is clear that successful exporting from the PIDCs requires
very carefully defined strategies. Accordingly, success will most likely
be achieved when:
~ foreign technology and investment are combined with the natural
resources of the region; and
~ specialised niche markets are secured.
82. The niche marketing approach will avoid head-on competition with more
advanced and sophisticated competitors, by focusing on sectors which are
relatively unattractive to producers of large volume items because of
smallness of export volumes. Such markets are normally characterized by:
~ relatively short production runs;
~ relatively short seasons - in the case of fresh produce;
~ distinctive design or taste characteristics;
~ price inelasticity;
~ supply through specialist distributors targeting a particular
market segment (e.g. the ethnic market in some overseas
countries);
~ supply not being time-critical.
83. However, it must be noted by the PIDCs that niche markets are very
volatile and often transitory. Constant market contact is therefore needed
to take full advantage of market changes and fluctuations.
84. As part of a comprehensive study to assess the range of potentially
exportable products from the South Pacific, the Forum Secretariat undertook
a region wide survey in early 1995 based on government and private sector
inputs.
85. The survey findings indicate that, taking the region as a whole,
exports are undertaken in over 120 different product categories. While
considerable variations obviously exist - from only 2 products from Nauru
to nearly 60 from Fiji - the findings support the view that tradeable
product diversification is an achievable objective for the PIDCs.
86. By global standards, the range of PIDC exportable products is
relatively small. The diversification of the export base of the PIDCs
needs to be focused on products with a comparative and competitive
advantage targeted at niche markets, rather than attempting to develop
broader new "industries". This approach has proved extremely successful in
Japan and is a valuable model for consideration by the PIDCs. In addition,
the PIDCs need to consider more closely their comparative advantage
relative to other PIDCs. It can be noted that eight of the 13 PIDCs
surveyed indicated that "taro chips" had the potential to be developed as
an export product in their country. The market for taro chips is limited
(other PIDCs, Hawaii and New Zealand). If more than one or two PIDCs were
to embark on a concerted programme of taro chip manufacturing development,
it is likely that the market would rapidly become saturated, price would
fall and benefits to the PIDCs would be reduced. PIDCs should therefore
more closely assess and consider those products where they have a
quantifiable comparative advantage.
87. With this in mind, from the broad list of products and sectors
identified, through the survey and other regional research 20/, two
product groupings have been identified for consideration for further
development and diversification by the PIDCs:
~ products of primary importance and of most significance to the
greatest number of countries; and
~ products of secondary importance because of either limited
potential or of interest to fewer countries.
88. Sectors and products not meeting these criteria may still be of
primary importance to some countries. Taking these parameters into
consideration, a list of potentially exportable products and sectors for
the PIDCs is presented below:
Primary importance Secondary importance
Fresh fruit and vegetables Beef
Handicraft Coconut by-products
Fresh & processed marine products Cut flowers
Wooden products Footwear
Honey
Light engineering products
Organic coffee
Processed food products
Recycled scrap metal
Stamps
Aquarium fish
89. This information is based on current export performance, potential
opportunities which are likely to develop as global trade liberalization
increases and growth in the Asia Pacific region continues to draw in an
increasingly diverse range of imports. Across all the PIDCs, fisheries
resources are a vital domestic and export resource.
90. Prospects for attracting production of labour intensive goods such as
garments will become increasingly more difficult as a consequence of
expanding trade liberalization in major markets. In general, wage rates in
the PIDCs are higher than those in many Asian countries, and productivity
is lower. These industries will only move to the PIDCs when offered very
large tax incentives and other conditions which are generally not
sustainable over the long term 21/. The PIDCs should also be wary of
overseas companies which seek to "play off" one PIDC against another to
extract maximum levels of incentive and minimum levels of contribution to
the PIDC economy.
91. Within each market there are specific sectors which will need to be
targeted by the PIDCs through "micro-niche" marketing. An example is that
of organically grown food products and products sourced from
"environmentally friendly" countries. Considerable success has already
been achieved in this micro-niche by coffee exporters from PNG, ginger
processors in Fiji, and processed food producers (taro chips, jams and
spreads) from Western Samoa. The PIDCs are generally viewed as having a
clean environment and many products are grown organically (i.e. without the
use of chemicals or pesticides).
92. Breaking into new niche export markets, or establishing downstream
value added processing for existing export industries, and sustaining a
profitable market share is not an easy task - it requires commitment,
constant market research and a stable domestic economic infrastructure. The
World Bank 22/ supports this view stressing the following conditions for
viable niche investment in the PIDCs:
~ maintenance and enforcement of quality standards;
~ competitive enterprise environment;
~ steady improvement in economic infrastructure;
~ sustained commitment to human resource development.
93. Against the background of trade liberalization, a critical factor for
future market performance will be competitiveness. For the PIDCs,
competitiveness is not simply about producing cheap products - it is about
increasing efficiency and productivity in all business operations,
particularly those associated with exports.
94. Badrinath 23/ suggests the following key determinants for
increasing competitiveness:
~ Technological upgrading;
~ Quality control and management;
1. Packaging;
2. Prudent financial management; and
3. Export financing.
95. Hand-in-hand with increasing competitiveness is enhancing the market
focus of PIDC production. This is important not only for determining
market needs from a purely production focus, but also to ensure that PIDC
export development is in step with international developments, which are
changing rapidly. As an example, the internationalisation of standards and
certification procedures through the WTO and APEC processes will
necessitate benchmarking by PIDCs in these areas.
96. PIDC export competitiveness would also be enhanced by more effective
management of exchange rates. For example, in Fiji, the currency was
devalued by 30 per cent in an attempt to stem capital outflow following the
coup in 1987. This depreciation in the real exchange rate boosted Fijiþs
competitive position. However, both the nominal and the real effective
exchange rates have appreciated in recent years, with the real effective
exchange rate appreciating by 12 per cent between 1990 and early 1994,
adding pressure to other concerns about the country's export
competitiveness. Further appreciation will undermine Fiji's prospects for
export-led growth in the medium term.
97. Macroeconomic reform is also essential for the enhancement of export
competitiveness in PIDCs. Increased private and public investments are
needed for sustained economic growth and employment generation. Across the
PIDCs, low investment levels may be attributed to political uncertainty,
lack of confidence in the direction and continuity of public policy, and
doubts about competitiveness.
(c) Development opportunities for the export of services
98. Services have increasingly become a major growth area in
international trade. World exports of services rose by 12 per cent
(US$104 billion) to US$ 960 billion in 1992. By world standards, the share
of PIDC service trade is small, estimated at less than 0.001 per cent of
world service trade 24/, and is dominated by tourism, aviation,
shipping, telecommunications and to a lesser extent offshore banking.
99. To date, the PIDC service industry has had very limited involvement
in the international market. With demand for service outputs being a
function of the size and level of diversification and sophistication of a
countryþs economic base, the narrow economic bases of the PIDCs weaken the
service sectorþs capacity to meet even domestic needs. Where service
skills and capability do exist, a range of market imperfections weaken
suppliersþ ability to deliver services to external markets.
100. For the PIDCs, the development of an internationally tradable service
sector would result in flow-on effects for employment, national income and
standards of living. However, as noted by Price Waterhouse 25/, "the
potential gains from developing traded services need to be placed in the
context of the structure of each (PIDC) economy and based on careful
analysis of the strengths and weaknesses of their existing and potential
service sectors".
101. There is little doubt that the benefits from growth in services trade
extend beyond the sector itself - including the close linkage between trade
in services and trade in goods. An internationally competitive service
sector could assist the expansion of merchandise trade in a number of the
PIDCs, assisting the integration of these economies into the global market.
It is important however, to acknowledge the need for development of service
sectors which are consistent with the rest of the economy, including the
capacity to generate and utilise new service sector activities.
102. At present, the PIDC service sector is not in a favourable position
to penetrate the world market for services. Most PIDC service firms lack
sufficient capital, human resources and infrastructure to sustain
international competitiveness. The position is further exacerbated by the
existence of significant international and regional impediments to trade in
services. The General Agreement on Trade in Services (GATS) establishes a
multilateral framework of rules and principles governing trade in services
which it is hoped will increase transparency and liberalization of services
trade, reducing these impediments. International developments in trade in
services flowing from the GATS and growth in PIDCs at the domestic level
should improve their performance and share in services trade 26/.
103. Tourism offers perhaps the best, and in some PIDCs, the only
opportunity for long term sustainable economic growth and diversification
in the Pacific region. Tourism is not an extractive activity - with
careful management it constitutes a renewable resource.
104. A dynamic tourism sector offers other sectors the opportunity to grow
through the provision of goods and services to tourists and to operators of
tourist facilities. Tourism is not an isolated economic activity, having
many linkages to other sectors and should therefore be fostered. As an
example, tourists are major buyers of island products which serves both to
increase revenue to indigenous producers, and acts as a form of trade
promotion. Of critical importance to the PIDCs, tourism provides an
economic rationale for the preservation of indigenous culture and heritage,
and conservation of the natural environment.
105. To the year 2000, the projected average annual growth rate of tourist
inflows to the region is 5.7 per cent, with the volume of tourist traffic
in the region by 2000 anticipated at 1,028,000 arrivals per annum.
106. While scope for expansion in tourism exists in most of the PIDCs,
achieving real expansion requires overcoming several major internal
constraints including:
~ shortages of trained staff; air transportation access, scheduling
and pricing;
~ quality and level of supporting infrastructure - bed shortages,
restaurants, tour companies, airport facilities etc.;
~ marketing and promotional effectiveness - limited budgets and
tendency to compete between PIDCs;
~ foreign investment - lack of capital, regulatory barriers and
restrictions on land ownership remain key constraints to increases
in FDI.
107. Given the diversity of constraints to growth, action is required to
improve accommodation and recreational facilities, strengthen marketing and
promotion, and stimulate activities that support tourism such as training
and investment. All the PIDCs have further potential as tourist
destinations, with a focus on niche opportunities based on PIDC comparative
advantages in the global tourism market, such as: the existence of
globally important natural resources, such as rainforests; cultural,
anthropological and historical links and differences; participation by
tourists in the conservation of natural, cultural and historical resources;
unique sporting activities - fishing, diving, surfing, triathlons.
108. There is scope in all PIDCs to develop a tourism industry of far
greater significance. However, this will require greater coordination of
government policy, particularly in respect of the operations of airlines,
foreign investment and fiscal policies and the development of overseas
marketing programs. Also, as noted by Price Waterhouse 27/ "there are
obvious conflicts of policy where particular countries adopt high foreign
currency exchange rates for wider economic management purposes."
109. Greater efforts will also be required in regional packaging of multi-
island tourist products incorporating differentiated attractions in each
PIDC. This will require greatly increased cooperation of PIDC tourist
agencies, airlines and tourism operators to develop a regional approach to
routing, planning, development, marketing and promotion. Yee 28/ also
suggests that PIDCs consider making some commitments in the tourism sector -
particularly in hotels and infrastructure - as -entry feesþ to the GATS.
110. The strong tourism orientation of the South Pacific is reflected in
the importance of aviation services in PIDC service exports, when foreign
country nationals use the air services of PIDC-based companies. The market
for air services within the South Pacific is very small by global
standards, while operators are many. This environment of low demand, often
unsuitable aircraft, and subsequent low yields has an adverse affect on the
frequency and reliability of air services and air ticket pricing in the
region.
111. The PIDC airlines face competition from international carriers
operating in the region. On the more viable routes, these carriers operate
larger cost-efficient aircraft which return higher yields. The trend
towards liberalization and privatisation in air services has resulted in
increased entry possibilities for new carriers, both domestic and
international, in a number of PIDCs. It is likely that Asian carriers will
seek to expand services to the South Pacific. GATS could assist South
Pacific carriers to gain terminal slots or better access to computerised
reservation systems in developed country markets.
112. Considerable progress has recently been made towards regional air
service rationalisation - Air Pacific and Royal Tongan Airlines have
jointly leased an aircraft, and Polynesian Airlines has signed a new
commercial alliance with Air New Zealand which will involve seat-sharing on
several routes. However, without on-going adjustments to the number and
efficiency of airlines operated by the PIDCs within the region, the
opportunities for the PIDCs to increase international aviation could be
limited.
113. Closely related to the operation of air services is the provision of
support services such as ground handling (cleaning, refuelling, catering),
repair and maintenance, computer reservation services, and marketing and
selling. PIDC carriers undertake their own ground handling and, in a
number of cases, limited repair and maintenance. Some of these services
are already traded within the region and to extra-regional third party
carriers.
114. The scope for increasing the provision of these services to non-
regional international carriers is presently hampered by the smallness of
the market and the large number of airlines operating in the region.
However, opportunities do exist to increase trade in these services between
PIDCs - particularly with repair and maintenance of similar aircraft
operated throughout the region by PIDC carriers. Further assessment of
opportunities to transfer Fiji's skills and technology for ground handling
services (from Air Terminal Services (Fiji) Limited) to other PIDCs should
be considered.
115. Yee 29/ suggests the need for greater collaboration in aircraft
maintenance and repair services in the PIDCs in order to rationalise
infrastructures, stocks of spares and mobility of specialised personnel.
However, past experience in the South Pacific suggest that such cooperation
will only be achieved if PIDCs overcome nationalism and inter-island
rivalries.
116. While the PIDCs are almost totally dependent on shipping for their
international trade, very limited scope exists to increase the provision of
shipping services within the South Pacific and to external markets, except
in two specialised areas - vessel crewing and -flags-of-convenienceþ.
117. Some PIDCs already have large numbers of nationals working on
international shipping vessels - in particular, the small island states of
Kiribati, Tuvalu and Tonga. This employment generates valuable service
trade inflows from remittances and wages. Under the GATS, it is likely
that a more secure framework and environment for this employment may exist,
if concessions could be negotiated with the major countries providing
shipping services.
118. There is increasing interest from international shipping lines in
Vanuatuþs open shipping registry. Vanuatu has enacted legislation to
provide for an international shipping register along lines similar to
Liberia. The underlying law is the non-statutory maritime law of the USA.
High standards are required, fees are low and there are no nationality
restrictions on officers or crew. Vanuatu has also become a popular base
for ship holding companies whose ships and/or subsidiaries are registered
in Liberia, Panama or other jurisdictions. The Vanuatu shipping register
has achieved considerable success, gaining a strong reputation for quality
and safety standards for its ships and operators. Vanuatu Maritime
Services Limited operates the registry, with its main office in New York,
and offices in London and Hong Kong. Vanuatuþs comparative advantage is
the ability to offer a "packaged" service of ship registration, company
registration, ship management services and ship financing.
119. Offshore banking and tax haven services are traded internationally by
a number of the PIDCs, including the Cook Islands, Niue, Vanuatu and
Western Samoa, with varying levels of development. While the services
provided by these industries are generally extended through the operations
of expatriate professionals, the industry is still a major generator of
foreign exchange and employment for the PIDCs. Yee estimates that
Vanuatu's foreign exchange earnings from offshore banking and tax haven
services represent one third of its export revenues.
120. The tax-free Offshore Financial Centre is one of the success stories
of Vanuatu. The Centre was established in 1971 and contributed around 10
per cent of GDP in 1990. It employs about 450 people, including 380 ni-
Vanuatu. One of the keys to Vanuatu's success has been the establishment
of a Financial Services Commission as an independent, well resourced
statutory authority that can develop, maintain and enforce appropriate
regulatory standards.
121. Temporary migration from a number of the PIDCs, in particular the
small island atoll states, has been a common practice for many years. As
noted in Section 1, remittances from PIDC nationals living overseas
contribute significantly to overseas earnings for Kiribati, Niue, Tonga,
Tuvalu, and Western Samoa. Such temporary migration is not normally
regarded as the provision of manpower services, although in the strict
sense it is exactly that. The two major areas where manpower services are
exported by the PIDCs are ship crewing and workers for phosphate mining in
Nauru (although this is decreasing as phosphate reserves are depleted).
122. The demand for I-Kiribati and Tuvaluan seamen is predicted to remain
firm, especially as the recruitment of European crews becomes more
difficult. More Kiribati and Tuvalu seamen are also being recruited by
South Korean and other Asian fishing vessels. Long term prospects for
these sources of employment may be reduced as a result of changes in marine
technology. The involved PIDCs need to push for increased national
employment on foreign fishing fleets operating within their economic zones.
123. Yee 30/ suggests that the liberalization of movement of service
personnel under GATS could assist the movement of manpower from the PIDCs
to Pacific Rim countries where labour shortages exist. However, given the
large pool of labour within East Asia, it is likely that such opportunities
would be restricted to very narrowly defined niches - such as the recent
agreement between Taiwan and Fiji for 400 semi-skilled Fiji workers to be
employed on infrastructure development projects in Taiwan.
(d) The scope for trade diversification in relation to the environment
124. The issue of trade and the environment has only recently started to
attract attention in the South Pacific. In general, the interest has been
driven by the environmental side of the equation, and has often been
pursued on a confrontational basis vis-a`-vis business circles, rather than
in a cooperative manner.
125. The PIDCs are primarily dependent on natural resources and
agricultural products. These areas are generally environmentally sensitive
(particularly forestry, fisheries and minerals) and therefore feature high
in the sustainable development debate.
126. If the PIDCs are to have sustained economic growth based on natural
resources, the latter must be managed in a sustainable way. This must be
taken into consideration by enterprises which are always tempted to seek
short-term financial reward with little regard for resource sustainability.
127. Environmental protection and resource sustainability come at a cost.
Developing countries generally find it difficult to absorb the full direct
and indirect costs of environmental protection as they strive to feed a
rapidly growing population. However, environmental damage also entails a
real cost, which is borne by society (in particular the most disadvantaged
groups), as it increases health hazards and lowers productivity.
Therefore, it is crucially important to compare these costs with the
economic burden of environmental protection and resource sustainability.
128. At the enterprise level, there are specific problems related to
environmental costs. As the world becomes increasingly sensitive to
environmental issues, markets are shrinking for products produced in the
PIDCs which do not meet environmental conditions either in the production
process (e.g. non-dolphin friendly tuna), or in the packaging and marketing
process (e.g. products packaged in non-recyclable materials.)
129. Complying with high environmental standards imposed from the outside
and which do not necessarily relate to domestic problems of sustainability
in the islands usually implies high production and marketing costs. The
latter can decrease competitiveness on international markets as these
additional costs are added to the high production and shipping costs of
products that are specific to the PDICs. The result is that many companies
in the region cannot afford to move to processing and packaging methods
that would meet environmental standards.
130. However, the PIDCs are well placed to take advantage of global
environmental awareness in producing either products which use the
environment as a marketing tool (e.g. organic agricultural products) or
tourism services that are based on environmental factors (e.g. eco-
tourism). Other sections of the paper have highlighted specific niche
markets for both services and merchandise exports which can be developed on
the basis of their environmental attributes.
131. In relation to imports, considerable efforts are being made to reduce
the region's reliance on petroleum imports through the development of
alternative energy sources. The economic and environmental impacts of such
strategies are significant and warrant further research within the region.
Chapter IV
REGIONAL COOPERATION FOR TRADE DEVELOPMENT IN THE
PACIFIC: OVERVIEW OF SUCCESSES, SHORTCOMINGS AND PROSPECTS
(a) Regional economic integration
132. There is only very limited economic integration of the economies of
the South Pacific. The concept of a free trade area for the South Pacific
has been mooted many times, driven by the rationale that "regional
collaboration that combines the PIDCs' individually limited manpower,
financial and natural resources may in certain areas, allow for economies
of scale, reduce vulnerability to external shocks, and thereby improve
overall welfare" 31/.
133. While the potential for greater development of trade among the PIDCs
is being explored with vigour by a number of countries, trade flows suggest
that little real progress has been made in increasing trade within the
Pacific. For the period 1989 to 1991, inter-PIDC trade showed virtually no
growth, and accounted for only 5.0 per cent of total exports of the PIDCs.
Research undertaken by the Pacific Islands Development Program of the East
West Centre, Hawaii 32/ found that the total value of inter-PIDC trade
fell in the 1980s both absolutely and relatively to the total value of
trade. This trend has continued in the 1990s.
134. However, there are significant constraints to pursuing trade
cooperation within the South Pacific. First, the theory of integration
suggests that benefits accrue when the trade patterns and commodities
traded between countries are quite different. This condition is not met by
the PIDCs which, by and large, produce and trade the same, or similar
commodities. Imports are dominated by machinery, other capital goods and
petroleum - most of which are not produced in the region. Likewise,
exports are predominantly raw materials which are processed in markets
external to the region. In addition, benefits are maximised through
regional trade integration when complementarities exist between the partner
countries. With the exception of Papua New Guinea, potential gains are
limited for PIDCs.
135. On balance, the World Bank 33/ expresses the view that -the
benefits from trade within the South Pacific are likely to be limited and
largely offset by the administrative costs involvedþ. There is general
agreement within the PIDCs that a too-narrow focus on the enhancement of
intra-regional trade may detract from the implementation of policies aimed
at stimulating trade and investment at a broader level. Direct measures to
liberalise trade and investment regulations and policies aimed at fostering
a conducive economic environment are generally considered to be a more
important focus for development than regional integration. These
developments would assist in building up economic linkages with the "growth
centres" of the wider Asia-Pacific region and beyond. It is also likely
that such developments would stimulate increased trade within the region.
136. Another prerequisite for closer bilateral, sub-regional and regional
ties, which would also assist extra-regional trade, is the improvement of
market access in all the PIDCs. Harmonisation and standardisation of
administrative procedures are necessary in the areas of customs and
quarantine, labelling and packaging, phytosanitary and other sanitary
requirements, export/import controls, exchange controls and technical
standards. These are issues which need to be addressed primarily at the
national level.
(b) Regional cooperation in the South Pacific
137. The concept of regional cooperation in the South Pacific has been
strong and on-going since 1947, when the oldest regional agency, the South
Pacific Commission (SPC) was established. Since that time, a further seven
regional agencies have evolved to cover a diverse range of areas:
1. The South Pacific Forum and Forum Secretariat
2. The South Pacific Commission
3. The Forum Fisheries Agency
4. The South Pacific Regional Environment Programme
5. The South Pacific Applied Geoscience Commission
6. The University of the South Pacific
7. Pacific Islands Development Program
8. Tourism Council of the South Pacific.
138. In an effort to ensure that decisions taken by the organisationsþ
governing authorities are implemented effectively and with minimal
duplication, the South Pacific Organisations Coordinating Committee (SPOCC)
was formed in 1989. The government membership of all the regional
organisations overlap, which makes it vital for each organisation to be
keenly aware of the othersþ work programmes. SPOCC provides this
opportunity and helps to avoid unproductive competition for scarce aid
resources and thereby encourages more effective aid utilisation, a common
request of aid donors.
139. South Pacific Forum member countries' trade and economic interests
are considered and discussed at the bi-annual meeting of the Committee on
Regional Economic Issues and Trade (CREIT). Participation by senior trade
and economic officials from all Forum member countries, plus
representatives of regional and international donors and economic agencies
as observers, allows the CREIT to consider a diverse range of issues
relating to trade and economic development in the South Pacific. The CREIT
plays a critical role in the strategic direction of the Forum Secretariatþs
work programme activities relating to trade.
(c) Sub-regional cooperation and integration
140. Against the background noted above, and given the diversity and
geographic spread of the South Pacific countries, it is perhaps not
surprising that more progress has been made in the area of sub-regional
cooperation than across the region as a whole. A number of specific
cooperative efforts exemplify this point.
141. The Melanesian Spearhead Group (MSG) is the most significant sub-
regional agreement in the South Pacific comprising Papua New Guinea,
Solomon Islands and Vanuatu, with Fiji as an observer. The MSG countries
have proceeded to develop their trade relationship through an initial
positive list of three commodities. The MSGþs objective is to promote a
sub-region where trade will be conducted free of duty and where a sense of
cooperation in areas of investment and technical cooperation will be
promoted. The MSG aims to increase integration and cooperation not only
through trade, but also through cultural interaction, shipping and
communications, tourism, and investment promotion.
142. The first summit of the Heads of Government of the Republic of
Kiribati, Republic of the Marshall Islands, Republic of Nauru and Tuvalu
was held in Kiribati in March 1995. The meeting acknowledged and
reaffirmed a desire to promote sub-regional cooperation in the areas of air
transportation, shipping, trade, and immigration. While it is still early
days for the grouping, it is anticipated that in the area of trade, efforts
will be focused on providing a competitive and cost effective system of
sub-regional trade.
143. The Leaders of the Small Island States (SIS) in the South Pacific -
Cook Islands, Kiribati, Nauru, Niue, and Tuvalu have met on an annual basis
since 1990. Past summits have focused on a diverse range of issues, with
trade not being given a particularly high priority. The fifth summit, held
in October 1995, reversed this trend with a number of significant outcomes
relating to trade development cooperation. Of particular note was the
decision to examine the possible establishment of bulk purchasing
arrangements and supply services within the SIS or at the broader regional
or sub-regional level, particularly for pharmaceuticals.
144. Under the Regional Long Term Sugar Agreement (RSA) which recently
entered its 20th year, Fiji supplies sugar on a cost-plus basis to a number
of other PIDCs. Currently five PIDCs purchase sugar under the RSA -
Kiribati, Solomon Islands, Tonga, Tuvalu and Western Samoa (which also
supplies Tokelau). Sugar is a staple import for the PIDCs, and the RSA has
proved to be an excellent example of South Pacific cooperation from which
benefits are derived by all involved parties.
145. Philatelic exports are a significant export earner for a number of
the PIDCs, particularly the small island states. In an effort to assess
and maximise the potential benefits of economies of scale in the philatelic
area, the Forum Secretariat has developed the concept of a regional network
of cooperating PIDC philatelic agencies. The first meeting of the
potential network was held in Suva in early November 1995, with
representation by 12 of the 14 PIDC philatelic agencies.
146. Trade linkages between the PIDCs and the French Territories in the
Pacific (New Caledonia, French Polynesia) are limited, with the exception
of trade between Vanuatu and New Caledonia.
147. The Forum Secretariat will be undertaking a major programme of
activity in 1996 (trade exhibitions, missions etc.) from the PIDCs to the
French Territories - initially New Caledonia - to assist with the further
development of PIDC trade with the Territories.
(d) Inter-regional fisheries cooperation
148. The vast exclusive economic zones (EEZs) of the South Pacific island
countries contain a significant percentage of the worldþs fisheries
resource which are the major economic resource of many of the smaller
island states. The waters of the South Pacific are fished by some twenty
distant water fishing nations (DWFN). Prior to the establishment of the
Forum Fisheries Agency (FFA), the small island nationsþ negotiating
position with DWFNs was weak. FFA provided the impetus and opportunity for
member countries to pool information on their negotiations with DWFNs. It
was clear that the DWFNs were presenting different information on the same
fishery to various member countries and were trying to play one island off
against the other. The close regional cooperation fostered by FFA
outflanked this negotiating tactic.
149. In the South Pacific fisheries sector, standardisation of minimum
terms and conditions of fisheries access through the region was one of the
most significant results of regional cooperation. Perhaps the greatest
achievement in access negotiations was the conclusion of the Multilateral
Treaty on Fisheries with the USA. This highly complex treaty is regarded
as a unique fisheries access agreement. It was pursued at the direction of
the Forum and came into force in 1988. The treaty has become a benchmark
for further multilateral negotiations with other major DWFNs - negotiations
on similar agreements with Japan, Taiwan and Korea are currently the focus
of considerable FFA activity.
(e) Regional tourism cooperation in the South Pacific
150. As noted previously, Fiji dominates the South Pacific tourism market.
The Tourism Council of the South Pacific (TCSP) is the regional
organisation with responsibility for tourism planning, development and
marketing.
151. There is a strong awareness in the PIDCs that they -must market their
unique shared Pacific identity and, within that framework, promote their
own individual cultural identity and unique attractions. Only in this way
can they capitalise on the comparative advantage they have over other
destinations and compensate for their remotenessþ 34/.
152. Many commentaries on the region, although commending the work of
regional agencies such as TCSP, note the many and various difficulties of
regional cooperation in tourism development. These are underpinned by
differences in culture, tradition, degree of economic dependence and even
the long history of rivalry between the various island communities and
nations. ESCAP 35/ has noted that the degree of fragmentation and
independence of the PIDCs is "not conducive to cooperative and integrated
(tourism) policy and strategy formulation."
153. While noting these conditions, the TCSP has nonetheless been
successful in its activities as a regional agency, more so in the marketing
and promotion of the South Pacific as a tourist destination in Europe and
the USA, than in the area of strategy and planning. Tourist arrivals in
the South Pacific continue to demonstrate strong growth, driven by regional
and individual PIDC initiatives. The TCSP has to some extent been
constrained by lack of funding to adequately cover the broad range of
activities which it must undertake to increase market awareness and capture
new opportunities - product development, investment attraction, human
resource development, and marketing and promotion - across such a large
number of countries.
(f) South Pacific cooperation in the wider regional environment
154. When considering regional cooperation for trade development in the
South Pacific, it is important to note the success of regional cooperation
in the region's dealings with the international environment. The South
Pacific Forum is a full member of the Pacific Economic Cooperation Council
(PECC); is one of the three observers to Asia Pacific Economic Cooperation
(APEC) and also attends meetings of the Pacific Basin Economic Council
(PBEC) on an invitation basis. These three Asia Pacific regional groupings
are focused on trade and investment liberalization and facilitation.
155. To promote export trade, attract foreign direct investment, source
cost effective imports and facilitate industrial collaboration, the Forum
Secretariat has established the South Pacific Trade Commission offices in
Sydney and Auckland. Linkages with Asia are also being developed with
proposals to establish a South Pacific Economic Exchange Support Centre in
Tokyo, Japan, and possible South Pacific Trade offices in the People's
Republic of China, and Taiwan. Furthermore, the Forum Secretariat's Trade
and Investment Division undertakes a range of regional efforts focused on
trade and investment development. Trade missions, participation in
international trade fairs and exhibitions,and publication of a
comprehensive South Pacific Trade Directory are examples of the
Secretariat's efforts to maximise the benefits of regional cooperation for
trade development.
Chapter V
CONCLUSION AND RECOMMENDATIONS
156. The Pacific Island Developing Countries (PIDCs) are open trading
economies. Because of their limited natural, human and capital resources,
they are increasingly import-dependent. There appears to be a link,
working through exports, between exogenous shocks, terms of trade changes
and economic growth in PIDCs. Most PIDCs are dependent on overseas
remittances and aid transfers.
157. The larger PIDCs (Fiji, Papua New Guinea and the Solomon Islands)
show more potential for export growth than the small island States of the
region (Palau, Federal States of Micronesia, Republic of Marshall Islands,
Kiribati, Tuvalu, Niue). However, some PIDCs such as Tonga and Samoa have
made significant attempts to diversify exports in niche markets in recent
years. In the services sector, tourism offers the greatest potential for
PIDC export growth.
158. As the global trading environment becomes increasingly integrated,
the PIDCs face a number of challenges:
. how to deal with the adverse effects of the conclusion of the
Uruguay Round, as preferential market access is being largely
eroded for key PIDC exports;
. can the PIDCs afford the costs of joining the World Trade
Organization and, conversely, can they afford the cost of not
joining;
. how the limited regional economic integration among the PIDCs can
be enhanced;
. what benefits can the PIDCs draw from the wider Asia Pacific
region;
. how to diversify trade and develop niche markets in areas where
PIDCs have a comparative advantage.
159. Potential exists for trade diversification in the PIDCs as a result
of opportunities presented by trade liberalization and globalization. To
take maximum advantage of such opportunities PIDCs must adopt a focused and
strategic approach to identify products and sectors for possible future
development.
160. Regional cooperation for trade development in the PIDCs has been
limited compared with other regions in the world. While scope exists for
further regional economic cooperation in specific areas, the PIDCs'
interests are most likely to be enhanced by more rapid development of
linkages with the global trading environment, in particular the Asia-
Pacific region.
161. The PIDCs must therefore take a holistic view to the issue of trade
diversification based on the diverse range of factors which are part of, or
impact on, trade and economic development. In this connection priority
should be given to the following key issues:
~ macro-economic and public sector reforms to create an environment
conducive to economic growth, particularly with respect to small-
and medium-size enterprises;
~ implementation of international rules for trade and investment
liberalization, which provides a more favourable climate for trade
growth and diversification;
~ regional economic cooperation that promotes key markets and taps
new sources of investment capital, particularly in the Asia
Pacific region;
~ long-term strategic approaches to industry development based on
key products and services of comparative advantage, targeted at
selected niche markets (including "micro-niche" marketing);
~ enhancing competitiveness of PIDC exports through improved quality
control, and better access to new technologies that can improve
production techniques and facilitate information flows;
~ development of human resources through education, training and
skills formation matched to present and future social and economic
needs; and
~ cost-effective procurement and management of imports to ensure
foreign-exchange savings.
162. The speed of change in the international environment necessitates
that PIDCs seek to address the above policy issues at enterprise, national
and regional levels. These efforts will need to be supported by expanded
aid flows, on concessional terms where appropriate, and provision of the
required technical assistance. In providing the above support,
consideration should be given to other modalities to improve the quality of
aid, such as priority to programme support and recurrent-costs financing
where appropriate.
Notes
1/ Data used in the preparation of this report will be available in a
separate annex document.
2/ Pacific Economic Cooperation Council (PECC). "Pacific Island
Developing Economies: Priorities for the 1990s." The PECC Pacific
Economic Development Report. 1995.
3/ World Bank. Pacific Island Economies: Building a Resilient
Economic Base for the Twenty First Century World Bank. 1995.
4/ World Bank. Toward Higher Growth in Pacific Island Economies:
Lessons from the 1980s World Bank, 1991.
5/ World Bank, 1995 - op cit.
6/ Pacific Economic Cooperation Council (PECC) - op cit., p. 39.
7/ World Bank - op cit.
8/ Pacific Economic Cooperation Council (PECC) - op cit.
9/ This view is supported by ESCAP: see UNESCAP. Uruguay Round: some
implications for Pacific Island countries. Paper for the Seminar on Trade
Policy Issues for Pacific Island Countries. Nadi, Fiji, Nov 1994.
10/ United Nations Economic and Social Commission for Asia and the
Pacific, 1994 - op cit.
11/ Grynberg, R. The closure of the Uruguay Round and its impact of the
South Pacific Forum Countries. Paper for the South Pacific Forum
Secretariat. 1994.
12/ United Nations Economic and Social Commission for Asia and the
Pacific. Enhancing the external trade and investment of Pacific Island
Countries, in particular with Asia: policy issues and implications for the
1990s. Note to the Special Body on Pacific Island Developing Countries.
April 1995.
13/ Grynberg, R. A study of the trade and economic effects of the
Lome' Convention on Pacific ACP Countries. Report prepared for the Forum
Secretariat. 1994.
14/ World Bank. The Uruguay Round: A milestone for the developing
countries. 1995.
15/ World Bank, 1995 - op cit.
16/ Badrinath, R. Trade expansion by small and medium enterprises and
enhancing access to the markets of industrialized countries. Address to
the Seventh International Conference of the World Assembly of Small and
Medium Enterprises. Addis Ababa: ITC UNCTAD/GATT, March 1994.
17/ Badrinath, R. - op cit.
18/ Asia Pacific Economic Cooperation (APEC). APEC Survey of Small and
Medium Enterprises. 1995
19/ Hughes, A.V. "New bags, old copra" Pacific Islands Development
Dialogue, Vol.1. Noumea: South Pacific Commission. April 1995.
20/ Trade Development Institute (TDI) Ireland. Regional Trade
Development Study. Draft report for the Forum Secretariat (unpublished).
1993.
21/ United Nations Economic and Social Commission for Asia and the
Pacific, 1995 - op cit.
22/ World Bank. Pacific Island Economies: Building a Resilient
Economic Base for the Twenty First Century World Bank. 1995.
23/ Badrinath, R., 1994 - op cit.
24/ Price Waterhouse. Report for the South Pacific Bureau for Economic
Cooperation on Trade in Services under SPARTECA 1992.
25/ Price Waterhouse - op cit.
26/ Yee Che Fong. The GATT Uruguay Round of negotiations on trade in
services and their impact on Pacific Island Countries. Report for the
UNCTAD/UNDP Regional Project for Asia and the Pacific "Institutional
Capacities for Multilateral Trade" Geneva: UNCTAD, 1994.
27/ Price Waterhouse, 1992 - op cit.
28/ Yee Che Fong, 1994 - op cit.
29/ Yee Che Fong - op. cit.
30/ Yee Che Fong, 1994 - op cit.
31/ World Bank, 1995 - op cit.
32/ Thirlwall, Anthony. The Performance and Prospects of the Pacific
Island Economies in the World Economy. Plenary address to the Third
Pacific Islands Conference of Leaders. Pacific Island Development Program.
Hawaii: East-West Center, 1990.
33/ World Bank, 1995 - op cit.
34/ United Nations Economic and Social Commission for Asia and the
Pacific (ESCAP) - Sustainable Tourism Development in Pacific Island
Countries 1992.
35/ Ibid.
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