ADB outlook for Pacific remains positive, despite pressures

Transcript

A new report on Pacific economies says despite drops in exports, Pacific countries are predicted to benefit from increased tourist arrivals.

The Asian Development Bank's Pacific Economic Monitor notes the slowdown in commodities and Papua New Guinea's resource sector, but says remittances have picked up since the global financial crisis.

A senior economist with the ADB, Christopher Edmonds, launched the report in Auckland, saying smaller island nations can boost their tourism numbers on the back of demand from Asia, but may struggle at times to meet that demand.

He spoke to Alex Perrottet about some of the challenges, including the impact of El Niño on Pacific economies.

CHRISTOPHER EDMONDS: With all fragile island ecosystems, carrying capacity is a concern, and already the countries who are at the forefront in terms of their level of development and their dependence on tourism, as a core sector of economic activity, we're already seeing these capacity constraints. So in the case of Palau and the Cook Islands, those are the two countries that are most tourism dependent, in terms of estimated share of GDP that comes from tourism, the share of employment that comes from tourism. You know they need to think very carefully about their carrying capacity. You know ADB would suggest, and is eager to work with the countries and the Pacific Islands Forum Secretariat and other regional organisations to think about a more regional approach to dealing with some of these issues in terms of airline services, visa facilitation, all these things.

ALEX PERROTTET: Vanuatu, it's still coming off Cyclone Pam, straight after the cyclone we had people putting their hands up saying 'our resort is still operational, don't put off your trip, come along, what have you looked at in this report in terms of Vanuatu's recovery?

CE: So we've been following the tourism arrivals and actually they've show a very quick recovery. So even the cruise ships were suspended for a while but now they're back at their pre-cyclone levels so from a tourism standpoint it seems very good. They have a variety of infrastructure plans so it might be the case of rebuild better than what was lost so it is an opportunity in that regard. Although you have to put this against the fact that estimated development partner contributions for Cyclone Pam recovery amount to roughly a fifth of what the estimated need is. And that's typical for disasters.

AP: Turning to Papua New Guinea and we're looking at several problems in terms of them being able to service their debt, finance the budget deficit and we're looking at ways they could save money. 700 million kina could be saved by 'weeding out non-performing workers and spurious posts' - is that an issue that can be tackled in the short term?

CE: I mean surely it's an issue that has to be dealt with with great delicacy and in time, but that's not so atypical across developing country governments where you'll have that influence of political considerations in public employment and there's you know a variety of measures that need to be taken into account and you need to face the political realities. You can't just throw people out of work suddenly, it has to be done with due concern for the adjustments costs of doing that.

AP: We're also going to be seeing a slow-down in those core markets that have been such a boon for PNG, the liquefied natural gas, the palm oil and then of course with El Niño coming across as well, and it's hitting PNG probably the worst at the moment, out of all the Pacific, there is a bit of doom and gloom there isn't there in terms of the outlook?

CE: Yes, I mean, yes in that regard, like the resource exporting countries, the countries are always going to be vulnerable to these fluctuating commodity prices and it's really hit PNG at an unfortunate time especially with as you know, El Niño coming on top of that. So that's where having a good public financial management system is so crucial so there's certain things that the government is supporting that you really just can't interrupt and they have to be prioritised when you are making cuts. You can't cut off emergency food aid to the highlands where the subsistence farmers are losing their crops. You can't cut off education. You can't ask the kids to come back in six months because you'll interrupt the whole stream of education, so if you're in the middle of building a bridge you don't want to let the concrete dry and mess up that. It's the ability to prioritise important expenditures."