Impact of the Global Economic Crisis on the People of the Pacific
Pacific Conference on the Human Face of the Global Economic Crisis
10 February 2010, Port Vila, Vanuatu
Your Excellency, President of Kiribati, Mr. Anote Tong;
Dame Carol Kidu, Minister of Community Development, Papua New Guinea;
Chairman, Mr. Tuiloma Neroni Slade, Secretary General of the Pacific Islands Forum;
Dr. Jimmie Rodgers, Director General of the Pacific Community:
Mr. Larry Greenwood, Vice-President of the Asian Development Bank;
Ladies and gentlemen,
Impacts of the global economic crisis are often reported in terms of figures on economic growth, government expenditures and increases in poverty. This conference is a timely reminder that the crisis has a human face. It has exposed the vulnerabilities of the Pacific Island Economies in terms of people’s lives and well-being:
- Garment workers were particularly exposed in Fiji, where 1000 workers lost their jobs in 2009, following a 25% drop in export revenue. Eighty percent of these workers were women.
- Farmers in Papua New Guinea and Solomon Islands watched their incomes virtually disappear with the drop in prices of coffee, copra, cocoa and timber
- Tourism workers in Fiji and the Solomon Islands have experienced a decline in hours and layoffs as the number of visitors has fallen.
- Families in Fiji, Kiribati, Tuvalu, Samoa, Solomon Islands and Tonga have seen significant reductions in their incomes from remittances.
- People struggling with the loss of lives, assets and homes after disasters.
All these people have less money for food, electricity, school fees, health services and savings. As poverty increases so too does the vulnerability of women and children, people living in rural areas, the urban poor, the elderly and people with disabilities. It is a reminder that social recovery takes longer even if the economy is beginning to recover.
With sharp declines in tax revenues, governments in the Pacific are cutting back on social spending.
- The Solomon Islands have cut recurrent expenditure by 35 per cent, frozen vacancies for government jobs and reduced development expenditure.
- Tonga has implemented tight spending controls on government expenditures.
- Several countries, such as Cook Islands, Fiji, Papua New Guinea, the Solomon Islands and Vanuatu, have introduced fiscal stimuli by reducing taxes and increasing government expenditure through capital investment programs focused primarily on infrastructure.
Ladies and gentlemen,
None of the Pacific SIDS is on track to meet all the MDGs by 2015. The paper commissioned by ESCAP for this session – “Impact of the Global Economic Crisis on the People of the Pacific” – notes that the incidence of poverty is likely to rise as the impacts of the crisis filter down to households and individuals. In fact, the vulnerability of the Pacific islands has increased while their ability to cope has decreased. Development gains made will be lost. This point was made earlier this week during the Pacific High Level Dialogue on the Mauritius Strategy.
However, not all the news is bad. Overall GDP growth in the Pacific Island Developing Economies is expected to be 1.9% in 2009. While this is low in comparison to the 3.9 % 2009 growth figures for Asia Pacific – it reflects a better performance than many developing countries in the rest of the region which actually fell into a recession. According to the Pacific Regional Report, over 30 initiatives to implement the Mauritius Strategy have been taken in the Pacific over the last five years. Also several SIDS are on track to achieve some of the MDG targets. I take this opportunity to commend you for your efforts.
Pacific Island Economies have a number of handicaps that cannot be changed. These include their isolation, small size, lack of resources, the high frequency of natural disasters and vulnerability to rising sea-levels. Despite these challenges, the Pacific has produced resilient island communities. Their strength is founded on their social fabric, their extended family values and a tradition of community cooperation. However, these traditional systems of social protection and security are changing and under threat. The social foundations are taken for granted and not invested in.
More recently, new strategies have been developed for growth and managing the challenges faced by Pacific SIDS today. For example:
- The development and expansion of tourism and related transport services has helped the Pacific SIDS to sustain economic growth.
- Likewise the increased migration of people from the islands to economic centres in other countries has triggered a rapid rise in remittances.
- Some Pacific SIDS have improved their resilience to crises by maintaining fiscal discipline and by promoting savings when commodity prices were high. These funds are now available to support their economies in more difficult times
However, the increased dependence of Pacific SIDS on external sources of growth has made them more vulnerable to global economic shocks. Even a relatively mild slow down in economic growth, such as the one experienced by Australia in 2009, can trigger large impacts in smaller economies. Pacific SIDS will, therefore, need to continue to diversify their economies while managing the instabilities that come with each source of growth. So how can this be done, given the constraints and challenges?
Responses can be framed at three levels:
- At the global level, donors need to be held accountable for their commitments to support SIDS,
- As a region, we need to work together to manage the ocean as a common wealth, pool our resources and explore new ways of promoting South-South cooperation; and
- Nationally, countries need to increase their commitment to introducing planning, financial systems and budget allocation that strengthen their resilience to economic and climate shocks and the multiple crises affecting our region, including those associated with food, energy and water security.
I will share my thoughts on each.
Role of the International Community
The international community has acknowledged that Small Island Developing States face special challenges to development. The international community now needs to renew its commitment to partner with Pacific LDCs and SIDS in light of new issues and challenges emerging from recent crises. The SIDS cannot do this alone.
ODA will play an important role helping this region recover from the current crisis. It should, therefore, be made more predictable and be better aligned with national priorities and the MDGs. Unfortunately, the Monterrey Consensus’ promise of providing financing for development remains largely unfulfilled. Financial resource flows to the Pacific are insufficient compared to their level of vulnerabilities and needs. This Conference can discuss strategies to ensure that the international community honours its commitments on trade and financing of development in support of the MDGs and MSI. This would follow up on the ESCAP organized Bali Dialogue and the Pacific Forum meetings, especially the Cairns Compact, both of which have sought for an early, fair and balanced conclusion of the Doha development round and increased cooperation for development.
New sources of development assistance also need to be explored. In response to the global economic crisis the G20, at its London Summit in 2009, endorsed a six-point plan and made significant financial pledges that target low income countries as a priority. Furthermore, the Copenhagen meeting includes a pledge of US $30 billion to address the impacts of climate change. This Conference could add its voice to the call for these “new” pledges to be additional – above what had already been committed by the Monterrey Consensus. The aim should be to ensure that:
- These are new and additional funding and that the funds are quickly and fairly disbursed to countries with the greatest degree of vulnerability and needs; and
- Pacific LDCs and SIDS are represented on the Financial Stability Board, established by the G20 with greater representation in international financial institutions. The Asia-Pacific LDC group issued this call two weeks ago in Dhaka, as did the Pacific SIDS High-level Dialogue which has just concluded.
- Pacific LDCs and SIDS should be given due priority in the provision of resources promised in COP15 in Copenhagen – given they are at the frontline of climate change.
- They should also be assisted through transfer of technology and finance to adopt a new development strategy based on Green growth, fostering green jobs to address increasing youth unemployment and more inclusive and sustainable development.
Trade plays a significant role in the development of Pacific LDCs and SIDS. Unfortunately full use of the trade preferences accorded by the Doha Development Agenda and the Brussels Programme of Action for Least Developed Countries has not been possible. This is due to lack of supply capabilities, poor infrastructure facilities and resources. Restrictive rules contained in these arrangements also restrict the seven Pacific LDCs, and SIDS from developing the full potential of trade.
Pacific LDCs and SIDS need genuine market accesses and assistance to build production capacities, trade infrastructure and affordable energy to exploit international trade opportunities through increased mobilization of resources, enhanced foreign direct invest and Aid for Trade.
Role of Regional Cooperation
Improved regional cooperation and integration can play a significant role in promoting inclusive and sustainable development in the Pacific. This has been demonstrated through the implementation of the Pacific Plan and the momentum generated by the Cairns Compact. Implementation of the Pacific Aid Effectiveness Principles would further enhance regional cooperation.
The recent meeting in Dhaka on LDCs, organized by ESCAP and the Government of Bangladesh, underlined the need and importance of South-South and Triangular Cooperation; requesting ESCAP and other regional bodies as well as international organizations to strengthen the capacities of LDCs in harnessing regional opportunities.
Regionally, much can be done to exploit the potential of economic and financial cooperation in Asia-Pacific. With over US$ 4 trillion dollars of foreign exchange, the region now has the ability to foster a major programme of investing in itself to improve regional connectivity, energy and water security, social protection and disaster preparedness.
Green growth is being championed in Asia-Pacific as a pragmatic response to the economic crisis and climate change, and as a viable strategy for promoting inclusive and sustainable development in the region. Much can be achieved to promote green growth through enhanced regional cooperation. This can be done through the transfer of green technologies, the development of partnerships to promote renewable and affordable energy, including for rural households, and sustainable management of natural resources, including ocean resources.
Improvements in transport infrastructure as well as advances in ICTs will provide significant economic opportunities for neighbors in the Pacific, and for the rest of the region, to trade and invest in one another.
At the country level, much can be done to respond to the current crises. National development plans and budgets must integrate social services and social protection measures as part of equitable economic growth. Only 20% of the Pacific’s population has access to social protection, leaving the remaining 80% vulnerable to crises. National development plans should be based upon stakeholder consultation processes that improve ownership. They should also include disaster preparedness and climate change adaptation strategies.
Both the Pacific Plan and the Cairns Compact call for improvements to national planning systems and ownership. Support will be provided through a regional initiative now being established entitled, the “Pacific National Sustainable Development Strategy Regional Support Partnership”. This capacity development initiative involves the participation of many UN agencies, including ESCAP.
Directing aid to those that need it most is an important responsibility of governments through which the vast majority of assistance flows. For instance, Samoa is providing free education to primary school children as a response to the economic crises with funding support from Australia and New Zealand. Vanuatu is doing the same.
The timely production and ongoing use of statistics is absolutely crucial for sound decision making. Together with other development partners, ESCAP provides technical assistance to build statistical capacity in the Pacific.
Both donors and private investors have shown interest in supporting the implementation of green growth strategies at the national level. These strategies could include investments in sustainable infrastructure, shifting to renewable energies and investing in energy efficient technologies to reduce the economic and environmental costs of energy. Over time fiscal measures and budgetary reforms can also be introduced to promote the demand for eco-efficient products and services, promoting the creation of green jobs.
Ladies and gentlemen
While the economic crisis has hit Pacific SIDS hard, it has also provided us with an important opportunity to rethink the future and make major shifts. Business as usual is not an option.
We need to address the economic, social and environmental vulnerabilities of this region together with wealth generation. Much can be done to promote regional cooperation, both among SIDS in the Pacific as well as a stronger link with Asia. Asia is the fastest growing region in the world. Improved regional cooperation and connectivity can facilitate trade and the transfer of technology, increase levels of financing and investment, as well as support eco-tourism. Instead of just seeing the ocean as isolating, we need to build the capacity of SIDS to forge regulatory frameworks and manage the ocean as a vast regional resource.
This Conference provides a timely opportunity to assess the impacts of the global economic crisis and climate change on the peoples of the Pacific, and to forge concrete strategies and solutions. In doing so, we must never forget the human face of the crisis and always remember that the human face of poverty is often female; it is often a child.
As we forge the future, let us always remember that we have borrowed that future from our children. The time is now to build the economic and social foundations for an inclusive and sustainable world fit for all.
I wish you every success in your discussions.
I thank you.
 AusAid, 2009. Surviving the global recession: strengthening economic growth and resilience in the Pacific.
 Mauritius Strategy for further Implementation of the Barbados Programme of Action for Sustainable Development of SIDS.
 Figures come from forthcoming ESCAP Social & Economic Survey. This is a 3.0% drop compared to 4.9% growth in 2008
 Note: Developing economies in Asia Pacific actually contracted by 0.9% going into a recession in 2009. This figure excludes China and India and is taken from ESCAP’s forthcoming survey. The relatively good performance of SIDS is a reflection of their low connectivity with international markets.
 When expressed as a per capita ratio, aid to the Pacific SIDS appears high by comparison. However, a per capita measure is misleading for a region with a small, widely dispersed population, high overheads, thin routes and small economies.
 The Sustainable Development Working Group of the Council of Regional Organizations (CROP) has approved the setting up of a Pacific National Sustainable Development Strategy Regional Support Partnership to assist Pacific SIDS. UNESCAP is a key promoter and partner in this.