A step up in engagement by the Australian and New Zealand governments, combined with regional and international economic support over the past year, has cushioned the initial blow of Covid-19.
Moving forward, labour mobility, a fast vaccine rollout and safe travel corridors in the region, combined with the faster release of infrastructure support will be critical to its ongoing recovery.
Closed borders have hit the Pacific island economies hard. The idyllic, Covid-free beaches of the Pacific islands are empty of visitors, and the countries that rely on tourism are experiencing a disproportionate impact of the pandemic on their economies, despite not having a health emergency.
While overseas economic conditions are set to improve this year, the Pacific will require international support to see an uplift in economic conditions. Unlike many of the developed Western countries, the relatively poor Pacific island countries were not able to put a floor under demand and shelter their economies from a more severe recession.
A more severe economic downturn, pressures on payments and elevated currency and country risks are probable in 2021.
Fortunately, the Pacific has long benefitted from support provided by some of its nearest neighbours. Australia and New Zealand have been the region’s key development partners, and more recently, their step up has been encouraging when combined with international donor assistance.
In the last year alone, the World Bank and IFC announced AU$1bn investment into Fiji and the AU$2bn Australian Infrastructure Financing Facility for the Pacific (AIFFP) has become operational. Recent Australian and New Zealand government assistance to the islands in the wake of Tropical Cyclone Yasa has been welcomed.
In the wake of COVID-19, the Pacific will continue to require international support. The most beneficial types if support are likely to include:
Steps to ensure a:
Tourism key to a jobs recovery
Prior to the pandemic, the Pacific’s inbound tourism was strong, helped by solid economic conditions, particularly income growth in key source markets including Australia and New Zealand. Growth in overseas arrivals averaged about 5% a year. So much so, that that in the past decade tourism became the main driver of growth for many of the Pacific island economies including Fiji, Vanuatu, Samoa, Cook Islands and Tonga.
Tourism revenue flowed directly into sectors such as accommodation and food services, retail and transport, but then also fed through to other supporting industries yielding secondary benefits to the economy.
Once you add the stimulus from employment and taxes collected, the tourism sector’s total contribution to GDP is several multiples of its direct contribution to GDP and equates to about 40 - to 60% of the region’s output. For the Cook Islands, the contribution to GDP is closer to 80%.
However, since the Covid-induced border shutdown, visitor arrivals have collapsed to virtually zero since April 2020.
Tourism-dependent businesses are experiencing negative cash flows and are struggling to meet commitments. This has resulted in the loss of many thousands of jobs. Fiji lost nearly 70,000 formal sector jobs in 2020 (21% of total employment) which saw the unemployment rate shoot up to 27% from 7% in 2019. Taking into account the informal sector of the economy, which comprise the majority of total employment in the Pacific islands, then the jobs impact is a lot higher.
The solution: A tourism-led jobs recovery.
Many Pacific island countries have not had any community transmission of the virus with some countries having gone several hundred days without a local case. In the absence of international tourism, the economic hardships will get worse.
Recreating the strong growth in inbound tourism seen in the period leading up to the pandemic will be a challenge but it is through the support of its international allies where we might see a turnaround.
GDP and jobs is not the only problem – national debt is mounting
Most Pacific island countries experienced solid growth before the pandemic. But the flipside of this is a rising trade deficit, fuelled by imports of both consumer and capital goods. Over-consumption and narrow growth raises the risk of a return to larger deficits if tourism does not recover.
The need to finance the current account deficit requires a continued inflow of funds, either debt or equity. With the latter requiring favourable economic conditions, debt is the only viable alternative for now.
However, debt has limited wriggle room given the substantial uplift in government borrowings to finance budget deficits in 2020. If the current account deficit comes to a head, then pressures on foreign reserves will emerge and currency risks could rise.
Yes, migrant remittances are holding but that is not enough because consumption does not provide for a jobs recovery.
More budget support can contain credit and country risks
Pacific island governments had to take out large loans and issue debt to offset the decline in revenues brought about by a collapse of the tourism industry. Larger budget deficits have pushed debt higher and has left limited room to borrow more.
Further, Pacific island countries are B-rated credit nations and this prevents them from accessing cheap funds from the international capital markets. The need to fund budget deficits with more expensive domestic debt will heighten credit and country risks. To contain these risks, other countries may consider providing cheaper budget support loans while the Pacific awaits a recovery in tourism and jobs.
Ramping up Pacific labour schemes can help
The Australian Government has restarted its Seasonal Worker Program (SWP) to help fill acute labour shortages in rural and regional Australia. New Zealand has also received seasonal workers. In the 2018-19 financial year, 12,200 Pacific people worked in Australia under the SWP and remitted an aggregate nearly AUD110m back to Pacific. There are further opportunities here due to the current pool of displaced Pacific workers.
Agriculture technical expertise can reduce imports and help in economic diversification
No doubt after the pandemic we will see a shift away from the Pacific islands being so heavily dependent on tourism as a source of growth. The Pacific has great potential in agriculture with kava exports coming in leaps in bounds in recent years.
Despite this potential, the Pacific remains a net importer of fruits and vegetables when it comes to meeting tourism demand. With abundant land, the Pacific should be looking to reduce these imports and become an exporter of fruit and vegetables. There is also great potential in other areas such as fisheries and niche products like coffee, cocoa and turmeric.
The region would benefit from help with training, technical support and equipment, which could see the Pacific islands, produce high-quality produce at a scale to feed themselves and for the export market.
Release infrastructure funding quickly and get work started
Inadequate infrastructure remains a key constraint to Pacific prosperity. Without question, the Pacific needs better roads and ports to get produce to market, electricity to drive rural development and industry and more reliable and sophisticated telecommunications. It also needs to safeguard against climate risks by reducing reliance on fossil fuels. The Asia Development Bank estimates that over US$30bn needs to be invested in Pacific infrastructure by 2030.
But the Pacific islands alone lack the resources to meet the ADB’s targets. The narrow-based economies provide limited resources for governments who have to juggle competing priorities, and infrastructure investment is often the casualty. Donor funding is critical.
The AU$2bn Australian Infrastructure Financing Facility for the Pacific (AIFFP) has built a project pipeline of about AU$300m for year ending 30 June 2021. This is exactly what the region needs, more urgently than ever. Fast roll out of this funding, along with the release of fast disbursing funds for infrastructure maintenance works, would mean projects can begin immediately, creating much-needed jobs.
Tessa Price is ANZ's Regional Executive Pacific. Kishti Sen is ANZ's Pacific Economist
There's good news for Vanuatu’s seasonal workers this week with the announcement that 170 workers will be able to go to Australia for the mango season.
The workers will go to the Northern Territory in a pilot program designed to meet industry shortages.
National Farmers’ Federation Chief Executive Officer, Tony Mahar says it’s a “pragmatic decision”. Under the arrangement, eligible workers must return a negative COVID-19 test before departing and be required to self-isolate for 14-days after arriving in Australia, before commencing work. Mango farmers will also have to show that they are unable to secure local workers.
“No one wants to see fruit and vegetables wasted and this trial will help make sure that doesn’t happen," Australian agriculture minister David Littleproud says. “This trial will see up to 170 workers under the Seasonal Worker Programme come to Australia to help with the 2020 harvest, with more workers to potentially follow subject to a review of the first cohort and approval for additional numbers by the NT Government.”
Fiji, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu and Vanuatu are eligible to participate in the Pacific Labour Scheme. It’s unclear at this stage, which of these nations may send workers to the Northern Territory if the trial goes well and it is extended.
Labour mobility programs are a likely topic of discussion at the Pacific Island Forum Economics Ministers Meeting (FEMM) next week as both hosting countries (Australia and New Zealand) and supplying countries are FEMM participants.
The Director of the Development Policy Centre at the Australian National University, Stephen Howes says Pacific governments need to be prepared to let their workers leave for seasonal work. Similarly, New Zealand-based research fellow, Charlotte Bedford says there will be a demand for labour for the approaching season (September/October) but there are still a number of logistical questions to be addressed such as which workers will be employed (e.g. those who may have just returned or those who have missed out on deployment), and who pays for quarantine.
“When workers return at the moment, our current quarantine requires they will have to self-isolate in a quarantine facility for two weeks and employers are very keen to get in place a work bubble so that workers can go back to the work site and quarantine on the work site and start straight away,” Bedford says.
University of the South Pacific Senior Economist Neelesh Goundar believes there would be an appetite for this work from Fijians.
“ If organised well and if it’s targeted well, there certainly will be lots of workers who will be willing to go and work until the Fiji economy rebounds or tourism opens…if something can be implemented sooner [rather] than later, that would go a long way to helping households, especially those who have lost jobs here in Fiji.”
By Sadhana Sen
Is the Pacific an aid-dependent region making endless requests for development assistance but with little care for how effectively and successfully this aid is used?
What should be done by Pacific governments, donors and other stakeholders to improve the Pacific’s status in the aid effectiveness tables? We currently rank at the bottom?
Do donors really care about how successfully their development dollars are used across the Pacific region, or is aid just soft diplomacy; a means to influence geopolitical maneuverings in the region?
Delegates to the Australasian Aid Conference (AAC2020) will look at the state of development in Australasia and in the Pacific and aid effectiveness when they meet in Canberra at the Crawford School of Public Policy at the Australian National University February 17-19. Researchers working on aid and international development policy will share their insights and promote partnerships to build the research community.
So what can the Pacific Islanders and those working in the region expect from the discussions?
The conference’s location and Australia’s position as the South Pacific’s biggest aid partner as well as the current Australian International Development Policy Review, means Australian aid will be front and centre of the discussions.
The aid effectiveness sessions are led by the Devpolicy Centre’s Dr Terence Wood who writes on Australian aid project effectiveness – what shapes it, and why is it worse in the Pacific?
There will be a launch of a mapping study looking at funding gaps, opportunities and trends for Pacific women and girls, led by Fiji’s Virisila Buadromo from Urgent Action Fund for Women’s Human Rights Asia and the Pacific and Michelle Reddy from the Fiji Women’s Fund.
A research project titled Pacific perspectives on the World will also be launched at the conference. Led by the Whitlam Institute and an outfit named Peacifica, it “analyses views of a diverse group of Pacific islanders from Fiji, Vanuatu, and the Solomon Islands on their countries’ and region’s future place in the world.” The researchers say they’ve sought Pacific peoples’ views on “the role that Australia can play as a partner in realising that future.”
Other sessions will look at: infrastructure investments and NGO-participation in this sector; gender and development case studies; child-focused aid; climate change; eliminating violence against women and girls; and women’s economic empowerment (which includes Solomon Islands’ Dr Alice Pollard, the founder of the West ‘Are’Are Rokotanikeni Association NGO.)
Several panels are centered around Australian aid to Indonesia. However any mention of West Papua or a look at the plight of the West Papua people under Indonesian rule is a glaring omission from the program.
With this year marking the twentieth anniversary of UN Security Council Resolution on Women, Peace, and Security (WPS,) a panel will discuss the updated WPS Index, revealing areas of progress, stagnation, and reversals, and current opportunities for advancing the WPS agenda in Asia and the Pacific. Case studies include getting women’s issues onto the table in Bougainville, timely given the recent referendum.
Labour Mobility is another focal area, with a keynote panel looking at lessons learned from the first year of Australia’s new Pacific Labour Scheme, and an overview of recent recruitment reforms in Papua New Guinea.
Overall there are 58 panels and 220 presenters. And no Canberra is not closed. It’s had a bad summer with fire, hail and smoke, but the smoke is reducing, the weather is improving, and the conference is in a modern, air-conditioned building, promises Convenor and Development Policy Centre Director, Stephen Howes.
Sen is an independent Regional Development and Communications Consultant.
In January at the height of the Australian bushfires, I received a message from James Walau, a ni-Vanuatu Seasonal Worker Programme (SWP) team leader, informing me that he and his team of 47 had left Batlow due to the impending fire. Since September 2019, Australian firefighters have been battling bushfires and it is estimated, currently, that over 12 million hectares has burnt. Among the many affected are farmers and workers participating in the SWP. This blog discusses the impact on a group of 48 ni-Vanuatu SWP workers evacuated from Batlow in the New South Wales Riverina region. It is in no way intended to neglect or downplay the experiences of the thousands of people who have lost their homes and livelihoods, and those who have lost their lives and loved ones. Rather, this blog is part of a larger discussion on experiences of SWP workers in Australia.
In the first few days of 2020, the community of Batlow was told to evacuate. It was predicted that the fire would destroy the township, which was declared to be ‘undefendable’. The team of ni-Vanuatu workers had only been in Batlow since late November 2019, five or six weeks into their six to nine month stint working on orchards with apples and berries. For many, this was not their first SWP season, and knowing the area proved to be advantageous in their evacuation. As Walau informed ABC’s Pacific Beat, ‘We are lucky, we have so many friends that helped us. We know the area with the two seasons we already have, so easier for us to move.’
The group, all men, evacuated Batlow – their workplace and home – on 31 December. In preparation for the evacuation, workers had been informed to pack all essential documentation and their bags. They did not know what the fate of the farm would be, only to prepare for the worst. A packhouse for berries had already been destroyed by the fire.
Initially, the group took refuge at the Batlow RSL Club; however, it was clear this was not going to be a safe option. After discussion, Canberra was ruled out and the next plan was to travel the 25 minutes to the Adelong evacuation centre. Once they arrived in Adelong, they realised the centre could not accommodate everyone, so the decision was made to travel further again, another hour away to Wagga Wagga where they could all be accommodated together.
When they got to Wagga Wagga, they notified their labour hire company of their safe arrival and their employer transferred money into a bank account for the workers to purchase food and supplies. The group were welcomed into the township of Wagga Wagga and received excellent support from the community. In a video clip, that’s since gone viral, workers showed their appreciation to the host township too. The group also became involved in community fundraising activities through a local church to assist with donations for those affected by the bushfires.
Fundraisers are a normal part of life in many Pacific countries. In previous work I have documented how seasonal workers have contributed funds to assist with responses to natural disasters in their respective countries, but also those in their host countries. Workers in New Zealand’s Recognised Seasonal Employer scheme (RSE) raised funds for Christchurch after the tragic 2011 earthquake. SWP workers not only fundraised, but also assisted in evacuations and the clean-up process in response to various floods in Queensland. Colin Foyster, an avocado farmer in northern New South Wales, also praised his workers from Papua New Guinea for helping to fight the fire on his farm. Support from Pacific workers for the communities in which they live and work during their time in Australia has always been valued.
We’ve seen generous support for Australia from Pacific nations for the bushfire disaster too. Papua New Guinea deployed 100 military personnel on 13 January. Vanuatu donated 20 million vatu (approximately A$240,000). And there are stories of grassroots fundraising for the fires from communities across the Pacific.
Back to business as usual?
Walau and the group returned to Batlow on 12 January and started work again the next day. The orchards where they are employed only suffered minor damage. Walau told ABC’s Pacific Beat,
‘We prayed for our farm to be protect [sic] so we could have jobs … now we can go back to our jobs … We are so lucky our orchard is safe and our camp is safe. When I let the guys know, they just praised God and [started] singing, because they feel they are going to have a job again.’
They were lucky in comparison to other farmers in the region. On 11 January, ABC Canberra spoke with Batlow apple farmer Malcolm Stein reporting that, ‘thousands of trees were lost at his orchard in Batlow after fires swept through the Snowy Mountains’.
The season for SWP workers is short. With the workers having only resided in Batlow for approximately five to six weeks when the fire swept through, there is a high chance that they would have only just paid off the debt associated with participation in SWP. Some may still owe money, as depending on the season’s work it can take up to two months before workers begin to start earning money over and above their participation costs. Time not working is time and money lost.
The Batlow example had a good outcome. But has it been the same for other SWP workers in similar positions?
Unable to obtain data on the number of SWP workers affected by bushfires, it is unclear what the impact has been. A recent Radio New Zealand article citing Vanuatu’s Labour Commissioner, Murielle Meltenoven, stated, ‘there are 480 workers who are not in danger or [are] unlikely to be brought back to Vanuatu’. What, then, is the total number of SWP workers affected? How many SWP Approved Employers have endured significant damage? Will this impact the jobs available for seasonal workers in future seasons?
For workers currently in Australia – what have been their experiences of the bushfires, what impact has it had on their earnings, will it affect future job prospects, and do they have any intention of returning for another season? There will be several lessons to be learned from this disaster. In order to figure out what lessons need to be addressed, more research is required. Conversations with labour contractors, employers, workers, local communities and participating government departments, will be necessary to piece together a full understanding of the impact.
This article appeared first on Devpolicy Blog, devpolicy.org, from the Development Policy Centre at The Australian National University
Rochelle Bailey is a Research Fellow at the Department of Pacific Affairs, ANU.