Accessing credit is difficult for businesses in the Pacific. While there’s enough liquidity in the banking system, the ratio of private sector credit to GDP is in most cases less than 50 percent— similar to the level in many South Asian and South American countries.
In developed or fast-growing economies it is typically around 100 percent. Reasons for the lack of credit include the difficulty in using land as collateral, a lack of financial records, and poor business skills. Whatever the root cause, business cannot grow without credit, and employment, income growth, and living standards are constrained.
Government-sponsored credit guarantees are often promoted in the Pacific as a way of overcoming the lack of lending. The logic is straightforward: if the government agrees to repay some or all of a loan in the event of default, lenders will be more willing to lend and access to credit will increase.
But the rationale for guarantee schemes can be challenged on several fronts. The experience to date of the Pacific with these schemes does not make a compelling case for extending their use. In fact, they stand in the way of reforms which could resolve the underlying issues that inhibit lending.
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“I SEE the room. I see the reaction is positive, I hear no objection. The Paris Climate Accord is adopted.” As the French Foreign Minister and President of COP21, Laurent Fabius, gaveled the decision, the huge number of delegates, who still remained in Le Bourget broke out into a spontaneous burst of applause and celebration.
In spite of the meeting running another full 24 hours, with lots of anxiety waiting for the release of the final text, thousands of delegates remained at the venue to be part of history. And they were not disappointed. This was a culmination of 4 years of hard negotiations under the Durban mandate.
The South African Chair of G77&China, the largest negotiating block in the climate negotiations, aptly echoed the words of Nelson Mandela: “it always seems impossible, until it is done.” Just a week before, the prospect of an agreement looked daunting. The first week of negotiations, by the technocrats, resulted in a text with so many brackets and options, that an agreement based on these seemed improbable if not impossible.
It is a credit to the French Presidency and the amazing diplomacy from the world political leadership that a deal was forged, without losing the ownership by the Parties. As Laurent Fabius kept reminding Parties, there will be ‘no surprises’ and the process as well as the final outcome will be driven and owned by the Parties.
THE 3rd Annual PIDF Summit will be held at the Grand Pacific Hotel in Suva from September 2 to 4. The theme is “Building Climate Resilient Green Blue Economies.” Delegates from across the Pacific and observers from the region and beyond will meet to discuss strategies to build resilience in the face of the greatest challenge the Pacific has ever faced. The summit has attracted regional and international interest with the Presidents of Nauru and Kiribati, Prime Ministers of Solomon Islands and Tuvalu, Ulu of Tokelau, Vice President of the FSM, and Foreign Ministers of Tuvalu and Marshall Islands confirming their participation.
The Chief Guest is His Excellency General Thanasak Patimapragorn, Deputy PM and Minister of Foreign Affairs of the Kingdom of Thailand. HE Ambassador Mr Kamalesh Sharma, Secretary-General of the Commonwealth Secretariat along with Ambassador Mary Robinson Former President of Ireland and currently the UNSG Special Envoy on Climate Change will also be in attendance. In addition, over 200 delegates are expected from as far afield as Chile, Israel, Kazakhstan, Kuwait, and the UK.
This extends the list of highly distinguished guests who have attended previous summits, but there is something different in the air. There is increased interest as this Summit will witness the birth of a new International Organisation. Pacific Leaders will meet over the preceding two days to review the activities of the past year, to appoint the Secretary General and to discuss the PIDF Charter. The new Secretary General will be the first without the ‘interim’ or ‘acting’ moniker in front of his title and will take on the responsibility of realising the vision of the PIDF.
The Secretary General will be empowered to do so by the Charter. The Charter is the missing part of the PIDF institutional structure. The Charter is the international agreement officially founding the PIDF as an international organisation and providing the basis for future cooperation. Along with new financial and administrative regulations that have also been put in place, it will provide the basis for direct action to respond to climate change and to attract development partner support
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Eight years ago, just weeks after Voreqe Bainimarama took over the reins of Fiji’s administration, I was among the earliest from the international media to interview him for the New Zealand Herald. In that more than two-hour rambling interview in the Prime Ministerial offices at Government Buildings, he was at pains to convince me that he had made the move with utmost reluctance. He had no choice, he had said. His hand was forced. I could see he was a straight shooter, telling it like it is – warts and all. There was no hint of any political nous or diplomatic savoir-faire in the manner that he spoke, only an air of sincerity. When I dispatched the piece to the editor, he called back to ask what I really thought of his “reluctance.” I told him what I thought. That weekend, the interview ran with the headline ‘The Reluctant Coup Leader.”
I never met Bainimarama in a journalistic capacity after that. But going by the pride of place he earned for Fiji last month hosting two men who lead almost half the world’s population within a couple of days of each other, I suspect he is not so reluctant to lead anymore. He has no reason to be. He was elected with a convincing margin in an electoral process that the world endorsed. In any case, back then he had only said he was a reluctant coup leader.
This year has been momentous for Fiji. After sitting around like the proverbial maiden who was all dressed up with nowhere to go, Fiji seems to have been delivered its long due ticket for the journey to realise its true potential. Fiji has always been the regional leader – geopolitically, logistically and economically, even when it has been in political turmoil, which is every so often. It is this political instability and uncertainty that has held Fiji back from achieving greater glory, which is well within its capacity. Fiji has grown to be a middle-income country and in many indices the envy of its Pacific Island compatriots. This is despite the political troubles it has faced.
Even under the military dispensation, the economy grew quite impressively, amidst less than salubrious global conditions. Many a commentator has said in the past that Fiji has the potential to grow into the Singapore of the South Pacific. That metaphor is back in circulation. At a meeting of movers and shakers in New Zealand last month, exactly that sentiment was aired.
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When the western business world refers to the ‘Asia Pacific’ as a region, the focus is usually on the fast growing economies of Asia and those of the Pacific Rim nations, including Australia and New Zealand. The heart of the Pacific Ocean – the Pacific Islands – is rarely part of the discourse, if at all. Even for the tiger economies of Asia and the Pacific Rim, the Pacific Islands have traditionally been a bit of a blind spot, so to speak.
We know only too well why this has been the case: the tyranny of distance, small populations, high logistics and communications costs all tend to put doing business with the islands in the ‘too hard’ basket for many advanced nations. But what is not apparent to many countries is the growing range of trade and investment opportunities that the islands offer to countries in the Asia Pacific region.
A major stumbling block in promoting trade and investment between the Pacific Islands and Asia is the sheer lack of opportunity for interaction and information exchange. Over the past couple of years, however, the Pacific Island private sector is being represented at one major business event in the wider region: The Asia Pacific Business Forum.
Every year, the Bangkok headquartered United Nations Economic & Social Council for Asia Pacific (UNESCAP) hosts the Asia Pacific Business Forum and the annual EBAC (ESCAP Business Advisory Council) meeting in a different Asia Pacific member nation. Private sector businesses from several Asia Pacific member nations, representatives of world development organisations, funding bodies and financial institutions attend the event. It was held in Bangkok in 2013 and last year, the venue was Colombo, Sri Lanka.
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by Dev Nadkarni