Mar 08, 2021 Last Updated 9:51 PM, Mar 7, 2021

2021: The diagnosis

  • Mar 09, 2021
  • Published in January

After an incredibly challenging 2020, what will this year bring? We take a look at the economic and political prognosis and a few key sectors.

Vaccinating for recovery

Timely vaccination campaigns will be key to the recovery of Pacific island economies. The Pacific Community says a handful of Pacific Islands have still recorded no cases of COVID-19 at all (at the time of going to print)—Cook Islands, Kiribati, American Samoa, Niue, Nauru, Tuvalu, Tonga, Tokelau and Palau.  Others such as the Federated States of Micronesia,  have only recorded cases at the border from returning citizens, while most other island nations have recorded no cases of community transmission for months. Those with more open borders—Guam, French Polynesia and Papua New Guinea—have ongoing community transmission.

The economic outlook

As a region, Pacific Island GDP growth was forecast to shrink to 0.5% in 2020, the lowest rate since 1967 according to the World Bank. While most are predicted to grow by small margins in 2021, the World Bank has outlined a number of risks to these projections. “The pandemic could last longer than expected, the long term damage from last year’s recessions could be deeper than anticipated, balance sheet stress could intensify, or the contraction in global trade could be sharper or longer lasting than envisioned. More countries in the region could experience difficulties with procurement and distribution of the vaccine than currently anticipated,” it writes in its Global Economic Prospects report for this year.

Other sectors

The continued reliance on tourism in many Pacific Island countries and uncertainty over the opening of borders and appetite for travel is one of key risks to economic recovery (see page 16).

For the island region’s largest economy, Papua New Guinea,  growth will depend on a strong resources sector, including new investments. There’s some optimism around the construction boom being driven by additional investment into the resource sector and its potential to generate jobs.

“The implementation of new resource projects (Papua Liquified Natural Gas (LNG) and Wafi-Golpu) combined with professional, administrative, and support services needed alongside these projects, could generate formal jobs. There are downside risks, however, such as ongoing disputes over the Porgera mine which could weaken investor confidence,” the World Bank has written.

Work in 2021

In its December 2020  report on COVID-19’s macroeconomic impacts and job prospects, the World Bank said that redeploying workers from hard-hit sectors like tourism to alternative occupations that draw on similar skillsets should be prioritised, and could be supported through re-training.

Globally there has been much hope placed in the digitalisation of work but how does this translate to the Pacific Islands? “Low numbers of ICT job vacancies indicate potential obstacles to the digitalisation of work seen in other regions. Mismatches between demand and supply of skilled labour, which have been exacerbated by the impacts of COVID-19 on labour demand, point to the continued importance of investment in skills development,” the World Bank states.

Political outlook

For Marshall Islands, the Federated States of Micronesia and Palau, critical negotiations over the Compacts of Free Associations with the United States will continue this year. Under each compact, the island nations receive development assistance and visa-free access for its citizens to the United States, and the US in return has a strategic monopoly on the Micronesian states. The compacts also allow the US to test missiles at Kwajalein atoll in Marshall Islands. Palau guarantees the United States the use of certain defence sites in the future under its compact agreement.

Telecommunications tussles

The geopolitical tussle for influence continues to play out in the region’s telecommunications sector.

Digicel has indicated it may sell its Pacific operations in Fiji, Samoa, Vanuatu, Nauru and Tonga after a difficult 2020, and says it has been approached by a number of buyers. The company was carrying approximate US$6.7 billion in debt at the end of last year.  Digicel won’t confirm if those buyers include Chinese telcos, but it is  a prospect that has created concerns in Washington and Canberra. This follows nervousness around reports that Huawei Marine has bid for the Kiribati Connectivity Project, a submarine Internet cable that would connect Kiribati, the Federated States of Micronesia and Nauru to the HANTRU-1 undersea cable which lands in Guam, home to important US military assets.

Climate negotiations

Many Pacific leaders spent 2020 working to push messages on climate change, even as the world’s attention was swallowed by the pandemic, Brexit and America’s political difficulties.

The damage wrought by Tropical Cyclone Harold in Vanuatu and TC Yasa in Fiji last year highlight the continued urgency of this message.

“This is not normal. This is a climate emergency,” Fiji Prime Minister Voreqe Bainimarama said in the wake of TC Yasa.

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Departure Lounge

  • Mar 09, 2021
  • Published in July

Boarding Pass

  • The International Civil Aviation Organisation (ICAO), the UN body responsible for aviation, has agreed to ease airlines’ obligations to offset their emissions growth until at least 2023. The decision postpones the date airlines have to start paying for carbon credits to offset a portion of their climate impact.
  • Hawaiian Airlines will resume flights to Pago Pago, American Samoa on August 5. However international flights are subject to border restrictions and to change based on COVID-19 containment.
  • Air France plans to introduce a third weekly flight from Paris to Papeete from early August. Air Tahiti Nui has now resumed its Paris service however Air New Zealand says at this stage, its Papeete flights are suspended until 24 October.
  • Meanwhile Air Tahiti has reversed a decision to cut its network, and for now says it will continue to fly to all 46 destinations on its route map. It had earlier said it would fly to just 20 destinations. The government will provide a US$4 million subsidy for those routes which normally rely on the tourist trade.
  • The Civil Aviation Authority of Solomon Islands (CAASI) building at the Henderson Airport in East Honiara burnt to the ground early July. At the time of printing, Permanent Secretary of the Ministry of Communication & Civil Aviation Moses Virovolomo said the cause of the fire was unknown, although there were signs the compound fence had been cut. The office regulates the safety, compliance, security at the airport.
  • Fiji Airways is recruiting for up to 30 “customer wellness champions”. The new roles require people with medical qualifications. The airline says it is part of its preparations to resume flights under strict health and medical conditions. The officers will lead the airline’s medical response on the ground and in the air. Fiji Airways has laid off 758 people due to COVID19.
  • Taiwan-based airline, EVA Airways may operate twice-weekly flights between Taiwan and Palau. Taiwan’s transport ministry is reviewing EVA’s application, although a launch date will depend on how the epidemic unfolds and real market demand. It is anticipated Palau’s COVID-free status will be a big drawcard for Taiwanese travellers.
  • Eight Pacific civil aviation authorities have participated in an expert airport runway safety training webinar organised by the Pacific Aviation Safety Office (PASO). The training was designed to prepare the authorities and airports for mandatory International Civil Aviation Organisation (ICAO) runway condition reporting requirements, ahead of a worldwide implementation deadline of 5 Nov 2020.
  • Boeing and the Federal Aviation Administration (FAA) in the United States have completed certification flights for the Boeing 737 MAX. Over three days, FAA test pilots, and engineers, evaluated Boeing’s proposed changes in connection with the automated flight control system on the aircraft. The FAA still needs to issue airworthiness certificates and approve training programs related to the aircraft before it can fly again. Fiji Airways was flying two 737 Max before grounding them in March 2019 following fatal accidents involving the same model in Indonesia and Ethiopia.
  • Air Terminal Services (Fiji) PTE Ltd has advertised 106 positions, just a week after terminating the contracts of 285 workers. ATS human resources manager Richard Donaldson had stated the company would introduce a daily fixed-term employment contract. The Federated Airlines Staff Association unsuccessfully sought an injunction against the workers’ termination, with the court saying the ATS exercised its contractual and statutory rights by giving two weeks’ notice of termination.
  • Guam, the Northern Mariana Islands and the Marshall Islands will receive a share of airport safety and infrastructure grants the US Federal Government is awarding through the Federal Aviation Administration. The funds are earmarked to improve infrastructure and strengthen safety measures.
  • Qantas’ international services will not return until mid-2021 says CEO Alan Joyce. The Australian carrier has laid off 20% (some 6000 people) of its workforce and grounded most of its international fleet.
  • Mount Hagen, PNG-based MAF is preparing to fly to rural airstrips in the country once they are surveyed and given safety clearance. All passengers will need to wear masks (2000 of which have been sewn and supplied to the airline) and will have their temperatures checked before boarding and after disembarking from MAF planes.
  • Labasa airport in Fiji’s north is undergoing upgrading and maintenance work so domestic carrier Fiji Link has cancelled all flights in and out of the destination until August 4. Passengers can change their bookings to fly to Savusavu airport as an alternative.

The Shipping News

  • Kiribati will receive a US$12 million grant to help improve the safety and resilience of inter-island transport in the western Gilbert Group. In 2018 the MV Butiraoi sank on its voyage from Nonouti in the Gilberts to the capital. 88 people died. Now the Asian Development Program and World Bank are funding navigation aids and infrastructure, including jetties, boat ramps and shelters.
  • Matson has christened a second Kanaloa Class container/roll-on, roll off ship. The Matsonia will operate on Matson’s Pacific routes and will help “drive substantial economic benefits in and opportunities in communities around the Pacific” says the company.
  • Tonga’s first Joint Maritime Coordination Centre has been launched, providing a central coordination point for all maritime operations within Tongan waters. It has been outfitted with equipment worth $75,000 pa’anga (US$32,457)  from His Majesty's Armed Forces (HMAF), Customs, Fisheries and Police.
  • Port Denarau Marina has reduced its operations as a result of the pandemic. In a notice to shareholders, the Marina says all capital projects have been put on hold, but that the PDM Board is confident it can sustain minimal operations for several months without having to extend any existing financing. PDM will consider a 50% reduction in rent for all commercial operations on a month-to-month basis. Boatyard, fuel and private vessel operations continue on a limited basis.
  • Cook Islands ship owners will not have to pay any registration fees this year or next. The Ship Owners’ Association has agreed to subsidise the registration fees in response to the COVID-19 pandemic. “We hope that this small gesture will ease some of the financial burden, during these trying and most uncertain times,” Chief Executive Eleanor Roi said.

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