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Debt traps and doing business

Kava exports as an economic activity
Pacific governments are putting hope in high-value exports such as kava. Photo:PHAMA Plus

Tourism may be the poster child of the Pacific’s post-COVID economic crisis, but it’s not the only sector that has suffered. A stark example of the challenges that border closures are causing came in reports from Cook Islands this month, where farmers are reportedly being  forced to kill off oysters because off a lack of highly-skilled Japanese technicians in country.

It’s a story that is repeated across the region. And it’s prompted business leaders to ask the region’s governments to state clearly what a pathway for economic recovery looks like. After vaccinations, then what?

Debt forgiveness, resilience funding, ecommerce, freight costs, correspondent banking and the vaccine roll-out were amongst the many economic issues concerning Pacific Islands finance and trade ministers this month.

All the Pacific is suffering, but each nation it seems, is suffering in its own unique way.

Tao Zhang, International Monetary Fund Deputy Managing Director said at the start of the Forum Economic Ministers Meeting (FEMM): “For commodity exporters such as Papua New Guinea, and Solomon Islands, a return to positive growth is plausible this year, as the external environment improves. For tourism-reliant countries including Fiji, Palau, Samoa, and Vanuatu, the recovery will take longer. Our best guess is that the region may not get back to 2019 tourism levels before 2023.”

The FEMM was chaired by Tuvalu’s finance minister, Seve Paeniu, who noted that under the Pacific Humanitarian Pathway, 121 tonnes of health and humanitarian supplies, and 130 technical personnel had been transported around the region. There are hopes this pathway and the agreements that underpin it may be used to bolster economic activity.

Pacific Islands Private Sector Organisation (PIPSO) representatives told the ministers they were keen to see more details on pathways to recovery.

“How will business and tourism bubbles be created intra-regionally,”  Vice Chairperson Jennifer Ula-Fruen asked. “What systems and facilitation is needed to get this off the ground and working practically, cost-effectively and most importantly, safely? We in the private sector are still of the view that there seems to be no reasonable forecast for when we can do business again beyond our borders, and intra-regionally. Of particular interest is business travel and engagement, albeit a phased or transitional approach – which in our view is at the heart of economic recovery.”

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