2002 Look Ahead
A Year Of Uncertainty
Events Beyond Oceania, And Many Locally Generated, Will Affect The Pacific In 2002.
No part of the world is immune from what happened in New York and Washington, D.C. on September 11th.
Through 2002, Oceania’s 22 independent and partly independent countries and last few colonies will feel the cost of last year’s terrorism attacks, but in varying degrees.
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In the North Pacific, United States-dominated parts of Micronesia and Hawaii quickly became the worst affect territories. Their heavily Japanese visitor dependent tourist industries contracted immediately after the September 11th attacks.
In the South Pacific the impact was much less evident, except in French Polynesia, which is reliant on the U.S. for half its tourist traffic.
Other destinations, in particular Fiji, hope for compensation of lost American and European visitor business by the diversion to their shores of mainly Australian, New Zealand and Japanese visitors who would otherwise head for the U.S. or parts of Asia having strongly Islamic influenced societies.
But all the Pacific Islands will bear the load of higher insurance and freight costs that are consequences of the attacks. Airlines in particular are worried about the steep climb of aircraft hull insurance and security costs.
Other economic consequences will be felt by island economies that have U.S. markets for garments and agricultural and seafood product.
However the Asian Development Bank is expressing optimism about recovery and pointing out that the Asia/Pacific region’s growth was slowing down well before September. What happened in that month will merely delay recovery, it says.
The ADB has “cautious optimism” that the region’s economic fortunes will pick up by the middle of this year, assisted by lower oil prices, and should be back to “close to potential” in 2003.
January 1, 2002 is the day of the inception of the South Pacific free trade market agreed to by the 2000 Pacific Forum meeting. No overnight impact is to be expected. Trade barriers will between participating Forum states will be dismantled over the next 10 to 12 years, a period during which some U.S. and French dominated economies in the region might also become participants in the experiment, if their colonial bosses let them.
Melanesia will remain Oceania’s hazard zone in 2002. Violence and political unrest in the Solomon Islands is far from being settled, political stability in Fiji is still in the balance, political instability in Vanuatu likely and Papua New Guinea is a cauldron of simmering political, economic and social unrest.
Papua New Guinea, Vanuatu, Tonga, Niue are due to hold general elections this year. In Papua New Guinea, the replacement of the present government by one less reliably committed to the cause of governmental and finance reforms and curbing of corruption would dismay all who aware of how close to disaster former disreputable leaders have led the country.
And through this year Pacific Islanders will continue to receive cascades of conflicting and hence confusing information pertinent, or not, to the great climate change and sea level debate. Of this only one observation by Australian and other Pacific scientists most consistently and closely associated with researching these issues appears to at present be incontestable. This is that the Pacific Ocean’s average level isn’t rising by an iota that matters and that the tiny territories of Tuvalu and the Pacific’s other coral communities have no cause to abandon ship just yet.
COOK ISLANDSDr Terepai Maote, the easy going physician who has been the Cook Islands prime minister since November 1999, can expert to keep his job until an election due in November 2004. That’s if he wishes to, if his shaky health doesn’t let him down, and if foes like Norman George don’t make a comeback.
Last July, Maote sacked George from the deputy prime minister’s job after learning that the National Alliance Party leader was trying to take over from him The break left the prime minister with 14 supporters in the 25 –member Parliament, enough to carry on comfortably in power but not so many as to guarantee immunity for attacks on his position.
The Cook Islands continues to make headway with recovery from its dire foreign debt and vastly overstaffed government troubles of the mid 1990s, though progress in all sectors of “restructuring” is not as fast or through as donors would like.
On the surface the Cook Islands are doing outstandingly well from tourism and cultivated black pearl exports. Tourism hit a record 72,000 arrivals in 2000 and was heading for another record in 2000 until terrorism attacks in America affected arrival from North America and caused the collapse of Canada 3000, a charter airline that had been expected deliver several thousand tourists during a five month season of flights that should have begun in November.
A serious problem is depopulation. Since the economic crisis six years ago the population had dropped from 22,000 to now only 13,900 due to migration to New Zealand and Australia by people whose businesses or jobs were lost in hard times. Now hotels and other business are desperate for any staff at all let alone trained, experienced hands.
COMMONWEALTH OF THE NORTHERN MARIANA ISLANDSSaipan is bracing for the worst, as outlooks for both tourism and garment industries dim due to the ripple effect of the September 11th terrorism attacks in the United Sates. The Marianas Visitors Authority disclosed that continued cancellation of travel reservations has slashed the number of tourist arrivals. On average, CNMI has been losing 804 inbound tourists daily since the September 11 terror attacks, or a daily average decline of 49 percent.
Visitor arrivals are expected to remain sluggish until the last quarter of 2002. Government financial projections reviewed by the Strategic Economic Development Council (SEDC) show that unless airline load factors return to pre-September 11th levels by this month, the resulting drop in CNMI revenue would make drastic cuts in government spending inevitable.
However, several visitor industry forecasts warn that arrivals not expected to return to normal before the fourth quarter of 2002. “The CNMI is in a very real economic crisis, and without a timely concerted recovery effort, the tourism sector will continue its downward spiral. The effect on the CNMI economy as a whole would be staggering,” said SEDC Chair Joe Camacho.
The Saipan Garment Manufacturers Association also reported a major slowdown in the volume of orders from U.S. buyers, citing the sudden shift in the spending behavior of Americans after the terrorism attacks. According to industry spokesperson Richard A. Pierce, statistics show Saipan’s sales topping $1 billion in 1999. Sales then dropped about 4 percent in 2000 and another 10 percent in 2001. “For the last quarter of 2001, the bottom just fell away when the terrorist attacks occurred, as we experienced a 30 percent decrease in sales for July, August and September,” said Pierce, adding that if this trend does not reverse itself by middle of 2002, at least half a dozen companies might close shop.
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FEDERATED STATES OF MICRONESIA
Like their Marshallese neighbors to the east, the Federated States of Micronesia is facing a difficult deadline for completing negotiations on new, long-term funding from the U.S. The FSM-U.S. negotiations are much further along than in the Marshall Islands, but they have also revealed a deep chasm between the FSM’s expectation and need for aid, and the U.S. willingness to provide it.
While the FSM negotiators have been seeking a long-term funding pact over a 20-year period worth about $2 billion that would include annual U.S. contributions to a new government trust fund, the U.S. has issued a counter proposal offering less than 60 percent of the FSM’s request.
Importantly, too, while the FSM sees the need for a 20-year trust fund period, to adequately build up the corpus to fund future government services, the U.S. has held firm to a 15-year limit — a period of time, which FSM negotiators say, won’t work financially. The pressure will mount on the negotiators to get a funding package to the U.S. Congress by mid-year 2002, in time for it to gain congressional review and inclusion in the fiscal year 2004 budget planning that normally takes place early in 2003.
The ongoing budget tug-of-war between the four states and the national government could get more interesting with the increasing push by Faichuk, an area of Chuuk State, to become the fifth state in the FSM. Faichuk’s interest in becoming a state has been evident for years but during 2001, leaders from Faichuk stepped up their campaign.
Each of the states has developed modest, income-producing eco-tourism or scuba diving ventures. From Manta Ray Bay and Traders’ Ridge hotels in Yap to the Nautilus and Kosrae Village Resorts in Kosrae, increasing though still small numbers of visitors are coming into the islands. Everyone’s visitor counts were hit by September 11 fallout, but unlike Guam and Hawaii, destinations where tourism is the economy, the relative drop off in visitors hasn’t hit the states’ economies the way it has their largest neighbors.
FIJIThe months of February and March will be a crucial time for Fiji. In February the Fiji Court of Appeal is expected to rule on whether the cabinet named by Prime Minister Laisenia Qarase after his unquestionably proper election to power last September is constitutionally proper.
Opposition Labour Party leader Mahendra Chaudhry, deposed by a coup in May 2000, argues that it is not. Many local lawyers agree with him.
According to the Constitution Chaudry’s party is entitled to seven or eight places in Qarase’s Cabinet. Qarase insists that political differences with Labour would make such a Cabinet unworkable. A lot of Fiji Islanders agree with him. Qarase says he will accept the court decision but that if he’s forced to accept Chaudhry and Co. into the Cabinet he will resign.
Such a departure could revive the ethnic tensions that ripped Fiji apart after the May coup by civilian-led thugs and a subsequent army takeover. The consequences could be disastrous, perhaps more so than those of 2000.
But there is scope for hope. In November, Qarase and Chaudhry, who previously hadn’t been talking, met for two days of “Talanoa” (a form of open Fijian discussion) sessions facilitated by Dr Sitiveni Halapua, of Hawaii’s East-West Centre. A communiqué afterwards suggested that differences be resolved by “inter-party and multi-ethnic dialogue.”
However there is speculation that the trial of coup leader George Speight and some of his conspirators, also due to begin in February, could produce revelations about the identity of Speight’s behind-the-scenes backers that could arouse more insecurity, as possibly could a court martial, now underway, of army mutineers involved in a November 2000 plot to kill army commander Frank Bainimara and apparently install a Speight supportive government. Bainimarama still has to contend with small pockets of army opposition his command.
Should Qarase and Chaudhry reach a clear détente, leading to a steady evaporation of distrust between Fijian and Indian communities, Fiji could begin to recover quite swiftly from the heavy economic penalties that after May 2000 deferred investment in its core manufacturing, tourism, mining, forestry and fishing industries.
But the country has other pressing matters to urgently address, such as the resettlement of thousands of tenant farmers whose leases of Fijian tribal land are expiring and the rescue, if this is possible or even desirable, of a failing sugar industry that once was the central prop of the economy.
FRENCH POLYNESIASince last May French Polynesia’s 70-year-old president since 1991 (and with a break also before that) Gaston Flosse, has been secure in his fifth term of office. Only his personal decision or his demise could remove him from being the overwhelming dominant figure.
While he opposes independence from France so as not to lose massive amounts of aid, Flosse is progressively pushing for something just short of it. After the election Oscar Temaru, leader of the main pro-independence party, called for a referendum on independence and complained that the large number of resident European nationals were allowed to vote in local elections. Since they were people not inclined to risk their place by supporting independence, they added to the impossibility of giving local people full freedom in deciding their own political future, he said.
Late last year a Paris court ruled that the territorial government was free to open a foreign affairs department instead of relying on the French foreign office since Paris had given it competence of hand various extra-territorial matters. Flosse now wants Paris to allow him to control immigration so that he can curb inflows of unwanted foreigners.The territory is moving to more than 50 percent economic self sufficiency based an exports of cultured black pearls and tourism, together worth US$500 million, and now tuna fish, which is to be grown to be landing 30,000 tons a year with the next five year.
But tourism took a 25 per cent visitor arrival hit after the September attacks in the United States. Flosse at the end of last year was succeeding in winning Paris traffic rights and more flights to Japan for the national airline, Air Tahiti Nui, for which he had also won loan money for the purchase of a second Airbus wide-bodied jet need for the Paris service.
GUAMGuam policymakers have taken a hard look at a critical report recently released on the state of Guam’s economy by Bank of Hawaii. In the past few years, the bank notes that gross business receipts from all business activities in the territory have been reduced by about 25 percent to $3.6 billion. Other notable data includes an almost 15 percent unemployment rate (triple that of the United States), a shrinking construction industry (down 500 jobs from last year’s figure of 4,400) a decreasing military presence, increased crime rates, and a reduced workforce due to early retirement incentives and poor labor conditions.
Guam’s economy is perilously teetering as the island’s two primary markets—Japan and the United States—are in recessions.
A reduced cash flow to hotels has seriously impacted projected revenue streams to the territorial Dept. of Revenue & Taxation. The Guam Dai-Ichi Hotel, one of the oldest hotels in Tumon, borrowed $10 million from Asahi Bank Limited in Japan to build the Dai-Ichi Villa Gardens, but failed to make its semi-annual payment at the end of last May.
Elsewhere in Tumon, a rash of hotel closures and bankruptcies have shaken the industry. A year ago, the 198-room Tropicana Hotel closed its doors, forcing 60 employees out of work. The 334-room Sherwood Resort Guam also closed its doors, putting more than 100 employees out of work. The Santa Fe on the Bay hotel on the former Camp Watkins Road area has filed for bankruptcy protection.
KIRIBATIKiribati’s 41 parliamentary seats are due to be contested in an election to be held by November this year. The last election in 1998 became a bitter personal strong between President Teburoro Tito, who has held office since 1994, of the Maneaba Te Mauri Party and Dr Harry Tong of the National Progress party. Tito got 52.3 per cent of the vote and Tong 45.8 per cent. Tito can’t be sure of re-election. At Tarawa, talk around town is that the present government is somewhat repressive and reacts angrily to criticism.
Kiribati’s first president, regionally and at home the greatly respected Ieremia Tabai, has tried for three years to obtain a licence for a commercial broadcasting station, which is installed ready to go. But he got charged with “importing telecommunications equipment without a permit” and fined US$25. Tabai later started a newspaper to provide an alternative to government media that tends to get gagged.
Kiribati’s 94,000 people subsist on exports of copra, seaweed, substantial fishing licence revenue and remittance of around US$5 million a year from seamen recruited as crew for foreign vessels. The budget is support by interest from a national investment fund of more than A$700 million. Japan is slowly moving towards the construction of a space station at Christmas Island. Last year, President Tito offered to help Australia by accepting 500 Afghan refugees at Canton Island but it seems now that Australia won’t take up the offer.
MARSHALL ISLANDSLocking up a satisfactory long-term funding agreement with the U.S. government remains the highest priority — and greatest challenge — for the Marshall Islands in 2002. With the late 2003 expiration of guaranteed funding from Washington, D.C. rapidly approaching, the administration of President Kessai Note will be hard pressed to get a pact concluded, particularly as the Marshall Islands just submitted a 15-year strategic development plan to the U.S. for consideration last month.
But while the tight deadline for the funding talks is a huge challenge for both sides, in other areas the Marshall Islands government has had some good news. Debt payments that were sucking more than $20 million annually to U.S. banks — about 20 percent of the national budget — ended September 30, leaving the Marshall Islands with its best financial outlook since the early 1990s. Not only does it have access to the money previously going to pay debts, the final two years of Compact funding is paid at the average level for the first 15 years, which has meant a bump up of about $3 million annually through 2003. Coupled with strong support from the Republic of China (Taiwan), the government has had the wherewithal to embark on numerous overdue school building, road and airport renovation projects throughout the country.
The Marshall Islands government has chosen to invest about $14 million of this “extra” money in a newly created inter-generational trust fund, for which it is seeking additional donors. The trust fund will be one part of the Marshall Islands’ pitch to the U.S. for future funding, and the substantial contribution that the government has made should increase donor confidence about the country’s seriousness in savings after 15 years when the opposite was the case.
NAURUAll the sea around Nauru is troubled. Weak and financially reckless rule by a succession of governments (eight changes since 1996) and the spendthrift style of governments since independence in 1968 have led to the squandering of nearly all the wealth derived from phosphate mining, which is expected to end in about five years with the exhaustion of what little is left to be mined.
Nauru is reckoned to have foreign debts of US$400 million to US$500 million and has just borrowed more to pay interest due on it loans, putting up as collateral the last of its Australian and American properties. Critics say the government won’t be able to meet its debts and the property portfolio will have dwindled to almost nothing.
Nauru is reckoned to have squandered in the region of A$2 billion in the last 10-15 years, according to a new political party, Naoero Amo (Nauru First) formed last year by young activist determined to try to halt the final financial and perhaps even political ruin of the country.
The next election is due in 2004 but going by the recent record there could have been several more changes of government by then due to constant infighting among the 18 mostly old-timer politicians who form the Parliament and who get elected mainly on family votes.
However a court ruling in November led to the election of four MPs, including former president Bernard Dowiyogo and the finance minister being declared null and void due to irregularities.
Nauru last September agreed to temporarily accept about 800 Asian illegal migrants not wanted by Australia in return for A$20 million, a sum of which the near insolvent government, which now regularly fails to pay civil servants on time, was in desperate need. But the presence of the Asians kept guarded inside a wire fenced camp was arousing local opposition by the end of the year.
The government was so short of cash that Australia reportedly used part of the A$20 million to pay a shipping company, which refused to land food and other supplies in November until it was paid for them. As the ship waited offshore desperate locals reportedly stormed empty food shops in vain.
NEW CALENDONIANew Caledonia had a rough year last year with a four month building industry strike that caused serious disruption and then towards the end of the year splits in the main Kanak pro-independence party that could affect political stability this year and further ahead.
Last June the anti-independence RPCR (Rally for New Caledonia in the French Republic) president and founder Jacques Lafleur was re-elected party leader for another five-years by the party’s first congress since 1991. Re-election was a test for Lafleur, who had been running into hostility in some quarters. He was the only candidate.
In contrast in October, his deputy replaced Roch Wamytan the head of the Kanak multi-party pro-independence movement, as president of his own party, the Union Caledonienne. Pascal Naouna, who took 174 votes to Wamytan’s 74 after an internal political squabble.
Wamytan remained president of the Kanak Socialist Front for National Liberation (FLNKS) pro-independence movement, of which the UC is a key player. Naouna was elected from the north of the country, where most people favor independence from France, and had criticized the UC for not having a strong political role. Wamytan was accused of weakening the party because of his dual role as UC and FLNKS presidents.
In November the FLNKS (Kanak Socialist National Liberation Movement) failed to elect a new president because of a leadership struggle between its two main factions, the Union Calédonienne (UC) and Kanak Liberation Party (PALIKA). The FLNKS congress decided that until a December 22 meeting its political bureau would take care interim leadership but there were hints of a permanent rift between UC and Palika.
NIUENiue has to hold a general election by March. Given the fickle nature of the island’s politics there’s no way of accurately predicting whether Premier Sani Lakatani will sink or swim.
Reliant on limited air services operated from Tonga with a small aircraft by Royal Tongan Airlines in place of a former direct jet link to New Zealand, and watching its population seep away to New Zealand, where 17,000 Niueans live, the island’s remaining 1,750 people really don’t know what the future has in store for them.
The more realistic of them say it’s down to a question of whether Niue can survive as a viable self-governing entity and that the size of parliament should be cut from 20 MPs to 14.
A constitutional review committee suggested last year but politicians who would lose their seats in consequence, Lakatani included, appear to have shelved the idea.
Another line of thought is for integration with New Zealand, the former colonial power, which would be the end of Niue as an independent political entity.
Air service troubles last year gave Niue its worst-ever year for tourists; it entertained more people from cruise yachts. Lakatani asked China to fund a jet airliner for the island but was unlucky with that proposition.
PALAUSince 1994-95, Palau’s economy has been largely driven by payments from the U.S.-Republic of Palau Compact of Free Association agreement. This began with a whopping $192 million in the compact’s first year, including $70 million for a national trust fund, which has nearly doubled in size. Government expenditures of these funds kick started a fair amount of private sector activity, mainly in tourism, construction, and various sorts of investment.
Tourism, a big revenue generator for Palau, was down for the year and took a bigger dive after the September 11th terrorism attacks in the U.S. But the huge new dolphin facility located in the rock islands a short speedboat ride from Koror is expected to help tourism rebound. Sport fishing will also see some development in 2002 In addition, Japan Airlines is seeking to expand the number of flights to Palau, and Taiwan’s travel industry began efforts in November to revitalize travel to Palau as a desirable option. These two nations provide the bulk of Palau’s tourists.
Palau attracts foreign investment of both small enterprises such as restaurants and beauty shops and large schemes such as golf courses, airlines, and banks of various degrees of credibility. Virtual pachinko and other gambling games will be available to international players from Palau via Internet. Midcorp’s Alan Seid teamed up with a Japanese-based firm to hatch this project, which claims it will earn a net profit of $42 million in its third year. Seid is now working with Hawaii’s Aloha Airlines to begin Palau Rock Island Air, which will compete with Continental Airlines for the Japanese tourist dollar and may succeed given its plans for lower fares and routes to both Manila and Micronesia.
PAPUA NEW GUINEAPapua New Guinea’s population passed 5 million in mid 2001. The difficulties besetting Oceania’s largest and richest country grew with the population This year is election year for PNG, with voters due to go to the polls by the end of June. As before the outcome is unpredictable, but most observers agree that pace of the decline of the country’s fortunes will accelerate slope unless Sir Mekere Morauta, prime minister since July 1999, remain in office.
In May 2001, Morauta claimed the backing of 70 of parliament’s 109 members, an unprecedented amount of support, but a few months later four parties said they were swinging behind his discredited predecessor, Bill Skate, the subject of criminal investigations. PNG’s Parliament represents about nine parties and 37 independents.
Morauta’s tough anti-corruption line in tackling PNG’s grim list of political, governance, economic and social difficulties have inevitably caused some erosion of his political support due to defections by politicians hoping for personal pickings from alliances with tainted political leaders who would like to take over the prime ministership.
PNG’s was forecast to slide into deep recession last year after respectable growth in 2000 due to a combination of low commodity prices, diminishing income from mining and oil revenues that were 70 per cent of government income, and the deterioration of foreign investment confidence that has caused the stalling of mineral exploration.
However there are good prospects in palm oil and fisheries development and revenue from a multi-billion dollar scheme for the pipeline delivered sale of gas to Queensland from about 2006.
TOKELAUTokelau’s 1,445 inhabitants this year, like last year, will advance quietly to a greater degree of self-government from New Zealand and eventually free association with it.
The territory’s three atolls, to the east of Samoa, earn cash from sales of copra, postage stamps, handicrafts and get some money from fishing rights licenses for foreign fishing vessels.
New Zealand subsidizes the territory at a cost of about NZ$2.8 million a year. As with Niue, more Tokelauans are settled in New Zealand than at home.
TUVALUTuvalu’s 9,500 people will this year be asked in a referendum whether they want to carry on with their present way of government or change it. No date for it has been fixed yet. Since the country became independent of Britain in 1978 it has a Westminster type parliament and has retained the British monarch as its head of state represented locally by a local governor-general.
There have been past moves to adopt a republican government headed by a president. This is likely to be the outcome of the referendum.
A parliamentary committee is touring the country’s eight populated atolls to explain the purpose of the referendum.
The present parliament has just 12 elected members and a government comprising a Prime Minister, elected by parliament and a small cabinet of other MPs as his ministers.
For years one of the poorest of Pacific Island states, Tuvalu is now enjoying prosperity form several millions of dollars a year revenue from the licensing of its dot-TV domain to a North American internet company, from foreign fishing license fees and interest from a growing national investment fund.
It recently bought half of a company which controls more than 50 per cent of Air Fiji, an airline which operates domestically within Fiji and internationally to Tuvalu and Tonga, and has inquired about buying land in Fiji for resettlement by some of its people to ease pressure on the 27 sq km’s country limited land and as a long-term hedge against the day, if it comes, that large areas of Tuvalu actually are threatened by sea level rise. Scientific evidence at this stage shows this not to be the case.
— Robert Keith-Reid, Aldwin R. Fajardo, Bruce L. Campbell, Donald Shuster and Giff Johnson contributed to these reports.
