Hightide
Spreading The Benefits
How Not To Put All Our Eggs In One Basket
On the same day that Fiji’s fourth coup unfolded, the news broke that the Emperor Gold Mine in western Viti Levu, Fiji was closing. Mark Wellesley-Wood, the outgoing CEO of DRDGold, which owns majority shares in Emperor Mines, told Mining MX at that time, “We can’t keep running a loss maker. We cannot put more shareholder money at risk at Vatukoula and in Fiji, given the political scenario there.” Locally Emperor’s official line was that the closure was entirely unrelated to the political situation.
Whatever the spin, as Ricardo Morris describes in his story (Page 14) in this issue, this is a decision that has left thousands of people without any income, given that the mine essentially supported economic activity in two of the country’s towns. It demonstrates the challenge facing not only Fiji, but many other Pacific Island nations, how not to put all your eggs in one basket.
Fiji has a reasonably diversified economy compared to its neighbors. But the coup had devastating effects—in the short term at least—on tourism. Other important industries such as sugar and garment manufacturing have shrunk along with the erosion of preferential market access. Fiji’s Reserve Bank says “there is an urgent need to lift export levels” and that emphasis should be given to supporting timber, fish and agricultural products.
- ADVERTISEMENT -
And it is something that is a nagging concern when you consider other island nations, who on the surface of it, are performing much better.
Guam, for instance. In this issue, Frank Whitman also asks some hard questions about how Guam can be prepared for, and truly benefit from the impending military buildup on the island.
Meanwhile in Papua New Guinea, where the continuing success of the mining sector driven by high commodity prices for oil and copper are contributing to a buoyant economy, we need to ask if investment is being made for the future.
Sometimes mining conferences about PNG’s prospects take on the tone of the evangelical. Last year Oil Search PNG’s gas pipeline project between PNG and Australia was being trumpeted as the economic project on which much of PNG’s future development could be built, not least by some prominent politicians. In contrast this February, Oil Search announced it was shelving the project to concentrate on other prospects.
Other operators such as Lihir Gold are also upbeat. Lihir says it is moving towards the magic one million ounces mark in terms of annual gold production, although its projected capital costs to make this target will be significantly more than originally estimated. It says it made US$53.4 million in 2006, a healthy 9.8 percent increase on 2005.
These revenues, while they last, need to be invested in projects that will have long-term benefits for Papua New Guineans, particularly those in rural areas. With an election in just a few months, the fear is that much of this money will evaporate.
The relocation of U.S. Marines or high price of copper and oil are not a panacea for all economic ills. They are an opportunity to be sure—and a chance to think laterally and creatively (biofuels anyone?)—about the path of economic development. But without disciplined financial planning and management with an eye to how as many citizens as possible can truly benefit, they will be as ephemeral as tourism, garment production and sugar have been for some of our number.
