1 A QUICK READ INTO GROWTH, SUSTAINABILITY AND THE FUTURE OF THE PACIFIC ECONOMIES The World Bank Pacific Department www.wordbank.org/pi
GDP weighted distance (km) 11,000 Size and GDP-Weighted Distance from Production TON VUT FJI 9,000 TUV WSM SLB KIR TMP MHL PLW FSM 7,000 5,000 World PICs Carribeans 3,000 Log (pop) (1k) -3-2 -1(1m) 0 1 (1bn) 2 3 4 2 PICs are different: smallest and most distant to centers of global economic activity.
Geography is major constraint 3 Inadequate local markets for economies of scale Long distances to markets Increase cost of imported inputs Preclude competitive exporting Creates diseconomies of scale in services and infrastructure Poor quality High cost Capacity constraints in delivery of services and infrastructure due to small populations and few individuals with specialized skills
Costs of Production as % Costs in Median Economy Costs of Production by Country Size as Percent of Costs in 70 60 50 40 30 20 10 0 Electronic Assembly Clothing Hotels and Tourism Small economy (4 million) Threshold (1.6 million) Very small economy (200,000) Micro economy (12,000) 4 Consequently, production is inherently more costly.
5 Integration can Ameliorate Costs of Geography Shared regional institutions Harmonization of laws and regulations Labor market integration Better transport and communication links Achieve economies of scale Help overcome capacity constraints Ease cross-border business Help overcome capacity constraints Allow people to move to areas where opportunities exist Allow access to necessary skills and capacities Reduce costs of business Facilitate flow of knowledge and ideas
Overcoming Constraints 6 Problems are well known Potential role of integration is clear but implementation uneven It is time for solutions Immediate Demonstrate the potential of regionalism with success in key areas Longer-term Build on successes to drive a broader conversation and a deepening of regional approaches
Overcoming Constraints 7 Regional solutions to improve telecommunications Regional approaches to energy sector reform to reduce avoidable costs of business Making the most of natural resources through regional approaches in fisheries Catalyzing Regionalism
Lower Business Costs through Regionalism in Energy 8 Small Country Electricity Costs per kwh (US$) Solomon Islands (2009) Vanuatu (2008) Bermuda (2008) WEB Bonaire (2008) Tonga (2005) Dominica (2008) Anguilla (2008) Cayman (2008) St Vincent (2008) Grennada (2008) Bahamas (2008) Aruba (2008) PNG (2009) Barbados (2008) Guam (2009) British Virgin Islands (2008) Belize (2008) St Lucia (2008) Jamaica (2008) Martinique (2008) Fiji (2009) Trinidad (2008) -0.1 0.1 0.3 0.5 0.7 Access to Electricity (% Population) Solomon Islands Vanuatu Haiti Kiribati Micronesia Fiji Marshall Islands Dominican Republic Guyana Tonga Jamaica St. Kitts and Nevis Paulau Samoa Dominica St. Lucia Grenada Trinidad and Tobago Cook Islands Niue Nauru Barbados 0 20 40 60 80 100 Options for regional approaches to petroleum procurement and shipping reduced costs through scale (E.g. Tonga Energy Roadmap) Regional regulation of electricity utilities through a joint regulator Sharing of regional technical capacities and technical assistance Facilitating renewables through sharing of experience and
Increased Connection through Regionalism in Telecommunications 9 140 Cellular Telephone Connections per 100 People 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 East Asia & Pacific (developing only) Fiji Kiribati Papua New Guinea Samoa Potential of liberalizing reforms has been illustrated Share capacity burden of regulating liberalized telecommunication markets: Regional regulatory body Shared/harmonized regulatory rules Regional technical assistance resources Informal knowledge and capacity sharing
10 Regional Approaches to Unlocking Fisheries Potential 60% global tuna stocks Total landed value annually of around US$1 billion and an estimated market value of US$3-4 billion Access agreements for distant-water fishing nations US$60 70 million annually and increasing Uneven proportion of catch value retained by PICs Yellowfin and bigeye tuna at serious risk of overfishing.
Regional Approaches to Unlocking Fisheries Potential 11 Collective action required to manage supply to preserve stocks and market value Uneven performance across existing regional institutions Demonstrated potential in sub-regional mechanisms led by PICs Agreements need to be supported by technical capacity for implementation and shared resources for enforcement
Constraints to Regionalism 12 Collective action problem regional institutions create incentives to freeride Focus on withinregion solutions when resources and capacity are often lacking among all members Concerns regarding sovereignty Limited progress to date Focus needs to shift from independent sovereignty to shared prosperity.
13 Incentives Supporting Regionalism Expanding the jurisdiction of existing regulators in large countries to cover PICs Sustained capacity support, rather than short-term technical assistance Sustained financial assistance to regional institutions rather than reliance on contributionbased models New incentives for Regionalism Additional donor funds tagged for regional initiatives