Launch of Pacific Economic Survey 2008

(Joint launch with Parliamentary Secretary Bob McMullan)

Thank you very much indeed. I would like to thank Peter Forau and Odo Tevi for their kind remarks and to tell you how happy we are to be here. Thanks for taking the time out of your busy schedules to be here in Vanuatu. We very much appreciate it.

Your Excellencies, distinguished guests, Ministers, particularly those who have played a part and contributed to this important work, including those on the Steering Committee.

I think all of those who have had any connection with the preparation of this report have recognised the very substantial amount of work that was incurred collaboratively for this product to be achieved, and I commend all of you who have contributed to that hard work. I won't go into great detail about the contents; I will leave that to the principal author, Dr Stephen Howes.

But I do want to say that since the change of government in Australia, many of us have had the opportunity, with the Prime Minister, with the Foreign Minister and my colleague Bob McMullan, to visit the Pacific.

Bob McMullan - who is very much the architect of the new thinking that has been manifested by the Australian Government, which was developed while we were in opposition, and has continued in his role as Parliamentary Secretary for International Development Assistance - and I have travelled together to a number of Pacific Island countries and have been delighted with the reception we have received; and the appreciation that has been given for the new approach and new tone of discussions with the Australian Government than previously in relation to the Pacific.

It is a very great pleasure to be here in Vanuatu - a place that is the cradle of Lapita Civilisation and, like so many places in the Pacific, a place of true diversity that shows the strengths and challenges that Pacific Island countries face. It is a country that we are very happy to see as a point at which this survey is launched for a number of reasons - because of the current economic situation and because of some of the real challenges and opportunities that are coming together.

A few weeks ago, our Prime Minister Kevin Rudd initiated what we believe to be ostensibly a new era and relationship of cooperation between Australia and the island nations of the Pacific. What matters in the Pacific, matters to Australia, because Australia is a Pacific country, we are part of the Pacific. We want the Pacific to prosper because it is in all our interests, and those of our people, to live in a stable and economically healthy region.

Through the Port Moresby Declaration, the Australian Government has made a commitment to work closely with Pacific Island countries to address challenges and their common aspirations for better living standards, and we have been very much encouraged by the warm reception that the Pacific Island nation have given to Prime Minister Rudd's statement through the Port Moresby Declaration, hence the notion of a fresh start in our relationships.

Over time, we will be developing Partnerships for Development, where increased partnership invested by Australia will be offered to assist countries in the Pacific to improve governance, to create access to economic infrastructure, and to achieve better outcomes in health and education.

Those of us who have any familiarity with the Pacific notice the region is rich with physical beauty, cultural heritage and particularly with real intentions. Isolation from the wider world preserves much of the Pacific's real identity. The region as a people survived the millennium through effective networking, information exchange, and trade and travel with each other.

But there is another side to this. The Pacific, through remoteness, has made it harder for the region to take advantage of new technologies, opportunities for global trade, access to investment and education and training. This is changing, and it needs to change.

During our visits, we have been struck by the different circumstances each country faces and the creative approaches to reform, and the positive impact this can have on growth.

Too often, many journalists write persistently on the Pacific, and in it, that there are only challenges and only problems. I don't want to be na�ve about this. This report contains a number of statements, which taken on their face might read to that reading. If you go to page three of the report, you will see statements such as these: the current trends in the Pacific region will not come close to achieving the Millennium Development Goals; poverty is on the increase; health risks facing the Pacific are growing and the like.

But what is so important in this report is that it also gives the good news about the regional economy, as well as the not so good news. It is a straight-forward, honest appraisal of the strengths and weaknesses of the Pacific.

It illustrates that there are success stories and I would hope that the reporting of this forum, and this Pacific Island economic report focuses very much also on those success stories, because much more attention should be paid to these.

The Survey provides detailed economic trends and is of practical use to leaders, policy makers, investors, business people and for the research community.

If I can take you to what I regard as a key point because it identifies the difficulties that are faced and which says growth is critical if the Pacific is to combat the trends. If we are going to achieve success in the Millennium Development Goals, if we are going to address significantly poverty, if we are going to be able to improve health outcomes, then growth is critical if the Pacific is to combat those trends.

In that context, I would like to mention what, for me, is one of the Survey's most pertinent points. Firstly, regional economic growth is possible. That is important, because if it were not the case, then it would be fair to say the reporting should be negative. But what this report shows very clearly is that regional economic growth is possible.

Earlier this decade, Pacific growth was negligible. This year, it is expected to reach a regional average of 4.5 per cent, which is a very good result by any measure. Vanuatu, for example, PNG and Solomon Islands, which make up 70 per cent of the population of the Pacific, have GDP growing at about six per cent. If this rate of growth is sustained it will make a significant contribution to poverty reduction.

Growth here in Vanuatu, for example, is notable. You have averaged six per cent GDP growth since 2003. Vanuatu's fiscal reforms, expanded aviation sector investment, investment policy, active land markets and general stability have placed Vanuatu's economy on a higher growth path. Recent decisions to expand Vanuatu's mobile phone network and to begin direct flights to Melbourne will only expand opportunities for growth.

This is the first point: economic growth is possible, it has happened, it can continue.

Secondly, for that to occur, sustainable communication and transport infrastructure are vital. I would like to dwell just a little on mobile phones and internet access. Now, these are creating business and paying opportunities for people, and reducing transaction costs, which was not possible a few short years ago.

Research from the London Business School of Economics suggests that an increase of ten mobile phones per 100 people can raise economic growth by 0.6 per cent a year.

In people terms, let's consider one example.

A carpenter used to travel long distances into the provinces to place orders for timber growers. He and his growers can communicate now by mobile phones. The carpenter saves a lot of time, he doesn't need to travel and he can build up his staff, from just two five years ago to six.

And since the carpenter started using SMS to promote his furniture, sales have increased from between 40 and 60 per cent. And that is in a country where there is no competition in the mobile phone sector and user costs are high.

Communications and transport therefore offer an opportunity for greater breadth and source of markets. And, of course, in the past, travel to and within the Pacific has been difficult and expensive. Tourism is, and will remain, a major driver of economic growth in several Pacific countries.

Making it easier for tourists to get to and from the Pacific leads to jobs, education and, importantly, trade. Regular, reliable flights, efficient ports and airport services, mobile phone and internet access will all support trade.

And that brings me to the third point. We can improve our communications systems, telecommunications, air travel, sea travel, port facilities, infrastructure, internal infrastructure, but if we only look to a local market, then the chances for growth are going to be very slight.

The third point, therefore, is that trade is good. That open markets do matter. In the long term, it is trade more than development assistance that will reduce poverty. Open trade opens doors. Making trade easier and removing excessive regulations can have enormous benefits.

For example, one of the important aspects of open trade is the personal connections it creates. When you increase the level of business travel, you increase the level of interest in each other.

But expanded trade can't happen if the infrastructure that underpins it is not adequate. More trade will result in economic growth in the Pacific and for its people. It will reduce dependency and lead to more prosperity and sustainability.

And to this end, we hope that our upcoming discussion on closer economic relations, through the PACER Plus process, can be seen in that context.

Fourthly, competition is important. Competition in telecommunications, aviation and shipping services offers opportunities to better connect Pacific nations to each other and the wider world.

Competition can be used: to keep fuel prices down; to auction subsidies to private sector operators to service non-commercial shipping routes; and to create aviation partnerships that increase flights and also return profits.

Where there is competition and costs are driven down, opportunity will be even greater. Competition draws in the private sector, which is vital for economic growth in the Pacific. The private sector is where most jobs and incomes will be generated; not just in telecommunications, but right across the economy.

But the private sector can only do so much. It must be supported by a strong, stable public sector.

And so that is the last point that I would like to highlight from Survey. And that is that ongoing public sector reform gets results. A strong public service is necessary to develop effective education and health, to keep the legal, judicial and regulatory environment robust and on track.

Investors become more confident when they can trust the environment in which they are doing business. In the global context, the regional public sector, including in Australia, must be flexible and adaptive to the needs and aspirations of the general public, as well as to the business environment.

Sadly, Fiji's current political malaise demonstrates one of the effects a less than perfect environment can deliver. Following each coup, Fiji's GDP drops, and sadly, that is the case as has occurred as the result of the 2006 coup. Again, GDP fell sharply.

But I look forward to the day that Fiji can re-join the community of Pacific Island democracies so that people can share in the growth that benefits the region.

Ladies and gentlemen, the Pacific Economic Survey 2008 and future annual updates are a great resource, and a contribution to the developments facing our region. I thank the Pacific Islands Forum Secretariat for its work with AusAID. I thank all those persons who have assisted in the preparation of this report and I encourage you all to take the time to digest the content of the Survey, and I hope you will find it useful.

Thank you.

View the Pacific Economic Survey 2008.

Media inquiries: Mr Kerr's office - 02 6277 4991