Regionalism and island nation economies

When Pacific Islands Forum Leaders gathered in Apia, Samoa in 1978, the then Prime Minister Honourable Tupuola Efi said: “The basic question that faces us, is that of deciding how to re-define the rules to assure that the rights of small nations are adequately protected. The guts of the issue is that we are small. We have to define the rules as we see them to protect our interests”.

Forty years on, these sentiments remain key to our regional development considerations, as economic and social developmental challenges, exacerbated by the impact of climate change, require innovative approaches in the design and implementation of economic policies. They were at the heart of the recently concluded Pacific Islands Forum Economic Ministers Meeting (FEMM) which was themed Finance for Development Solutions.

Addressing economic vulnerabilities is crucial given the Pacific’s inherent geographical isolation and distance from major global markets, dispersed population across islands, and narrow economic bases.

While addressing barriers to inclusive progress has been a natural part of development efforts, Pacific Islands Forum Leaders and Ministers are also considering options for sustainable approaches to weaning themselves off external fund dependency, particularly in terms of disaster preparedness.

A few days before the week-long 2017 FEMM, a new US$29.73 million regional disaster risk finance project was launched. The Pacific Catastrophe Risk Assessment and Insurance Initiative (PCRAFI) will effectively ease the financial impacts of disasters including major cyclones, earthquakes and tsunamis.

Speaking on the PCRAFI at the post FEMM press conference, Cook Islands Minister for Finance, Hon. Mark Brown said: “The beauty about this insurance facility is that there is no need for project development or project monitoring, you can put your money in the knowledge that it is being managed professionally and the outcomes of this particular fund go directly to addressing the issues of disaster and helping countries to recover from disaster”.

According to the World Bank Group, financing for Pacific Island Countries (PICs) has quadrupled from US$290 million in 2009 to US$1056 million in 2016. In the last 60 years, PICs have experienced losses from disasters including climate shocks averaging $284 million a year, affecting more than nine (9) million people, reportedly killing some 10,000 people. On the World Risk Index, PICs are among the top 20 ranked countries globally – Vanuatu 1st, Tonga 2nd, Solomon Islands 6th, PNG 11th and Fiji 16th.

Being part of the global United Nations family, the Sustainable Development Goals (SDGs, also referred to as the 2030 Agenda) and its ultimate objective of advancing society without leaving any one behind, has been an invaluable planning framework for Forum countries, with regional and national development strategies fundamentally aligned to the 2030 Agenda.

The implementation of the Millennium Development Goals (predecessor to the SDGs) taught the region much that can improve national performance indicators for the SDGS. At our disposal also is the Forum Compact on Strengthening Development Coordination in the Pacific Region, an initiative of the Forum Leaders implemented by the Forum Secretariat, to further strengthen country systems through peer learning which includes (Pacific) South-South attachment arrangements for central planners and finance professionals.

The requisite to continue addressing development needs as a bloc of nations fighting for mutual interests and presenting unified positions on issues that matter was clear at the 2017 FEMM; Pacific regionalism as a development pathway will be crucial if no one is to be left behind.

2017 FEMM chairperson Samoa’s Minister for Finance, Honourable Sili Epa Tuioti, cautioned that the pursuit for development would be at a cost, underlining the importance of shifting from being reactionary to the way we addressed issues to being proactive and “solution-based”.

“The issue of financing is not a simple discussion. The 2017 FEMM provided us with the opportunity to consider the common challenges we face and deliberate on a coherent and practical way forward for improved and sustainable livelihoods for our people,” Honourable Tuioti said.

“We drive our respective national development agendas. The same should be said of our regional development agenda. For if there is no linkage between our national and regional aspirations, then how are we as member states to take ownership of our regional development goals.”

In his welcoming remarks, Fiji’s Minister of Economy, Honourable Aiyaz Sayed-Khaiyum shared Fiji’s experience in post-Cyclone Winston reconstruction, stressing the extreme vulnerability of Pacific Island countries to catastrophic events, which could wipe out years of economic development overnight.

The region can expect an increase in external development finance in the near future through sources like the Green Climate Fund. These, however, will need to be matched with the absorptive capacity of countries, managed smartly and in a way that maintains national sovereignty and regional coordination, bargaining power and unity.

Strengthened engagement with development partners including civil society and the private sector will be fundamental moving forward recognizing, for example, that of the US$391 billion climate financing mobilised globally in 2015, private finance accounted for 69 per cent.

The Forum Secretariat is currently in discussions with global financial institutions to advocate for an amendment to the definition of “vulnerability” so prerequisites for concessional loans could take into account the climate change-induced challenges Forum countries are already grappling with.

Ministers also emphasised the importance of vulnerability indicators being embedded in multilateral financing to Pacific Island countries, for a clearer picture of countries’ vulnerability to catastrophic events and global economic shocks.

Forum Economic Ministers are asking that apart from the numerical count utilized to assess vulnerability, multilateral agencies should also consider population size of Pacific countries by comparison to other parts of the world.

“They would have to take into consideration the economies of scale that don’t exist for us but in larger countries as a measure of vulnerability, the lack of diversity in economy and other factor such as debt stress levels that some countries are currently under as measures to assess when looking at vulnerability of Pacific countries,” Mr Brown said.

A proposed regional finance facility as an option for development financing was also discussed by Ministers; the Forum Secretariat has been tasked to further consult with Forum countries before the 2018 FEMM.

Speaking to the proposal, Minister Brown said: “There is no doubt for many Pacific island countries, the ability to be able to access development finance is a challenge, the complexity of applying for financing through various multilateral donors or banks or even bilateral partners can be onerous and so the ability of the region having a facility that can house these types of financing to make it easier for Pacific countries is something worth pursuing”.

Pacific Islands Forum’s Secretary General Dame Meg Taylor urged Forum countries to ensure that resilient development finance options (including included climate change and disaster risks) were embedded into national plans and budgets and aligned to regional agendas like the SAMOA Pathway and the Framework for Pacific Regionalism “to help address our vulnerabilities, improve our resilience and enable us to achieve our sustainable development aspirations”.

“It is time to explore constructive and practical regional solutions that will propel a dynamic shift away from this traditional development model. Now is the time to begin exploring new, innovative and sustainable means for financing our priorities and addressing our challenges. A regional fund is one pathway that promotes coordination, sustainability, low administrative costs, and predictable and flexible financing,” Dame Meg said.

Pacific regionalism is a Pacific-specific pathway that has worked for the region thus far and is as critical today as it was for the founding members of the Pacific Islands Forum. Bold steps are sometimes required when challenging the status quo, to ensure Pacific peoples benefit as much as they can from socio-economic development efforts.

Economic Ministers agreed that the FEMM will take the lead on economic development and finance issues (including climate change finance). The meeting will be convened every 12 months with Palau playing host in 2018.

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