Pacific update suggests remittances, Australia for growth
Updated
The latest World Bank economic update for East Asia and the Pacific has praised the region's fast rebound from the global financial crisis. While the report focuses in-depth on just the three Melanesian economies of Fiji, Papua New Guinea and Solomon Islands, it is has praised regional economic stimulus measures for helping contribute significantly to a healthy rebound.
Regional economics professor Satish Chand says while China is being hailed as the global saviour, Australia and the all-important remittances industry is saving the Pacific.
Presenter: Bo Hill
Speaker: Ivailo Izvorski, author of World Bank's East Asia and Pacific Economic Update; Professor Satish Chand, University of New South Wales School of Business
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HILL: It's a rebound that the World Bank's East Asia and Pacific Economic Update has welcomed - a regional upturn from the worldwide economic collapse that's contributing to global confidence. But while report author, Ivailo Izvorski, has praised the region for its swift turnaround, he's guarded against calling it a recovery.
IZVORSKI: Even though we see some rebounds among the developed countris, it's still very early days to say rebound and actually sustainable recovery. Likely to see output in the US much slower than before crisis, therefore imports from region much slower so region must look for other sources of growth, both inwards within region, look at other opoprtunities so potential slowdown in developed countries, this double dip if you will, is a very very serious risk.
HILL: Mr Izvorksi says East Asia learnt from the Asian financial crisis of 1997 by building substantial buffers against outside influences. Economics professor from the University of New South Wales, Satish Chand, says this time around, Pacific island nations have learnt from a financial crisis.
CHAND: I think the lessons for the Pacific islands are - diversification, including having access to foreign labour markets and two, having some savings, this is true of nations as it is for households.
HILL: Professor Chand says those nations where a large part of their economy is money sent home by overseas workers have fared better than others. The World Bank continues to advocate a push for economies to move away from exports to boosting domestic investment and consumption, and service sectors. But Satish Chand says the Pacific region is different.
CHAND: I think it's wrong advice. May be it is possible for countries like China and India who have the scale to increase investment but for the Pacific the only way forward is to integrate deeply with the global economy. If you're Nauru, there isn't all that much opportunity to raise invesment. Remittances is exports, labour and for some Pacific countries exporting labour may be the way to go, but I again would like to reiterate these countries cannot protect local industries to protect jobs at home, this is just not an option.
HILL: In the case of Fiji, the country has seen remittances decline by as much as 200 million dollars. Professor Chand agrees that better relations with Australia, for example, could have helped Fiji.
CHAND: Yeah it does and in the case of Fiji, you will have to remember it's heavily dependent on tourism. I think the other good thing for the Pacific is Australia at least has not gone into reverse. Surely Asia is bouncing back but the Australian economy has been quite robust and for several of the Pacific island economies, at least those who are heavily dependent on tourism, Australia is the source of those tourists. So I think if tourism flows were to continue, Bo, then surely you need to have a reasonably good relationship with the region as whole.
HILL: The report actually points to China leading the recovery in Easrt Asia, so you think maybe Australia is leading the recovery, or at least providing that buffer you're talking about, to the Pacific?
CHAND: Yeah, I think that on several fronts - tourism, but two, also in terms of creating demand for Pacific exports. I think again it's different for different countries - if you're thinking Papua New Guinea and Solomon Islands and the export of timber, palm oil and minerals then surely Asia does matter a lot more for them than Aust and New Zealand. But if you're thinking Fiji, Solomon Islands, Nauru Cook Is and so on, Australia is a major source of growth for these countries.
