Speech by Hon. Edward Natapei, Prime Minister of Vanuatu at the Global Economic Crisis Conference
Port Vila, Vanuatu, 10-12 February, 2010
Heads of Governments from Pacific Island Forum Countries;
Honourable Ministers, Parliamentary Secretaries;
The Administrator of UNDP and the Executive Secretary of UNESCAP;
Secretary General of the Pacific Island Forum;
Heads and Representatives of Regional Organizations and International Multilateral Agencies;
Dean of the Diplomatic Corps;
Excellencies;
Senior Government Officials;
Ladies and Gentlemen
It is an honour and privilege for me, my Government and the people of Vanuatu to extend a very warm welcome to you all to this very important conference "The Global Economic Crises". You all are special to us and my officials and the organizers will be there to ensure that your stay in Vanuatu is a memorable one.
2. I welcome and acknowledge the presence of Heads of Governments, Ministers, Parliamentary Secretaries and Senior Officials from Pacific Forum Island Countries. I look forward to your participation in making this conference a successful and worthwhile one for our entire region.
3. May I also extend a very special welcome to the distinguished Representatives of the United Nations and its Specialized Agencies. Ms Helen Clark, the UNDP Administrator, who not too long ago was one of our Pacific Island Forum Leaders. The Pacific is indeed blessed to have someone like her in a very senior position in the United Nation, and I have no doubt that our voices will now be heard clear and loud in the UN system.
4. Dr Noeleen Heyzer, the Executive Secretary of UNESCAP who I believe is visiting Vanuatu for the first time, is most welcome. I trust that her presence here today signals a renewed commitment to further strengthen the capacity of UNESCAP to help realize the social and economic development aspirations of Pacific island developing countries at this critical juncture of our history and development.
5. It goes without saying that the organisation of this conference is timely for Pacific Island countries, coming at a critical period in our development path for the future. May I therefore thank each and every bilateral partners and multilateral agencies for their inputs and commitments towards organizing this historically important conference.
6. This conference will discuss not just what the global economic crisis is about and how it has affected Pacific Island people, but also chart the future direction that our countries should take. The extensive involvement of Senior Pacific Island leaders, officials, development partners and academics should give us confidence in our future plans. Let us use this occasion to create opportunities that will be supportive of long term measures for the sustainable development of our region.
7. Ladies and Gentlemen, let me at the outset make some remarks about the global economic crisis. These remarks are not necessarily new but appropriate to reflect on what we are faced with. First, let me state that many leaders of the developing world have blamed the crisis directly on some of the developed economies and their economic and financial policies as opposed to previous global economic crises.
8. At least this time around developing country governments have not faced the criticism that they did during the 1997-1998 Asian Financial crises. While there are multiple causes for the global crisis, many have pinned it down to ‘extensive excesses’ which simply means doing business with more of others’ than one’s own money. Excess risk taking happens when individuals or institutions have a perception that they get a share of gains but need not share in the losses. It was failure on the part of Governments to have prudent management over financial institutions on their lending portfolio.
9. In the developed world the financial sector has grown rapidly and in many instances the productive sector including other goods and services have not grown commensurately. The belief that excessive ‘financialisation’ in the developed countries would result in massive wealth creation was undermined by the distribution of wealth in the hands of a few as a result of self interest and greed leading to increasing inequalities.
10. For example, in the US, share of labour in the growth was far less than that of capital, and in many other developed economies the trends are similar. There are lessons for developing countries, and indeed for us in the Pacific Islands countries about ‘extensive excesses’ not only in the financial sector but in our fiscal management as well.
Responses to the Global Economic Crisis
11. The responses to the global economic crisis by governments around the world are well known. The fiscal stimulus adopted by many developed and developing countries have, for the time being, averted the disasters that some had predicted. While some of the large emerging economies such as China, India and Brazil may have fared better, many others have not, and the economic recovery of developed countries is still very tentative.
12. Decline in foreign trade taxes, remittances, aid, commodity prices and capital inflows have in some cases severely threatened the fiscal positions of many developing countries. In many of them, social spending such as in health and education has been badly affected. Pacific Island economies were not spared by these trends.
13. In 2009, almost all Pacific Island economies achieved lower levels of economic growth compared to 2007 and 2008. Much of the decline was directly linked to the global economic crisis. For 2010, the forecast is generally lower for all the countries with continued decline in investments, tourists, exports and remittances.
14. Vanuatu achieved growth rates of 6.6 percent in 2007 and 5 percent in 2008 but the projected growth rates in 2009 and 2010 have been revised to 3.5 percent--- a sharp decline of 0.8 percent respectively. Vanuatu has over the past few years invested in the tourism infrastructure especially on the island of Santo, which resulted in an increase in the number of tourists. In 2007 for example, tourism sector contribution to its GDP was 38.8 percent and provided 34.9 percent of total employment in the country. Vanuatu’s future growth prospect will hinge on several factors---tourism prospects in other Pacific Island countries, the employment situation in Australia and New Zealand and the performance of its agricultural sector and the export of beef. Let me now turn to regional responses to the crisis.
Pacific Island Countries' Response
15. The speed with which many of our governments and development partners acted to ensure that Pacific Island countries were not severely affected as a result of the global crisis is commendable. Several policy interventions have been pursued by the Pacific Island countries. These include monetary, exchange rate management, fiscal, structural and social protection policies.
16. Some island countries have also adopted a certain degree of fiscal stimulus strategy. This has been one of the key policy choices available to us to ensure that the effects of the crisis are minimized through increased economic activities by creating demand in our economies. However, we also know that fiscal stimulus increases our public debt, which imposes a major burden on future generations.
17. At the global level, there are signs of stabilisation as a result of massive injection of stimulus packages by both developed and large emerging economies but this is predicted to be fragile. This means that tourist numbers to our shores, export demand, remittances and aid volumes could still be affected, sluggish and subdued.
18. We therefore need to remain vigilant and active to ensure that our policies and economic reforms strongly support the enabling environment for economic growth. In addition, we have to pay special attention to our social protection policies to ensure that our poor, our children and our women, who are the most vulnerable, are not left behind. For example, it is estimated by UNICEF and UNDP that 18,000 children under the age of five die every year in the Pacific region, which is fifty deaths a day or one death in every thirty minutes.
19. Ladies and gentlemen, if we do not take appropriate action now, it is predicted that the impact of the crisis could result in more malnourished children and ultimately more deaths.
20. Before I highlight few other issues that we may consider in our discussions in this conference, let me also make some remarks on our past performances and what it means for us in the future.
Review of the last decade
21. Ladies and Gentlemen, while the global crisis has preoccupied our minds for the last 2 years, let us not forget that even without this crisis many of our countries were not doing well. Our growth rates have generally remained sluggish over the last 15 years and this has also affected the pace of our social development. Despite having made some progress in some areas, including achieving reasonable levels of economic reform, you will agree that we have also lost many opportunities to put our countries on a more secure social, political and economic footing.
22. Without the crisis, we would have still struggled with economic, social and political decline in some of our countries. What did we do wrong? Are there lessons for us to learn at this critical point? Are there new opportunities that we can discern on the horizon and develop our ‘radar capability’ to make use of those opportunities? Do we need a new roadmap for creating sustainable energies for our development? Does this mean that we are at a new ‘departure point’?
23. I believe that the current economic crisis allows us to review, reflect and rethink what we have done in the past. Pacific Island countries from the late 1980s and through the 1990s have pursued structural adjustment policies. They concentrated on macro-economic policies to stabilize their economies, improved market access to enhance our exports, promoted public and private partnerships and undertaken micro-economic reforms to enhance competition and productivity.
24. These, we could say were the first generation reforms with mixed successes. This was followed in the last decade by a focus on the second generation reforms which concentrated on institution and capacity building in our region.
25. In some areas of economic and political governance we can give ourselves some credit and say that we have been successful. But in many areas, the many opportunities have been lost due to poor and ill-executed plans and policies coupled with lack of capacity and economic governance.
26. Therefore, ladies and gentlemen, if we feel that we have not succeeded in some areas then we must ask why? What has gone wrong? What is required to address this issue? Have we monitored and evaluated fully what we have done in the last decade? We need to learn more not only to do things right, but also to change the way we do things in the Pacific Islands.
Opportunities and Choices for the Future
27. Despite the pain of the global crises, Pacific Island countries can come out of this crisis with better choices and more opportunities. We have concentrated on adjustment and institution building in the last two decades, and there may still be a need to concentrate more on institution building.
28. But we will have to move to the next generation of changes. These should include the transformation of our economies to a knowledge-based economy. Investments in knowledge infrastructure in the next decade could define our ability to become competitive in an increasingly globalised information economy. The competitiveness and linkages of our key industries such as tourism, agriculture and fisheries to each other will depend on how effectively we can create a knowledge economy supportive of the production of the goods and services in those sectors.
29. The further development of agriculture and fisheries for future food security will require new and sustainable techniques of production. Production process and methods that are environmentally friendly and that adapt to climate change will ensure that our agriculture and fisheries sectors remain relevant for our peoples’ livelihoods. Adaptation and mitigation measures to reduce the adverse impacts of climate change will require our countries to develop better and sustainable knowledge bases.
30. The Copenhagen summit failed to get a global commitment to halt high carbon emissions. There is, however, some hope that the Mexico summit will agree for a limit of 2 degrees centigrade in global temperature rise. However we in small island states fear that even with a 2 degree rise in temperature, the existence of many of our islands will become very severely threatened. We need the support of our "developed country friends" to assist us achieve this goal. Pacific Island countries will have to respond to this by ensuring that we are able to develop climate resilient farming techniques. Once again, new technology, new methods and new knowledge will be required to do this.
31. The tourism industry promises to be a sustainable industry for the future. Yet, it is fraught with uncertainties, including the impacts of climate change. Our ability to deal with these challenges would be better served by developing the structures for a well-developed knowledge economy.
32. We will have to build better local capacity and stem the migration of skilled people by ensuring a sustainable education system and employment opportunity. Developing and promoting a knowledge economy will require investments in education at all levels. Countries such as Vanuatu, Solomon Islands and Papua New Guinea still require more quality investments in primary and secondary education.
33. I believe that our donors and development partners will need to consider some strategic shift to help in this transition. The next generation of reforms and transitions will require new approaches from our donors and development partners. Allowing Pacific Island countries to explore options and giving them time and space will help create the environment to think about the new opportunities and choices. Pacific Island countries are unique and have a special status and this should be taken into account when negotiating international and regional economic and trade agreements.
Governance and Politics and Leadership
34. Let me now turn to the issue of leadership and governance. There is no denying that this issue is vital for our development and equally there should be no denying that our leadership, both political and economic needs further consideration.
35. Today, we are faced with difficult choices. A good distribution of public resources and in many cases scarce resources is vital if we are to address social development problems in our countries. Good governance relates to the quality of leadership that is sensitive to the competing needs of various groups in our society. The ability of leaders to promote ‘social cohesion’ in our societies will depend on how they are able to promote the development of basic needs and capabilities of all their people.
36. As leaders we must ensure effective and efficient performance of the public sector through appropriate reforms. This will not only enhance efficiency but also provide effective policy implementation at the whole of Government level.
37. We call on our donors and development partners to be more conscious of the "local" situation in each of our countries and be pro-active to the needs of poor and disadvantaged if we are to realize the Millennium Development Goals (MDGs) and the objectives of our own Pacific Plan realistically.
38. While economic growth based on market forces is an integral part of our economic policies, social objectives cannot be left to market forces alone. It is imperative therefore that together with our focus on economic policies, we should also ensure that governance and leadership structures support the development of appropriate social policies in our countries.
39. It is also important to note that because of constraints of available resources, many Pacific Island countries have to balance allocation of their resources between social and productive investment sectors. This directly impacts on the quality of service delivery. I wish to suggest to the international community that they should provide direct support to the development and implementation of social policy measures.
40. We need to create the demand, acceptance and recognition for good governance. Unless there is this demand, acceptance, and recognition of political leadership is likely to shy away from addressing this issue.
Concluding Comments
41. I am pleased that this conference includes sessions that address a wide range of issues and these should provide an opportunity for all of us to develop a "radar capability” for the future. My question is, will international organizations simply put up recommendations which are measures that they are recommending elsewhere in the world or will they go to the trouble of doing the hard work of identifying what are uniquely Pacific Island features of the global economic crises and devise tailored solutions for the Pacific?
42. I am optimistic that the issues I have raised will be seriously debated during the conference and at the end of this Conference come up with a menu for our future plans and policies. These, in my view, should include plans for transition to a knowledge based economy. Together with this we need to support the development of tourism, agriculture, fisheries and other productive sectors through appropriate infrastructure, technology and adequately trained human resources.
42. Ladies and gentlemen, I look forward to a constructive discussion and concrete outcome from this conference. Please also take time out to enjoy our unique, safe and beautiful country while you are here and as host we will do all we can to make your stay a productive and memorable one.
Tank yu tumas
Other Speeches and Statements
Lead Presentation by Dr. Noeleen Heyzer: Impact of the Globa - 12 February 2010
Speech by Hon. Bob McMullan MP, Parliamentary Secretary for - 12 February 2010
Keynote Address by Miss Helen Clark - 10 February 2010
Statement by the Minister of Finance and Economic Management - 23 November 2009