21 April 2019
Solomon Islands: Reflecting on national growth prospects going forward
I have always considered Easter to be a time for a renewal of faith and the hope for a better world.
It is in the latter context of hoping for things better that I spent some time yesterday reading the report prepared by the World Bank in 2010 which related to the economic growth prospects for the Solomon Islands going forward.
Knowing of the high level of youth unemployment, currently, the burgeoning birth rate, over-urbanisation, the oil spill disaster off Eastern Rennell, the continuing effects of climate change, the decrease in the logging industry and the lack of manufacturing to aid employment, to mention just a few concerns, the strategic vision outlined by the World Bank 9 years ago is still far short of being achieved when it comes to growth prospects.
By quoting a short précis of that now dated report, I hope it will re-focus the attention of the members of the incoming parliament and donor partners to see what challenges remain (and those that have become more manifest like climate change impacts since 2010) and must be met before there can be any meaningful change to sound economic growth for the country.
“Since 2003 Solomon Islands economic growth has been driven by rapid expansion of the forestry sector and large increases in international aid flow. Stocks of natural forest logs are nearing exhaustion, and as the security situation improves, aid flows are likely to flatten.
“Most countries have improved living standards by moving from a reliance on agricultural production towards manufacturing and services, with accompanying urbanization. Geographical disadvantages, combined with weak governance and limited capacity for regulatory and economic policy reform suggest that Solomon Islands’ progress along this trajectory is likely to be highly constrained over the medium term.
“Solomon Islands’ best prospects lie in realizing opportunities in areas where it has an existing advantage, and improving flows of people, resources, and ideas within the country and regionally.
“Future economic growth in Solomon Islands will come from four primary sources:
“A vibrant smallholder agriculture sector. Most Solomon Islanders will continue to rely on smallholder agriculture for incomes and livelihoods. Improving productivity of smallholder agriculture is vital for food security and livelihoods. But even with the best policies, this growth will not be sufficient to provide economic opportunities for all, nor sufficient revenues to enable the Government to meet commitments for service delivery. Alternative sources of growth and revenue are needed.
“Natural resource industries that benefit Solomon Islands. Solomon Islands is well endowed with natural resources, including world class tourism potential, forests and fisheries, gold and nickel. But good outcomes from exploiting these advantages are far from assured. The chances of good outcomes will improve if the right policy and regulatory arrangements are in place to ensure that resource owners gain a fair share of benefits, and that Government is able to capture revenues and spend them equitably on public services.
“An internationally mobile workforce. Growth in the local private sector will not be sufficient to provide jobs for the rapidly growing labor force. For many Solomon Islanders the best prospects for well-paid, productive employment may lie overseas. Closer integration of the Solomon Islands labor market with regional partners is a key objective. Short-term regional labor schemes can lead to remittances and the acquisition of skills that benefit the local economy. In the longer-run, integration would allow Solomon Island workers to make the best use of their skills and partner countries to address growing labor shortages in key sectors.
“International partnerships. Growth from smallholder agriculture, natural resource development and an increasingly international workforce is unlikely to be sufficient to deliver economic opportunities and Government revenues required to meet public expectations on income and service delivery.
“Aid will continue to play a vital role in addressing shortfalls in fiscal resources and capacity across public administration, security, infrastructure, and social services. Solomon Islands faces two challenges.
“The first is to maximize the advantages of economic concentration by planning for integration, both externally and within the country.
“The second challenge is to make development inclusive, by ensuring the benefits of growth are more evenly felt in access to public facilities and services. These two challenges can be addressed by: Building efficient connections between centers of economic activity and to surrounding populations.
“Benefits from sources of growth will be maximized if the cost of movement of people, goods and services are reduced. This will enable people to take up employment opportunities, or to set up businesses supplying ancillary goods and services to growth industries.”