UNESCAP forecast "robust" growth for Pacific

UNESCAP launches 2007 flagship publication


By Dionisia Tabureguci

IN the face of an expected slowing of US economy in 2007 nudging Asia into what has been described as “uncertain times”, Pacific Island economies are forecast to experience “robust growth”, according to the 2007 Economic and Social Survey of Asia and the Pacific, the flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).
In a worldwide launch of the survey report, titled: Surging Ahead in Uncertain Times, UNESCAP executive secretary Kim Hak-Su said although Asia and Pacific nations were rapidly emerging as engines of global growth, there were key questions.
“What will drive our growth if the U.S economy slows down in 2007? Ten years after the Asian economic crisis, is the region once again becoming more vulnerable to shocks? Has the region learnt to live with high oil prices? What kinds of opportunity and challenges does China present to trading nations in Asia and the Pacific? How do central Asian countries cope with the appreciation of their currencies in the face of rising oil prices?”
While indeed growth will be robust for PICs in 2007, they lag behind their Asian peers, most of whom have long instituted economic and structural reforms and policies on good governance, transparency and accountability.
The report estimates Pacific’s average growth at 3.7 percent in 2007, on par with last year’s 3.8 percent. Although considered robust by UNESCAP, the growth is not enough to push forward the standard of living of Pacific islanders.
“Much higher levels of economic growth are required if Pacific island countries are to raise their living standards significantly in the face of rapid population growth,” said Herve Beaver, head of UNESCAP Pacific Operations Centre.
“For the future, there remain many big challenges that Pacific islands have to meet. The poor investment climate in many Pacific island countries is depriving them of much needed investment to sustain higher economic growth. Limited scope for export diversification and poor infrastructure continues to be a problem in many countries,” Beaver said.
The report identified internal challenges faced by PICs as poor investment climate, maintaining political stability, limited scope for export diversification and poor infrastructure.
External challenges, of which PICs had little control, were noted as being geographical isolation, trade liberalization and higher oil prices.
The prevailing high oil prices, although expected to ease in 2007 as global economy slows, has posed and will continue to pose considerable challenges for policymakers in Pacific island countries, with only PNG expected to benefit from the windfall, it being the sole producer and refiner of oil in the Pacific region.
“For other Pacific island countries, high oil prices have reduced their terms of trade and led to the deterioration of their trade balances and current accounts. The 250 percent rise in the price of West Texas Intermediate petroleum has translated into sharply higher import bills and to higher costs for businesses and consumers, thereby reducing incomes and stoking inflationary pressures. And the cost of international air travel is rising just as tourism was beginning to improve in several Pacific countries,” the report said.
The report noted that PICs had implemented various policy measures in order to manage shocks from this cost but for most, the option of exploring and developing alternative renewable energy sources is the only logical one to take in order to ensure sustainable and less costly energy supply in the long term.
In terms of social challenges, the report identified the rapid rate of urbanization and subsequent rise in unemployment due to lack of economic activities as root cause of what has been perceived as increasing urban poverty in the region.
To manage this, the report suggested that PICs developing countries “develop a clearer vision of how they want their urban development to go in the future, how they might get there and who will be responsible for the different tasks.”
“Policies aimed at poverty reduction could first aim at rehabilitating those in dire danger of losing their lives due to extreme poverty – and second at providing sustainable income generating opportunities,” it said.
In a special study it also carried out as part of this report, UNESCAP research showed that the Asia-Pacific region loses US$42 to US$47 billion a year due to restrictions on women’s access to education and another US$16 to US$30 billion a year because of gender gaps in education.
It is not clear how much of these figures may be attributed to the Pacific because of lack of reliable statistics.


NOTE: This article was published in the Islands Business Magazine (www.islandsbusiness.com) as article titled: ROBUST GROWTH FOR THE ISLANDS, p.52, May 2007 edition.