Ev­ery­thing you need to know about business in the Solomons

David James re­ports that eco­nomic ad­vances are be­ing made in the Solomon Is­lands, pro­vid­ing plenty to smile about.

Paradise - - In Paradise | Contents -

The Solomon Is­lands, 1400 kilo­me­tres east of Pa­pua New Guinea, is a coun­try that is mak­ing big eco­nomic ad­vances. Al­though it faces many of the fa­mil­iar chal­lenges con­fronting de­vel­op­ing Pa­cific economies, such as a nar­row in­dus­try base, the coun­try has been mak­ing some pos­i­tive gains.

Ac­cord­ing to the United Na­tions’ Hu­man Devel­op­ment In­dex, be­tween 2000 and 2015 the Solomon Is­lands’ rat­ing in­creased from 0.442 to 0.515 – an im­prove­ment of 16.5 per cent.

The UN es­ti­mates that be­tween 1990 and 2015, Solomon Is­lands’ life ex­pectancy at birth in­creased by 11.4 years, mean years of school­ing in­creased by 0.7 years and ex­pected years of school­ing in­creased by 3.6 years.

Over the same pe­riod, Solomon Is­lands’ gross na­tional in­come per head (GNI per capita) in­creased by 14.8 per cent.

The bulk of the pop­u­la­tion de­pends on agri­cul­ture, fish­ing and forestry for at least part of its liveli­hood. Most man­u­fac­tured goods and petroleum prod­ucts must be im­ported. The is­lands are rich in un­de­vel­oped min­eral re­sources such as lead, zinc, nickel and gold. Some cal­cu­la­tions put the coun­try’s GDP at $US1.317 bil­lion in 2017.

The Asian Devel­op­ment Bank’s Asian Devel­op­ment Out­look 2018 notes that cash crops, fish­ing rev­enue and con­struc­tion re­mained strong in 2017, but eco­nomic growth slowed be­cause of a de­cline in log­ging ex­ports.

“In­fla­tion de­cel­er­ated on lower food prices, and the cur­rent ac­count deficit al­most halved. Slower growth is ex­pected in 2018 and 2019 as new con­struc­tion only partly off­set a likely fur­ther de­cline in log­ging out­put. Progress is be­ing made in im­ple­ment­ing a much­needed na­tional trans­port plan, but chal­lenges re­main.”

Jay Bartlett, chair­man of the Solomon Is­lands Cham­ber of Com­merce and In­dus­try, says progress on broad­en­ing the coun­try’s agri­cul­tural base has been rel­a­tively slow in the short term. “There is a lit­tle bit of small niche prod­ucts get­ting ex­ported at the mo­ment but noth­ing very sub­stan­tial.”

In the medium term, how­ever, there are plans for ex­pan­sion of the palm oil in­dus­try.

A sub­sidiary of New Bri­tain Palm Oil, GPPOL, is, says Bartlett, look­ing at an ex­pan­sion pro­gram in the Guadal­canal, in the east of the coun­try.

“GPPOL is look­ing at more plan­ta­tions; that is in the pipe­line. There just needs to be some key

in­fra­struc­ture built: two bridges to open up ac­cess.”

Bartlett says there are some cas­sava ex­ports but it is still on a “quite small scale”. Virgin co­conut oil pro­duc­tion has been grow­ing slowly, but could po­ten­tially be af­fected by spread of the co­conut rhino bee­tle.

“That is a huge threat to the liveli­hoods of our ru­ral pop­u­la­tion that de­pends on the co­conut in­dus­try. It is also hav­ing a neg­a­tive im­pact on the palm oil in­dus­try, as well. It is spread­ing around the Solomons at the mo­ment and be­ing found in a num­ber of dif­fer­ent provinces.

“A task force has been es­tab­lished. The Cham­ber of Com­merce is work­ing with the Gov­ern­ment and the Min­istry of Agri­cul­ture. The pri­vate sec­tor is tak­ing the lead to find a so­lu­tion. It needs to be a bi­o­log­i­cal so­lu­tion … a virus that will kill it.”

Bartlett says the gov­ern­ment is em­bark­ing on a three-year re­view into tax re­form “to en­sure that its ad­min­is­tra­tion is ef­fi­cient and sim­pler”. He de­scribes it is a very pos­i­tive step.

“We in the pri­vate sec­tor, the Cham­ber of Com­merce, we are part of the com­mit­tee so we are try­ing to en­sure that the gov­ern­ment un­der­stands

the business point of view and how we would like to see the re­form hap­pen.

“It will broaden the base, make tax eas­ier to pay and broaden the net. There is a large in­for­mal sec­tor that at the mo­ment isn’t con­tribut­ing to gov­ern­ment rev­enue so hope­fully we can look at get­ting more busi­nesses into the for­mal sec­tor with a sim­pli­fied tax sys­tem. That is some­thing we can pro­mote.”

Bartlett says the mem­bers of the cham­ber are busi­nesses that “con­trib­ute and com­ply”. He says it is hard to say what the level of com­pli­ance is across the whole econ­omy. “We be­lieve there is a lot of room for im­prove­ment.”

Two pos­i­tive de­vel­op­ments for the Solomon Is­lands are the Tina River Hy­dropower Devel­op­ment Project and the Solomons Un­der­sea Ca­ble Project (which will be mainly funded by the Aus­tralian Gov­ern­ment). The ADB es­ti­mates that these will start con­tribut­ing to eco­nomic growth in 2019.

Bartlett says the lay­ing of do­mes­tic ca­bles is ex­pected to be­gin in May 2019. The main in­ter­na­tional ca­ble will go into Ho­niara and there will be three ad­di­tional do­mes­tic con­nec­tions. He says it will “def­i­nitely” lead to more ef­fi­ciency in business, lower costs and in­creased speeds.

Bartlett says af­ter that im­me­di­ate im­pact, ex­pe­ri­ence sug­gests that con­sump­tion will dou­ble ev­ery year for the first five years. “It cre­ates other av­enues where we can use tech­nol­ogy a lot more to de­liver ser­vices and in­fra­struc­ture; con­nec­tiv­ity is al­ways a chal­lenge and lo­gis­tics costs are al­ways very ex­pen­sive. I think in­no­va­tion is a big area that can grow from this.”

The Solomon Is­lands is mostly Me­lane­sian, and has strong cul­tural con­nec­tions with PNG. “I think peo­ple that in­vest and run business in Pa­pua New Guinea and Me­lane­sia prob­a­bly see the Solomons as a good op­por­tu­nity as well,” says Bartlett.

A trade del­e­ga­tion from the Solomons to PNG is be­ing planned. “It will be a part­ner­ship be­tween the pri­vate sec­tor and gov­ern­ment just to gauge what sort of in­ter­est we can get in PNG and also for us to go on a bit of a learn­ing mis­sion as well.

“There is a lot of in­no­va­tion that is hap­pen­ing in Pa­pua New Guinea with agri­cul­ture. So maybe there are some lessons we can learn and bring back. We are still in dia­logue with the Port Moresby Cham­ber, the Trade Com­mis­sioner and the High Com­mis­sioner in PNG but we would like to do it this year, work­ing to­wards Septem­ber.”

The Solomon Is­lands is re­cov­er­ing from some se­ri­ous civil con­flict. Ac­cord­ing to the In­ter­na­tional Mone­tary Fund (IMF) the Australia-led Re­gional As­sis­tance Mis­sion to Solomon Is­lands (RAMSI) with­drew this year af­ter 14 years, “hav­ing suc­ceeded, to­gether with the au­thor­i­ties, in restor­ing law and or­der and re-es­tab­lish­ing pub­lic in­sti­tu­tions”. RAMSI was es­tab­lished in 2003 to deal with eth­nic vi­o­lence, the clo­sure of key busi­nesses, and gov­ern­ment fis­cal stresses. Bartlett says the re­la­tion­ships re­main. “It has just changed from the mis­sion to a bi­lat­eral re­la­tion­ship so we still have a lot of sup­port from the Aus­tralian gov­ern­ment. One of the things we are do­ing as a cham­ber is work­ing with law en­force­ment and po­lice to build trust and con­fi­dence in business, and to en­cour­age more in­vest­ment.

“The Solomons is a safe coun­try. But we do have a lot of (neg­a­tive) el­e­ments like un­em­ploy­ment, which is very high. We have also got a very young pop­u­la­tion.

We are talk­ing seven out of 10 un­der 30 – so sim­i­lar de­mo­graph­ics as PNG.

“With a lack of eco­nomic op­por­tu­nity for young peo­ple and a lot of un­em­ploy­ment, in the fu­ture se­cu­rity could be a con­cern. So we are just look­ing at ways we can ad­dress this holis­ti­cally. Not just fo­cus on how we can stop it, but also why these is­sues are there.”

Land own­er­ship is an­other is­sue, says Bartlett.

“Ac­ces­si­bil­ity to land is al­ways chal­leng­ing. Sim­i­lar to Pa­pua New Guinea, most of the land is cus­tom­ary owned.” Bartlett es­ti­mates 85 per cent of the land is cus­tom­ary land and only 15 per cent is reg­is­tered land.

“With the ma­jor­ity of our land we need to get some own­er­ship struc­tures in place so we can move on devel­op­ment and get in­fra­struc­ture in place. There are dif­fer­ent mod­els in the Pa­cific.

“Some of them are quite suc­cess­ful, like in Fiji – they have the Na­tive Land Trust Board that man­ages this. But it is a long-term process. Land re­form is about peo­ple, not land. We have to go through some sort of iden­ti­fi­ca­tion process to re­ally un­der­stand who is there and what peo­ple own. It is not some­thing that is go­ing to hap­pen quickly. It will take some time and it needs a lot of po­lit­i­cal will to drive it.”

Bartlett adds that the Solomons cham­ber rep­re­sents “a quite di­verse group of busi­nesses”.

He says the big-ticket items are in­fra­struc­ture, the cost of business, util­i­ties, roads and gen­eral business ef­fi­ciency.

He says the cost of in­ter­net is also pro­hib­i­tive, but he ex­pects that to fall with the lay­ing of the over­seas ca­ble.

I think peo­ple that in­vest and run business in Pa­pua New Guinea and Me­lane­sia prob­a­bly see the Solomons as a good op­por­tu­nity as well.

The bulk of the pop­u­la­tion de­pends on agri­cul­ture, fish­ing and forestry for at least part of its liveli­hood.

Jay Bartlett … chair­man of the Solomon Is­lands Cham­ber of Com­merce and In­dus­try.

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