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The Contemporary Pacific 14.2 (2002) 426-438

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The Region in Review:
International Issues and Events, 2001

Karin Von Strokirch
School of Social Science, University of New England, Armidale, NSW

This review assesses recent economic trends with particular emphasis on changes to official development assistance strategies and the regional free-trade agenda. These issues are examined from different perspectives including those of donors, the Pacific Islands Forum, and nongovernment organizations (NGOs) in the field. In particular, a milestone was reached at the Forum with the signing of the Pacific Islands Countries Trade Agreement. In relation to aid, Australia has developed a unique strategy for exporting its refugee problem by inducing island states to host detention centers. The merits of the now infamous "Pacific Solution" are assessed. Finally, developments in West Papua are examined, as this has significant ramifications for human rights and regional security.

It is well nigh impossible to obtain reliable economic statistics from the Pacific Island countries for the immediately preceding year. Discussions of economic performance and trends must therefore rely on data up to two years old. Moreover, it is not particularly instructive to merely examine economic indicators from one year in isolation. For these reasons, the following analysis draws on statistics collected in the late 1990s to ascertain broad patterns and their significance.

In recent years several of the region's major donors—including Australia, the United States, the European Union, and the Asian Development Bank (ADB)—have undertaken reviews of economic development and aid. The peak nongovernment aid body, the Australian Council for Overseas Aid (ACFOA), has also engaged in an assessment of overseas development assistance and the role of nongovernment organizations in providing support including aid to the Pacific. It is timely to analyze the state of the debate concerning Pacific Islands development and aid.

An assessment by the Asian Development Bank concluded that economic performance in its twelve member Pacific Island countries was disappointing in the 1990s, notably when measured in terms of growth in gross domestic product. The average growth rate in the 1990s was around 3.5 percent. However, the late 1990s were volatile due to the combined effects of the Asian economic crisis and natural disasters, resulting in a negative regional growth rate of 3.2 percent in 1997. Papua New Guinea recorded almost zero growth in the five years ending in 1999. Conversely, 1999 was identified as the year of recovery for the Pacific overall. Papua New Guinea and Fiji beganto improve after an extended downturn. With the exception of Papua New Guinea, inflation declined in the Pacific Island countries in the late 1990s mainly due to deflationary pressures in the world economy. The overall balance of payments position of most Pacific Island countries improved. The Asian Development Bank attributed the improved outlook largely to the fact that several Pacific Island countries engaged in economic reforms, which began to [End Page 426] reap benefits by the end of the decade (ADB2000, 1-2).

Notwithstanding the region's chronic dependence on imports and aid, the economic outlook was generally positive in the late 1990s. This was shattered by political instability and violence in Fiji and the Solomon Islands in mid-2000, with devastating economic effects that rippled through the region as a whole (see von Strokirch 2001).Both countries experiencednegativegrowth,unemployment, loss of business confidence, strains on government finances, and severe balance of payments difficulties. In the Solomon Islands the key export-earning industries of palm oil, gold, fish canning, and tourism shut down altogether as a consequence of the crisis.

Statistics on growth and financial management do not accurately portray quality of life. There is agreement among analysts, including the Asian Development Bank, AusAID, and the Australian Council for Overseas Aid, that poverty is on the increase in the Pacific Islands. The Pacific Island countries still enjoy relatively high per capita incomes, high per capita aid, and productive subsistence sectors by global developing country standards. However, high costs, weak economic performance, aging infrastructure, rapid population growth, urban drift, widening inequality, and the erosion of traditional support networks...


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