Kiribati economy: The sinking feeling

Kiribati is made up of a group of 33 Islands in the Pacific Ocean that are under threat of being drowned by the Ocean, on account of climate changes. The present International conference on Climate change at Copenhagen has failed to address the concerns of such small Island nations such as Kiribati that has to do with their very survival.

Phosphate deposits that until the late ‘70s were the key contributors of the economy have since depleted, and now fishing and agriculture, mainly copra production, are the major economic activities. Kiribati did one wise thing by establishing a Trust Fund with proceeds from phosphate mining-the Revenue Equalization Reserve Fund (RERF). This fund is used to cover the annual fiscal deficit.

Kiribati has an exclusive economic zone in the pacific covering a vast area of 3.5 million square kilometers, endowed with a variety of fish, especially tuna. Kiribati derives good income by licensing foreign fishing vessels to operate in its EEZ. As a matter of fact, over 80% of the Kiribati population is dependent on the fishing industry for its sustenance.

As for other economic activities, there does not appear to be much scope, primarily on account of the small size of the economy, as well as the Island nation’s remoteness from major markets, apart from lack of a variety of raw materials. All these factors have combined to stunt the growth of the economy, so much so, that it is classified as a least developed country by the United Nations.

Australia is the major market for Kiribati, as well as a source of aid, and there is a Kiribati-Australia Partnership for Development in place. The Kiribati Government has also taken initiatives in addressing these problems and has identified the following areas for special attention in the Kiribati Development Plan 2008-2011: Human Resources Development, Economic growth and Poverty Reduction, Health, Environment, Governance and Infrastructure.

Kiribati is in need of help from the International Community in addressing the most critical problems faced by it, namely the threat of environmental degradation, global warming, etc, that threaten its very existence.

Papua New Guinea economy: Handle properly for high growth.

Papua New Guinea is a country rich in natural resources that requires political stability and proper economic management to realize its promise and potential, for the benefit of its people, and the region in general.

Agriculture is the occupation of 75% of the population. The country produces a large variety of agricultural produce including coffee, tea, sugar, palm, cocoa, fruit, vegetables, copra, etc. Its forests also produce timber that is a major export item. However, environmental concerns have come in the way of developing this sector in a big way.

Mineral and oil resources are another major asset of the country. Gold, copper, oil, natural gas, etc, are the major contributors in this sector, and the Government gets considerable revenues in the form of royalties from companies active in this area. In the near future, expoloiation of natural gas and oil is likely to get a boost with American companies busy with plans to set up refining plants and exploit the mineral resources.

As for industry, some activity is seen in clothing, paper, beverages, soap, fruit juices, furniture, etc. But industry contributes a small percentage to the GDP at less than 10%. The GDP of the country is expected to log in less than 5% growth this year, and the inflation rate is on the rise at aound 9%. Industrial production is growing at the rate of 6%, with more foreign investment expected in 2010 in industry.

Papua New Guinea exports oil, copper, gold, timber, palm oil, cocoa, coffee, fish, etc., and imports manufactured goods, equipment, machinery, fuels, chemicals, foodstuffs, etc. Australia is the major trading partner, with Japan and Europe following.

Papua New Guinea needs to invest and improve its infrastructure, provide education and training to its citizens aimed at creating a pool of trained manpower to ensure its development and progress on its own terms.

Australian economy: Too early to cheer.

The Australian Treasuer, Mr. Wayne Swan was in a definitely congratulatory mood, when he is reported to have declared, that the Australian economy had registered a handsome growth and the highest among its developed peer nations. Is it true that the Australian economy is upbeat and ready to touch the stars?

Mr.Swan’s enthusiasm stems from the fact that while other developed economies have registered negative growth, his own country had recorded a modest growth of 0.60% in the second quarter of fiscal 2009. At other times, this rate of growth would be considered negligible. However, in these times of economic chaos, countries are clutching a all kinds of statistics to prove their point of economic growth and development, much like a drowning man clutches at straws to save himself.

A notable feature of Australia’s modest growth is the fact that it was accomplished solely on account of the stimulus package initiate by the Government pumping in USD 60.00 billion into the economy. There is widespread acceptance of the fact that but for the stimulus package, the economy would be in the wilderness, with the recession playing havoc with it.

Australia is a vast continent, groaning under the weight of natural resources, and a sparse population that has never put the economy to real strain. What has helped Australia avoid the recession, is a combination of exports and domestic demand.

Where Australia has taken a hit as a fallout of the recession, the rise in domestic demand, or consumer spending has restored the balance to a large extent in favor of the economy. However, the major headache of the country now is the increasing trade deficit, inspite of zooming exports to China, and that is occupying the attention of the economists now.

The stimulus package seems to have done the trick, at least for now. However, Australia is not really out of the woods and it may be too early to cheer.

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