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The Pacific Island Nation Conference

SESSION II
Speeches by the Members on the Topic,"Social and Economic Development of the Participating Countries: Present State and Future Outlook"

Safeguarding Tradition, Culture, and the Social System Through Development that Accommodates Both Old and New

Rt. Hon. Ratu Sir Kamisese Mara

Eight years ago, in March 1980, the Pacific Island Leaders held a meeting at the East-West Center in Hawaii just like our meeting here today. It was called the "Pacific Island Conference" and the main theme of that meeting was "Development, the Pacific Way." Our common concern at the time was, how could we fashion the development destinies of our respective nations without sacrificing the culture, the customs and traditions and, indeed, the entire social fabric of our Pacific Island societies? Five years later, we held the Second Pacific Island Conference. This time in Rarotonga in the Cook Islands in August 1985. The theme of this Second Conference was "Development and Change." At this meeting, we all acknowledged that our transition from a subsistence to a money-based economy has invariably meant our adoption and application of foreign technologies and models of development. We agreed, however, that all too often we have not fully appreciated and anticipated the disruptive and debilitating effect and impact of modernization and change on the social and cultural systems in place in our respective societies.

How then could we promote and sustain development through change while maintaining the essential features of our traditional Pacific Island lifestyles? I believe that this fundamental concern is the biggest development challenge that faces all our Pacific Island Leaders even today. Although as Pacific Island Nations, we may feel secure in our splendid geographical isolation in the middle of the vast Pacific Ocean, we are all inextricably part of an inter-dependent world and a world in which technological advances in communications and transportation have brought our people and societies into instant and direct contact with those in other countries.

All our countries are, therefore, being subjected more than ever before to trends and influences that have brought enormous pressure on our traditional values and institutions. As part of our colonial and Christian legacy and by our own free choice, we have enshrined in each of our countries the egalitarian ethos of Western civilization with its glorification of individualism, and as if this is not enough, we are constantly being reminded by our friends in the West, fueled, amongst others, by their own mass media and trade unions that there can be no acceptable standard or code of behavior other than total adherence to the unencumbered and unrestrained and unfettered rights and freedoms of the individual. Through our adoption of the Western style of democracy, again by our own free choice, we have secured political independence or self-government for our countries. But whilst we now have control of the political destiny of our nations, we have also come to realize that the Western ethics and values that we have incorporated and institutionalized in our legal system and government administration have actually had the cumulative impact of undermining the very essence of our traditional Pacific Island societies.

Whilst Western society emphasizes above everything else the virtue of the unbridled rights and freedom of the individual, obedience and loyalty to kinship groups and the social hierarchy, and the overriding importance of the unity and harmony of the whole community form the core values of our traditional Pacific Island societies, as they also do here in Japan. At the same time, the Western-oriented system of education that we inherited has had a profound impact on the development expectations and goals of our people. Whether they live in a city, or town, or in the rural areas or outer islands, our people now generally have the same aspiration for better health and educational services, improved housing, clean water supplies, electricity, and

above all, a regular and reliable source of income. Invariably, this has led to a constant movement of our people into the towns and urban areas, in search of a wage- or a salary-earning job. And this rural-urban drift is not confined to the young school leavers. In our enthusiasm to preach to our rural dwellers the importance of self-help and increased income through commercial agricultural production, very often our farmers have been encouraged to completely switch to cash crops, only to find that they cannot sell all their produce. When there is a long draught or devastating hurricane, there is no subsistent crop to provide temporary relief.

This, too, has helped to swell the ranks of those moving to urban areas in search of regular income through jobs and employment. So, all these - the emphasis on individual rights, the rising level of expectations, an education system that encourages a preference for white collar jobs and wage employment, and a worsening trend towards increased urbanization - have inevitably led to a loosing and diffusion of group loyalty based on kinship and a hierarchical social structure.

And, concomitant with the increase in the pursuit of essentially individual goals, there is now a parallel trend towards group association based on wage, labor and employment specialization - especially through organized unions.

In all our countries, the creation of increased opportunities for gainful employment is, without doubt, the most immediate of our development needs. It is, therefore, imperative that we should provide positive conditions for sustained economic growth. For this, it is absolutely essential that we should allow increased foreign investment in the productive sectors of our economy and also that we should bring in new technology and skills and attract increased tourist visitors to our country.

Whilst this development option is the only way we can hope to stimulate increased export earnings that we need in order to sustain a steady and satisfactory rate of economic growth, it does, at the same time, increase the risks to our country of overexposure to foreign economic domination, to the vicissitudes of the world market, and even to the threats of interference from unfriendly overseas trade unions.

Within our own country, the attraction of increased salary and wage employment opportunities in manufacturing, in tourism, and in other service industries has also had the dread effect of further accelerating and exacerbating the drift of young people into urban areas with a resultant increase in urban unemployment, over-crowding in low-cost housing areas, juvenile delinquency and crime, drug addiction, and increased vulnerability to modern diseases like diabetes, hypertension and cardiovascular ailments.

So, our development needs and problems as Pacific Island Nations are complex, although we are all small countries both in size and population. We realize, of course, that no society can afford to cut itself off completely from the rest of the world. Indeed, for our economic viability and survival, it is vital that we must always endeavor to strengthen and promote our links with the world economy, and especially our relationships with all Pacific Rim countries, including Japan.

But, for us in the South Pacific, if we are to protect and safeguard our tradition, our culture and social systems, development through modernization and maintaining an open economy can only be one that also involves a mutual accommodation of the old and the new in order to meet the demands of the present and the future. Only in this way can we influence the course of our own future, even if we are not able to completely control our national destiny.

In our desire to promote economic development in harmony with the Pacific Island lifestyles, I believe that there is a lot that we in the South Pacific can learn from your own experience here in Japan, and I hope that, as one of the areas of cooperation, exchanges of study visits will be initiated as an outcome of this Conference.

For example, we greatly admire the way you have applied the principles of Western parliamentary democracy, whilst maintaining the consensus system of decision-making which is an integral part of your traditional way of life.

Japan is today one of the world's foremost dynamic economic powers and optimal industrial societies. You have achieved this through a process of careful selection and assimilation of Western technology, and concentrated investment in education and human resources development. And yet, you still have been able to preserve in your people a keen sense of your own special identity and a continuing deep appreciation of your traditional social values of hard work, discipline, courtesy and respect for each other, strong kinship ties, and loyalty to the unity and harmony of your community and the national interests of your country as a whole.

Study visits between our countries and Japan, together with your assistance in training and other human resources development programs for our people, can perhaps be accompanied by your active support in sponsoring cultural exchanges and cooperation between our countries in the South Pacific.

This was, in fact, a regular feature of our inter-island relationships in our history. And regional initiatives like the Polynesian-inherited crafts in the South Pacific Festival of Arts are part of our collective endeavors to revive and to strengthen these intercultural ties and links between our peoples. It is through this process of mutual reinforcement of our common interest in perpetuating the best in our customs, traditions, social values and rich cultural heritage that we can help each other in maintaining our traditional Pacific lifestyle, whilst actively encouraging at the same time the modernization of our respective national economies through foreign investment, technical innovation and tourism.

Finally, I would also express the hope that this Conference will, as part of its initiatives, provide assistance to the Pacific Island Nations in undertaking development programs to stem the outflow of people from our rural areas and outer islands and to ameliorate the ill effects of increased urbanization. Support for programs to take development and to spread its benefits to our rural areas and outer islands could include assistance with national youth schemes, the improvement of inter-island shipping, air services and telecommunication facilities, agricultural research and improved marketing facilities, and the development of marine resources, including research into the application and preservation of traditional fishing techniques, new approaches to new mass sea farming such as aquaculture and mariculture, conservation systems to prevent the rapid depletion of important marine food sources and the identification and the exploitation of seabed mineral resources and marine energy potential.

In ending, I would like to quote from Mr. Sasakawa's waterology. It says: "Water fills an ocean, and evaporates into clouds; then it becomes rain, snow or hail without losing any of its basic traits." That is precisely the kind of development we want in our respective Pacific Island Nations. While we welcome development through change and modernization, it is also our fervent wish to keep and to maintain all that is best in our traditional Pacific way of life.

Developing a Viable Community, Capable of Sustaining Itself Within Its Means

Hon. Ieremia T. Tabai

I am pleased to have this opportunity to give a few remarks and to share my views regarding the development strategy we have undertaken and the prospect for future development in my country.

At the outset, let me state that, for us, development means more than just improving our lifestyles. The aim is to maintain a viable community, capable of sustaining itself within its own means. In this way we hope to maintain our dignity and our self respect. We do not share the pessimistic views often expressed of the future prospect of the South Pacific countries and, in particular, of the small island countries like ours.

My colleagues will no doubt share my belief that with will and determination, we can achieve a degree of success, compatible with the resources that we have, for our people. Let me reflect on our history, which has much bearing on our present situation. For some seventy-five years, Kiribati had been under a British administration. In 1979, we achieved political independence, and the event was marked by much happiness and rejoicing in the country. It was also time to face the future. A future that would be particularly challenging with the loss of our major source of income - phosphate - on that same Independence Day. During the colonial period, phosphate was our major export commodity and also accounted for a large proportion of government revenue. Its loss in 1979 required readjustments. The situation was not improved by the failure of the colonial administration to develop alternative sources of income. The government was confronted with a situation which required urgent action and, at the same time, demanded a realistic approach.

The approach developed to appraise that situation was one that incorporates our cultural traditions. That option has been, and still is, self-reliance. That approach does not only involve the development of our limited resources, it also involves prudent budgetary and financial policies. This is particularly important in a small country like ours where the government budget dominates the economy. I am pleased to say that we have made some headway in this respect. Three years ago, we voluntarily terminated our arrangement with the British Government for budgetary assistance. The fact that this was done a year before the expiry date of the arrangement, reflects our commitment to this aim. The termination of the arrangement meant tight control on government expenditure. While this has not always been easy, we believe there is no other option but to reinforce our resolve to continue along this path.

Our development efforts naturally will have to concentrate on the productive sectors of the economy - the areas that we hope will give us an income to support ourselves. This involves many areas, but the one we place our hopes on is the exploitation of our marine resources. We have a very large Exclusive Economic Zone (EEZ), and it was inevitable that we develop our fishing industry to take advantage of the fish that often migrate through our waters. A national fishing company has been established for this purpose. In this, we are most appreciative of the continued support and assistance extended by the Government of Japan in the form of fishing vessels, storage facilities, equipment and technical assistance. Alongside that development, we also entered into fishing agreements with other countries as a means of increasing our return from this sector.

At present, we have agreements with our honored host, Japan, and with the governments of Korea and America. These arrangements are based purely on commercial considerations. They allow fishing vessels from those countries with which we have arrangements to fish in our EEZ in return for a fee acceptable to both parties. The proceeds from these agreements have contributed much to government revenue. We have realized that the government alone could not hope to achieve the progress demanded by our people. Development requires the full cooperation and participation of everyone. With that in mind, the government has actively encouraged the development of the private sector. The initial results have been encouraging, and it is government's intention to provide whatever assistance it can to further development in this area.

In that connection also, the government welcomes initiatives that will contribute positively towards our development as a nation. In particular, we are encouraging foreign investors to participate in our development program - a program that is designed to give a "fair go" to whoever decides to invest in our country. And I hope that this visit will generate some interest on the part of some possible Japanese investors.

One particular area of real potential is the Line and Phoenix Groups in our country, which are about a two-hour flight out of Waikiki Beach in Honolulu. Already, government has initiated approaches to promote fisheries development and tourism. There is, however, a long way to go, and we believe this is an area suitable for foreign investment. This has been confirmed by a survey recently undertaken by a firm of consultants from this country. It is this area also which we have agreed to have considered as a possible site for a space launching center. I am advised that it is particularly suitable by virtue of the size of the land and its close location to the equator. I know this is some ways into the future, but should it take off, it would have a big impact on the economic situation of our country that is presently grossly disadvantaged in many ways.

And in order to facilitate these developments, we must address, among other problems, the lack of basic infrastructures. This is a problem shared, I believe, by many South Pacific countries. An improvement in this area will, I am sure, have a far reaching effect on our capabilities to pursue other options.

The only other area that I want to touch on is our traditional subsistence way of life. I want to say briefly here that while all these development programs are being planned and implemented, this area is not forgotten. Indeed it is receiving government attention. We believe it is important to make life easier and better, as the majority of our people still live in this way. We regard this policy as an integral part of our aim to be self-reliant.

That aim is also an important factor in our attitude to aid. We recognize that at this stage of our development, we need foreign assistance for our development, and over the years since our independence we are grateful that we have been getting aid from many friends, one of which, of course, is Japan. I want to take this opportunity to thank them all. But one important consideration from our point of view is that we regard aid as a means to promote our economic independence, so that a need for aid will be increasingly reduced over time. And that calls, among other things, in my view, for a conscious effort on the part of both donors and the receiving country for understanding and respect for each other. In that way, the objective is more likely to be achieved.

A gathering such as this is one way in which mutual understanding can be developed. Therefore, allow me to thank once again the Sasakawa Peace Foundation for this opportunity to share with everyone here our views on development and what we are doing in Kiribati.

A Period of Transition and Reconstruction; First Phase of 5-Year Economic Development Plan

Hon. John H. Haglelgam

Turning to economic development, the Federated States of Micronesia is entering the third year of our first five-year Development Plan. This phase of the plan is designated as a period of transition and reconstruction. A time for transition from the Trust Territory and reconstruction of the economy.

For this reason the primary emphasis has been on educating and training our people and building the roads, sewers, airports, docks and water systems, telecommunications and electric utilities necessary for future growth. While work in these areas is not complete, it has been progressing well. And I want to note that development in some of these areas has been advanced with assistance so generously provided by the Government of Japan. We will continue to devote substantial resources to these areas for some time to come. While effort in construction continues, we are making use of the infrastructures that are in place in order to create an appropriate economic development climate. FSM offers a number of opportunities, some natural and others man-made. Natural advantages include extensive reef and abundant fishery resources, and land resources for agriculture, and scenic beauty. By far, our fisheries resources within our more than 1 million square-mile fisheries Exclusive Economic Zone, offer the greatest promise. We, therefore, give the development of this sector high priority and look to countries like Japan which have the expertise and resources for its development.

Presently, foreign fishing fleets are paying between five million and seven million US dollars a year in fishing access fees to operate in our waters. But we need employment as well. Therefore, great attention is paid to encouraging the greater use of land base facilities on our islands by foreign fishing fleets. A good example of this was the successful test of trans-shipping tuna to Bombay last spring by Japanese fishing fleets. Commercial agricultural development is possible even with our limited land area. We look to developing nations of the Pacific and Asia to help us identify those crops and farming methods that have been successful in fostering agricultural development. Through closer cooperation, I am confident we can grow together.

In the Federated States of Micronesia, substantial economic growth depends on tourism. Comprised of some 600 islands, the Federated State of Micronesia offers the advantage of being located relatively close to Hong Kong, Korea and Japan. Consequently, we would like to capture some of the substantial flow of tourism that now streams to other regions of the Pacific. As in most small island countries of the Pacific, tourism facilities are sometimes inadequate. To support substantial tourism development, we look to the developed nations of Asia and the Pacific for cooperative effort in partnership or joint venture with us in developing the types of resorts that meet the fancy of the world traveler.

In addition to primary natural resources, we offer a substantial man-made resource: Special tariff treatment for imports from the Federated States of Micronesia into the United States. The opportunity is there for the creative businessman to obtain duty- free import of certain products into the United States. This special market window is opened to FSM as a result of the treaty, the Compact of Free Association, which it has with the United States.

We are looking for opportunities to work with foreign companies with manufacturing expertise to create employment for our people and profit for the investors.

Let me close by stating that these are our priorities. We in the Federated States of Micronesia wish to work with all of you in the spirit of friendship and mutual cooperation to achieve a dignified way of life for our people.

Social and Economic Development; Problems Facing Papua New Guinea and Shared by Other Pacific Island Countries

Rt. Hon. Michael T. Somare

Papua New Guinea has a land area of 464,842 square kilometers, 85% of which is part of the Eastern half of the Island of New Guinea, and some 600 islands. About 85% of the land area is not suitable for cultivation, 97% is held within the customary land tenure system. Human settlement is dispersed and fragmented which makes movement of people and goods difficult. About 85% of the total population of 3.5 million live in rural areas. The remaining 15% live in 63 urban centers, most of which have a population of below 10,000 people. The total population is expected to reach 4.8 million by the year 2000. At present, about 42% of the population is below the age of 18. The bulk of the population, of course, is engaged in traditional agriculture and fishing.

There is also enormous cultural diversity with 700 different languages, which makes communications very difficult. There is no unifying road infrastructure, and therefore, transportation is relatively expensive and mostly by air. Many parts of the country are still inaccessible, although access to education, health and other basic services has improved since independence in 1975. A major portion of the population is still not able to receive an adequate standard of basic services. For example, 78% of the population have no formal Western education. The system of government comprises a national government based on the Westminster parliamentary system, and nineteen self-governing provinces supported at the village level by local councils and community governments. In terms of resources, there are significant deposits of copper, raw petroleum, and gas as well as abundant forestry and fishery resources. Papua New Guinea also produces significant output of tree crop commodities for export, such as coffee, cocoa, rubber, copra and oil palm. According to the World Bank, the per capita income of Papua New Guinea is about 520 Kina or about US$ 609. However, this is seen from the provincial level where there are 19 provinces in which 79% of the population earn below the average.

As for the economic status and outlook, there is a general consensus that Papua New Guinea's current economic situation is sound and that its future prospects are bright. The World Bank and major donors at the First Meeting of the Consultative Group of Papua New Guinea in May this year commended Papua New Guinea on the management of its economy, especially reduction in the fiscal and current account deficits, adoption of borrowing policies and low inflation rates, and the recent initiatives to plan development expenditures more systematically and to direct public spending away from general administration to productive sectors in the essential infrastructure.

Papua New Guinea government recognizes, however, that PNG's rate of growth in terms of GDP has been disappointingly low and well below the population rate of growth of 2.3%, which is one of the highest. The major source of growth has been in the mining sector around a few major copper and gold mines. The other significant area of investment is in the agricultural sector, centering on tree crops such as coffee, copra, cocoa and oil palm. These crops account for 40% of Papua New Guinea's total export or 320 million Kina out of 978.6 million Kina in 1986. Small holders produce roughly two-thirds of the output of these crops, with estates and commercial plantations producing the rest. Timber is currently the fourth largest export industry after gold, copra and coffee, and the potential is quite significant. Fisheries, especially skipjack tuna, are largely unexploited. Significant opportunities exist both for industrial and coastal village-based fisheries. Although significant progress has been made in development of tree crop agriculture for export, the international market for these commodities is uncertain, making our country very vulnerable to international market speculations. The irony of it is that despite the relatively rich agriculture potential of Papua New Guinea, we still import a significant amount of food, totaling some 165 million Kina in 1986, or about 19% of total imports. Out of this, 3.9 million is for imports of 151,419 tons of rice. Even though we are a country which we believe can grow rice, we are still being told that we have to import. The other major food import is canned fish: 23.9 million Kina for 23,707 tons.

Food production, including imported subsistence crops such as taro, yams and sweet potatoes, has been neglected in past agricultural development. Attempts to manage these commodities are constrained by limited availability of international expertise and interest in tropical food production. The forestry resources also need close management. The current base of exploitation runs the risk of depleting these resources without replacing them. The potential danger to Papua New Guinea's environment is also being monitored.

At the moment, future investment in these resources will be hindered by evidence of serious international transfer pricing practices by investors. The same situation applies to fisheries. Again, there is need to ensure that fisheries resources are properly managed, including from a conservation point of view. Too often, the objective of immediate returns on investment has been placed before long-term conservation and viability of the resources, especially by the private sector.

Coastal and village-based fisheries, unfortunately, are seriously underdeveloped. A study is now being conducted to prepare a strategy for development of this type Of fishery, as about one-third of our people depend on fish, both as a source of food and income.

As I said earlier, Papua New Guinea imported 23.9 million Kina worth of canned fish during 1986. This clearly confirms that a fishery industry geared toward meeting the domestic demands is viable in the country. Therefore, despite the optimistic economic outlook, the majority of Papua New Guineans will still be outside the mainstream of activity being generated by the mineral and petroleum boom.

How to actively engage our people in the development process is still a major concern and a challenge. I outlined some of the general facts about Papua New Guinea. I would be misleading this Conference if I did not say at the outset that our social development prospects are not as bright as the economic outlook. Successive governments have recognized that although there has been significant progress in social development, such as education and health services, much more needs to be done. Many of these difficulties have a close relationship with the nature of the development of the economy. For example, 44,000 young people are joining the work force each year; however, the economy is not growing fast enough to provide employment for most of these young people. On the other hand, much of the education system is designed to provide a general education with very little skill or employment orientation. Given also the rate of population growth, a reinforcement of the education system to meet the demands for skilled manpower would involve significant additional allocation of resources.

In any case, the benefits of any investment in education now can only be seen in 10 years'time. On the other hand, it is also true that many people are not interested in seeking labor-intensive or agricultural-type work. Many also prefer to leave the village for urban centers. Migration of people from province to province and from rural areas to urban centers has also added pressure on services and created new problems.

We have a problem of squatter settlements. Malnutrition, and other health and social problems are becoming prevalent in these squatter settlements. In recent years, violent crimes have become more prevalent. This is also creating a serious problem in our ability to attract foreign investment and expertise. Health services, on the other hand, are generally of a satisfactory standard; however, this is limited to urban centers. Most of the population are still more than two hours in traveling time from the nearest health center. In terms of disease, malaria is still the main killer in PNG. Given the increasing pressure for services, attention is being focused on population control. However, any measure to implement a population policy would conflict with the traditional and cultural values of our people. In conclusion, contrary to optimistic outlook, which is being presented by economists, we face serious challenges in our development prospects. I have attempted in this address to provide insight into the current status and prospects for social and economic development of Papua New Guinea. I am sure other Pacific countries share similar situations as ours, although the scale may be different. .

As I suggested in my opening address, the rapid pace of change itself adds to problems which must be confronted. Unlike Japan in the past and China during this century, other Pacific Island countries are not in a position to close their doors. They must be able to address current problems as well as adapt to the rapid pace of new changes. Japan is a major actor in the Western industrial world. It has the capacity to assist our development efforts in the region. I am, therefore, encouraged by the recent statement by Prime Minister Takeshita, and I quote: "Japan, aware of its position as a mainstay of international order, must play a large global role and accept greater global responsibilities. It is especially important that Japan make a larger contribution in the political, economic and cultural and other spheres."

Bearing in mind this international commitment, this Conference should consider possible ways and means of translating this commitment into practical programs of cooperation between Japan and the Pacific Island Nations.

I am pleased to be able to say that the Japanese Government has been prepared to assist with the improvement of our hospitals and roads, and in our hydroelectricity and agricultural projects. Given the magnitude of challenges ahead for Papua New Guinea and also for other Pacific Island countries, we should be prepared to look at the long- term approach based on a predictable and significant commitment of resources from Japan.

A Development Policy Emphasizing Education and Training, Efficient Utilization of Grant Aid, and a Board Economic Base

Hon. Ezekiel Alebua

Thank you very much for giving me the opportunity to share with you a brief overview of the socio-economic constraints and prospects in Solomon Islands. I hope you will bear with me even if I become boring.

To begin with, and as an introduction, the Solomon Islands' economy consists of a monetized sector, which produces approximately 80% of total output, and a subsistence sector, which consists of about 80% of the population.

The monetized sector comprises tree crop plantations of copra, cocoa and oil palm, as well as commercial fishing, logging and services industries, while the subsistence sector comprises primarily gardening and fishing for self-consumption. The two sectors are linked through the gradual participation of the rural population in commercial undertakings, primarily in agricultural products.

The main source of the country's economic growth in the past 10 years of our independence was commercial fishing and logging, which provided cash income and foreign exchange earnings to the economy. And these two sectors are expected to play a more significant role in the years to come.

Nevertheless, the present government is encouraging the diversification of the economic base and is actively assisting the agricultural sector through the promotion of small-holder agricultural schemes. Solomon Islands is thus trying to change the structure of the economic base from one which is dominated by a few large commercial ranchers to one which will allow the majority of Solomon Islanders to participate fully in the economic development of the country.

Some of the major development issues and constraints which the country faces are that Solomon Islands has a very high population growth rate of 3.5% per annum, which means that everything being constant, our population should double every eighteen years. Moreover, since independence, the average annual real economic growth rate has been estimated to be lower than that of the population growth rate resulting in a declining real per capita income or in a deteriorating standard of living.

Given the rapid population growth, the greatest challenge facing the country today is how to maintain acceptable levels of income and employment opportunities while providing the basic social services such as education and health. The country has also inherited an inadequate infrastructure of roads, wharves, air fields, water supplies, energy and inter-island communication from its colonial past. Therefore, the developmental issues which face the country today concern not only how to promote economic growth, but also how to provide adequate social services and the necessary infrastructure.

In the case of economic development, the strengthening and the diversification of the nation's economic base have been important objectives. In order to realize these objectives, the country has committed itself to undertaking large-scale natural resources development, while the private sector has been encouraged to play an active role in small-holder agricultural production and in the areas of commerce, industry and tourism.

In fact, a number of new projects have recently been identified in these areas, including a small-holder rehabilitation program, a communal farm rehabilitation scheme and oil palmｪ@development, and, of course, a specific project, the Kolombangara commercial forest venture, which is a large-scale hardwood reforestation scheme. In the fisheries sector, the purchase of new vessels and the expansion of fish cannery facilities are promising developments. This is a joint venture between Taiyo Gyogyo and Solomon Islands Government.

In the mining sector, hopeful signs for the development of large-scale mining have been given. However, small-holder food crop production, tourism and small-scale industries are areas which obviously need more attention. In social services, education and health have received more financial support during the last ten years. Primary and secondary school development have been and continue to be assisted by World Bank loans and Australian bilateral aid. Overseas scholarships have been and continue to be provided by the United Kingdom, the European Economic Community, Australia and New Zealand. Similarly, the country's health services are being maintained through the European Economic Community, the World Health Organization and the Government of Japan as well as other bilateral assistance. However, a major social services issue facing the nation is the ever-increasing recurrent cost of providing and sustaining such services.

Even so, education and training are the country's most important priority. Manpower development for the public and private sectors is being expanded under a European Economic Community-funded human resources development project. In the area of health, rural health services and primary health care have been emphasized in our 1986-89 health development plan, and already the Republic of China has concluded an agreement with my country to construct for us a national hospital to be located in the capital city of Honiara. Through assistance from the Japanese government, a malaria laboratory project has been completed. The existence of such hospitals and facilities should enable us to improve health delivery systems in the country. One of the greatest needs of my country at this point in time is infrastructural development, and much effort has been made in planning and setting priorities in this area. Some of the large-scale infrastructure projects such as roads, new port facilities, etc. are being identified; and careful development of these is likely to follow so as not to unnecessarily spend valuable aid money on projects which may also increase the country's recurrent costs while the economy itself is not generating sufficient revenue from its resources.

Certain major constraints which have emerged in the Solomon Islands' development planning experiences are 1) inadequate planning capacity at the national, sectorial, and regional levels, 2) shortage of skilled manpower, 3) frequent turnover of key national personnel in the government, and 4) problems arising from the customary land tenure system. However, while these constraints are not peculiar to Solomon Islands, my country is trying very hard to minimize the adverse impact of these issues on the economy, because without persistent efforts to do so, economic growth can be difficult to achieve.

Given these issues and constraints, the government's overall development objective for Solomon Islands is to allocate more financial resources to revenue-generating projects as well as to build up financial resources and infrastructures which are likely to boost economic activities, while at the same time trying to stabilize expenditures on social services and government services. Thus the country has committed itself to promoting natural resources development in the areas of agriculture, forestry, fisheries and mining as well as to promote, support or create a favorable business environment where commercial industry can grow. The efficient utilization of grant aid and soft loans is another objective of Solomon Islands. To achieve this objective, the country has put in place policies which will direct grant aid to specific areas where adequate returns can be expected, while basic development needs are met. This means that the aid donors will now be directed to focus on mutually-agreed sectors rather than thinly spreading assistance in many areas as has been the case in the past. The new approach will require aid donors to allocate a minimum of 50% of aid funds to mutually-agreed sectors for a specific number of years while the balance can be negotiated for other purposes.

This new approach, we hope, will tidy up the country's aid management system and will make our generous aid donors a little happier. Our third development objective which my country is pursuing is to broaden and, where necessary, reorient the economic base. To date, Solomon Islands has become too dependent on imported food and manufactured items. For instance, in the period 1984-87, the importation of food items grew at an average annual rate of 26%, while the importation of manufactured articles grew at an average annual rate of 23%. This situation is somewhat disconcerting to the country. As a result, a rural-based, self-reliance economic program is being developed where agricultural production schemes, particularly in food crop production, will be actively promoted. At the same time, small-scale industries, local processing of raw materials, and additional fisheries will be given more attention. In its quest for improving the economic base, Solomon Islands is not unmindful of the need for a balanced development approach between long-term economic projects and short- and medium-term projects. Reforestation projects are usually regarded as long-term, while agriculture projects tend to be viewed as medium-term. For short-term revenue-generating projects, the Solomon Islands is actively encouraging private-sector manufacturing, tourism and related industries, food processing and timber milling, etc.

The country with its relatively stable political climate continuously seeks genuine investors in these areas. Of course, for such investments to be mutually beneficial, a country's infrastructural development must be up to standard. This is a fact that is of paramount concern for Solomon Islands, and we are doing something about it.

Nevertheless, there are certain national projects such as the national parliament building, national referral hospital, the national sports stadium and our national prison, and international airport terminal, which may not have any direct bearing on economic growth, but which are nevertheless necessary for national self-esteem, civic needs and welfare, and which the country would like to see done. In fact, these residual-priority projects have been included by Solomon Islands in its submission to a United Nations Development Program-sponsored Round Table meeting on projects to be held in Geneva in October of this year. Another priority area in Solomon Islands and probably the most important single factor is human resources development. Much needs to be done to upgrade the skilled manpower of the country in many essential areas, particularly in professional, technical, scientific and management fields. At the end of 1986, when the country held a national population census, 57.8% of the population was age 19 and under.

Only a small proportion of the country's young go further in education, because of high dropout rates in primary and secondary schools and because of limited and expensive places in schools. However, thanks to a European Economic Community project, substantial initiatives have been taken to improve the situation. A close monitoring of manpower development is being maintained by the authorities concerned since the country believes it must have well-educated and trained human resources. For medium-term development projects, one or two important intentions are worth mentioning here. A new emphasis and concentration on small-holder agriculture has indicated the country's push for self- sufficiency in food production. A redefinition of national goals so as to emphasize revenue-generating projects, to improve the local environment for foreign investment, and to encourage flexible and realistic incentives for commercial development has been made. The seven provincial governments in the country and the town councils have completed their five year development plans for the years from 1988 to 1992. It is intended that those provincially- proposed projects should be incorporated into the national planning system, as this will on the whole will improve the national planning mechanism, which for many years has been lopsided due to a strong top-down development planning legacy. But this is changing; a wholistic approach to planning is being pursued where a bottom-up approach to development planning may be helpful.

And, as a matter of fact, there is a lot to be done in every aspect of development in a less-developed country like ours. The challenge is great but the prospects for the future are neither bleak nor bright; and I am glad to say that my government is in a much better position today to prioritize, prepare, and implement projects which will be conducive to the strengthening of the economic base in general, and rural economy in particular, and which have been identified.

We can only go forward in progress, given the mutual cooperation in trade, investment and aid which the Solomons has been receiving from its friends. I have shared my country's problems with you as friends, and it is our intention to maintain and strengthen such links.

Island Country Development Through Close Interdependence of Pacific Rim Economies

H. R. H. Crown Prince Tupouto'a

In attempting to explore this crucial and complex issue, I am constantly reminded of the fact that we are living in the world of economic interdependency where instability in the powerful economies is reflected and amplified in the weak ones within a very short period of time; whereas recovery in the powerful economies takes a longer period to reach the weak.

My country, like many of the neighboring island countries in the Pacific, faces serious problems of high population growth, unemployment, dwindling export earnings, and rising expectations. Many of these imbalances are for the moment alleviated by foreign economic aid, and I am happy to note that Japan has become one of the most significant donor countries to the South Pacific.

More than this, Japanese companies have been so active in investment in the Pacific that the mere mention of Japanese investment has come to be interpreted in some quarters as a sure indication of greater things to come. It shows, in my opinion, the esteem in which Japanese management, marketing skills, and production techniques have come to be held in our part of the world.

In the 100 years previous to the Second World War, the great powers which ruled most of the South Pacific attempted to maintain global economic stability by imposing a brand of protectionism, which involved in some cases the creation of an entirely artificial market for the commodities produced by their colonies. The result was that most countries were locked into a system whereby they were for all intents and purposes an inseparable part of the administering power's economy, but geographically located thousands of miles away.

The aspirations of small Pacific countries, like those of their larger neighbors in the South Pacific, were subjugated to the interests of the great powers. Consequently when, twenty-five years later, the South Pacific countries began one by one to attain political independence, they inherited single-commodity economies, and educational systems which neglected scientific education. But with the rise of the Asian economies in the 1960s and '70s, it was possible to discern a trend which, regardless of whether it grew out of a specific design or whether it came about as an extension of pragmatic corporate policy to the overseas branches of companies, not only offers hope for the small island countries in the Pacific, but also shows the closeness of the interdependence of the Pacific Rim economies.

When a product becomes too expensive to produce, the normal solution in some parts of the world is subsidization of that industry. However, among the Pacific Rim countries, in many cases such a product is then manufactured in a neighboring country within the region with lower production costs. This is possible because of the great diversity in the stages of development among these countries, with Japan at the top of the heap and the South Pacific island countries at the other end of the scale.

No other economic grouping can claim such diversity. It is logical, therefore, that we should look for ways of plugging into this existing dynamic economic system within the Pacific Rim, as opposed to attempting to establish a separate economic grouping south of the equator. But whatever happens, I believe that it would be a great error to force economic reality to conform with purely political aspirations, because the marketplace is the wrong place for ideological conflict.

Indeed, the Pacific Rim is the only place on the globe where all three of the greatest military powers can claim to have a coastline. I hope within the last remaining twelve years of the 20th century, all three of these military and economic giants might be invited to participate in this worthy venture in order to support the peaceful and friendly relations which characterize the Pacific Rim today, and to promote our mutual prosperity.

A Trust Fund to Assist the World's Second Smallest Developing State; Economic Assistance with Political and Cultural Integrity

Rt. Hon. Tomasi Puapua

By way of introduction, I would like to begin by saying that Tuvalu achieved its independence from the United Kingdom on October 1, 1978. It is the world's second smallest independent developing state in terms of land area, which is about 26 square kilometers with a population of about 10,000 people. It is also a most remote nation both in terms of its extremely peripheral position in the world economy and its distance from the nearest developed countries.

Further, it is by far one of the most fragmented of the developing states, consisting as it does of nine coral atolls dispersed over 1.3 million square kilometers of ocean and running 600 kilometers north to south. Tuvalu's economy is basically subsistence, with the majority of its people relying heavily on what they can catch from the sea or grow from the limited land available. Infertile soil and a generally harsh atoll environment limit subsistence products to coconuts and other products from the coconut palm, bananas, fish and root crops.

With only 26 square kilometers of land available, there is only so much which can be produced, making the need for limiting the population growth a priority. The subsistence sector is supplemented by an emerging cash economy, with the demand for imported goods and services amplifying the needs to create employment and income earning possibilities.

Within Tuvalu, employment in paid work is severely restricted, with the government accounting for about 40% of the work force. We used to make reasonable returns on our stamp sales, but these have been badly affected by a downturn in worldwide demand. Earnings from copra have proven unreliable, and although handcraft products are popular, the impact of their sale is still relatively small.

There has been some commercialization of fishing; and there are also a few small buildings and service industries in the private sector. Cooperatives, which often prove most effective in a communal society like Tuvalu, have been successfully established in the retail business sector and for coconut and other products in the primary industry sector. Chicken and egg production has been introduced on a commercial basis on the main island of Funafuti and to some extent on the outer islands, and efforts are being made to improve pork production as well. Remittances from people employed overseas, particularly in Nauru, and on overseas ships as seamen, have proven to be a major impetus to the growth of the cash economy in Tuvalu. The major concern, of course, is that Nauru employment prospects will decline in the not-too-distant future and jobs for seamen tend to fluctuate in numbers.

The other major foreign-exchange earner is fisheries licensing; and Tuvalu at present has such arrangements with Japan, South Korea and the Republic of China. The recently established regional fisheries agreement with the United States highlighted the advantage for Tuvalu in participating as a member of the original Pact. The likely return from this arrangement is expected to be much greater for Tuvalu than if it had acted on its own. The absence of alternative resources or any reserves of the kind available to others makes our position vulnerable and, therefore, can inhibit our abilities for economic independence. Tuvalu's economic strength is most likely to emanate from the relationships it has developed within the region. This relates to the trading and developing-assistance links that we have with countries like Australia and New Zealand. And also, through taking advantage of our common interests with our neighbors, we find ourselves in a better position to negotiate fishing agreements. Through our membership in the Pacific Group of the ACP, we are also able to seek a stronger relationship with the EEC. It is a fact of life that Tuvalu will continue to require external assistance in maintaining its capital development program, and while much of this is aimed at generating possibilities for income accumulation much still needs to be done in the provision of improved health, education, transport and communication services. This type of assistance has been primarily given to Tuvalu by its traditional friends, the United Kingdom, Australia, and New Zealand with additional support coming from the EEC, United Nations, Japan, Canada, West Germany, the United States and others.

The greatest limitation on Tuvalu for achieving real economic development is its incapacity to match annual budgetary expenditure with revenue. There are limited options available for the Tuvalu Government in raising revenue. Income tax and customs revenues are major contributors to the government budget but there is only so much that can come from these sources, particularly with only about 20% of the population involved in the cash economy. Efforts have been made to increase revenue from philatelic sales and fisheries licenses, but both have proven inconsistent. Every attempt has been made to find other means of raising revenue, but ever since independence there has been a need for external support to achieve a balance between current revenue and expenditure. Between 1978 and 1987, budgetary support was provided by the United Kingdom government. However, such assistance, with its necessary accompanying monitoring mechanisms, is not considered an appropriate basis for relations between sovereign countries. Therefore, it was agreed by both Tuvalu and United Kingdom that it should be phased out.

This decision left Tuvalu with the urgent need to develop an alternative, and this emerged in the form of the Tuvalu Trust Fund. A fund of A$ 27 million governed by an international agreement, with contributions from Australia, New Zealand, the United Kingdom, Japan, South Korea and Tuvalu, was established in June, 1987. It is designed to maintain its real value in the longer term, while, at the same time, providing income for use by the Tuvalu Government in meeting its recurrent budget shortfall.

The Trust Fund is seen as Tuvalu's most important project since independence. It gives us a semblance of financial independence, allowing Tuvalu a much greater say in the overall management of its economy. It is not designed to replace other revenue sources but to provide a cushion between the income that can be raised locally and the revenue needed by the government to provide adequate services to its people.

Donor governments who have contributed to the Trust Fund have also recognized that, by doing so, they are providing a greater certainty that their development programs and projects will be successfully implemented and maintained.

The Fund has been in existence for just over one year, and it is already clear that it has allowed our financial managers to become less introspective. The emphasis is not so much on how to balance the budget, but increasingly on using the revenue that is raised more constructively. More attention can be given to providing government services more efficiently and, therefore, at less cost rather than trying to reduce services. As a tiny island nation with manpower and products of the sea as its only real resources, Tuvalu faces a difficult future and must rely on the generosity of others for its long-term survival. The difficulty for my government and for those who follow will be to endeavor to strike an appropriate balance between the need for external economic assistance and the preservation of our political and cultural integrity.

Integral Role of Health, Education, Vocational Training, and Community Activities in the National Development Process

Hon. Sethy J. Regenvanu

I am very pleased to have the floor once more and for this opportunity to address this Conference on the present state and future outlook for economic and social development in Vanuatu. I am pleased because in this paper I shall try to share with you facts and issues relevant to present and future trends of economic development of Vanuatu; impart information which I hope will serve to enhance the understanding of the people of Japan of economic conditions and problems prevailing in Vanuatu; and to generally share with you some of the aims we have which are relevant to the future outlook of the economic and social development of Vanuatu.

Vanuatu, a newly-independent country, includes 80 islands and has a population of 145,000 (as of 1985). It is one of the less densely populated countries in the South Pacific. Although there is a relatively well-developed commercial sector, this sector only operates in the two urban areas, while 80% of the population still lives in the rural areas and is mostly engaged in mixed subsistence and small-holder agricultural production.

The per capita income of ni-Vanuatu, as the citizens of Vanuatu are called, is about US$ 450. The economy is of a dualistic nature with a modern, expatriate-dominated and urban-based sector, co-existing with a traditional rural-based sector. Only 20% of the population is engaged in the modern sector, but the sector counts for 65% of the gross domestic product. The modern sector comprises the government sector, tourism, manufacturing, trade and financial services.

The country's main export commodity is copra, accounting for 70% of total domestic exports. Other commodities exported are beef, cocoa, coffee and timber. About 70% of the exports are sent to European countries, mainly Holland, Belgium and France, while 25% of the exports, mainly beef, now go to Japan. The imports come from Australia, New Zealand and Fiji, and to a less extent from Japan, New Caledonia and Hong Kong. Because the value of the imports is about 50% higher than the value of the exports, Vanuatu has a persistent external trade deficit. This deficit is partly compensated by earnings from tourism; development aid in the form of grants and concessional loans, as well as to a less extent foreign investment, largely meet the rest of the deficit.

Foreign investment is supported by the fact that the country is a tax-haven with a finance center consisting of international banks, accounting firms and trust companies, which provide the necessary services for Vanuatu-registered companies and ship registry. Companies are attracted by the absence of income, company-withholding and capital-gain taxes together with the absence of exchange control. Certain types of registered companies are not required to submit audited accounts or to disclose beneficial ownership.

The finance center contributes to employment and is an important source of foreign exchange earnings. The recurrent problems the economy has to deal with stem from the fact that a small island economy like Vanuatu is very vulnerable to external events. The external events which potentially have a significant impact on the economy are commodity export prices, the level of external assistance, and natural disasters. As exports are mainly copra, the price of this one commodity heavily influences total export earnings.

External assistance is very important for the financing of development investment. More than 90% of this investment is financed through funds made available by overseas donors either on a grant or concessional-loan basis. A significant drop in the level of external assistance would heavily affect the implementation of the planned development program. A change in donors' aid policies can have a tremendous effect on the economic development of the country.

Natural disasters form another unpredictable external factor. Cyclones frequently hit Vanuatu. Some are more destructive than others, but they almost always cause extensive damage and can set the country several years back in development. At the beginning of this year, cyclones Ann, Bola, and Dovi caused damage to buildings and agricultural crops, while the country was still recovering from the destruction caused by cyclone Uma last year. Reconstruction projects are well underway, but they pose a recurrent cost burden on the limited financial and human resources of the country.

The very limited availability of skilled human resources is one of the biggest bottlenecks in the economic development of the country. The modern sector of the economy is still very much dependent on expatriate labor. In the professional and technical areas 30% of the workers are expatriates. Localization of the economy is one of the top priorities of the government, but it will take some time before the problem of availability of skilled workers is solved. The output of the education system is small and more investment in education is necessary to guarantee a sufficient availability of skilled human resources. The development capacity of the country is to a large extent dependent on the easing of these bottlenecks.

If external events do not put too much strain on the economy, the future outlook for economic development is positive. For the agricultural sector, the prospects are promising. Less than half of the total area of arable land is utilized at the moment, which means that there is a significant scope for expansion of agricultural and forestry output.

The small-holder production of copra, vegetables and beef is increasing mainly because of the need for more cash in rural areas. The plantation sector, however, has been stagnant for some time. Investment, mainly foreign investment, in this sector has been hindered by land disputes, but is expected to grow once land ownership problems are settled. Investment in the plantation sector has now started to increase. The setting up of joint ventures in the large-scale commercial plantation sector is under way and is encouraged. The government is a partner in joint ventures with overseas investors and custom land owners in coffee, cocoa and cattle enterprises.

The government supports the agricultural sector with research programs, extension services, provision of loans and supply of subsidized equipment and other inputs, through which it is seeking to encourage diversification and quality improvement in agricultural output.

For the forestry sector, plans are developed for large-scale industrial forestry plantations on some of the larger islands, creating a potential source of foreign exchange earnings from the export of timber and wood products, as well as extending the supply of a renewable source of energy. Other available and economically exploitable energy resources are hydro- and geothermal resources, which can reduce the current dependence on imported sources of energy.

With a large sea area within the country's Exclusive Economic Zone, fisheries have a lot of potential. However, commercial deep-sea fishing has been badly affected by low tuna prices and out-of-date fishing techniques. Fishing rights sold to foreign companies, which make use of modern techniques, can become an important source of revenue for the government, provided that favorable agreements can be achieved.

Commercial coastal fishing has grown rapidly and the domestic supply of fresh fish is on the increase, enabling better nutrition and higher incomes for the rural population. Small-scale fisheries are widely supported by the government. There is still scope for increasing support by the government, and there is still scope for increasing the output of coastal fishing. A number of projects in this fields are being carried out. Manufacturing is currently only small scale. The main constraints facing this sector are the very small domestic market, lack of skilled manpower, scarcity of capital, and the remoteness of export markets. Manufacturing is mainly geared towards import substitution in the area of basic consumer goods. Further development of this sector is necessary to diversify the economy.

The government encourages foreign investment participation in industry, especially in those industries which use local resources, the products of which have domestic as well as export markets. Tourism is becoming more and more important as a source of employment, government revenue and foreign exchange. In foreign exchange earnings, it is second only to copra. The number of tourist arrivals, however, is vulnerable to external factors such as fluctuation in exchange rates, cyclones, and the frequency and capacity of air transport services. Plans for extension of hotel accommodations are well underway and Port-Vila's airport will soon be upgraded to enable it to accommodate wide-bodied aircraft.

There are also plans for expansion of the airport terminal, a project for which donor support is being sought. Promotional activities for tourism are particularly aimed at new sources of tourists such as Japan, Europe and the United States. This will hopefully make the sector less dependent on the Australian market, which provides more than half of Vanuatu's tourists. Other important sectors not mentioned above are transport and communications. Especially for an island country with a dispersed population, these sectors play a crucial role in economic development in that they enabled the economic integration of all areas of the country. The development of these sectors requires considerable capital investment, which government cannot provide. Support from the international donor community for these sectors is indispensable.

Overall economic growth of 3% is envisaged for this year, while the target growth rate for 1989 is 3.5%. Foreign aid and private investment will play an important role in meeting these targets. Careful development planning will be required to ensure that not only the people working in the urban sector but also the 80% of the population in the rural areas take part in the economic development of the country. This will create conditions for meeting the increasing aspirations of the people for a better standard of living and for maintaining peace and political stability.

I should like to address the social aspects of development. Social, economic and political developments that have occurred in Vanuatu during the last 150 years have brought both benefits and challenges to the people of Vanuatu. On the positive side, this development has resulted in a more widespread access by ni- Vanuatu to basic services like health and education. A steadily growing participation by ni-Vanuatu in the national economy and the achievement of independence in 1980 after seven decades of joint colonial administration by Great Britain and France. Social developments in Vanuatu concern a broad range of issues which not only need to be addressed but also have to be appreciated, since these will determine future development trends in Vanuatu. Some of the issues preoccupying our development planners include a rapidly growing population which places heavy demands on both the provision of basic services and on the labor market; providing effective and equal access to health and education for all ni-Vanuatu living on the some 80 islands in the country; and ensuring the full participation of men, women and Vanuatu's youth in the development process.

The biggest challenge facing social development relates to a structurally unbalanced economy inherited from the colonial years, with a narrow economic base co-existing with an extensive and relatively well-developed system of health and education services. Although significant improvements have been made in the productive sectors, which also receive considerable attention in the Second National Development Plan for 1987 to 1991 as outlined earlier, a very small economic base cannot easily support increased demands for social services. Notwithstanding these constraints, social development plays an integral part in Vanuatu's development process. The fact that the health and education sectors together account for some 40% of national budget allocations, clearly reflects our government's concern. The latter is also indicated by administrative and planning requirements that all development projects submitted to the National Development Commission are to be evaluated on social as well as on financial and economic criteria.

I would now like to turn to some current social development issues in somewhat more detail.

Long- and Medium-Term Planning is Being Carried Out, but Immediate Development Assistance is Critical

Hon. Tuilaepa Sailele

The problems stifling development in small island economies, which have been so eloquently echoed by the previous speakers, apply equally well in my country, Western Samoa.

Independent since 1962, we are a very small country of only 1,030 square miles. There is an abundance of blue, clear, clean ocean with very few fish, sharks included, which, therefore, is absolutely safe to swim in. I invite all the congregation here to come over to Western Samoa and swim in our lagoon.

We are overly dependent on one crop, coconut, and when prices of coconut products fall in world markets, we face problems; and prices of these commodities have been low over the past 2.5 years. Our major foreign exchange earner is people, through remittances and tourism. In fact, we earn about 4 times more from tourist earnings and remittances than from agriculture exports. Hence, we have had a trade deficit ever since the 1970s. We are an LDC and that tells all.

Our balance of payments remains in surplus. Our foreign exchange reserve is about six months of exports; and we have only been able to achieve that through continuous flow of remittances from our people overseas and also through tourist earnings. Together also with the tight control of our central bank, which we established in 1984, our gross domestic product for 1987 rose by only l% in real terms, after a negligible 0.5% rise in 1986. Economic development since we gained independence in 1962 has been guided by long-term and medium-term planning. We are presently on our sixth development plan for the period from 1988 to 1990, and the target growth anticipated is between 2 to 2.5% in real growth. But, the main requirement, of course, would be capital finance.

As Minister of Finance, I see the value of coming to this Conference in very simple terms: to improve the standard of living for our own people, we need, as all governments do, to provide such practical services as adequate water supplies, rural electrification, better education for our young people, better health services, and adequate job opportunities, etc. These things have already been touched upon by the Honorable Prime Minister Ratu Mara, and I do not wish to dwell much further.

Japan is richly positioned to offer this kind of assistance to our developing economies through the provision of additional capital finance and encouragement of private investment, development of tourism, and needed technical assistance in just about every sphere of development in our respective island economies. Japan is already doing this, but if meaning is to be given to the spirit of this gathering, then a little more concrete assistance will be necessary very quickly, for delays are the only enemies of development. Thus, it is probably more appropriate for me to conclude by recalling the words of one economist who said, "In the long run we are all dead."

Developing Specialized Products of High Value for Export Through the Resourcefulness of Our People

Hon. Pupuke Robati

There is a Japanese proverb which I will try to say in Japanese. It goes something like this: "Shimbo suru ki ni kane ga naru." It literally means money grows on a tree of perseverance. In other words, the proverb means perseverance brings success.

I personally believe that perseverance is one of the essential elements for success in any endeavor. In my view, therefore, this proverb actually describes one of the essential components of the development efforts of Japan which has today brought it to the pinnacle of success as one of the major economic powers of the world.

Japan's success was not achieved overnight, nor was it achieved only through its effort in the past 40 years. Perseverance is a characteristic that is not easily acquired but, for the most part, is inherited and nurtured through generations. In the Cook Islands, the limited achievements that we have realized, especially in recent years in our social and economic development efforts, owes much to the perseverance of a few of our people. The Cook Islands, therefore, has a few things in common with Japan: a people with strong family ties and proud of our cultural heritage in a country composed of small islands located in the vast expanse of the Pacific Ocean with a paucity of natural resources. But there, the similarities between Japan and the Cook Islands end.

While Japan long ago found a means to overcome its paucity of natural resources, the Cook Islands has not. Japan's exports far exceed its imports, but for the Cook Islands the exact opposite is true. Even before the shock of realization by the Western world could sink in, Japan long ago joined the ranks of the developed world, while the Cook Islands, at least in the economic sense, is still in the limbo of the developing world. Japan is a mega-state, while the Cook Islands is a micro-state. In Japan, you talk about millions of people and billions of yen, while in the Cook Islands we talk about hundreds of people and hundreds of dollars. The contrasts between the Cook Islands and Japan are endless, but I think those that I have listed will serve to emphasize just how wide is the chasm of differences and contrasts between the Cook Islands and Japan. The Cook Islands is a canoe, while Japan is a super tanker.

As with the other Pacific Island Nations, we in the Cook Islands promote a free market and private enterprise concepts. But it is only in the past 15 years that our private sector has gradually established itself to take over roles that have traditionally been carried out by government. We still have a long way to go before we can be considered to have fully realized the free-market concepts practiced elsewhere.

An independent macro-economic review of the Cook Islands which was completed early this year concluded that "... in real terms the economy grew an impressive 4.5% per annum over the nine-year period, 1976 to 1985. However, growth in the earlier years was low, around 1.5% annually from 1976 to 1982. This was compensated by growth of about 11% per annum for the three years from 1982 to 1985."

It is this growth rate of 11% that my government hopes to maintain if we are to have any hope of catching up with the rest of the world in terms of our social and economic development. With the vast contrasts that exist between Japan and the Cook Islands, we cannot hope to emulate Japan's effort, nor do we aim to do so. We do, however, realize that since our growth has been due largely to the contributions of the tourist and finance sectors, both of which are highly susceptible to external pressures, it is becoming increasingly difficult to maintain our economic growth.

Internal pressures within New Zealand, our largest development partner, have led to the capping of its assistance to the Cook Islands some two years ago. To maintain our current economic growth rate, therefore, we are in desperate need of development assistance both for the continued development of our infrastructure, especially in the outer islands, and for private-sector investment purposes.

Our hope is to develop specialized products of high value for export purposes. We realize that with our small population of 18,000 people, we cannot hope to compete even with other larger Pacific island nations in mass-produced articles. To realize our objective, we require significant investments for the education and training of our people as specialists in particular areas. We do not, at present, have the resources for these requirements. At this stage, I would again draw on the comparisons between Japan and the Cook Islands with which I started this statement. Like Japan, our main and virtually only resource for whatever lies ahead of us is the resourcefulness of our people. It is, therefore, to the development of our manpower resources that much of our financial resources have been devoted. However, the accelerated growth in our economy in recent years has highlighted the paucity of skilled and trained personnel that we require to meet the challenges of today and tomorrow.

We know that we must accelerate even more the pace at which we are developing our pool of skilled and trained manpower. We know that if we do not provide the necessary manpower and financial resources for our development efforts, we will join those numerous countries that are standing still. We also know that if we stand still, we will in fact be receding and moving backwards as the rest of the world advances.

Japan and the Cook Islands have not had any real bilateral dialogue at the government level until early last year. It was in fact one of the few characteristics that we have in common with Japan that brought about a closer relationship between our governments. Parts of Japan experience typhoons from time to time. In the South Pacific, we sometimes experience cyclones. It was in fact one of the worst cyclones that we have experienced in the past 30 years in the Cook Islands that brought our countries together. It was the experience of cyclone Sally that resulted in Japan spontaneously providing a small but welcome contribution to our cyclone-recovery efforts.

My government is pursuing more significant development initiatives with the Japanese government. We are quietly confident that Japan will not wait until the next cyclone before we draw even closer together. We know that it is to countries especially such as Japan that we must turn if we are to progress from an outrigger canoe economy to the motorboat economy that we aspire to achieve for our country in comparison to Japan's supertanker economy. At least with a motor boat, a craft that is so familiar to the Sasakawa Peace Foundation, we in the Cook Islands might be able to keep our current pace of economic and social development. With perseverance, the application of relevant techniques, the acquisition and development of specialized skills, and the cooperation of development partners such as Japan, we believe that we will succeed in our respective endeavors. I do concur with your early statement, Mr. Chairman, that while most of the problems of the Pacific Island Nations might be similar in many respects, their solutions cannot be the same. The bigger island countries such as Papua New Guinea and Fiji have better resource bases than the small ones. Even amongst the smaller ones, there are major differences in our respective resource bases. The smallest countries, such as the Cook Islands and Tuvalu, must be more innovative in our approach to developmental issues than the relatively more resource-rich countries such as the Solomon Islands, Vanuatu, and Western Samoa.

One source of comfort that I can offer potential cooperative partners-in-development like Japan is that, with countries such as the Cook Islands, we do not require billions of dollars to achieve our development aspirations. We do not even require hundreds of millions. We require only a few million in order to develop the kind of sound basis for on-going development that we know we require for an assured future for our people.