Page 18 - IB August 2020

Economy Economy

Value-added agriculture in PNG. Photo: Innovative Agro Industries. Timor Leste’s COVID package includes a temporary basic universal
income. Photo: Supplied.

STRENGTHS AND STRESSES

PACIFIC ECONOMIES RESPOND TO COVID

By Samantha Magick borrowing capacity from multilateral banks, other donors and
domestic sources, social protection and how to maintain basic
A prominent Australian economist says it is “scary” to see services.
COVID-19 put at risk so many of the gains Pacific island coun- “A lot of governments as part of their COVID-19 packages
tries have made over the last decade. are going to forgive power bills and other types of bills but
Dr Jenny Gordon, the Chief Economist at the Australia De- unfortunately that doesn’t help SOEs [State Owned Enter-
partment of Foreign Affairs and Trade, says the Asian financial prises] or private sector providers who are already struggling
crisis “taught us in South East Asia that setting up good social to pay the return on the capital that they have invested. So
protection infrastructure” is important so resources can get to that’s quite challenging, how those SOEs will come out of
the most needy when there is an emergency. this.” Gordon says there may be an opportunity to improve
Gordon anticipates Pacific nations’ economic recovery infrastructure quality and “put into pace some more robust
will rely on the regaining of export markets, local stability user-pays systems.”
and access to finance, and that post COVID economies may She says the Australian government is looking at how the
have a much greater focus on local production, subsistence Australian Infrastructure Financing Facility for the Pacific
agriculture and movement back to rural areas, and a strong (AIFFP) can respond to economic changes.
investment in human capacity. She describes a “recovery “Large infrastructure projects take a long time to design
sequence” that starts with resource prices recovering first, properly, get up and running it’s hard to pivot really quickly.
“although it might be some time before we see a consider- I think there’s various views but one of the things that is very
able rise in energy prices”, potential in agriculture and export important and it had already been an agenda for AIFFP, was
of high-value agricultural products, continued return of the to ensure that these infrastructure investments are made in
Pacific labour market (including labour schemes in Australia) ways that build skills within the countries who are making
and then, the return of tourism. that investment because these are loan financed as well as
“I suspect the recovery of international tourism is going to grant financed.”
be very slow,” Gordon says. “We’ve got to think about the She says some infrastructure projects that were in the
next four years. So in terms of the financing gap there’s not pipeline in Fiji have been put on hold “because they are
much point in just financing this year’s deficit for govern- focusing on other priorities but one of the things that IFFP
ments, we’ve got to actually got to think about how they are is looking for is looking at infrastructure that employs more
going to finance those deficit in [following] years and what local labour.”
the size of those deficits will be.” Gordon was speaking at a webinar organised by the De-
Gordon says Australia—the largest development partner velopment Policy Centre at Australian National University to
for many Pacific island nations— is asking questions about launch DevPolicy’s Pacific COVID Economic Database. Centre
governments’ fiscal situation, what is essential expenditure, Director Dr Stephen Howes says while every Pacific country

18 Islands Business, August 2020