Development in the Pacific

Distinguished guests, parliamentary colleagues, ladies and gentlemen.

I'm very pleased to have the opportunity to address you at this important seminar on "Development in the Pacific".

The initiative is, of course, a timely one.

The issue of development in the South Pacific, has received a high level of attention during recent months as a result of the dramatic events that have taken place in Solomon Islands, but also the August meeting of the Pacific Island Forum and the publishing of the Senate Foreign Affairs, Defence and Trade References Committee report "A Pacific Engaged".

All this has highlighted the South Pacific's importance to Australia - not that anyone at this Seminar needed reminding.

In my remarks today, I will look at the development record of the region and the challenges confronting the Pacific states in improving governance to achieve sustainable growth and stability.

I'll also touch on the role of aid and other sources of development finance - as well as the emerging agenda in the region, including Australia's more so called "hands-on" approach to the problems of the South Pacific.

Pacific development - a mixed record

Some recent media commentary on PNG and the Pacific has presented the view that since independence, development has gone backwards; and that the region is awash with failed states where corruption, poor leadership and lawlessness are endemic.

This assessment is too simplistic.

It fails to recognise that there have been significant development gains in the region and that some South Pacific countries are faring a lot better than others.

In particular, improvements in overall life expectancy in the Pacific have been substantial, outpacing those in both the Caribbean and Sub-Saharan Africa.

Infant mortality rates have decreased at a rate comparable to that of the Caribbean and are well below rates in Sub-Saharan Africa.

However, these social gains have not been matched by economic performance, which has deteriorated - particularly since the mid 1990s.

The region is not homogenous and there are significant disparities between countries in the region.

Samoa, for instance, has achieved sustained economic growth of around 5 per cent, whilst reducing tariffs and taxes.

While on the other hand, PNG, Vanuatu and Solomon Islands have had negative rates of per capita growth and are confronted by very young demographic profiles.

I have just undertaken my 12^th visit to PNG as Foreign Minister.

I think we all would agree that despite the advances PNG has made since independence, and they have made a lot, it continues to face considerable development challenges.

If current growth rates are maintained, its population is estimated to double by 2025 from the current five million.

HIV/ AIDS is a major health and development challenge for PNG, affecting about one in every 350 Papua New Guineans.

The resources sector that has, in the past underpinned economic development and attracted foreign investment, is confronted with an uncertain future.

Clearly, the PNG Government now faces a significant challenge to re-establish the foundations for sustainable improvements in living standards.

Governance is central to the Pacific's future

Improving governance will be critical if the region is to lock in development gains and address recent reversals - indeed development experience shows a strong correlation between governance and growth.

The Pacific's record on governance - including sound policies, the rule of law, mature institutions and accountable systems- is mixed.

On the one hand, countries like Samoa and Fiji that have diligently and consistently pursued governance reforms, clearly show the gains that can be made.

On the other hand, in countries like Solomon Islands, the quality of core national institutions such as the police has deteriorated, and as a result social and economic prospects have declined.

Political leadership required for reform has proven difficult to sustain, and often been derailed by short-term political considerations and the self-interest of elites.

Lack of capacity, as well as inappropriate institutions inherited from colonial times, have resulted in wasteful public spending - which in turn has undermined reform and the delivery of basic services.

Just to give you one example among many, in the first seven months of 2003 the Solomon Islands police force spent four times its permitted budget.

Corruption - both a symptom and a cause of poor governance - is another issue to contend with.

Countries like PNG still lack the preventative and enforcement capabilities that they need to combat corruption.

This raises concerns about trans-national crime.

Already some of the small island states are troubled by business scams, illegal exploitation of natural resources, gun running, and the selling of passports and bank licences to dubious foreign interests.

This sort of corruption is often accompanied by a breakdown of law and order, which further compounds the inability of Pacific countries to attract investment and generate growth - we have seen this kind of vicious circle in Solomon Islands.

These are serious and complex issues and I have only scratched the surface.

They go to the heart of our Pacific neighbours' development.

Financing the Pacific's Future

Improving governance will also help regional countries to maximise the benefits of globalisation and open their economies to trade and investment.

Greater trade liberalisation, both within and outside the region, can give Pacific countries with sound policy settings a means to finance their future.

Indeed countries in the Pacific are heavily reliant on trade - revenues from exports was 70 per cent of Vanuatu's GDP in 2000 and averaged around 60 per cent of PNG's GDP between 1999 and 2002.

New regional arrangements like the Pacific Islands Countries Trade Agreement and the Pacific Agreement on Closer Economic Relations can provide the building blocks for expanded regional markets, greater economies of scale and enhanced foreign investment.

Governance will also play a critical role in ensuring that the resources from remittances are harnessed effectively.

Remittances play a key role in Pacific economies like Samoa, Tonga and Kiribati - recent estimates suggest that remittances comprise almost 40 per cent of Tonga's GDP.

The role of aid

So how can aid make a difference in the South Pacific?

The past five years have witnessed a vigorous debate on the role of aid.

A broad consensus has emerged that aid is more effective in countries with sound policies.

Pacific countries themselves need to take leadership for their own development.

They must implement sound domestic policies, create environments for private sector investment, overcome financial mismanagement and corruption, promote stability and provide an appropriate level of services.

Nonetheless, there is also evidence to show that even where policies are weak, aid plays an influential role in encouraging and supporting policy and institutional reform.

This debate demonstrates that it is not aid per se that leads to development.

Rather, properly-targeted aid affects outcomes by influencing policies, institutions and processes.

Poorly targeted or coordinated aid can, by contrast, have a range of negative effects.

In some cases, poorly managed aid has damaged rather than improved conditions by propping up unsustainable systems, weakening public sector structures and adding inappropriately to recurrent budgets.

In this regard, the Pacific is no different from any other developing region.

Australia's aid program to the region is well targeted and well managed.

It has delivered credible returns in a high-risk environment and has evolved to meet new challenges:

We also have a head start in that we are deeply familiar with the region and its peoples.

The Government has always placed great emphasis on personal high-level contacts with our Pacific neighbours.

I have, as Foreign Minister, visited nine countries on at least eighteen occasions in the South Pacific.

The emerging agenda

Clearly Australia is willing to help.

But Pacific countries themselves must recognise that this assistance is not a substitute for proper governance and management of their own affairs.

The international community also has a responsibility to support development efforts, by providing sustainable market access for Pacific exports, employment opportunities and investment, as well as aid.

But, understandably, the international community will continue to look to Australia to play a leading role in the South Pacific.

As I said in my opening remarks, the events of the last few months in Solomon Islands have naturally led the Australian Government to re-examine how we can best support the development efforts of our other South Pacific neighbours.

We are not willing to stand back and watch regional neighbours descend into instability.

Together with our Pacific Islands Forum partners we are helping restore not just the economy but hope for a better future to Solomon Islands.

The Regional Assistance Mission has already made excellent progress in its efforts to restore law and order and to re-build the institutions of governance.

In PNG, addressing the problem of law and order is essential for re-establishing investor confidence and strengthening the foundations of the nation.

That is why Australia is prepared to look at all means to work with PNG in this area.

If this means providing more "on the ground" assistance with policing, then we are willing to look at that.

The details are still to be worked out with the Papua New Guinea Government - but Australia and PNG have agreed on a framework for taking our partnership to a new level of shared commitment.

We have made additional offers to help improve financial and budgetary governance, to provide strengthened assistance in key economic ministries and to boost capacity within law and justice agencies.

In the rest of the region, our engagement will be based on an increasingly robust dialogue on reform.

We will deepen strategic partnerships with key Pacific counterparts, particularly with economic, financial and law and justice agencies.

And we will continue to support basic service delivery.

Breakdowns in health, education and essential infrastructure not only have a significant human cost, they also undermine the legitimacy of nation states and sow the seeds of instability.

We are well-positioned to do all this.

We are not starting from scratch, but building on existing strategic footholds.

In Solomon Islands, for instance, existing initiatives in the law and order, basic services, and public sector reform areas provided a solid foundation for the work of the Regional Assistance Mission.

There is also scope for the region itself to meet shared challenges.

Indeed the Pacific has a long tradition of working collaboratively to deal with common issues.

Australia is discussing with our Forum partners pooled regional governance, where sharing of resources might ensure greater efficiencies in the delivery of services and help overcome capacity constraints.

To help this endeavour, Australia will be supporting a new regional policing initiative based in Fiji and has agreed to fund a study to explore economically viable cooperation in aviation and shipping.

Pacific Islands Forum Leaders have also agreed that better governance, winding back corruption, and stronger security are needed to tackle instability and economic decline.

This is surely the most tangible sign of the Pacific nations commitment to deal head on with difficult issues.

It is a milestone in Forum relations, providing a mechanism through which we can combine forces to meet the region's toughest development challenges - better governance, sustainable development, internal stability and nation-building.

The incoming Secretary-General of the Forum, Greg Urwin, an experienced and dedicated member of the Pacific community, will be a key asset to the Forum as it tackles these challenges.

Conclusion

Ladies and gentlemen

Development is a difficult, complex and long-term undertaking.

And in some parts of the Pacific development gains have been eroded by conflict, economic decline or failures of governance.

Our aid has made a difference.

It has encouraged the conditions required for broad-based economic growth and promoted stability through the delivery of essential services.

But the challenges are great.

We are seeking to review our responses to ensure our approach best supports our neighbours and meets our own national interests in a stable and prosperous Pacific.

Our hands-on approach is helping to restore law and order in Solomon Islands and to address the considerable challenges facing PNG.

And it is enhancing the capacity of the region to pursue governance reform and to work collectively to address shared problems.

What Australia wants is to help our neighbours be well-managed, stable and prosperous.

To this end, we are committed to a sustained and robust partnership with South Pacific countries.