Opinion & Commentary
Aid for growth only hope for a Pacific solution
The emphasis on growth in Alexander Downer's white paper is a victory in the struggle to save Australian taxpayers' hard-earned dollars from the waste that populism has forced on Australian aid. Last week's Solomons riots were a judgment on aid as welfare. They have occurred because no steps have been taken to make the Solomons economy grow.
The Solomons has 50 members of parliament for a population of not much more than 500,000. Of these, 20 are cabinet members, each of whom is in charge of a ministry with a staff of officials, drivers, secretaries and cleaners. There are nine provincial administrations. All these have grown fat on aid for "governance" and "capacity building". Aid funds have not led to roads, schools or health centres.
The Solomons has enough government to run a country 20 times its size. Persuading parliament to reduce the number of cabinet members and ministries to five that worked should have been the first priority of the Regional Assistance Mission to Solomon Islands. Members of parliament should be spending most of their time in their electorates ensuring that law, order and infrastructure work, as a requirement for re-election.
The International Monetary Fund, looking for jobs for its non-performing staff, founded a rash of central banks in the 1970s. When the Reserve Bank of the Solomons collapsed, RAMSI had a golden opportunity to persuade parliament to replace it with a currency board with a staff of five and rent its luxurious premises to private enterprise. Instead, Australian bureaucrats resurrected the whole wasteful structure. It will have to rely on expatriate staff for years if retained. It should be reformed now.
The Solomons is a member of 29 international organisations that foster its dysfunctional government and economy. When it was clear that the Asian Development Bank's non-performing loans could not be serviced in 2002, they were not written off the books as they would have been by any private bank. Australian taxpayers paid the interest and capital repayment as part of their 100per cent support for the Solomons budget.
Solomons' elites travel endlessly to boondoggle meetings and seminars on per diems. The hordes of consultants and agency staffs that crowd Honiara joined the local elites in creating a market for Chinese traders who have moved in because of the absence of private property rights and deplorable education that denies Solomons children the ability to read, write, do arithmetic and communicate in English. The rage that led to the burning of the casino may have a lasting positive outcome unless a new one is funded by insurance and government subsidies.
As in the rest of the Pacific, population in the Solomons has exceeded economic growth since independence. A small number of politicians and bureaucrats has waxed fat on aid funds that have supported the neo-colonial government structures imposed by the departing colonial powers and international agencies. Most people continue to eke out a subsistence existence. While women produce the garden crops that feed people, about 80,000 people, mainly men, are unemployed or underemployed. The labour force increases by 16,000 annually. They are spilling out of shacks in Honiara and rioting because it is the only way they can express their anger and frustration.
The first charge on parliament should be agricultural incomes. Land shortages have been at the bottom of the Solomons' troubles. Much land lies idle while many of those who want to farm cannot. Land reform is essential. Nowhere in the world has farming developed without individual property rights. Aid should involve offering assistance for land surveys, registration, roads, jetties and other infrastructure to communities willing to get land reform and farming going.
Urban employment opportunities, such as Samoa has developed, are urgently needed. The islands are beautiful, with enormous potential for tourism, which could employ many people. But tourism is impossible until there are incomes to ensure security. The disgraceful state of logging is well known. The exporters must pay taxes and replant instead of giving handouts to local chiefs and politicians.
The Solomons is the same size as Iceland, which has one of the world's highest per capita incomes, but the Solomons is much richer in resources and much better located. With sensible economic policies, the Solomons could have Western living standards in a generation.
The Pacific is forever on the brink of disaster because it has neglected growth. Poverty breeds crime and corruption as it did in 18th-century England, which had to house the victims in hulks and send them to Port Jackson. Out of the 7.5 million people in the Pacific, about 1.5 million are unemployed or underemployed and 220,000 are being added to the labour force every year. Pacific leaders (and their Australian supporters) want them employed as seasonal workers in Australia to save the inconvenience of reforming the Pacific economies. The full cost of employing such workers would be at least $30 an hour. These seasonal workers, moreover, would displace Aborigines, for whom fruit picking is a lifeline to employment. Some Australians would also like cheap Pacific Islander nannies.
Because of its lack of growth, the Pacific has become a breeding ground for international corruption, from the Chinese triads that run the gangs, prostitution, gambling, guns and drugs in Port Moresby to the million-dollar cash payouts by the Chinese and Taiwanese governments to Pacific parliamentarians. Stadiums and aeroplanes flow. Other Asian governments will no doubt join in. The Pacific will remain poor, corrupt and a danger to Australia. When islanders turn on those they see as exploiting them, the victims will be able to jump immigration queues to Australia as asylum-seekers.
The Australian armed forces and police have, as always, shown themselves capable in pacifying the Solomons. The white paper sets the right direction for economic reforms in the Pacific. But will the bureaucrats, consultants and contractors whose jobs are to deliver aid for growth be able to rise to the challenge?
Emeritus Professor Helen Hughes is a senior fellow at The Centre for Independent Studies.
