Listener: 18 July, 1981.

Keywords: Globalisation & Trade;

The islands to our north present New Zealand with a number of economic social and political problems – the problems of how to treat neighbours who are small in numbers and materially poor, but significant to us in human terms (and perhaps of strategic importance). It would be so easy to neglect them or to use them for our convenience. However, in 1976 we took a more positive Islands Industrial Development Scheme (PIIDS).

The idea of PIIDS is simple. Appropriately directed subsidies enable New Zealand firms to establish factories In the Islands, thereby employing the native people. The subsidies include grants towards the costs of new or additional factory plant and equipment, staff training, transfer of staff and plant, and feasibility studies.

Countries eligible for this assistance are the Island members of the South Pacific Forum: The Cook Islands. Fiji, Kiribati. Nauru, Niue, Papua New Guinea, the Solomon Islands, Tuvalu, Western Samoa and Vanuatu. So far there have been 37 PIIDS ventures, creating 545 jobs at a cost of around $2000 a job. Some of these ventures have been criticised. The most controversial. becaus: of th: health implications, was a cigarette-manufacturing operation in Western Samoa. But like all the others, the project was approved by the local government. Is it appropriate for the donor government to overrule the recipient government?

A more general issue is whether the scheme results in the wrong sort of industries. A number of projects are rather similar to the import substituting industries we established in New Zealand in the 1960s. Instead of importing final products, components are imported and local labour used to assemble them. The catch, as we know to our cost, is that when there is a shortage of foreign exchange such semi-processing industries do not have the imports to sustain them. and there is resulting unemployment.

A better strategy is to use some natural product of the Islands as the basis for manufacturing. In 1977 the scheme was extended to cover ventures which processed agricultural products. Successful ventures include banana drying, jam manufacture using indigenous fruits, ginger, orange juice. tropical plant propagation, coconut cream, honey, and annato seeds for dye. An exciting recent development is the processing of timber from senile coconut trees.

Some islands are so short of natural products that they are using labour-intensive processing of imported raw materials to produce export goods. Both Niue and Tonga are making hand-stitched soccer balls for export. Apparently the traditional manual dexterity of the local people give high productivity.

But in order to export, be it soccer balls or processed local materials, there has to be access to markets. In the case of the Island economies their major markets will be Australia and New Zealand. Recognising this, these two countries have drawn up the South Pacific Regional Trade and Economic Co-operation Agreement. which from the beginning of this year enables the South Pacific Forum countries to have duty-free and unrestricted access to our markets, subject to a few restrictions where great hardship would be caused to our own industries.

One of the most interesting criticisms is that industrial development based on private investment will Inhibit the grass-roots rural development and self-reliance. The wrong sort of industrialisation could destroy the social fabric of the islands which we are trying to support. New Zealanders will recognise that our equivalent debate is whether an over emphasis on think-big projects will distort our social and economic development.

Island leaders appear to have warmly supported PIIDS. The United Nations Industrial Development Organisation has been sufficiently impressed to commission a report on the scheme by Wellington economist Dennis Rose. Yet it would be wrong to leave the reader with an uncritical picture of glowing optimism.

It may well be that there is no economic structure for many Pacific Islands which will maintain the present and future population levels at an adequate standard of living. Even moderate levels may involve major social change. destroying much of what is most precious to the Islands. If so, we can expect that many Pacific Islanders will continue to migrate to New Zealand. Personally, I welcome them. Already they have added a variety and richness to our community and – providing the migration is steady rather than accelerated – our economy can. cope with and benefit from more Pacific Islanders. However, I am uneasy about the effects on the Island communities of a too rapid depletion of the young and the capable: Perhaps the role of our aid programme is to slow down the depletion and ease the transition rather than to try to provide the long term viable economies that some of the islands cannot hope to attain.

It is not easy for New Zealand to be concerned and supportive to our Pacific neighbours without being directive and interfering. It is not easy for us to protect our economic and strategic interests without being domineering. In the past we have too easily wavered between neglect and paternalistic imperialism. We must try to do better in the future.