Posted by: nativeiowan | May 14, 2012

An economic discussion…

I have recently been discussing the meaning of life with a business associate in Honiara.

I thought this to be a timely discussion to share. I’d love to know the opinion of those few economists out there who may be able to add to this discussion…

… email thread between Mike and Mr. X…

The one factor the economists miss is the social aspect of things. They cannot create a formula that adequately involves the “people” in their predictions.

I note in the west that money is drying up (as logging $$ dries up) and the pressures of society are increasing as young folks who have gone to Noro to work or have been employed by aid projects or even logging, refuse to return to the home areas/ villages and simply set up camp in an urban setting like Honiara or Gizo. These young citizens have little education, are normally “married” at a young age and stats show have children quickly. They are drawn to the bright lights as their homes offer them little and their skills are not up to actually surviving as subsistence farmers. They are caught in the cusp of change. So they move to “town” with their young families…

The hot spots are places with 24 hour power and public bars.

I see in Gizo a  trend to have large numbers of people, sometimes families and sometimes not, simply start living in a place, building houses, planting gardens, etc. The squatting that is so prevalent in Honiara is now happening in Gizo.

So the towns/ urban settings become one big disorganised village.

Infrastructure and regulation is required for business to grow and keep paying huge taxes but societally the future is confused… and the SIG refuses to really address the problems or discuss the regulation required here. The SIG’s attempts to manage or regulate societal matters are mostly laughable… I think of the millions spent to move the people living at the Honiara dump-area back to their “homes” on Malaita… they took the money, went for a visit to an island they may never have otherwise visited, and they returned “home” to the dump and their scavenging life styles.

Land is not being controlled and regulated properly. Urban settings turn into village squalor with inadequate sanitation, water, etc being the norm. And the will to control this appears to be weak or non-existent.

Of course the worse sorts of urban blight follow such a trend. Moresby has it. Honiara has it. Gizo is getting there.

I see the cost of business going up all the time. Mainly due to the cost of controlling the social side of things. What does security/ insurance cost you these days?

So much to talk about. Do look forward to it.

 

More later

 

On 14/05/2012, at 12:14 PM, Mr. X wrote:

Mike,

I have attended the launch of CBSI Annual report and although this is historical there are some general forecasts for 2013. I will be putting together an overview but it may be a few days away.

In general 2011:

–          GDP 10.7%

–          Inflation around 7% and steady

–          Positive trade balance due to logs mainly. Logs a sunset industry but now around 2020 before any real slowdown.

–          11 months import cover

–          SIG budget surplus

2012

–          Slower growth

–          Inflation to decline to 5 to 7%. Fuel prices a key part of the equation here as this is outside SI control

–          Sustainable exports to continue to increase, Oil Palm, Copra, Cocoa, Fish, Mining so a positive trade balance to continue. Go figure this one and a continuation of the last few quarters.

–          SIG Budget surplus

–          SIG external debt additional repayments to be made

You may know about Restructured Bonds and SIG making a principle reduction in the next few days. This is a good sign.

I would think in some areas there will be a greater slowdown. RAMSI numbers to decline to 150 by Dec 2012 and with this other support people such as HKL etc. Some impact to the economy but not significant. We still feel there may be a bit of a real estate bubble in the upper end of the market.

SIG and others need to address the major issues now, roads, power, water and continue the good work done to date. Stability in Gov important as well and not so much as who is in power but stability.

There you go overall outlook is reasonable but most economic activity in Honiara as usual.

 

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Responses

  1. The head of the IMF made an interesting point in 2008 or so (sorry no link yet, but I’ll dig). He was under pressure from several directions to step in and play a role in cleaning up the global meltdown. He actually declined taking on more power and said that it would be inappropriate because the skill set of economists is largely retrospective. They look backwards to see trends. They report the trends so that central bankers and policy makers can make informed decisions. But the sharp end of the stick – and I’d put business people here- have to look forward in and steer through the shoals as best they can. Unfortunately, indexes, whether they look at happiness or gross, net or individual outputs in some form, all look backwards. All we can measure is how people did. And usually that reflects policy decisions that are now stale. Something that made money, or made people happy, or increased productivity five years ago may or may not produce a similar result today. So no answers from my side except to have more respect for people up in the wheel house using the old maps provided by economists and historians. With regard to Solo, I’ll note that one of the most impressive people I met there, James Habu, was just reinstated as the Premier of Isabel Province so I still have a lot of hope for the future. He actively looked at how he could use what he had to tackle current problems instead of falling victim to the constant pull of the never-quite-available development budget. Unfortunately, the country remains trapped in patronizing structures that limit local capacity for mis-spending pennies while millions go to the Brisbane Treasury. Casino, that is. Thanks for the interesting space…


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