New Zealand Inquires In To The South Pacific: Part Four
19 March, 2011
By Cleo Paskal
Last December, the Government of New Zealand released an Inquiry into New Zealand’s relationship with South Pacific Countries, it’s the biggest public rethink on South Pacific issues since the end of the Cold War.
This, the fourth of a series analysing the findings of the Inquiry, examines the logic of some of the fundamental assumptions of the Inquiry.
THE ECONOMICS OF SMALL
One repeated assumption in the Inquiry is that “Isolation from the rest of the world, transport difficulties, small size, and often poor soils pose challenges for economic development. These factors make it impossible for small island communities to compete with larger and more populous centres of production.”
The problem with that logic is the use of an inappropriate point of comparison.
A small economy like Tonga’s is not just a miniaturized version of a larger production centre, and any policies that seek to shape it in that way will be destructive.
Small economies have their own dynamics and advantages. In a globalised economy, their options are diverse. This is especially true for a country like Tonga, which has a high level of education, and an English speaking population.
Samples of successful small island remote economies are:
- Seychelles. Population 90,000, in the Indian Ocean off the Coast of Africa, GDP per capital PPP US$20,000. Main industry tourism.
- Faroe Islands. Population 50,000, in the North Atlantic, GDP per capital PPP US$48,000. Main industry fisheries.
- Iceland. Population 300,000, North Atlantic, GDP per capital PPP US$39,400. Diversified economy.
- Greenland. Population 58,000, Off the coast of Canada, GDP per capita PPP US$35,900. Main industry natural resources.
There are many others. If small economies, regardless of location, are included, the list of successful micro-economies is even longer, and includes Monaco, Liechtenstein, San Marino, Andorra, and the Isle of Man. All of which have smaller populations than Tonga.
While the Inquiry assumes that Tongan and other Pacific economies revolve around New Zealand. However, many small economies mentioned above are globally diversified. These are the economies that the Kingdom should be looking to for lessons learned and models of development.
In many cases, their success comes from using international systems to their advantage. Monaco’s (population 33,000) success is not because of its casino, but because of its banking, immigration and tax laws. There is a lot to be learned.
This could, however, decrease New Zealand’s economic and so, potentially, political role in the region. The Inquiry seems concerned that Pacific Islands might start moving down that road and tries to cut it off by implying that Pacific islanders aren’t as smart as people from Monaco.
The Inquiry states: “Some Pacific Governments have been attracted by the financial possibilities of allowing their names to be linked with the provision of offshore banking facilities. Inevitably a lack of competent management and technical resources means an inability to distinguish clean from laundered money [...]. It is in their and New Zealand’s national interests to preserve the integrity and reputations of the financial services sector in the region.”
One assumes one preserves ‘integrity’ by not considering those possibilities at all. Coincidentally, that would also keep tax havens from being set up in the region, something that could affect New Zealand tax revenues.
Fundamentally however, the assumption that small remote economies are doomed to poverty does not stand up to scrutiny.
USE OF NEW ZEALANDERS OF PACIFIC ISLAND DESCENT IN LEGITIMISING POLICY MAKING
Another assumption is that, somehow, because there is a large population of people of Pacific Island descent in New Zealand, New Zealand somehow has a special right, if not a duty, to try to influence policy in the Pacific.
In the case of Tonga, consultations with New Zealanders of Tongan descent were used as a justification to support certain aspects of political reform.
The issue here is not the political engagement of New Zealanders of Tongan descent, and their use by the New Zealand government to justify policy, but rather that this is not a reciprocal, across-the-board policy by the New Zealand government and so, to those living in Tonga, can look questionable to say the least.
For example, the largest ex-pat community in New Zealand is not from the Pacific Islands, but is from Britain (according to some stats, over 80% of the population of New Zealand is of British descent).
Following the logic that ex-pat communities in New Zealand give the New Zealand government the right to advocate for political change in their countries of origin, there should be delegations sent from New Zealand to London to discuss the abolition of the anti-democratic all-appointed House of Lord. Perhaps workshops can be held.
This is not to understate the importance of democratic change, this is just to highlight the lack of logical consistency in New Zealand foreign policy.
Many of the core assumptions upon which the Inquiry bases its recommendations result from a narrow, Pacific-focused worldview. It is worth testing their logic against a wider worldview before moving ahead with implementation.
- Cleo Paskal is an Associate Fellow at the Royal Institute of International Affairs, Chatham House, London.
New Zealand Inquires In To The South Pacific: Part Four
Last December, the Government of New Zealand released an Inquiry into New Zealand’s relationship with South Pacific Countries, it’s the biggest public rethink on South Pacific issues since the end of the Cold War.
This, the fourth of a series analysing the findings of the Inquiry, examines the logic of some of the fundamental assumptions of the Inquiry.
THE ECONOMICS OF SMALL
One repeated assumption in the Inquiry is that “Isolation from the rest of the world, transport difficulties, small size, and often poor soils pose challenges for economic development. These factors make it impossible for small island communities to compete with larger and more populous centres of production.”
The problem with that logic is the use of an inappropriate point of comparison.
A small economy like Tonga’s is not just a miniaturized version of a larger production centre, and any policies that seek to shape it in that way will be destructive.
Small economies have their own dynamics and advantages. In a globalised economy, their options are diverse. This is especially true for a country like Tonga, which has a high level of education, and an English speaking population.
Samples of successful small island remote economies are:
- Seychelles. Population 90,000, in the Indian Ocean off the Coast of Africa, GDP per capital PPP US$20,000. Main industry tourism.
- Faroe Islands. Population 50,000, in the North Atlantic, GDP per capital PPP US$48,000. Main industry fisheries.
- Iceland. Population 300,000, North Atlantic, GDP per capital PPP US$39,400. Diversified economy.
- Greenland. Population 58,000, Off the coast of Canada, GDP per capita PPP US$35,900. Main industry natural resources.
There are many others. If small economies, regardless of location, are included, the list of successful micro-economies is even longer, and includes Monaco, Liechtenstein, San Marino, Andorra, and the Isle of Man. All of which have smaller populations than Tonga.
While the Inquiry assumes that Tongan and other Pacific economies revolve around New Zealand. However, many small economies mentioned above are globally diversified. These are the economies that the Kingdom should be looking to for lessons learned and models of development.
In many cases, their success comes from using international systems to their advantage. Monaco’s (population 33,000) success is not because of its casino, but because of its banking, immigration and tax laws. There is a lot to be learned.
This could, however, decrease New Zealand’s economic and so, potentially, political role in the region. The Inquiry seems concerned that Pacific Islands might start moving down that road and tries to cut it off by implying that Pacific islanders aren’t as smart as people from Monaco.
The Inquiry states: “Some Pacific Governments have been attracted by the financial possibilities of allowing their names to be linked with the provision of offshore banking facilities. Inevitably a lack of competent management and technical resources means an inability to distinguish clean from laundered money [...]. It is in their and New Zealand’s national interests to preserve the integrity and reputations of the financial services sector in the region.”
One assumes one preserves ‘integrity’ by not considering those possibilities at all. Coincidentally, that would also keep tax havens from being set up in the region, something that could affect New Zealand tax revenues.
Fundamentally however, the assumption that small remote economies are doomed to poverty does not stand up to scrutiny.
USE OF NEW ZEALANDERS OF PACIFIC ISLAND DESCENT IN LEGITIMISING POLICY MAKING
Another assumption is that, somehow, because there is a large population of people of Pacific Island descent in New Zealand, New Zealand somehow has a special right, if not a duty, to try to influence policy in the Pacific.
In the case of Tonga, consultations with New Zealanders of Tongan descent were used as a justification to support certain aspects of political reform.
The issue here is not the political engagement of New Zealanders of Tongan descent, and their use by the New Zealand government to justify policy, but rather that this is not a reciprocal, across-the-board policy by the New Zealand government and so, to those living in Tonga, can look questionable to say the least.
For example, the largest ex-pat community in New Zealand is not from the Pacific Islands, but is from Britain (according to some stats, over 80% of the population of New Zealand is of British descent).
Following the logic that ex-pat communities in New Zealand give the New Zealand government the right to advocate for political change in their countries of origin, there should be delegations sent from New Zealand to London to discuss the abolition of the anti-democratic all-appointed House of Lord. Perhaps workshops can be held.
This is not to understate the importance of democratic change, this is just to highlight the lack of logical consistency in New Zealand foreign policy.
Many of the core assumptions upon which the Inquiry bases its recommendations result from a narrow, Pacific-focused worldview. It is worth testing their logic against a wider worldview before moving ahead with implementation.
- Cleo Paskal is an Associate Fellow at the Royal Institute of International Affairs, Chatham House, London.