The Pacific is a crime bomb and needs economic reform

The new ‘guest worker’ scheme is being billed by many Pacific governments, aid organisations and The World Bank as a development policy to displace the demonstrable failure of aid.  Will it be enough to ease the enormous employment pressures that have been building in the region?  

Australians have become accustomed to bad news from the Pacific islands. Conflict in the Solomon Islands, coups in Fiji, murders by raskol gangs in Papua New Guinea, and the burning of Chinatown in Nukualofa in Tonga indicate an ‘arc of instability’ at our doorstep.

Underemployment and underemployment are at the core of the Pacifics instability, and are the cause of the ‘arc of instability.’ Without employment-led growth, crime, civil disruption, and corruption will undoubtedly worsen. With major criminal interests now operating in the region, the Pacific is also developing its comparative advantage as a location for international criminal activities such as people-smuggling, drug production, and arms trafficking.

Most working-age women in the Pacific are at least employed in gardens and household care. The real problem comes from more than two million men—four out of five— that are unemployed in towns or underemployed in villages. More than 100,000 men join the labour force annually with little chance of finding work. Most will never work and never earn an income. Every day, men and boys can be seen languishing in villages and towns, and by the roadside, bored and frustrated. Papua New Guinea alone has nearly 1.5 million unemployed and underemployed men, and is adding about 75,000 to this number annually. By 2030, Papua New Guinea could have a population of 9 to 10 million, depending on the progress of HIV/AIDS, and the Pacific’s population could be more than 13 million.

The entire region seems to present a bleak picture. But look a little closer and there appear to be two Pacifics. One group of islands has managed to grow, if not at the speed of East Asian economies, at least modestly. It includes the Cook Islands, French Polynesia, New Caledonia, Samoa, Tonga, and others, that have reasonable education and health with modest socioeconomic outcomes for their peoples.

A second group of islands, including Fiji, Papua New Guinea, Solomon Islands and Vanuatu, have stagnated at best. In some cases, they have become poorer. In these islands, governments are largely absent from the day-to-day lives of individuals. For most families, this means no electricity, no running water, no sanitation, and little healthcare. For women, it means giving birth without medical attention. Many villages lack institutions of law and order, and receive scant attention from political elites, who squander public revenues.

The problem for the region, and hence for Australia, is that the second group of countries includes the largest, most populous islands. About 80% of the Pacific’s population is found in the low-growth group of islands, where employment is rare and living standards are not rising. High mineral and timber incomes have not translated to better services or economic growth. These islands will decide the future stability and prosperity of the region.
The Pacific is bipolar.

The two groups of islands display markedly different demographic characteristics and different employment social and educational outcomes. Whereas one group of islands has moderate population growth and reasonable education, the other experiences some of the highest population growth rates in the world and high levels of illiteracy.

Permanent emigration can continue to be a safety valve for the Pacific, particularly for its small countries, easing labour-market pressures, adding remittances to income, and contributing to political maturity. Some Pacific islands may, however, wish to maintain a better balance between their island population and emigration than those that, like Tonga, Niue, the Cook Islands, and Tokelau,  have many more nationals residing abroad than at home.

A guest worker scheme would no doubt benefit the individuals lucky enough to be selected to participate in it, but it is not a development solution for the Pacific. The present Australian guest worker target of 25,000 workers a year would do nothing to ease the employment problems of Papua New Guinea, Fiji, and the Solomon Islands.

The Pacific can only avoid looming economic, social, and political crises if its large economies dramatically reform their policies to encourage substantial employment creating growth. Otherwise, it will only be a matter of time before the growing army of unemployed and underemployed turns from restless to violent.

Gaurav Sodhi is an economist at the Centre for Independent Studies, The Bipolar Pacific, written with Helen Hughes, is available at www.cis.org.au