ADB Report: Tourism Will Help The Pacific Region's Growth Rebound In 2022

by PNG Business News - December 21, 2021

Photo credit: Papua New Guinea Tourism Promotion Authority

According to the current issue of the Asian Development Bank's (ADB) Pacific Economic Monitor (PEM), the Pacific economies are expected to return in 2022.

While the Pacific region's GDP prediction was cut to -0.6 per cent in 2021 in the ADB study, the subregion is expected to increase by 4.7 per cent in 2022 as widespread immunization against coronavirus illness (COVID-19) allows borders to gradually reopen. This is intended to improve trade and tourism in the Cook Islands, Fiji, and Vanuatu, among other places. A brighter prognosis for Papua New Guinea's extractives industry is also expected to contribute considerably to this recovery.

“As the Pacific region gradually reopens borders, safeguarding the health, resuming safe travel, strengthening economic management, and promoting fiscal sustainability will be key to ensuring a resilient recovery from COVID-19,” said ADB Director General for the Pacific Leah Gutierrez.

According to the PEM, reopening to travellers who have been vaccinated against COVID-19 is critical for the tourism industry's future. The number of tourists to Pacific sites has remained limited, with the majority of visitors arriving via travel bubble agreements with bilateral partners. However, due to dangers associated with the global rise of COVID-19 cases caused by the Delta variant, these preparations had to be put on hold. For near-term tourism in the Pacific, a sustainable return to safe travel will be vital. This, in turn, will be determined by vaccine rollout success, which has been inconsistent, with near-universal coverage of eligible people in the Cook Islands, Nauru, Niue, and Palau, contrasting with relatively modest adoption in Melanesian nations.

Other country issues and policy themes critical to mitigating risks to the Pacific's recovery are explored in the PEM. It discusses public finance sustainability in the Cook Islands through fiscal consolidation and state-owned enterprise reforms in the Marshall Islands and Palau. Other articles focus on specific aspects of economic recovery, such as female labour participation in Fiji, labour mobility initiatives in Kiribati and Tuvalu, and reducing the burden of noncommunicable illness in Niue, Samoa, and Tonga. The PEM also looks at topics that are important across the subregion when it comes to the sustainable management of fisheries resources.

The PEM's policy briefs look at significant problems that will have a big impact on the Pacific's overall economic recovery after the COVID-19 crisis. The Lowy Institute's contribution estimates the time it will take Pacific countries to vaccinate their people and cautions that an unequal vaccine rollout would have long-term consequences for the region's growth. Another contribution from the Private Sector Development Initiative looks at the possibilities for tourism following COVID-19 and how rephrasing tourism goals and targets while including sustainability indicators might help people better comprehend tourism as a growth strategy. The final policy brief examines the topic of domestic resource mobilization and its role in ensuring the Pacific's public finances are sustainable.

The Asian Development Bank is dedicated to establishing a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while continuing to fight extreme poverty. It was founded in 1966 and is owned by 68 people, 49 of them are from the region.

 

Reference: Asian Development Bank (14 December 2021). “Tourism to Help Pacific Growth Rebound in 2022, Says ADB Report the region”.



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PNG Business News - September 28, 2022

PNG’s minimum wage

Commentary by Stephen Howes, Kingtau Mambon and Kelly Samof The urban minimum wage has been an important part of Papua New Guinea’s economic history. In the last few years before independence (in 1975), it was greatly increased. In the decade or so after independence, it was widely regarded as too high. In 1992, it was slashed, merged with the rural minimum, and hardly increased again for more than a decade. We can compare the minimum wage in PNG today with other Asia and Pacific developing countries using International Labour Organization (ILO) data. As Figure 1 shows, PNG’s minimum wage is 18% below the average of the 19 countries shown if the market exchange rate is used to compare minimum wages. It is 37% below the average if differences in cost of living are also taken into account (with conversions made on the basis not of market exchange rates but so-called purchasing power parities or PPPs). The greater difference in terms of PPPs reflects PNG’s relatively high cost of living. 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There have since been some significant increases, but today PNG’s minimum wage is only about one-third of its value at independence, and below its value even in 1972, which is when the steep minimum wage increases began. The Australian minimum wage has always been significantly higher than the PNG one, but the ratio has changed a lot over time. The lowest that ratio has ever been is 2.2 in 1986, the highest 45 in 2004. The gap between the two wages is much higher now than at independence: the ratio of the Australian to the PNG minimum wage was 14.5 in 2021, compared to only 3.2 at independence (1975). This reflects PNG’s 1992 deregulation, and the faster growth in the Australian economy, which has enabled an increase in the Australian minimum wage. The solution to low wages in PNG is not necessarily to increase the minimum. In some sectors, where there is a lot of international competition, a higher minimum wage might lead to job losses. For example, in tuna processing, one of PNG’s main competitors is the Philippines. From Figure 1, we can see that PNG’s minimum wage is lower than the Philippines' on the basis of PPPs, but actually higher on the basis of market exchange rates. While the former is what matters for the welfare of workers, the latter is what matters for international competitiveness. Whether PNG’s minimum wage should be increased will require a lot more analysis. The point of this blog is simply that PNG’s minimum wage does not look high any more by international comparisons, as it has fallen a lot since independence. PNG is often described as a high-cost economy, and this is a fair description. However, with regards to unskilled labour, it is no longer a high-wage economy.   Data note: The PNG Economic Database provides the weekly minimum wage of PNG going back to 1972, and the PGK-AUD exchange rate. Wikipedia provides the Australian weekly minimum wage data (hourly and weekly, on the assumption of a 38-hour week) starting from 1966. The Australian CPI is from the Australian aid tracker. There are some years where Australian minimum wage rates change more than once in a year. For such cases, we took the average as annual minimum wage rate. The data for Asia-Pacific comparisons are from the International Labour Organization and the World Bank. The different frequencies of minimum wages for each country in 2019 in the ILO’s report are adjusted to convert to weekly rates. World Bank data is used to obtain market exchange rates and PPP conversion factors. For the Goodman, et al., data go to Table 3.6 on p.61 in their report.\ Disclosure: This research was undertaken with the support of the ANU-UPNG Partnership, an initiative of the PNG-Australia Partnership, funded by the Department of Foreign Affairs and Trade. The views are those of the authors only. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is Director of the Development Policy Centre and Professor of Economics at the Crawford School of Public Policy, at The Australian National University. Kingtau Mambon is currently undertaking a Master of International and Development Economics at the ANU Crawford School of Public Policy, for which he was awarded a scholarship through the ANU-UPNG Partnership. Kelly Samof is a lecturer in economics at the School of Business and Public Policy, University of Papua New Guinea.

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