Catalog

	Table of Contents
p. 15 of 29 BACK | NEXT Executive Summary I. Introduction II. Development Challenges III. Key Variables Influencing Development A. Vulnerability B. Political Stability and Good Governance C. Capacity and Skills D. Sociocultural Context E. Population Growth Rates F. Physical, Technological, and Financial Infrastructure IV. External Assistance V. Review of ADB Assistance and Strategy VI. The New Pacific Strategy

A Pacific Strategy for the New Millennium : III. Key Variables Influencing Development

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F. Physical, Technological, and Financial Infrastructure

38. Undeveloped infrastructure severely constrains economic development. Combined with remoteness and high transportation costs, undeveloped infrastructure ranging from roads, ports, wharves, navigation aids, power generation and distribution, and telecommunications, remains a significant constraint to both external and internal investments in most PDMCs. Often productivity is low, and in many cases the rich natural resources of the PDMCs cannot be exploited due to the lack of efficient access. And where infrastructure has been built, often this infrastructure is not maintained because skills or public finance is lacking. Thus, future efforts to improve infrastructure must take account of skill and financial capacity to maintain the same.

39. There are opportunities for PDMCs to harness IT to overcome some of the economic constraints and vulnerability related to their isolation and smallness. An important development worldwide is the availability of new and powerful IT. While there is the threat that PDMCs may be largely excluded from the economic gains enjoyed by participants in the new information-knowledge society, IT has the potential to increase the size of markets, reduce the costs of distance, enable access to sources of learning and advice, and bring jobs to skilled people even in remote locations. Of particular relevance to small states is the fact that the IT industry generally does not require much land and has low environmental impact. To enable PDMCs to bridge the so-called digital divide and avail of IT in a socially inclusive way, they will need, at a minimum, to improve and expand their infrastructure for IT, set-up appropriate regulatory regimes, and enhance computer literacy. There is also the potential to generate income for small states from the global market for internet domain names; some countries, such as Tonga and Tuvalu, have already started to explore and develop this opportunity.

40. Undeveloped financial sector infrastructure remains a major disincentive to financial investment in the PDMCs. The financial sectors of the PDMCs are dominated by a few foreign-owned banks that concentrate their operations in the urban areas, are extremely risk averse, and have no interest in servicing the rural areas where the bulk of the population resides. A local capital market does not exist for all practical purposes. While two stock exchanges operate in the region (Suva and Port Moresby), they are small and service only the Fiji Islands and PNG. The lack of enforcement of commercial codes and accounting standards, and the lack of incentives for companies to undertake audits, make it difficult for potential investors to assess the true state of financial institutions or business enterprises.

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