Economic Growth and Sustainable Development in the Pacific Island Countries

The Pacific island countries (PICs) have benefited from the growth in Asia and the Pacific in the last 2 decades by integrating their economies within Asia and loosening ties with the Americas in some instances. Several bottlenecks however, still hamper sustainable economic growth in the region. For instance, Papua New Guinea (PNG) (with 7.6 million people), Fiji (with 850,000 people), and Solomon Islands (with 611,500 people) together account for about 90% of the population of all 15 PICs while 6 other PICs have populations of less than 20,000), discounting the economies of scale in the PICs as industrialization remains minimal. High transportation and raw material costs also make entrepreneurship difficult to sustain, leaving the islanders to survive at subsistence levels with family, clan, and community ties providing the social safety net. To foster sustainable economic growth therefore, the PICs need to invest in niche markets, upgrade their transport infrastructure, improve access to trade and invest in environmentally sustainable industries.

Key points

• Exports of the Pacific island countries (PICs) have increased by 169%, reaching $9.6 billion in the past 20 years.
• Given the lack of economies of scale as a result of their small sizes, the PICs need to establish “niche markets,” targeting high-end products or services.
• Lack of interconnectivity among the PICs because of inefficient transport infrastructure and a dearth of skilled labor remain key concerns in developing these niche markets.
• About 13% of the PIC population is either unemployed or underemployed, prompting them to seek work in Australia, New Zealand, and the neighboring countries, and the remittances they send form a critical slice of the countries’ gross domestic product.
• With the number of people over 60 years old increasing by 400 million in the next 15 years in Asia, the demand for skilled care workers is slated to increase, making the PICs a possible location for tropical retirement homes for Asia’s burgeoning middle class.

Policy Brief No: 2016-6