Pacific Economic Monitor - December 2016

This edition of the Pacific Economic Monitor focuses on niche product development. The Pacific is increasingly becoming known worldwide for products such as coffee, chocolate, chili, vanilla, cosmetics, and signature clothing. These products, while produced at low volumes, can fetch premium prices by trading on the unique stories of their development, and exotic local ingredients derived from the pristine Pacific environment. Collective efforts to improve product quality and increased access to trade finance are but two of the ways through which Pacific exporters can harness these opportunities.

Highlights

• Diverging tourism trends; higher global commodity prices. Despite growing global tourism, some Pacific destinations have seen declining visitor arrivals from major markets. Although international crude oil prices are projected to rise by 27% in 2017, much smaller increases are expected for food prices. Price prospects for key Pacific exports—liquefied natural gas, phosphate, and agricultural commodities—are mixed.
• Shoring up the fiscal front and raising productivity. Declining resource-related revenues remain major concerns for Papua New Guinea and Timor-Leste, while the major fiscal risks facing Nauru have been thrown in the spotlight by emerging developments regarding its Regional Processing Centre. Rebuilding fiscal buffers against shocks are imperative for these economies, as well as for those at risk of disasters. Other country-specific policy challenges discussed in this issue include strengthening public investments and state-owned enterprises, and information and communication technology.
• Carving a niche for Pacific products. Developing high-value niche products for export opens up promising economic opportunities particularly for rural households and small and medium-sized enterprises. Trade finance would help improve exporters’ access to financing, while collective action could help spur product development and cultivate support services responsive to the needs of the sector.

Policy Briefs

The twin challenges of smallness and remoteness have limited Pacific economies’ opportunities for exporting and participating in global value chains, at least in traditional markets for high-volume commodities. However, niche product development is gradually carving out an alternative path for these economies to partake in the benefits of international trade. Niche products harness the Pacific’s pristine environment, rich cultures, and unique histories to anchor product differentiation. Smallness translates to unique products that are very limited in supply, while remoteness underscores the unspoiled and exotic nature of raw materials used. These factors allow Pacific niche products to fetch premium prices in the global market, effectively overcoming the hurdle posed by high production costs.

The three policy briefs featured in this issue highlight the importance of raising quality standards and expanding access to trade finance to further support niche product development in the Pacific.

• Developments in agriculture and agribusiness in Samoa
• Bridging the trade finance gap in the Pacific
• Moving from commodity to niche: Timor-Leste's coffee exports

About the Pacific Economic Monitor

The Pacific Economic Monitor provides an update of developments in Pacific economies and explores topical policy issues. This bi-annual publication is produced by ADB with contributions from development partners and knowledge organizations engaged in economic analysis of the Pacific.