Pacific: Getting the private sector in

Islands Business | 3 August 2007

Interview: JAMES MOVICK — GETTING THE PRIVATE SECTOR IN
Chairman, Pacific Islands Private Sector Organisation

Dionisia Tabureguci

A number of significant regional level gatherings take place this month across the Pacific. Among them is the inaugural meeting in Fiji of public and private sector representatives from the 14 member countries of the Pacific Islands Forum Secretariat.

Organised by the Pacific Islands Private Sector Organisation (PIPSO), the Pacific Islands Business Forum in Nadi early this month expects to discuss issues that relate to the region’s competitiveness in the global markets, singled out by PIPSO chair James Movick, as being a very important subject for private sector development in the Pacific.

As major global market reforms happen, Forum Islands Countries (FICs) find themselves having to adapt to market realities that test national boundaries and traditional market access. Increasingly, the role of the private sector is being defined as critical in the bid to diversify what for most islands nations had previously been one or two-industry driven economies.

As such, the private sector plays a key role in the creation of business, employment and overall economic growth. Therefore, as an organisation that aims to consolidate and look after the interests of FICs’ private sector, PIPSO is well positioned to articulate issues faced by businesses in the region.

Movick spoke to ISLANDS BUSINESS about the importance of the business forum.

What would you like to highlight about this forum?

“The PIPSO 2007 Pacific Islands Business Forum marks a transition from policy rhetoric to the beginning of a meaningful action in terms of regional economic integration and public private dialogue in the Pacific islands region. This is the first time that members of the major business sector and representatives of private sector organisations from all 14 Forum Islands Countries will be coming together in a forum with regional ministers and senior policy officials to discuss major strategic business issues that face the region. It may not be able to offer definitive solutions to these problems but nevertheless it is important because it is that first step forward towards moving policy from rhetoric to meaningful action.”

How would you describe the progress of PIPSO what are some of its major tasks?

“The development of PIPSO has been slow but steady. Forging a regional organisation comprising voluntary associations is not an easy task. For many of us, it is difficult enough keeping our national business associations active and healthy. Nurturing a regional organisation is even more challenging. It is important to keep in mind the major impetus to the creation of PIPSO was the active interest of regional decision-making bodies, especially the Forum Economic Ministers Meeting (FEMM), and regional organisations to have a representative regional private sector mechanism with which they could engage. When the founders of PIPSO first met in early 2005 to discuss the concept of a regional private sector organisation it was as an initiative of FEMM with funding support from the EU- funded Pacific Regional Economic Integration Project (PACREIP).

“At that meeting there was a great deal of skepticism and some cynicism on the part of many of the private sector representatives. We have too often heard the rhetoric of ‘private sector-led growth’ and ‘private-public dialogue’ only to have our views disregarded when policy decisions actually get made. Furthermore, most businesspeople are frankly consumed with day-to-day operational problems of doing business, so interacting with governments on strategic macro-economic issues, especially at regional level, is not something that we necessarily rank as our highest individual priority.

“However, as we talked amongst ourselves, we recognised that many of the major economic issues that face us within our individual countries are the product of multilateral initiatives or are being dealt with by our governments at the regional level. These include issues such as the changing regional and international trade rules and many policy initiatives that promote greater economic reform at the national level. We finally agreed that it was important for us to rise to the challenge and opportunity that regional policy leaders had offered, for the private sector to form a regional body through which to engage with the governments and regional organisations.

“The formation of PIPSO came about in the midst of the adoption of the Pacific Plan and we were prepared to hope that the newly adopted Pacific Plan offers real opportunity for new relationships between and amongst governments and the private sector of the region.”

What are some major challenges faced by the private sector in the Pacific?

“The major challenges facing the Pacific Islands private sector’s investment and business activities have been well documented over the past 15 years. It is sad that over that period not much progress has been made to overcome these problems, with a few exceptions such as in Samoa. Key constraints identified by the Asian Development Bank include: State interference in the Economy; Poor provision of Public Goods; High cost operating environment; Underdeveloped financial markets; Natural resource issues; Poor investment policies, and Lands Rights Issues. More recently the Australian Government’s “Pacific 2020: Challenges for Growth and Opportunity” report identified four cross-cutting growth factors in which changes could realise economic growth for Pacific Islands countries-(1) Investment and Private Sector Development (2) Land reform (3) Labor; and (4) Political Governance. It also identified a number of priority areas for action including working with the private sector to build dialogue and capacity.

“The report reiterated the priority requirement for private sector to lead economic growth in the Pacific islands region. However, as the PIPSO board has noted in its draft Strategic Business Plan, the mere adoption of organisational and regulatory reforms is not adequate to bring about transformational change. Best Practice policies must be created and implemented successfully. Successful implementation of macroeconomic reform of the nature and scale required in the Pacific Islands requires better dialogue and a closer, cooperative, working relationship between the major public policy, private investment and community decision makers.”
Land ownership in some countries in the Pacific often poses difficulties for doing business.

“At the present time PIPSO does not have specific policies or programmes of this sort. However, PIPSO is committed to broad representation of all productive sectors of the national economy. Therefore, I anticipate that we will develop policy and operational recommendations toward the equitable inclusion of resource owners and programmes aimed at bringing the rural small producers into the national economic mainstream.”

Small and medium enterprises (SMEs) have been identified as the engine of growth in more developed economies. What role can PIPSO play to encourage policymakers to look into this?

“Differentiating SMEs from other business entities is a bit of a moving target and obviously varies from country to country. The range of businesses and interests in this sector are also diverse. As a representative organisation, PIPSO relies on its constituent members to define our priorities and our policies. Identifying what to do in the area of SME (or SMME to include micro-enterprises) is more complex for PIPSO because by and large this sector is still largely unorganised or is organised only with strong governmental intervention. Engaging with the SME sector is also difficult because most SME owners are heavily engaged in the day-to-day business of survival and are not as likely to be actively engaged in representative groups or in policy activities that do not have direct and more or less immediate return to their efforts. For SMMEs in almost all Pacific Islands states the most common issues appear to be the lack of feasible financing support, the importance of easy access to a wide range of technical advice when required, and the difficulty of conforming to cumbersome domestic and foreign government regulations. The Interim Board of PIPSO has recognised the importance of promoting the SMME sector primarily because it is the sector in which more Pacific Islands locals can become engaged in.”

There have been cases where clinching trade deals between PICs and larger nations have amounted to nothing because of what has been described as lack of consultation between governments and their private sector. If lessons have been learnt from this, the existence of PIPSO should go a long way in assisting governments and regional organisations negotiate the contents of their trade arrangements. Has PIPSO been approached to play such a role?

“PIPSO has been playing a role in the negotiations between Pacific ACP group and the EU on an Economic Partnership Agreement since early 2005. As chairman of PIPSO, I serve on the technical team that advises the regional negotiating team of Trade Ministers and Officials. The major problems that I faced were the initial reluctance of the official negotiators to have draft negotiating positions circulated outside of official circles due to confidentiality concerns. But another handicap has been the unavailability of an efficient mechanism on our side for me to disseminate that information and to get feedback from key stakeholders.

“With the new PIPSO website, we will hopefully be able to overcome many of these communication issues. When I first joined the regional negotiating process in early 2005, I found that many government trade officials were skeptical of the extent to which private sector input would be useful and wary that our input would simply be to further the specific business interests of those involved rather than be motivated by broad public policy considerations. However, I am very pleased to say that by the end of 2006, senior trade officials and ministers have largely realised the value of private sector and civil society input and they are now often taking the lead to seek private sector input in the trade negotiations at both national and regional level. The main benefit of involving the private sector in the trade negotiations is the level of practical insight that is gained. After all, it is the private sector that trades, not governments. As for the specific example you cited, trade agreements are often long on hype and short on practical benefits, so it is important that governments involve those business stakeholders who have the experience and expertise to verify the practical benefits of the arrangements being negotiated.”

Finally, what are PIPSO’s views on private sector development in the Pacific and what areas need to be addressed urgently?

“The challenges that face the private sector in the Pacific are immense and varied. However, just as modern healthcare now seeks to promote healthy lifestyle choices and conditions rather than just focus on the treatment of diseases that could have been prevented, so too governments and the private sector need to recognise that improvements to the economic decision-making system, in particular improved cooperation and coordination between the private and public sectors, is required.

“This institutionalisation of change in the economic relationship, the promotion of dialogue and stakeholder consultation, is what PIPSO and our NPSO members are all about. However, recognising the need for new macro-economic decision-making structures is a lot easier than agreeing on how it is going to be funded and maintained. The biggest challenge faced by the private sector to become involved in the national and regional economic policy dialogue is how those costs should be borne.

“Having the appropriate technical management staff to facilitate our work, and the costs of travel and communication within the region, are huge. These are not costs that individual businesspeople or most national associations can simply absorb. Our basic contention to regional governments and development partners, those who have the greatest stake in economic growth, is that the engagement of a representative private sector in this economic policy process should be treated as a public cost of good government.

“The challenge facing PIPSO leadership is how to persuade regional governments and development partners that funding of the governance costs associated with a representative organisation such as PIPSO is a legitimate public policy intervention for governments and development partners to support. If participation in PIPSO is to be funded solely by the private sector, we can expect that only a miniscule number of private sector actors would be able to participate fully and effectively.”