Falklands : Falklands Public Meeting on the Economic Development Strategy (17/08/10)
Submitted by Falkland Islands News Network (Juanita Brock) 22.08.2010 (Article Archived on 05.09.2010)
A public meeting was held at 1700hrs on Tuesday, 10 August 2010 in the Court and assembly Chamber of the Town Hall.
PUBLIC MEETING ON THE ECONOMIC DEVELOPMENT STRATEGY
Tuesday, 10 august 2010
By J. Brock (FINN)
A public meeting was held at 1700hrs on Tuesday, 10 August 2010 in the Court and assembly Chamber of the Town Hall. There was a presentation about the Economic Development Policy with FIG’s Senior Economist, Michael Poole and Head of the Policy Unit, Mr Sonny Jose presenting the Policy. The Hon Dick Sawle MLA and the Hon Roger Edwards, MLA was also on the panel. Mr Roger Spink, also a panel member was away.
After Dick Sawle welcomed everyone then he handed the floor to Michael Poole and Sonny Jose, who were responsible for the presentation of Part B of the Economic Development Policy covering Strategic Direction. Mr Jose explained the vision and mission of the policy by outlining policy priorities from 2010 to 2025, saying that targets include achieving annual economic growth of 4% to 6% by 2025 and the improvement of the balance of payments position from external accounts. He explained the goals of economic growth and expanding – deepening the fisheries, agricultural and tourism sectors and the importance of diversification into new industries and the service sector.
He continued with the main obstacles and constraints of growth such as issues in the business environment, legal and regulatory issues, technical and infrastructure problems, financial and capital issues as well as problems with labour supply, human resources, political and other issues.
Enablers and key policy actions were divided into 2 parts: Policy and Regulatory enablers and Resource Enablers. Regulatory enablers would be optimised in the short term from 1 – 3 years and in the medium term from 4 – 7 years, with long term actions from 8 – 10 years. Policies outlined were trade, fiscal & monetary, labour supply and human resource. Resource enablers include infrastructure development, services development, human resources, financial and capital and other key steps and actions. All had a time-frame for improvements as well as a plan of action for maximising these key areas.
Chapter 2 covered industry specific analysis of the various Falklands related ones like fisheries, tourism and agriculture. Mr Jose outlined what each industry was worth and extrapolated their value as well as advising what funds needed to be raised to improve these industries to a higher standard. He also listed several new industries like research centres, offshore financial services and other businesses, lifestyle offers, seaweed harvesting, aquaculture and a waterfront marina.
Finally Mr Jose explained that significant discoveries and ultimate exploitation of oil and gas would be a ‘game changer’ but this industry was in its early stages. The challenge would be to achieve balance, thus ensuring environmental stewardship, generating economic benefits, promoting, maximising and involving Falkland Islanders in developing Islands’ oil industry, should it go ahead.
Tim Blake asked the First question about the warning about what happened in Camp could happen in Stanley. He went on to say that what happened in Camp was the result of a Government decision to break up large farms into small ones, which meant the dispersal of a large number of residents. Perhaps this policy could occur in Stanley with the reluctance to allow outside investment as was shown with Camp, isn’t going to encourage outside investment in Stanley. I think you are actually drawing some conclusions from factors which have been brought about by specific decisions.” he said.
There was no answer to Mr Blake’s question but the microphone went to Mr Summers instead.
Mike Summers then raised a question about demographics because it appeared in at least half of Mr Jose’s presentation. Mr Summers went on to say that Mr Jose drew some very substantial conclusions from it. “None of that presentation, as I know, has been open for public scrutiny, nor do I think any of it was discussed in the Core Group. Isn’t it a bit unreasonable to come with a document that relies so heavily on that analysis without having published that analysis in the first place?”
SJ: Well actually the demographic picture has been discussed in all the earlier presentations from the Core Group to the Members – to FIFCA, to FIDB and all the other venues previously.
MS: But is it published?
SJ: It is in the presentation material but it didn’t come along with this.
DS: In fairness, I think about a year ago and I heard those same figures at that time. I think they have been public but whether they have been published I obviously don’t know.
RE: It’s one of the things worth thinking about. The rapid increase in population because one thing we don’t want to do – and this to engender some feedback from the public - is increase the population too quickly so that the Falkland Islanders’ lose their place.
He went on to mention the example of Fiji where a huge Indian population was imported to do the donkey work of investing and setting up businesses and ended up taking over resulting in the Indian population taking over the whole archipelago.
RE: It is one of the things I think could happen here when we grow up from a population from around 3000 to a population of 9000.
Tim Blake thought that Fiji was a bad example because two distinct cultures were involved – the Indian culture being a work culture and the other a leisure culture where the women work and the men sit back. He went on to say that the locals never wanted the jobs the Indians created.
RE: It is but the principle behind it is exactly the same. If we wish to remain Falkland Islanders, you have to be very careful as to how you approach that rapid change.
Mr Blake mentioned that the work force coming to the Falklands is from all over the world and this has been happening for the past 100 years. That’s what you describe as Falkland Islanders became what they are today – a mixture of peoples.
RE: But still, the population as Sonny has pointed out hasn’t grown for many, many years. It’s virtually static - at around the 2500 – 3000 mark. It hasn’t changed.
TB: The population in 1981 was about 1900. These figures I find rather odd. This population in 1995 was about 2300. We have now grown by about 700. You say that’s a decrease in population figures? I’m not quite sure where these figures have come from?
The actual census figures are as follows:
a. In 1980 – 1,813 population
b. In 1986 – 1,916 population
c. In 1991 – 2,091 population
d. In 1996 – 2,081 population
(down - 10)
e. In 2001 – 2,379 population
f. In 2006 – 2,478 population
g. Please notice the decelerating pace of population growth of late (2001-2006)
SJ: it’s actually more a trend. When your country’s economy was…
TB: You can draw lines and wiggle them up and down a bit but the facts are that numbers have increased by that. The trend isn’t quite what it should be but the fact is that the numbers have increased from 1900 in the last 30 years.
DS: I don’t think, that anybody’s actually disputing what the numbers may have been. I know that’s historical fact. Correct me if I am wrong here, Sonny, but what Sonny is trying to say is that if you extrapolate from that number and forecast forwards, which is the job of an economist, these are the numbers that you get. That’s all that Sonny is saying.
TB: Government policy during the last five years is to discourage settlement in the Falkland Islands, so it’s hardly surprising that the numbers over the last 5 years haven’t changed as they did in the previous 25.
SJ: The numbers have levelled pretty much in the last 5 years and there’s been a drastic decrease in the population growth. Squeezing the past 10 years into the last 5, it has really slowed down.
TB: That has been a political decision – not a decision made by opportunity or anything else. There has been a political decision to limit immigration.
DS: Yes there are and there are some very clear rules on immigration and work permits and so on and PRPs and status holders and that’s something, I think, which has been constantly reviewed, certainly by the last Assembly and, I think is being reviewed by this assembly as well. But I think it is important that we get that correct and I think it is important that we have it controlled if we want to…
TB: That’s the basis for this document. If there isn’t a population growth …. ?
DS: But immigration comes into the EDS and it does figure quite prominently within it as one of the issues to be discussed. I think what probably would be a good idea would be to published the demographics that Mike (Summers) mentioned earlier on, if that’s possible, Sonny?
SJ: Yes.
DS: So that you can see where the things have come from – sorry, Mike?
MS: Given that the EDS relies so heavily on this issue of demographics and the view that what you need for growth is population growth, isn’t there a requirement in the document for much more analysis for the effect of population growth, both from a political prospective, which we all know to be important and from a service provision prospective because the concern in the community for many, many years has been that if you let the population grow too quickly, then you will disturb the balance of the population, you will struggle to provide the amount of services necessary, etc. etc? There’s a bold assumption in here that for the benefit of economic development, all you need to do is let the number of people grow but there’s no analysis about the political effect of that from an internal and external prospective. It’s just fundamentally important.
SJ: On the contrary, the EDS does not just espouse population growth on a rapid pace. If you look at the other factors like improving and up-scaling the education level of the population it pretty much is very heavy on that; improving investment environment in the country is another feature of EDS. What I am saying is just borrowing from a Canadian economist when he talks about demographics in Canada and pretty much all the EEC countries, the demographics explains pretty much the experience of the economy – the economic growth. And it’s happening elsewhere – in Italy and Japan. You and I know everywhere else that population in most developed countries is ageing and they have to struggle with the issue of who will work and mind the shops in the same way we are facing here and in many other places.
SJ: You and I know everywhere else that population in most developed countries is ageing and they have to struggle with the issue of who will work and mind the shops in the same way we are facing here and in many other places. And unfortunately for Indonesia the ratio is 60% - 1 retiree to 6 workers whereas nowadays we are now down to 5 and it’s going to shrink almost to 2.1 over time. And we are not blessed with so many workers who will carry the burden of our pension expenses, much more are health expenses and we need the people to work to generate that income, unless, as I said, oil is a game changer and it will provide for something which we don’t need immigrants for. But that’s another dynamic, or if we can have another bonanza 10 or 20 years from now in fisheries, then we don’t need to import as many people as we want to. But at the rate we are going, with fisheries already pretty much at plateau level right now and oil still a big question mark, we have to either work smarter – up-scaling our population so that we could introduce new knowledge based enterprises and industries, which would attract higher value than the wages that we produce right now in the economy. Immigration is going to be a nagging issue.
Just to clarify, the “60%” should be 16%. This refers to the elderly segment of the Indonesia population in 1990. That represents 6.3 workers per elderly dependent. The more current figure, as of 2010 estimates is the number of workers has grown by 9 for each elderly dependent, meaning the Indonesian population has become younger in 20 years thanks to population growth, and surprisingly, the Indonesia economy has also growth at a healthy pace as its labour force has expanded.
DS: It seems to me that there are two areas which are important to consider in population growth. They are how are you going to grow the population by immigration and how much the indigenous population grows by itself; and I think, if I have understood it correctly, that what Sonny is saying is that on the current rates of births, deaths and retirees and workers and so on in the Falklands, it’s unsustainable. Therefore that begs the question of getting the immigration policy right and making sure that it works in everybody’s favour without penalising everybody who is already here. That’s the general gist of it.
MS: it’s really important, in doing this analysis, to get the balance right between economic migrants – those who come on a short-term basis and those who come on a permanent basis because my understanding of the document is that it is effectively espousing more permanent immigration, if you like, to increase the size of the population. But then if you relate that to the ageing process, which is not going to stop, the more people you bring on a permanent basis the more you will contribute to the ageing process. But if you bring more on an economic migrant, short term basis, you won’t retain responsibility for those people into old age. I think it’s important to think about these possible options without necessarily jumping to one conclusion.
SJ: In fact, as the EDS was drafted, it did not espouse bringing in more permanent immigrants unless they show commitment to the Islands and it’s going to be a balancing act, I suppose, whether we want to do a Cayman example, or, as you mentioned, a Fiji example, where you absorb the alien population and make them one of you; or you want to work on the premise that you have more work permit holders than there are indigenous, voting population. And that is all the entire Falkland population will have the decisions.
MS: You need an analysis of the political elements of those particular options.
DS: I agree and also I think it’s why it is very important to have the immigration review that we have got going at the moment is to keep that current. I don’t think that’s a book that we can ever close.
RE: Perhaps, Mike, we could take us through the document – the various phases of the…
MP: Before that I would just like to ask a quick question – and everyone else, I guess – as we are aware the document – 45 pages or so – lays out a lot of different issues and actions, priorities and such, if you could just choose one to focus both government and the private sector over the next year or two, what would it be?
DS: I think you are asking me to prioritise. I think it would be a big mistake politically to do so at the moment, so I will hand that one over to someone else and ask what would they like to prioritise?
MP: Can I suggest one myself?
DS: Michael, what would you prioritise?
MP: Port Development, I think.
DS: Is that what you were trying to get me to say?
MP: Yes.
DS: I did wonder.
MP: It could be a real game changer, I think, for the fishing industry itself. We have seen from the port reports from the last couple of months that have been published that the economic benefits could be very high. And I think it wouldn’t take much for FIG and the private sector to get really serious about this and put it in place relatively quickly. And I think it should be – probably will be – one of the key priorities when the action plan is put together – or I would hope.
DS: I would agree with that. I think a new port in the Falklands is something which will generate huge economic activity. The biggest problem with it, of course, is the age-old question of who’s going to pay for it. As we all know, Government Reserves are insufficient to be able to meet the costs of building a new port to the standard and style of the one we have all been talking about. So therefore it requires investment by others. Who those others may be, whether it’s existing players in the fishery or whether it’s new players in the services sector, whether it’s investment support from outside of the Falklands – I don’t know. That one’s open to offers, I guess. Does anyone else have any thoughts or priorities?
MS: Can I raise a broader question? It does relate to what Michael is saying and it’s an important point that he makes because there was a fairly bold statement on the presentation. It said ’growth generates wealth.’ We can all go around providing examples of this, that, or the other thing. And I can provide you with examples of where growth hasn’t generated wealth. The important thing about growth, surely, is that it is sustainable and it’s based on realities and not just on interdependent trading between countries that are going up, and up, and up, and up but with no real basis underneath it. In some of the earlier days of the EDS, I encouraged you vigorously to take out references to the ‘economic miracle’ in the South of Ireland, which is, of course, no longer an economic miracle – it’s a bloody disaster because it wasn’t based on reality. So I think the point that Michael makes is really valid about the port because around that you can see genuine activity relating to existing activities already in the Falklands. And growth just for the sake of it sometimes is not sustainable. There’s nothing underneath it.
SJ: Let me just qualify – the Irish growth miracle was basically a success story in terms of wealth creation. But in terms of wealth management and preservation it’s where they made a big boo-boo because they over-invested in real estate and speculative properties and I hope we avoid having that here as wealth grows and wealth concentrates in fixed assets like properties.’
DS: But is it not also true that Southern Ireland was helped enormously by the EU – wasn’t it?
SJ: Yes and just let me qualify that as well. Ireland got $90 Billion worth of aid money from the EU. Divide that by a population of 3 Million, which is now 4 Million. It’s roughly about £30,000.00 per person. Compare that with what we have gathered from the fisheries over the past 25 years and the per capita based on my recollection is somewhere around £60,000.00 plus per person. What have we done with the wealth? We have gone a long way but that is the comparison between Ireland and the Falklands. We also had our own fair share of the gift from the sea.
MS: I think it is a bit invidious to compare 60Billion Euros from the EU with a renewable resource from the sea, isn’t it?
SJ: The point is they created wealth just as we have created wealth but somehow they managed to flounder in terms of preserving that wealth because of some wrong judgments.
MS: The point anyway about this is that I am a very strong supporter of the EDS and I will ask questions to make it stronger, not to try and undermine it. But it’s important that when we look at growth and the opportunities for growth that they are based on something solid. That’s why Michael’s point about the port is important.
DS: I think this point was made by, well the source of that point was made the other day in the fishing industry sector where people were keen to see growth but what they didn’t want to see was growth in enterprises that were unprofitable. I think you are absolutely right. Nobody wants to force anybody down an unprofitable route, whether it’s in the fisheries sector or any other sector. And things have to stack up and make sense. And then we achieve what you are talking about, which is real growth as to oppose to sort of a false front style of growth.
SJ: One of the things that we have considered in formulating the new industry strategies is how much value added these industries would bring into the economy. I will just give you an example based on what I have gathered in the Philippians. They are a major exporter of electronic items. They import the raw materials, use some cheap labour value added and export it back out. The value added component is something like 5 to 10 percent. For us, if you introduce knowledge based industries like BPO or whatever, the value added is 90% and that is where wealth is created, not in the cheap labour.
DS: Just for the benefit of everybody, could I just ask you to explain what BPO means?
SJ: It is about business outsourcing and advanced knowledge – intensive industries that require business process outsourcing is service exports basically.
DS: Service Exports, Business Outsourcing. Which in layman’s terms means –?
SJ: International services like design industry
MS: It is well-developed countries with high labour costs exporting their services to countries with low labour costs. We’ve never been a low labour cost country and current plans are to make it even more expensive so I can’t quite see how that would work?
SJ: There are industries that can be high value added and can still cater to high labour cost jurisdictions. My example is Ireland. They created something out of nothing in the financial services field, just doing high impact, back offices service for all the hedge funds – all the venture capital funds, whatever, all over the world. That is a niche they created for themselves, staffed by very highly educated Irish and some expats and it’s a success story. But it requires a lot of educating the population, up-scaling the population and being able to capture the high value and the higher value chain.
MS: How many people in the world can do that because not everybody in the world can do that, can they?
SJ: We have some inherent values which we enjoy. Language in itself is an advantage. And the cost comparisons for the Falklands and other areas are still relatively competitive as I have seen but we have to create the capacity. So if we have the competitive advantage like the Irish, like the Singaporeans have done. They have to create it and they are benefiting from it.
TB: I would be interested to hear your comments in that the advice given to these Islands over the last 40 years is ‘keep out of the offshore banking business because it is a very dangerous occupation. But it sounds like this is one of the industries you think we should go into hedge funding basing and overseas account bases and these things.
DS: I think it is important to point out that if it is one of the areas that is talked about in the EDS, it’s a long way from being areas that it is agreed there should be action on. To be quite honest, there are many people in the Falklands who will find that sort of thing rather beyond their ken and I probably would be one of those people. It doesn’t mean to say that it is necessarily a bad idea. I think most people in the Falklands prefer what I would call nuts and bolts types of business that we can understand. Things like ports and fish and containers and every day stuff. These sorts of ideas are not necessarily bad; I think they are worth looking at and that’s why they are in the EDS. They are in the EDS because they are intrinsically worth looking at and not because I want to look at them.
TB: What I said was that the advice we had been given and when we ever thought of looking at it is ‘don’t touch it with a barge pole.’
DS: That’s right.
TB: Has that system changed? I think it’s unlikely.
DS: I don’t think anybody has said ‘don’t touch it with a barge pole’ but what they have said is that there is a large raft of legislation and regulation that would need to come into existence if those type of industries were to gain a foothold in the Falklands.
Keith Watson: Most of those industries like banking and financial services through most of the world into recession rather than the manufacturing industry or fishing industry. But giving encouragement to financial, banking services who, in my opinion leech off society rather than producing anything is a downward step for this place.
DS: Just to be contrary, Keith, perhaps if those services had been run by sensitive people in the Falklands it wouldn’t have happened.
KW: It’s a big risk.
DS: There’s a risk in everything.
KW: If you want to introduce all the sharks in the western world that have created the banking crisis over the last three years...
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