Staying off the rocks
“People need to realise that things are not so great and its time to make some changes across the board”

The economy. We all express our concerns about it. We all moan about how it affects our daily lives. We all know someone who gave up on it and moved overseas.
All this concern points to one undeniable fact – the Cook Islands is in the midst of an economic crisis. You only have to look at how visitor numbers are stumbling, or how costs are at an all-time high and still rising. This while Government is seemingly content to fiddle while the flames of discontent grow more fierce with each passing day.
What can be done to resurrect the country’s finances from the ashes of mismanagement and apathy? Can anything be done, in fact, or should the last person to leave be instructed to turn off the lights?
Turama sought out four experts to discuss the current economic situation in the Cook Islands and discovered they all agreed on several aspects for a recovery programme, starting with political reform, and including the fact that all Cook Islanders need to work together for a brighter economical future.
Questions and answers have been edited for brevity and clarity.
The Economist
Vaine Wichman
Q: How would you describe the economy at this point?
A: I’d describe it like this: In some cases, when you go swimming, you’re not moving and you know the current is taking you towards the rocks. You have to work a little bit harder to not get on the rocks, to move forward at least one or two strokes. I think that’s how I would describe our economy at the moment. On the surface, it’s looking very ‘business as usual’, everyone is putting the smiles on their faces but, unfortunately, underneath, there is a lot of give-and-take happening. In some cases, because they can’t move quickly with the changes that are happening, they’re moving towards the rocks. The few that are making the extra effort to move forward are getting out of the current. We need to go with the front-runners, the people who have vision, or are pig-headed, who can at least get us out of the current areas and into the calm waters.
Q: Are those people actually stepping forward to make changes?
A: At the moment there is not enough critical mass of them. There’s maybe three or four and, generally, they’re in the private sector. Fair enough: it’s the private sector that’s carrying us at the moment. There are a lot of people sitting on the fence. A lot of people talking too much. It’s time to stop talking, time to get off the fence and start being counted.
Q: We’re seeing more and more roadside stands sprouting up. Is this a sign that people are taking it upon themselves to improve their own personal economy?
A: About 30 years ago, before tourism started, that was a common scene on the island, because there was no other income other than agriculture. It’s saying that people are starting to fill their pockets from other people’s pieces of pie. But that’s the marketplace. The good thing is that they’re filling their pockets while they’re here in the Cook Islands and keeping the money here. They’re trying to consume and invest here. If you don’t have that, you don’t have an economy.
Q: The past couple years have seen a number of businesses close their doors or lay off staff. Is this an indication that the economy is faltering more than we’d like to think?
A: I’d say it’s not a warning sign; it’s more a readjustment of the market. We are coming to a level where we need to flush out what’s inefficient. We need to reinvigorate what can work, because 12-18 months from now, the way we operate will be at a different gear level than what we’ve used to operate for the last two years. I also think it’s a survival response by the private sector to cash flows that are being experienced at the moment and also a response to how they see the next 12 months. A lot of good businesses will cut back operations and reassess how they operate, especially if they have action plans for the next 12 months that require a little bit of investment in the future.
Q: Are you optimistic that the future will bring an improved economic climate?
A: Things will be much better than now, and at a different level of operating. And at a more Cook Islands business-perspective way. We are evolving – our culture of business, our culture of interaction, our culture of government. It’s all evolving. It’s just sad that, at this point in time, certain players are not at the same level as the front runners to be able to push it all together. If we had everyone working in tandem, this would never be happening. It’s a lesson, and a good lesson, that the few who do take us forward should be recognized.
Q: So it’s not all doom and gloom?
A: Not at all. There’s just a lot of challenging work ahead.
The Business Sector
Steve Anderson, president, Chamber of Commerce
Q: Are people still starting up new businesses in these challenging times?
A: There are some small start-ups, some very entrepreneurial people who are positive and confidant and have new ideas. But they are few and far between. There isn’t a lot of confidence to expand businesses. It’s not a good time to be starting a business right now.
Q: What is the general feeling amongst business owners as far as a possible solution?
A: Most people are saying they really want to see more money spent on marketing tourism and getting more tourists here. They’d like to see a concentration on the European markets. Obviously, what has attracted a lot of publicity is to heavily market the new Australian route. This is going to make the key difference. This is the stimulus that the economy needs – marketing tourism is going to ripple right through to bus drivers and taxi drivers and people who sell fruit on the side of the road. Everybody benefits from that. So that is the single thing that is going to stimulate the economy at the moment.
Q: What would help businesses thrive or, in some cases, simply survive?
A: Lower interest rates would be great; it would be very nice to see that. Lower telecommunications costs would be great. The recent reduction in the cost of electricity was welcomed. Everybody would like to see that continue to drop, although that’s unlikely, given the cost of fuel. So, generally, the cost of doing business is a recurring theme. Some of Government’s charges for various things attract some criticism in that they may not be justified; they may be simple revenue-earning exercises. This country is an expensive place to do business.
Q: Are you sensing any optimism at all in the business community?
A: There is some. We have an excellent destination. We have – our political situation notwithstanding – a stable environment, a stable society. It’s the best destination in the Pacific. People are here because they’re optimistic and they’re working very, very hard to see things improve.
Q: Is it just a matter of waiting out this economic slump, with the idea that, if businesses can just hang tough, things will get better?
A: There is an element of that, for sure. The last 12 months have been quite tough and a lot of companies have put in a lot of economy measures and efficiencies, and they’ve made themselves a fairly lean and mean operation. Those efficiencies will carry them into the future with better prospects so that, when visitor numbers improve, when the economy improves, they will be more profitable than they would have been otherwise.
The Government Office
Terry Rangi, CEO, Business Trade Investment Board
Q: How is the cost of doing business hurting the economy?
A: There are several main areas. The first area is the cost of business finance. Our interest rates with the banks are around 11 to 13 per cent, compared to New Zealand’s business interest rate of around six to seven per cent. We also have very high energy costs because we rely on imported diesel. When the price of oil goes up, businesses will be affected by that. We have fairly high telecommunications costs, by world standards. Cost of goods and transportation is another area of concern. Most of our products are imported. The cost of bringing in a container has been increasing over the last few years.
Q: Can you offer any solutions for improving the economy?
A: The overall concern for me, personally, is the ongoing reliance on tourism. We need to diversify. We need to look at trade exports. We need to look at import substitution. We need to look at supplying ourselves. We need to look at products we can produce, products we can export. Let’s look at niche things that we’re good at. Let’s not rely solely on tourism.
Q: What can ordinary Cook Islanders do to help themselves?
A: People need to realize that things are not so great and it’s time to make some changes, across the board. The focus needs to be on where we are at now and where we’ll be in 20 years time. People get preoccupied with their daily lives and the elections and a number of other things. But the reality is we need to think ahead. We need to have commitment from our leaders. We have identify cheaper alternative energy costs. We have to identify better access to business finance. We need telecommunications costs that are more accessible to our people. Or else, let’s just all go to New Zealand.
The Visionary
Tata Crocombe, chairman, Economic Development Task Force
Q: The Task Force recently submitted a document to Government. What can you tell us about that?
A: It’s a comprehensive review of the prospects for the Cook Islands economy. It sets out a pathway to, basically, re-structure the economy so that it’s better angled to deliver the kind of standard of living that Cook Islanders want. The basic problem here is that we have outer migration of about 1,000 Cook Islanders a year. People are seeking a higher standard of living, a better income, better schools, better pension, better health services than they can get in the Cook Islands. If you want to turn around the problem of outer migration, you have to turn around the problem.
Q: Let’s go over a few of the highlights in that review, starting with comments about the government.
A: You can’t have a government the size of the Cook Islands’ Government in an economy as small as this one. There has to be a restructuring of the government, starting with the political system and then moving through to the bureaucracy. The current structure is built around village politics. It’s not built around national politics. You have to get the village politicians to see that and change it, either by electing different politicians or making it clear to those seeking public office that this is an issue important to a sufficient number of Cook Islanders that they will vote according to those requirements of change to the political system. What’s happening is this country is suffocating because it is not addressing its opportunities in tourism and other industries. It’s not addressing those fully because it’s strangled by the way we govern this country. We’ve got a system of failed governance.
Q: The report also contains some strong views on tourism. Can you address that?
A: This country’s economy depends on how successful the tourism industry is in competing in a very, very aggressive marketplace. The simple answer is, it is very successful. However, it is not delivering the kind of results that would pay for the kind of education and health systems that Cook Islanders want. And can get by buying a $288 airfare to Auckland. That’s the link between the success of tourism and outer migration.
Q: Are you seeing progress in any of the sectors?
A: Things are moving forward in the private sector. It always amazes me how much construction is going on, how enthusiastic private sector participants are in investing in their businesses and hiring more people. I think we’re moving forward. I don’t think it’s moving at the pace we could do and the bigger problem is, it’s not at a pace which younger Cook Islanders find acceptable. Therefore, they are still migrating. The kids know where the future is, and the Cook Islander kids are saying the future is not here. When the majority of high school kids are staying in the Cook Islands because this offers them the best future, you’ll know that you’ve got a successful society.
Q: How many of the recommended changes, to both the government and the economy, could we realistically start tomorrow?
A: We could start all of it tomorrow. Some of it has started. Some of the projects that we are debating are in various stages of implementation but you’d have to say that, overall, the programs are not being implemented at a pace that will make any realistic difference. It’s just a matter of do we find the political will, as a community, to get on with the job? Or do we continue to watch the decline of the population that started with self-government?
Q: In your opinion, will we ever see the full implementations of the task force’s suggestions?
A: I think we’ll see some. The question is, will we see enough to turn around the fact that 1,000 Cook Islanders leave each year? The task force is saying, economically, there is an opportunity for the Cook Islands to meet its aspirations for a New Zealand-standard of health, education and incomes within an appropriate period of time. But it does require choice and it does require investment and it does require a change in behaviour and a change in expenditure.

Herald Issue 463 10 June
- World famous activist assisting residents
- Budget will decide if residents prosecute Government over landfill
- Forestry project sucking Mangaia dry
- Budget 2010 – fiasco or disaster?