Life at ground zero not improving

Last year the Times (issue 422) looked at the difficulties faced by those in small businesses in the “other economy” and the Herald (issue 589) sought the views of ordinary people on what government needed to do to encourage economic growth.
In this article, the Herald revisits those interviewed in the Times article to see what has changed and sets out their views as to what should be done to improve the economy. Like last year, they have asked that their names remain confidential.
While tourism is the major contributor to the economy which leads many to believe we live in a “tourism driven economy” there is another economy, the “other” economy which involves many small businesses and which has little or no direct connection to tourism, does not benefit from any “trickle down” from tourism and hardly involves tourists.
It is because the wealth generated by tourism is not trickling down to those at the grassroots of society that another economy has sprung up.
It is the common view of those spoken to that things are slowing down and some major changes are needed especially in our tourism industry. There will be no dramatic increase in tourism spending as long as budget travelers fill aircraft. Also Foreign labour in the tourism industry prevents tourism dollars trickling down to Cook Islanders. Foreign workers remit money overseas. As the banking review has revealed, some Cook islanders and this will include some tourism operators, are banking their money overseas.
More locals are turning to their own resources through their connection to the land. Growing. Selling at the Punanga Nui market or other markets and also by the roadside. The rise in thefts of produce from plantations is also a concern. Others choose to go overseas.
Below are the views on the 2012 year of those who commented last year.
1. For small businesses there has been no improvement since last year. Income in many small businesses is trending downwards.
2. Many small businesses are trimming costs and cutting back on staff.
3. Some businesses are operating at a loss and high interest rates are not helping.
4. Costs for small businesses are high in terms of fuel, communication, company tax, electricity.
5. Some businesses are experiencing little or no cash flows. Customers are asking for goods to feed their children then refusing to return to pay. A vendor at the Punanga Nui market revealed making no sales for three weeks as tourists come to look but not buy.
6. One retailer said as was the case last year, people continue to be careful with spending although this year, spending on alcohol has dropped dramatically and this is a good thing. People are buying meats that last several days like cartons of chicken. People are still spending a lot on cigarettes. A lot of young couples are buying cooked meals.
As to what government could do to help, the views expressed were;
1.Reduce interest rates and company tax.
2.Review taxes across the board.
3.Provide incentives to encourage local businesses to invest especially in ways to increase production.
4.Diversify the economy and increase efforts to reduce reliance on imports.
5.Review VAT. Only certain expenses can be claimed. Do not reduce the rate but lift the threshold from $30,000 to $60,000.
6.Reduce the tariff on fuel.
7.Reduce the size of the public service because with depopulation and earnings dropping, the tax base is shrinking.
One Businessman said government should reconsider the role of the BCI. The old Cook Islands Development Bank helped locals into business but now the BCI with its limited resources is trying to compete on the same commercial scale as the two major foreign banks. When it comes to assisting local small businesses with cheaper loans, this role is being taken up by the BTIB which is not a bank.
One retailer had this advice for Cook Islanders; the secret to wealth is hard work, you need to be creative, you need to think positive, there’s money to be made and Cook Islands people don’t realize it.

Herald Issue 608 21 March
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