AUSTEO (AUSTRALIAN EYES ONLY) REPORT: EXCERPT NO. 8

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Australian Delegation Brief Prepared for the July 11, 1997 Forum Economic Ministers' Meeting in Cairns, Australia

NIUE

"Niue is doing better so far at managing its dependence on New Zealand than the Cook Islands."

As a coral island micro-state, Niue has little land, poor soil and few other resources. Niue depends on New Zealand aid and remittances to maintain relatively high living standards. Free association with New Zealand gives its citizens New Zealand passports and hence access to the New Zealand labor market -- and indirectly to Australia. As a result, Niue's population has been in steady decline for over a decade. Migration causes the loss of skilled workers and calls into question Niue's viability as an independent state.

Niuean Premier Lui, now in his second term, is a realist. His plans for a measure of economic independence acknowledge the need for continued access to the New Zealand labor market. Niue accepts that government should live within its means, and has reacted to falling New Zealand budget support by cutting the public sector, increasing revenue, promoting the private sector, and investing in tourist facilities and promotion. Lui is cautious about business proposals, including those involving the offshore finance center. But his predecessors were less careful and a financial scam signed under the former government could still endanger Niue. Investment is dropping again after the recent surge and Niue risks becoming complacent; its advisers fear it could still go the way of the Cooks.

Niue wants to negotiate new aid terms with New Zealand, which gives them more independence; one idea is a trust fund.

 

FORUM FOREIGN MINISTERS' POLICY AGENDA

Maintaining reforms: In response to a cut in New Zealand aid in 1991 Niue has steadily cut the public sector, but its public sector is still proportionally the largest in the South Pacific. The Government has wide discretion to grant incentives and tax exemptions. This could threaten its tax base, but in practice incentives are only given in exceptional circumstances.

Investment policy: In practice there are few restrictions to foreign direct investment as the Government sees it as a priority, especially in the tourism sector. But the Government has wide discretionary power over approval and incentives pertaining to foreign direct investment.

Tariff policy: Tariffs provide 30-35 per cent of total tax revenue. While the current tax system is simple to administer it contains a number of anomalies, for example Government owned firms are exempt from tariffs.

Australia supports Niue's application for membership in the Asian Development Bank.

 

AOKUSO PAVIHI Niue Minister for National Planning and Economic Development since 1994

Pavihi has proved himself to be a hard-working and competent minister, earning respect and overcoming an early image as a political lightweight and opportunist. Elected as a member of the present opposition, Pavihi soon swapped sides in return for a ministry. He has contributed to the government's effective handling of the challenges of adjustment to declining New Zealand budget aid. He has a reputation for honesty and has demonstrated loyalty to Premier Lui.

Pavihi is unlikely to be an active contributor at the FEMM and will probably follow Australia's lead and the majority view. The smallest of the island micro-states, Niue is conscious of its limitations and isolation and deliberately plays a modest role in regional affairs. Pavihi's present preoccupation is attracting a larger share of the region's tourist flow.

BACKGROUND

Pavihi was born in 1947 in Samoa, where his parents attended theological college. He was educated to high school level in Niue and worked in the public service -- the major employer on Niue -- for over twenty years in the ministries of treasury, justice, administrative services and the legislature.

Pavihi was first elected to parliament in 1993, crossing the floor in November 1994 to join cabinet. He is now in his second term as a minister; his other ministerial responsibilities include tourism, business relations and private sector development, administrative services, justice and lands. He also owns a small bar and restaurant.

Pavihi's wife is frail (she has Parkinson's disease) and has had extensive medical treatment in New Zealand. Pavihi sometimes drinks to excess and has a reputation for belligerency when drunk.

TOMORROW: PAPUA NEW GUINEA "PNG budget and foreign reserves are now healthy. But poor governance is blocking development and the job growth needed for an increasingly urban workforce."

 

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