New Zealand High Commission Honiara, Solomon Islands
Solobis December 2013
Welcome to the December 2013 edition of SoloBis, a bi-monthly newsletter prepared by the New Zealand High Commission, Honiara. SoloBis outlines economic and business developments in Solomon Islands likely to be of interest to New Zealand companies.
For further information on any of these stories, please contact the New Zealand High Commission, Honiara: firstname.lastname@example.org placing ‘Solobis’ in the subject line.
Economic growth forecasts for Solomon Islands in 2013 have been revised down from 4% to 2.8%. Key drivers of growth over recent years (logging and mining) are not contributing as much in 2013, and lower commodity prices have seen falls in copra and cocoa production. Moderate economic expansion, while welcome, is translating into only modest Government revenue growth making fiscal management more challenging.
The Central Bank of Solomon Islands (CBSI) reports that headline inflation has broadly remained within its forecast band of 5%-7% throughout 2013. Against this backdrop, gross foreign reserves are expected to rise moderately to around SBD3,738 million (NZD644 million) by the end of this year on the back of expected inflows from donors and foreign investments.
Following Westpac’s decision to withdraw financial services to the logging sector, CBSI has issued an interim banking license to the Pan Oceanic Bank. The new bank will likely be in a position to take over support to the forestry sector before the end of March 2014. While the risks surrounding financial support to the forestry sector (a mainstay of the Solomon Islands economy) have diminished, a lot is riding on a successful transition. Wespac has indicated it will not be extending its services beyond March 2014.
The commencement of ANZ, Westpac, and Bank of South Pacific, mobile banking services in Solomon Islands over the last quarter represents an exciting extension of financial services to provincial areas that should gather momentum over the medium term. This development reflects further benefits arising from previous reform efforts to increase competition in the telecommunications sector.
2013 Supplementary Budget
In October, Parliament passed a Supplementary Budget of SBD242 million (NZD42 million), required to legalise spending that had already occurred under contingency warrants. Major new appropriations were SBD115.5 million for education (teacher’s salary re-leveling and tertiary scholarships), SBD27 million for the payment of outstanding bills associated with the Munda Airport redevelopment and SBD9.4m for Parliament.
Unlike previous years, there is no additional revenue to fund the Supplementary Budget. The shortfall is expected to be accommodated by some Government agencies underspending their 2013 budget allocations, and by Treasury closely monitoring cash flow and squeezing agencies for savings over the remainder of the year. Funding pressures continue to be exacerbated by new and unfunded commitments on tertiary scholarships. There could be a small budget deficit in 2013 that is financed by reducing cash balances.
Public Financial Management Act
The Public Financial Management Act has been passed by Parliament and represents a significant achievement for the Ministry of Finance and Treasury. The Act clarifies the roles and responsibilities of those engaged in public sector finance; sets out fiscal responsibility expectations; and incorporates debt management provisions into legislation. The next steps are the preparation of financial instructions and regulations to implement the Act (a substantial undertaking), and training government officers with responsibilities for handling public finances on what the new Act means for them.
Phase one of New Zealand’s support to Western Province complete
In late September Acting New Zealand High Commissioner to Solomon Islands, Sarah Wong, and Solomon Islands Prime Minister, Gordon Darcy Lilo, opened the newly rehabilitated Nusatupe Runway in Western Province. The opening brings to a close Phase I of the New Zealand-funded ‘Munda package’ of critical transport infrastructure projects in Western Province (total funding envelope NZD25 million).
The works in Western Province have created two much safer and reliable runways at Munda and Nusatupe, and reduced road travel times between Munda and the regional fishing hub of Noro from an hour to under 20 minutes. The tourism and fisheries sectors are expected to benefit particularly.
Delivered in a large part by New Zealand companies Downer and AECOM, the resealed Munda runway has been lengthened from 1400 to 1800 metres and widened from 15 to 30 metres, large enough to land B737s and A320s once certification as an international alternate runway (Phase II) is achieved. Certification at Munda will significantly benefit passengers and airlines servicing Honiara with reduced emergency fuel loads from a much closer alternate runway than those in Vanuatu, PNG and Australia. Phase II of the ‘Munda Package’ includes reform of airport management in Solomon Islands.
Increase in Solomon Islands RSE numbers
The number of Solomon Islands workers able to participate in the Recognised Seasonal Employer (RSE) scheme in New Zealand has increased to 594. This is a very positive result for Solomon Islands and represents an increase of more than 20% on the number of places allocated in 2013. The RSE scheme provides the opportunity for Pacific workers, including Solomon Islanders, to travel to New Zealand and work in the agricultural sector. Workers are employed in regions across New Zealand in roles including fruit picking, tree pruning, planting and packing.
The RSE scheme is employer driven, meaning the increase in available spaces has been a result of the performance of Solomon Islanders who worked in New Zealand last season. On average Pacific workers return home with SBD38,500 (NZD6,600). The 2014 increase in numbers will result in an important boost in income for the Solomon Islands families concerned.
Employers interested in becoming involved in RSE, or expanding their current operations to include more Solomon Islanders, can contact George Rarere, RSE Relationship Manager at the Ministry of Business Innovation and Employment, George.Rarere@mbie.govt.nz, +64 6 834 2835.
Honiara International Port to be redeveloped by Japan
The Japan International Cooperation Agency (JICA) has recently committed NZ$31.5 million to the redevelopment of the Honiara International Port. The project will involve the construction of a second international wharf capable of birthing ships up to 150m long, the expansion and paving of the container handling area (10,500 square meters), and the installation of essential services including water, electricity and navigation beacons. Tendering and initial works will occur in 2014, with project completion expected in 2016. JICA advise that as the project will be funded using Japanese Grant Funding the prime contracting company is required to be Japanese. Sub-contracting opportunities are likely to be available for international firms once the prime contractor has been identified. For more information contact JICA Solomon Islands on +677 24170.
Tina River Hydropower Project (TRHP) continues to gather steam
Honiara’s electricity is currently produced solely from an expensive, unreliable and insufficient diesel-fired thermal generation plant. The TRHP aims to produce a single hydropower station with three turbines, each with a capacity of 5-8 megawatts. The station is expected to produce just over 80 GWh per year, which is the equivalent of Honiara’s current demand. The proposal is for the power scheme to be developed by a private investor either as an Independent Power Producer project or as a Public-Private Partnership.
Ongoing feasibility studies are scheduled to be finished by the end of 2013, with a final report and recommendation due in February 2014. An Environmental and Social Impact Assessment is currently in progress. A draft report for public feedback will be issued in April 2014. The International Finance Corporation (IFC) is the Transaction Advisor for the Solomon Islands Government. IFC is proposing to issue a Request for Proposal for the contract in the second quarter of 2014. For more information contact the TRHP Office on +677 25133 or email Julian Maka, Tina-Hydro Communications Advisor, at email@example.com
Information of Government contracts in Solomon Islands
The High Commission is occasionally approached by New Zealand businesses interested in investing in development programmes being delivered by the New Zealand and Solomon Islands Governments. Companies with an interest in conducting business in Solomon Islands are encouraged to check the New Zealand Government Electronic Tenders Service website, http://www.gets.govt.nz. The Solomon Islands Ministry of Finance and Treasury also maintains information on Government tenders on its website, http://www.mof.gov.sb/ReportsNew/ProcurementTenders.aspx. The website is a relatively new development and we note that information is not always up-to-date or fulsome. The website is, however, the only central repository of tender information run by the Solomon Islands Government.
Staff at the New Zealand High Commission are interested in meeting with companies as they pass through Honiara to talk about the business environment, to hear about commercial initiatives being pursued, and pass on relevant contacts. If you would like to meet, please email us at firstname.lastname@example.org to make an appointment.
Disclaimer: while every effort has been made to ensure that the information in this newsletter is correct, it is drawn from open source reporting and the New Zealand High Commission accepts no liability for its accuracy, nor for any actions or omissions taken on the basis of this information.
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