Foreign Investment - Who Needs It?
Professor Ron
Crocombe comments on an article in last week’s Cook Islands
News about the latest developments in the Vaimaanga Hotel saga.
What is foreign
investment for, and whose economy will be ‘developed’?
In most countries
of the Pacific there is good reason for investment, foreign
or local. Countries
with many people desperate for work can benefit from appropriate,
employment-generating investment.
Once full employment is achieved, the benefits of foreign
investment go down and the costs and problems go up.
That is the situation
in the Cook Islands. In
Rarotonga, Manihiki and Aitutaki at least, there are more jobs
than workers, so workers have to be imported, with all the costs
and problems that go with that.
The people pushing for more foreign investment will still
gain (in the short term at least), but most Cook Islanders will
lose. Every country
needs some imported skills, but the kinds and proportions are
getting out of hand in the Cook Islands.
There is a case
for appropriate investment on those outer islands where people
want work and cannot get enough of it.
But that is not where the ‘pushers’ profit most and therefore
not where their priorities are.
The ‘trickle down’
claim, that everyone profits from investment where there is
full employment, is just that.
Those at the top get the lion’s share and the ordinary
people get a trickle, but the ordinary people have to bear most
of the costs. The
rich have ways of avoiding taxes and other costs and transferring
them to the ordinary people.
Palau is about
the same size as the Cook Islands.
There was a time when it needed investment and all benefited
from appropriate investment.
That time is past, but since the ‘pushers’ continue to
gain, they organise and press their advantage to the disadvantage
of most Palauans. Whereas
20 years ago there were few foreign residents in Palau, now
most jobs are taken by foreigners.
Of the 13,300 people on the main island (where most people
live like Rarotonga) by 2000 less than half (6,243) were indigenous.
Because the immigrants are almost all working age adults
and the Palauans include many children and old people, most
jobs were held by foreigners.
(4,885 were Filipino or other Southeast Asian, 1,349
Chinese, 253 Japanese, 223 Bangladeshis, 347 Americans and Europeans
including many Russians).
Although they have
a high birth rate, Palauan numbers continue to drop due to migration.
In 1995 there were 12,575 Palauans in Palau, by 2000 only 11,646
and going down. Some Cook Islanders (not most) migrate to go
on the dole, but Palauans can work in USA but cannot get social
security because of their citizenship.
They go anyway.
The money spent
on campaigning on Palau’s election in 2000 was estimated to
be US$ 5 million (about NZ$ 11 million).
They have a 25-member house like the Cook Islands, so
that is about NZ$ 450,000 for each member. Ordinary Palauans
don’t have that kind of money and the people who do, and use
it, are buying influence with politicians, often to get them
to go against the real interests of the ordinary people who
elected them.
Likewise in the
Northern Mariana Islands, the belief that foreign investment
would benefit everyone had some truth for a time when people
wanted jobs. No
longer. Whereas
almost everyone in the Northern Marianas used to be Chamorro
or other Micronesian, now two out of three people there are
Asian or other non-indigenous.
They have about the same indigenous population as the
Cook Islands, but the World Health Organization recently estimated
that there were 3,000 prostitutes in the Northern Marianas,
servicing tourists, factory workers and others.
As in Guam and Palau, unemployment among Micronesians
is high, and many emigrate, but it is low among immigrants (excluding
refugees).
Foreign investors
demand, and often get, lots of concessions at the expense of
ordinary people. When
there is a desperate need for jobs this is sometimes justified,
but that is not the case in the Cook Islands.
When investors are given ‘tax holidays’, import duty
remissions, and where the government provides infrastructure
for them or gives them free access to public infrastructure,
then ordinary Cook Islanders through Value Added Tax and other
taxes have to pay the foreign investors’ costs for them.
These are some
of the results of following the path our ‘pushers’ call ‘development.’ In all cases the governments promise to control immigration,
but governments soon lose control due to pressure of those who
profit from investing. Once full employment is available for
those who want it and are prepared to do it (that was achieved
in Rarotonga several years ago) the advantages of foreign investment
go down and the disadvantages go up.
The cost of living
for ordinary people goes up; the price of land skyrockets making
it difficult for ordinary people to afford land or housing;
crime, juvenile delinquency and corruption grow; the gap widens
between rich (mainly foreign with a few locals – most of them
compradors of foreign investors) and poor (mainly indigenous
people); the proportion of indigenous people in the population
goes down and they lose effective political as well as economic
control.
Racial tensions
become a major problem, e.g. violence involving Indians in Fiji,
recently against Chinese in Tonga, French and Wallisians in
New Caledonia. The
growth of immigrant populations is worsening ethnic tensions
in several other neighbouring countries.
Research in the
Caribbean from the 1960s confirmed what was obvious to the public,
that when tourists and local people are of different cultures,
and income differences between them are substantial, then as
tourist density goes up, so does crime.
Race relations and social cohesion deteriorate.
Is that what Cook Islanders want, or even what the ‘pushers’
want?
Anyone familiar
with Tahiti and Fiji will be aware of the same trend there.
Is that what Cook Islands people want?
Last week the crime
figures for USA were published by the FBI.
They showed that the state with the highest theft and
larceny rates, and the highest property crime rate, out of the
50 states in the USA was Hawai’i.
Florida was close behind.
These are the two states where tourism is high and ethnic
differences substantial.
Do the Cook Islands want to follow that road? It is being
pushed along it, largely by those who hide their profits overseas.
The Cook Islands
Ministry of the Environment has, as I understand it, a legal
responsibility for the socio-cultural as well as the physical
environment. But almost all their attention seems to focus on the physical.
Important as that is, it is only part of the problems
created by forcing growth into overdrive.
They also need
staff who understand the long-term social and cultural impacts
of the projects that are being pushed on the Cook Islands. They
assume that if they attach the name ‘development’ to them, that
no one will notice that the negative effects of many of their
proposals are much greater, for the ordinary people, than the
positive.
There is no shortage
of investment here already. Building
permits issued in Rarotonga show that several millions of dollars
worth of buildings go up each year for tourist accommodation
and other investments.
Much of it is small and locally owned, and evidence around
the world shows that local investment is more beneficial than
foreign, and that ‘small is beautiful’ so long as the ownership
is widely spread.
It is time control
of this debate is taken away from those who have a conflict
of interest and who promote what will benefit them to the detriment
of Cook Islanders in general.
It is hoped that political leaders will focus on benefits
to Cook Islanders in the long term and not on what will make
a few rich ones richer and the rest relatively poorer, causing
more Cook Islanders to escape abroad, and the social and cultural
lives of ordinary people to deteriorate.
Is this what Cook
islanders want? This is the direction they are being pushed
by the small group of people who stand to gain at the expense
of the majority of Cook Islanders.
