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Keynote Address by Shiu Raj, Director Economic Governance Programme, at the 2nd Pacific - European Union Business Forum


2nd Pacific – European Union Business Forum

25 – 27 June 2014

Warwick Le Lagoon Resort

Port Vila, Vanuatu

 

Keynote Address by
Shiu Raj, Director Economic Governance Programme
Pacific Islands Forum Secretariat

                                                                     

·        Acting Deputy Prime Minister of Vanuatu, the Honourable James Bule;

·        Head of Cooperation for the European Union (EU) Delegation to the Fiji, Mr Renato Mele;

·        United Nations Industrial Development Organisation representative, Mr Christophe Yvestot;

·        Excellencies;

·        Private sector representatives and Technical Experts from Europe and Pacific

·        Distinguished ladies and gentlemen.
 

It is my great honour and privilege to deliver the key note address at the 2nd Pacific –European Union (EU) Business Forum today. From the outset, may I commend the Government of Vanuatu on the excellent meeting arrangements and for the wonderful Ni-Vanuatu hospitality that it is well renowned for.

2.                 I must also commend the ACP Business Climate Facility (BizClim) in convening the 2nd Pacific – EU Business Forum which is an excellent opportunity to build and strengthen relations amongst the private sector within the region, and also with related stakeholders from Europe.

 

Key Trade-Related Challenges Facing Pacific ACP States

3.                 The Pacific ACP region faces significant challenges when it comes to doing business and facilitating private sector business opportunities. We have our fair share of obstacles in the areas of access to finance, affordable and adequate access to infrastructure and utilities such as communication and electricity, as well as consistent, reliable and affordable transport, freight and logistics. With increasing competition from more efficient and larger producers, as well as distance from major markets, and given our small population sizes, the private sector in the Pacific operates with a greater degree of ingenuity and resourcefulness to ensure it can survive. I acknowledge the Pacific islands private sector for their perseverance.

 

4.                 I do not think we can overemphasise the point when we say that the private sector is the engine of growth for any economy. Only through a robust and resilient private sector can an economy truly flourish and create much needed development in the form of employment opportunities and improvements in services and infrastructure. Noting that the private sector creates 90% of jobs in developing countries it becomes an essential partner in the fight against poverty and a catalyst to achieving prosperity and improving the welfare and livelihoods of our people. It is therefore important that the business climate in the Pacific is conducive to private sector development.

 

5.                 Several of the impediments to trade and business are out of our control but there are many areas which can be addressed through a concerted and coordinated effort in terms of putting in place the right policies, facilitating effective dialogue and communication amongst different stakeholders, including government agencies and the private sector. In the recent years the consultation mechanisms between the private sector and government agencies have improved in the Pacific with many Pacific island countries effectively using their trade and development committees at the national level, and the private sector dialogue being held at the regional level. But further improvements are needed to these mechanisms on an ongoing basis.

 

6.                 In the words of Winston Churchill - “To improve is to change, but to perfect is to change often.” The global business environment is continually evolving and there is a need for Pacific ACP countries to keep abreast of the latest advancements in technology and to invest in research and innovation in order to embrace and adapt to change.

 

Role of the Trade Agreements in Facilitating Private Sector Development

7.                 At the heart of the shift in paradigm in the global trading landscape is the increasing proliferation of free trade and preferential trade arrangements. During the course of the next few days you will be able to hear from our experts based at the Pacific Islands Forum Secretariat’s Geneva Office on the latest developments at the World Trade Organisation (WTO), including the recently concluded WTO Trade Facilitation Agreement and how it would impact the private sector in terms of reducing the cost of doing business.

8.                 The main goal behind modern trade agreements is to reduce tariffs as well as address the non-tariff barriers such as Sanitary and Phytosanitory (SPS) measures and Technical Barriers to Trade. Trade facilitation and other supply side issues which have a bearing on the ability of private sector firms to take advantage of market access opportunities should also be addressed.


9.                 One such trade arrangement is the Economic Partnership Agreement (EPA) currently being negotiated by the 14 Pacific ACP States and the EU. The EPA was to have been concluded in December 2007 before the expiry of trade preferences under theCotonouAgreement which were deemed WTO incompatible. However, due to several remaining contentious issues only the Caribbean region was able to sign a comprehensive EPA before this deadline. The African and Pacific regions continued negotiations on the comprehensive EPA.


10.            For the Pacific region, an interim EPA (iEPA) is in place between the EU and Fiji and PNG that was initialed in 2007, signed in 2009 and ratified by PNG in 2011. The iEPA was signed by Fiji and PNG to protect market access for their sugar and canned tuna exports to the EU while they continued negotiations on securing a comprehensive EPA collectively with the rest of the region for a truly development friendly outcome. A Joint Roadmap was developed in 2013 committing both parties to do their level best to conclude negotiations in 2014.


11.            The current level of two way trade between the EU and Pacific ACP States amounts to approximately EUR 1 billion which is relatively small when compared to the EU’s other trading partners. We have a handful of commodities that are exported from the Pacific region to the EU in the form of fisheries, sugar, palm oil, food items, garments, spices, cocoa, and coffee and also Kava, until the institution of the Kava ban by the EU in the early 2000s.


12.            Kava was a key export from the Pacific region to the EU and has the potential to regain its glory as a major Pacific export. At this juncture, allow me to acknowledge the efforts of the “Friends of Kava” countries from Pacific ACP region, and in particular, the Government of Vanuatu under the capable stewardship of Vanuatu’s Ambassador to the European Union, His Excellency Roy Mickey Joy and his technical team for advocating the interests of the Pacific region. The battle to get the EU ban on Kava lifted has not been an easy one. With the recent ruling by the German Courts that the Kava ban is indeed illegal and unwarranted, there is hope that Kava can once again be exported to the EU in the near future. But we have significant amount of work to be done and there are specific sessions at this Forum which should guide us on the next steps.


13.            Apart from Kava, the other key export that would benefit immensely from the EPA is fisheries. Under the iEPA we have global sourcing preferential rules of origin for canned and cooked fisheries products (HS 1604/1605). The Pacific ACP States are trying to get an extension of global sourcing for fresh, chilled, frozen, dried and smoked fisheries products (HS 0304/0305). The EU rules of origin as they stand are very restrictive when it comes to fisheries imports. In order to qualify for duty free and quota free access to the EU, the fish must be caught by a locally owned and registered vessel. This is highly impractical for a majority of Pacific ACP States who do not have locally owned fleets due to the high costs involved and issues related to efficiency and diseconomies of scale.


14.            Global sourcing, which was only given to the Pacific region due to its unique circumstances, enables the sourcing of fish from foreign-owned vessels as long as they are EU certified and land their catch in a Pacific ACP States for further processing. Global sourcing has resulted in significant investments, increased export earnings and job creation in PNG. It is anticipated that by 2016 over 30,000 workers, mainly women, will be directly and indirectly employed in the canning sector in PNG with tens of millions of dollars worth of investments in the pipeline.


15.            As canning operations are quite large in size and require significant investments in infrastructure as well as adequate access to large volumes of water it is not feasible for such operations to take place in smaller Pacific ACP States therefore the Pacific ACP region has been requesting the EU to include global sourcing for fresh, chilled and frozen fisheries products in the comprehensive EPA which would benefit the Smaller Island States (SIS) in particular. Some of the Pacific islands are already producing fresh, chilled and frozen fish fillets and steaks and this can potentially be exported to the EU subject to meeting the required food safety and SPS requirements. Global sourcing for both HS 1604/1605 and HS 0304/0305 in an EPA has the potential to stimulate investments in onshore processing to enable Pacific ACP States derive greater returns from their fisheries resources.


16.            While the Pacific has a handful of products that have the potential to reach EU markets, the influx of European goods in the Pacific is increasing. We can now see more and more of Peugeots, Volkswagen, Renault, Fiats, BMW and Mercedes on Pacific roads which would have an impact on the revenue collected from tariffs. We need to make a concerted effort to deal with this trade imbalance and I would encourage the ACP Business Climate Facility and other EU based agencies present at this Forum to assist the Pacific businesses in exporting its products to the EU.

 

Aid for Trade

17.            To address the structural adjustment costs arising from the EPA implementation obligations, such as the setting up of costly competent authorities to test and certify fisheries exports to the EU, a development cooperation chapter is being negotiated in the comprehensive EPA to facilitate and channel Aid for Trade resources to the Pacific ACP region to address our trade-related needs.

18.            The Pacific ACP region is seeking to establish an independent Facility that will mobilise and channel the Aid for Trade resources required by the region. The region has developed a Pacific Aid for Trade Strategy for 2014-2017, which also includes a Matrix of key AfT needs of the region that requires attention in the short to medium term.

19.            As highlighted earlier, the lack of productive capacity and supply side constraints remain key challenges that prevent Pacific ACP States from effectively benefiting from market access opportunities. But let me be clear. There are opportunities for Pacific businesses in Europe, however, they need assistance from the technical agencies in addressing the trade-related challenges and improve trade with the EU.

 

Key EU Programs in the Pacific Region

20.            The EU is one of the largest donors in the Pacific ACP region when it comes to Aid for Trade assistance. The region is benefitting from several EU programs under the 10th European Development Fund (EDF) that is administered through various technical agencies. The Strengthening Pacific Economic Integration through Trade (SPEITT) is one such programme that is being implemented by the Forum Secretariat, Secretariat of the Pacific Community (SPC), the South Pacific Tourism Organisation (SPTO), the Oceania Customs Organisation (OCO), as well as the MSG Secretariat, the Office of the Chief Trade Adviser (OCTA) and the Pacific Islands Private Sector Organisation (PIPSO). Such coordinated engagement has proven to be an effective way of consolidating our efforts for the private sector. I urge other technical partners to collaborate with relevant technical agencies operating in the region.

21.            The Pacific Integration Technical Assistance Project (PITAP) supports the Pacific’s engagement in the EPA negotiations, the formulation of trade policy frameworks, and trade and investment promotion through the Pacific Islands Trade and Invest network. Other components of SPEITT also provide valuable assistance to the Pacific ACP private sector through the Increasing Agricultural Commodity Trade (IACT) project, Paci?c Regional Tourism Capacity Building Program (PRTCBP) and Trade Facilitation in Customs Cooperation (TFCC) project funded by the European Union. The discussion on the 11th EDF will be held in a separate session later in the day.

 

PIFS Engagement in Trade Policy, Private Sector Development and Trade and Investment Promotion

22.            The Forum Secretariat is the lead technical agency in the EPA negotiations and the formulation of trade policy frameworks, and also has a dedicated Aid for Trade Unit to support Members. The Secretariat also assists the Pacific private sector directly through its Pacific Islands Trade and Investment (PT&I) network of offices based in Auckland, Beijing, Geneva, Sydney and Tokyo. The PT&I Offices play a key role in assisting Pacific exporters to take advantage of market access opportunities available in the respective countries as well as promoting investment opportunities in Pacific ACP States through joint ventures and foreign direct investment.

23.            Our PT&I network has professionals with the right expertise, willing to assist the private sector reach international markets. The Pacific islands private sector should consider the PT&I office as their extended marketing team. I am pleased to say that the Secretariat’s Trade Promotion Adviser working to promote Pacific exports to the EU markets will be speaking to you about the opportunities tomorrow and I strongly encourage all interested private sector representatives to contact her to find how she can assist you with your exports to the EU. There are significant opportunities for organic and fair trade labeled products, as well as for cultural industry products. Our PT&I Geneva desk will also be facilitating the Pacific region’s participation in the World Expo in Italy in 2015. A more recent engagement includes support for Pacific exhibitors to be involved in the SIAL exhibition in Paris in October 2014.

 

EU Communication on Private Sector Development and Pacific Plan Review

24.            In May this year, the European Commission prepared a Communication titled “A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth.” which is expected to be the key policy document that will drive the EU’s engagement with the private sector in developing countries. The Secretariat has been working to ensure that the Pacific’s interests are prioritised in the area of private sector development by the EU as the communication is finalised.  

25.            The Pacific Plan review undertaken in 2013 has highlighted the important role of private sector in addressing the region’s development needs. A Framework for Pacific Regionalism is currently being developed taking into account the recommendations of Review team. The Review team proposed that more focus should be placed on the process for selecting and pursuing priorities, with less emphasis on developing a long list of priorities. The Review called for the process to be driven by Leaders, with top regional priorities subject to strong political oversight to help ensure that they are achieved. These are important aspects of Pacific regionalism in which the Private Sector has an important role. I encourage you to fully engage in this process as the Framework is being finalised and beyond.

 

Summary of the Forthcoming Sessions in the Forum

26.            Over the course of the next few days you will be informed in greater detail about the various initiatives being undertaken by various regional and international organizations based in the Pacific region as well as internationally to promote private sector development and address many of the challenges I have just highlighted. You will also be provided with important information on the latest advancements and opportunities in terms of green growth, access to finance, the role of SMEs in sustainable tourism development, organic certification and eco-labeling, agricultural and fisheries value chain and finally the significance of Inclusive and Sustainable Industrial Development (ISID) for small island developing states. The forthcoming SIDS conference in Samoa is an excellent platform for the Pacific private sector to seek true partnerships.

 

Conclusion

27.            Ladies and gentlemen, the EU has been a key development partner for Pacific region over the past 50 years and will continue to be a good friend in the many decades to come. We have built a good working relationship with the EU over this time and it is a natural progression to ensure that our private sector is able to leverage of the political relationship that we share and to create business and commercial opportunities that can be beneficial to both parties.

28.            Various speakers who are scheduled to deliver their presentations will speak to you on a number of key issues and will provide an overview of the trade and investment opportunities in the Pacific, assist you in building partnerships while also improving your competitiveness, and at the end of the day contributing to increasing your bottom line. The Pacific region has great business opportunities for the European private sector to explore and invest in.

29.            The Pacific Islands Forum Secretariat is ready to assist you where we can, and we urge you to approach us with your enquiries. We are a very small region and only through partnerships and fostering a collaborative approach can we address the many challenges we have before us. Improving the business climate should be our paramount objective.

30.            I wish you all a constructive and productive meeting ahead.

 

Thank you. 

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