Logs drive record growth in 2007 - but not for much longer

According to the CBSI Annual Report was launched for the year 2007, double digit growth occurred in 2007, on the back of log exports.

Solomon Times reports

The Solomon Islands economy has performed exceedingly well in 2007 with a record estimated economic growth rate of 10.3%. The Governor of Central Bank, Rick Hou, described the rate as the highest in two decades, and, driven largely by a spurt in logging providing a large part of this growth.

While logging has been pushing foreign cash through the economy at a record rate, what is not clear is the opportunity cost for the country in terms of future forest productivity. Healthy forests have subsidised the rural majority forever - by maintaining soil productivity, clean-running rivers and productive reefs. With these free services depleted, who will pay to replace them, and how much will it cost?

With logging set to collapse after 2010 - a year Hou has called "make or break", we will soon find out.

All this does beg the question - is "logging growth" really growth, or once-off cashflow from a nation-wide liquidation?

Pacific Economic report released

AusAID has released the first of a new series of economic reports for the region:

The Pacific Economic Survey 2008 is the first of a series of annual reports on the economic performance of Pacific island countries and Timor-Leste.

For the Solomons, the results are mixed and very challenging:

• 5.8 % growth rate
• growth is highly unsustainable and based on aid and logging
  

More articles in coming postings, on these and other issues regarding SI raised by the report, .

The Pacific Survey 2008 can be downloaded here.

Private sector granting fund launched

The Enterprise Challenge Fund for Solomon Islands was launched in Honiara today. The fund was set up by Australia to provide investment grants to businesses, aimed at raising overall incomes in SE Asian and Pacific countries.

SI is in the second group of countries; PNG and Fiji were in the first group, launched last year.

Through open competition, matching grants of AUD $100,000 to AUD $1.5 million (SBD650 thousand-8 million) will be awarded to private-sector business projects.

US$200mil budget tabled...both growth and challenges ahead

Parliament is now debating the US$200 million budget. According to SIBC, recurrent spending is about $145million, while the development component is $55million.

According to Solomon Star, Finance Minister Rini's speech emphasised that rising oil prices, recovery from the conflict years and the end of logging will be the big challenges ahead.

The last two issues have already been highlighted by the Central Bank governor Rick Hou as key in the coming years:

“Economic growth in 2008 is foretasted to be substantially lower than in 2007. In fact International Monetary Fund has put a forecast of 1.5 percent growth by 2010.

“So you go from our growth of 10 percent now to 1.5 percent in less than five years. We are actually going backwards,”