The issues of Pacific Islands long term development and the part of Temporary Employment Schemes Address to the Australian Institute of International Affairs,
Sydney, July 2006

Good morning, thank you for inviting me, and congratulations on choosing such a significant topic.

I propose to give a few thoughts about the overall situation, a few comments on Greg’s paper, and thirdly talk, as I have been particularly asked to do, about the issue of labour market mobility, because we have just held a major conference on the subject in Wellington.

One’s role in the Pacific depends rather on what one sees the problems as being, that one is trying to address. My sense of the problem is that it is pretty big, but this might not be for the standard reasons. Usually, these days, a sense of serious concern relates to obvious instability which in some cases has called for military intervention. At that level I’d say that the picture is mixed rather than depressing, although that might simply reflect the fact that New Zealanders tend to look more closely at Polynesia rather than Melanesia and Australians the reverse. But around the Pacific there are certainly cases of countries like Samoa boxing along quite well.

My sense of seriousness relates less to the neighbourhood falling apart and more to the intrinsic difficulty of what we, and the Island States’ leadership, are trying to achieve. My limited reading about the growth and collapse of human societies over history suggests that the transition from a small group based on kinship patterns to a modern state is the most difficult ask possible. I have a lot of sympathy for countries in other transitions, such as Russia’s from a communist and Stalinist state to a democracy with an open economy (and privately think that Western advisers helped stuff that up), but they did have a history of institutions and infrastructure.

It has become a commonplace to say that people in the Pacific today are trying to cram into one or two generations what in England and western Europe took centuries is profoundly true.

It sort of follows that if the problem is that broad and deep, the solutions are likely to be complex and very long term too. And so I suggest that will be the case. To go perhaps to an extreme, nation building of the frontal sort will have its limitations in these contexts. There are many studies of modern interventions, using military power to support nation building and the track record is not encouraging – by one account, 27% of them over the twentieth century worked out. The case studies cite for example the US marines in Haiti – or was it the Dominican Republic - for 35? years, but when they pulled out thinking the job was done, it was all undone within three years.

I don’t propose to comment on the core of your subject for the day, Australia’s role, except perhaps in the most oblique terms. The word that recurs in recent Pacific writings to describe it is “muscular”, the meaning of which is self-explanatory.

I have no qualms about such a role, and am full of admiration at the speed and strength of Australia’s reaction to recent crises in Melanesia. There is an underlying desirability of having a friendly power with this capacity and the will to use it if necessary.

If I have anything to add to that, it relates to the view that we need an overarching context and what I’ve been trying to convey is that that context is very complex and very long term. The Sydney Morning Herald editorialized recently about the “ring of struggling new nations around Australia” and said that these “will be a continuing preoccupation of our military and intelligence communities.” To be fair it was talking about East Timor as well as the Solomons and other Pacific hot spots. But at the risk of sounding like Samuel Huntington preaching soft power to the United States Government, I’d say there are other Australian communities to be engaged.

The business of understanding the depth of social and attitudinal change required to bring about an open democracy and market in an island state; of ascertaining an appropriate balance between modernisation and retaining customary practices; of seriously developing a consent environment for interventions, and the like – these are matters that will require patience and wisdom to a degree that will test us all.

Pacific Labour Market Mobility

There appear to be three drivers of this:

1. One is demographic: there is clearly a population surge in the Pacific Islands and  a youth/young working age bulge is growing. There are time bomb elements in this: Port Villa forecast 80,000 young unemployed in five years. The figures of population growth in PNG are daunting. Countercyclical are the demographics of New Zealand and perhaps Australia: fewer coming into the working age population, rapid growth of the retirement population. New Zealand is enjoying near full employment, and labour shortages are a persistent impediment to economic growth.

2. A second is the specific NZ need for seasonal labour for, in particular, horticulture. The conference heard evidence of this from employers: the orchardist saying he had 35 Pacific Islanders out for picking this year and needed 200 next.

3. The third is the contribution emigrant labour makes to Pacific Islands economic development, particularly through remittances back home.

All of these three can be articulated in detail. The demographic factors clearly relate to Melanesia more than Polynesia. The seasonal need seems to widespread across a whole range of fruit and vegetable products.

The contribution of remittances to economic growth was documented by a world bank representative here today and are worth a bit of expansion. The case was not just on the quantum of the remittances, which are so great as to be the single largest foreign exchange earner for some PI countries, but also an argument, I guess addressed to a countervailing “welfare dependency” view, that the effect of the remittances are as good as any other foreign exchange earnings. That is clearly the case at a macro-economic view; I personally am a bit less convinced at the individual or family level but that may just reflect my Protestant work ethic upbringing.

It is worth noting that remittances are much more of a Polynesian rather than a Melanesian feature, because of the long term and broad Polynesian diaspora not matched by a Melanesian dispersal. The mismatch here, between this factor and the demographics which point to a Melanesian need, is yawningly apparent. A New Zealand contribution to addressing the youth bulge via work schemes will have to address Melanesia.

But we should also note that remittance data tends not to distinguish between permanent and temporary worker origins, and the benefits of remittances from increased temporary work schemes at least within NZ's capability is unlikely to have a huge bearing on ultimate PI outcomes. The maintenance of remittances from permanent migrants raises a separate set of policy issues relating to migration, which is another subject beyond labour market mobility.

Having said that, the proportional benefit of remittances from temporary workers was deemed to be higher: they sent a larger proportion of their income back home.

We had a not very satisfactory debate about skilled versus unskilled labour. Usually recruitment drives for permanent migrants focus on skills, and there was a lot of reference to the temporary market being for unskilled. Mainly this was fine because there are concerns about brain-drains, but there was actually little risk of temporary schemes contributing to this. But our horticulturists insisted that tending to plants and picking was skilled, and that was want they wanted. While accepting their point to a degree, the skills they are talking about are not those of engineers or doctors, which is what immigration policy talks about, and it is likely that we will stick to an unskilled, maybe semi skilled, definition of what we are on about for labour mobility.

The NZ Government has left open the door to increased temporary work schemes, specifying conditions that would have to be met before it did so:

1. there should be virtually no risk of overstaying – of the workers not returning home when they should

2. the payments to temporary workers would have to be consistent with NZ labour laws, a strongly felt concern of the trade unions too

3. the welfare of Pacific Islanders in NZ would have to be assured, which would include accommodation and local interpreters

4. the demand for employers would have to be long term – no use designing a big scheme this year and finding we had high unemployment next year.

A fair summary is to say that the evidence was very strong that all these issues could be resolved. The Canadian-Caribbean model was described and two features stand out: one  that it has built in incentives for the temporary workers to return, such as withholding a proportion of their remuneration until return; another was that they did not specify numbers but with conditions let the market determine the volumes. The main condition was that the employer should make a serious attempt to recruit Canadian workers first. This regulated demand for foreign workers to those genuinely needed to fill shortfalls.

Then there is the question of context: does one do this as part of aid policy because it is good for PI economic development; because it is debated at the PI Leaders Forum and would give momentum to the Pacific Plan; or because it is part of the WTO/GATTS negotiations?  

A last factor is the firm negativity expressed by Australia’s leadership. New Zealand I am sure has not the slightest wish to embarrass Australia over this or cause a rift between the two countries. However I suspect with little evidence that this concern is less sharp that six months ago.

If I were to guess how the New Zealand Government comes out on this one, I would speculate that it will open up to some further temporary work permits. I’d guess that it will not do so in the structured environment of trade negotiations, but will do its own thing directly with the Pacific Islands. It is likely, however, to present any such decision in some relationship to the Pacific Plan, to show its commitment to that project.

A particular reason for the desirability of doing this is expressed in last year’s report on Pacific regional architecture. This notes that regionalism doesn’t play well with domestic politics which after all are about getting re-elected. But, it notes, if links to the Pacific Plan bring access to jobs, and to money through labour mobility, that would bridge this gap, tying regionalism and the Plan to achieving domestic goals. So a lot of people have a great deal riding on this one.

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