Presentation for Seminar On The Pacific-EU Economic Partnership Agreement 28/29 April 2008, Madang, Panel II: Services and Investment Doing Business in the Pacific, OBE Co-Chair, Import-Export Impediments Sub-Committee
Presentation Overview Current state of play Implications of initialling IA for PNG Harnessing benefits Investments Services Summary
Current state of play Interim partnership agreement (IA) initialled Nov 2007 PACPs to explore the opportunities for comprehensive/ full EPA First JTWG meeting held Port Moresby 24 th & 25 th April 2008 Outcome document yet to be finalised Some friction in opinions
Implications of Initialling IA Trade preferences of Cotonou maintained Some trade preference improvements Improved relationships with EU Potential for increased development aid Improved environment for investments between EU and PNG s private sector Sustainable growth outside resource sector and leveraging value from our resources PNG can enter other FTAs without undue implications
Harnessing the benefits Trade agreements will not by themselves provide economic growth opportunities Life of trade preferences limited We state & private sectors must invest & work collectively for benefits to flow We need to address Investment regimes that welcomes and protects domestic and foreign direct investment Marketing PNG s business opportunities Service environment that facilitates such investments and business that allows growth creation Real development in trade facilitation and trade capacity is essential in our EU negotiations
Investments Is investment essential for economic growth? Is PNG s investment regime effective? How can we make PNG a place to invest and what are the impediments?
How does PNG rate? Global Rank - Dealing with Licenses New Zealand Marshall Islands 2 4 Vanatu 24 Tonga 30 Samoa 41 Palau 47 Kiribati 65 118 0 20 40 60 80 100 120 140 Source: World Bank Doing Business 2008 Total surveyed 175
Some other measures not great either! PNG's WB Doing Business 2008 Rank Doing Business (Overall) 84 Starting a business 76 Dealing with licences 118 Employing workers 31 Registering property 64 Getting credit 115 Protecting investors 33 Paying taxes 79 Trading across borders 82 Enforcing contracts 162 Closing a business 97 What measures might be improved by: An Investment Agreement? A Services Agreement? Arguably nearly all!!
Blurring and Interrelationship of Manufacturing & Services Blurring: Manufacturers profits often come from services: - Financing purchase - Warranty/ Maintenance - Manufacturing = series of service contracts Manufacturers need good services: - Finance - Telecommunications - Transport - Hotels & tourism - Manufacturing FDI % of GDP 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Japan M exico Suisse Hungary UK Korea US France Iceland Poland Spain Turkey Norway Germany Italy Austria Australia Portugal Greece Finland Denmark Net herlands Czech R 2 =43% Slovak 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Service FDI % of GDP FDI = average annual inflow from 1998-2002; GDP = GDP in 2002. OECD 2005
Services questions Are services essential for economic growth? Improved services will lead to economic growth but does a services agreement improve trade? Can the service industry play a major role in developing PNG s scope and breath of PNG economic potential? Are we able to address the PNG human resources development or lack there of by introducing the issue in a service or investment agreement?
Summary Not one stand-alone initiative such as a FTA, investment policy or service initiative will provide economic growth though direct investment. It needs linked, cohesive, coordinated approach The research tells us that: Bilateral investment treaties (BITs) by themselves have a minimal effect (recent Commonwealth Sec report) A FTA with strong investment provisions increases investment and trade between its partners as opposed to BITs alone (OECD 2006) The practicality tells us that: There is a need for real and effective delivery of development aid linked to output. We need effective and deliberate interaction between the public and private sectors including all stakeholders to improve our standard of living. Moving forward, should we unilaterally liberate or should we legally bind our policy space to address development of our economies?
Thank you. Co-Chair, Import-Export Impediments Subcommittee, pngmade@global.net.pg Written notes available.