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Foreign investment – who needs it?

A large hotel project, started by foreign investors in Rarotonga in the Cook Islands, was subsequently abandoned in the 1990s. This project became a major source of controversy in mid-2002, when several government officials stated that completing the project was a priority in developing the country’s economy and attracting foreign investment.

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. However, 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. 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 priorities of foreign developers lie.

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. Foreign investors demand, and often get, lots of benefits 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 reductions, and where the government provides infrastructure for them or gives them free access to public infrastructure, then ordinary Cook Islanders through value added tax (VAT) and other taxes have to pay the foreign investors’ costs for them.

In all cases the governments promise to control immigration, but governments soon lose control when investors pressure them. Once full employment is available for those who want it and are prepared to do it (this 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 foreigners with a few locals) and poor (mainly local people); the proportion of local people in the population goes down and they lose effective political as well as economic control. Race relations and social cohesion deteriorate. The growth of immigrant populations is worsening ethnic tensions in several Pacific 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 large, then as tourist density goes up, so does crime. Is this what Cook Islanders want?

There is no shortage of investment here already. Building permits issued in Rarotonga show that several millions of dollars worth of building 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’ as long as the ownership is widely spread.

It is time that control of this debate is taken away from those who have a conflict of interest and who promote what will benefit them to the disadvantage of Cook Islanders in general. It is hoped that political leaders will focus on benefits to islanders in the long term and not on what will make a few rich ones richer and the rest relatively poorer, or will cause more Cook Islanders to escape abroad, or worsen the social and cultural lives of ordinary people.

Adapted from an article by Ron Crocombe in Cook Islands News, 22 June 2002

Messages In This Thread

Foreign investment – who needs it?
Ron Crocombe -- Wednesday, 14 May 2003
Cook Islands: untapped paradise?
L. Davidsson, I. Lutchman, D. Reid, Shailesh -- Tuesday, 27 May 2003
Fostering development where it matters: the Turks and Caicos Islands
Anthony Garland -- Tuesday, 10 June 2003
Facing up to the tough questions of population control and political improvement
Brian R. Mommsen -- Tuesday, 24 June 2003
Saving island identity
D. Hudson, M. Jackson, W. Robinson -- Tuesday, 8 July 2003

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