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Free trade to open up soon

Solomon Times, Honiara

Free Trade to Open Up Soon

16 November 2012

The Melanesian Spearhead Group (MSG) of which Solomon Islands is a part of, is now ready to implement its Free Trade Agreement between at least three of its four members.

It follows a recent breakthrough from Papua New Guinea, who agreed to dramatically scrap duties on almost all of its protected goods.

In a recent interview with Radio Australia’s Sean Dornney, Ms. Merewalesi Falemaka, Port Vila based Director of Trade and Investment, Melanesian Spearhead Group Secretariat, the MSG Trade Agreement is based on a Negative List where all the MSG Countries have agreed to trade duty free on all products except a list of sensitive products which would gradually be reduced over time to zero.

Since 2009 Fiji had been applying duty free status to all MSG products. Vanuatu started in 2010. Solomon Islands started in 2011. And Papua New Guinea with its recent gazettal in September has now completed the process of its implementation.

So all the MSG countries are now applying and according preferences under the Agreement to each other. The significant part is that when Papua New Guinea gazetted its negative list they have actually accorded duty free on all products rather than gradually reducing duties over time which was allowed in the Agreement because of the lapse of time that had happened since the Agreement was signed in 2005, PNG has now decided to grant duty free on all those products except three.

There were about 50 products that were on that list. So now they have actually gone to duty free on all those products except for those three, three products which are mackerel, salt and sugar which are the only exceptions. So now all the four countries are implementing the Agreement fully.

So Vanuatu will actually go to zero next year in 2013. At the moment its tariffs on the Negative List is at 6%. So three of the MSG countries will virtually be trading duty free amongst themselves in 2012 - Fiji, PNG to be followed by Vanuatu next year.

What the MSG Leaders have also decided in 2005 is for members to explore a scheme for the movement of MSG professionals recognising the shortage of skills in some MSG countries and that they would gradually open up the labour market. So what has happened is Leaders launched the MSG Skills Movement Scheme in March this year and that has come into force on the 30th of September.

here is now an interesting, emerging trend within the MSG Countries which is also where the demand for skilled MSG nationals is coming from. And that is we observe an increasing trend towards intra-MSG investment. Now the MSG Trade Agreement is about the movement of goods. The SMS is about the movement of people - labour.

This intra-MSG investment is about the movement of capital between the MSG countries. And just to cite a few examples in recent years: Credit Corporation is in three of the MSG countries. Apart from PNG it’s in Fiji and Vanuatu. Also in the financial sector there’s BSP which is now also in those three MSG Countries although we understand it’s also trying to get into Vanuatu as well.

So that’s in the financial sector. In the tourism sector, the Lamana Hotel Development Group which invested in the Heritage Park in Honiara and is in joint venture with the PNG super funds and the Fiji Provident Fund to refurbish the Grand Pacific Hotel in Fiji. We understand the Tanoa Group has taken over the Moorings Hotel here in Vanuatu - from Fiji. So there’s the Tanoa Group from Fiji.

In the retail sector we’ve seen the entry here in Vanuatu of Punga’s in 2010 and also MH Cash and Carry also in Vanuatu which to us is also an extension of the goods trade. They’re actually coming in to retail their products within the MSG countries. And we understand that Punga’s is thinking of going up to Papua New Guinea.

In the computer IT services we have Daltron probably in all the Pacific countries - I’m not quite sure about Solomons. Datec is in all the MSG countries. So that’s in the computer IT and then we have Airline Services that are also - Air Niugini that is going into the other MSG countries - Fiji, Solomons. Air Vanuatu has now launched a new service into Suva.

This is an interesting time for the MSG countries as we see it given the goods agreement that is now taking shape, progressing; we have the Skills Movement Scheme which has been launched and already some of these investors like the banks already indicate that there are shortages. And they are already moving people.

In BSP they’re moving Papua New Guineans into Solomon Islands or Fijians into Solomon Islands to try and strengthen the capacity within BSP. So this is what some of these investments will do.