Resource boom cause growing wealth divide in the Pacific: ADB Report


Tamara McClean - AAP South Pacific Correspondent

A wealth boom in the Pacific's mineral-rich nations is stretching the regional divide between those with resources and those without, a new report claims.

A paper released this week by the Asian Development Bank has warned that while resource-rich countries like Papua New Guinea and East Timor are booming economically, its neighbours are struggling more than ever.

PNG and East Timor, which both export petroleum, are expected to grow by 8.5% and 10% respectively this year, boosted by the high international petrol prices, and increased investment and employment in the industry.

The Solomon Islands will grow by 7.5%, driven by increased logging and gold mining in the country, according to the latest issue of the bank's Pacific Economic Monitor.

Robert Wihtol, director general of bank's Pacific department, said there were two groups of Pacific economies emerging, one doing well and another struggling.

"The long term growth outlook for the Pacific region as a whole is very modest," Mr Wihtol said.

"If this trend continues, the region risks falling further behind the dynamic economies of developing Asia, resulting in a widening gap in incomes in the two regions."

To avoid this, Pacific governments needed to focus on the core functions of good government - that is investing in infrastructure, improving education and helping businesses - to encourage investment, he said.

The report also raises inflation projections for 2011 thanks to the sharp rise in commodity prices. It warns that high inflation rates in Fiji, PNG, and East Timor were of particular concern.

Mr Wihtol said there was a worry that the smaller, more remote and heavily import-dependent Pacific economies, such as those in the northern Pacific, were going to be hit hard by rising international food and fuel prices, and inflation.

He said these poorest nations needed to diversify their agricultural base and explore alternative energy sources to help protect themselves from rising prices.