The Economies of Small Islands: The Case of Pitcairn, Tristan da

Cunha and St HelenaMalcolm Summerfield

1. Introduction

Small Islands – broadly defined under 3 types:

• Independent sovereign states, members of UN – e.g. many Caribbean and Pacific Islands, Singapore, Maldives, etc.

• Islands - Integral Components of Main Country e.g. Azores, Canaries, Guadeloupe, Martinique, etc.

• Islands – Dependent Territories of Main Country, with degrees of independence e.g.– Bermuda, Cayman Islands, Gibraltar– Montserrat, Pitcairn, St Helena, Tristan da Cunha

2. Background Documents • UK Documents:

– The Overseas Territories: Security, Success and Sustainability, FCO, June 2012

– Operational Plan 2011-15 for Overseas Territories, DFID, June 2012– Key issues: (i) OTs have priority in Overseas Budget; (ii) committed to:

effective economic development, efficient finance management, VfM, reduction of public sector, promotion of private sector, reduction in aid dependence

• Island Plans:– Pitcairn – Strategic Development Plan 2012-2016 (draft)– TdC – Tristan’s Compass to Our Future 2010-2016 (draft)– St Helena – Sustainable Economic Development Plan 2012/12 – 2021/22

• International: – Trends in Sustainable Development – SIDS, UN, 2010

3. Pitcairn – Basic Facts

• Location – South Pacific: Chile 2,000 km and NZ 5,600 km• Islands – Pitcairn, Henderson (UNESCO World Heritage site), Ducie & Oeno • Size – Pitcairn: 4.5 sq km• Access – (i) Ship from Mangareva (French Polynesia); or (ii) cruise ships from Easter

Island • Resident population – 50 to 55• Expatriates – Gov. Rep., doctor, teacher, policeman, family & community adviser• Governance – New Constitution 2010: (i) Governor (HC in NZ); (ii) Deputy Gov. (based

in Auckland); (iii) elected Island Council + Pitcairn Island Office in Auckland• Resources – (i) Land (horticulture, fruit, wood & some animals); (ii) Marine

(fishing); & (iii) Other (wind & solar energy potential)• Infrastructure – (i) Bounty Bay landing; (ii) paved roads (1 km); (iii) energy (diesel: 10

hours per day); (iv) telecommunications (tel. & internet)• Social & legal background – (i) historical connections; & (ii) legal cases

4. Pitcairn – Economic Data

• Employment: (i) public sector (wage earning, part time): 78 positions for 31 Islanders; & (ii) informal self-employment

• Economic activities (no GDP estimates): (i) public sector activities; (ii) souvenirs (wood & others); (iii) honey; (iv) subsistence agriculture & fishing; (v) tourism; (vi) barter; & (vii) minor services

• Tourism: (i) cruise ships (8-10 p.a. some landing passengers); (ii) tourist visitors: via MV Claymore II & private yachts; & (iii) yachts (10 p.a.)

• Remittances: no figures• Off shore income: (i) stamps; (ii) coins; (iii) domain names; &

(iv) miscellaneous

Last 6 years: 2006/07 to 2011/12:• Revenue:

– £43,000 to £139,000 p.a.; or 2% to 5% of expenditure– Stamps 47%; domain reg. 27%; landing fees 15%; coins 9%; others 2%

• Expenditure:– £805,000 to £2.7 million p.a.– Island ops. 17%; expat. ops. 27%; PIO 17%; shipping 39%

• Deficits:– £728,000 to £2.5 million p.a. – Increased by 243%

• Important issues:– Deficit costs per head: increased by 233% to approx. £50,000 (50 residents) – Subsidies: (i) electricity – nil; (ii) telecommunications 82%; & (iii) shipping 84%– Exchange rate movement: £1 = NZ$ 2.8 in 2006/07 to £1 = NZ$ 1.95 in

2011/12 (44%)– Taxes: no income taxes or import duties

5. Pitcairn - Finances

6. Pitcairn – Challenges and Opportunities

Challenges:• Isolation and high transport costs• Limited resource base• Small & ageing population - over 66 yrs: (i) now 21%; (ii) 5 yrs 27%; & (iii) 10 yrs

43%• Dependence on budgetary aid & Gov’t employment• Limited development of off-island income• Education & health facilities• Social cohesion & child safetyOpportunities:• Immigration plan• Tourism development – support from DFID & EU• Exclusive economic zone (EEZ) – 836,000 sq km; marine & seabed resources• Unique historical brand name• Private sector development

7. Pitcairn - Conclusions

• Very challenging future• Major problem related to high transport costs• Immigration problem• Probability that Island will not emerge from

aid dependency

8. Tristan da Cunha – Basic Facts• Location: South Atlantic: South Africa 2,800 km, South America 3,360 km & St

Helena 2,400 km (to north)• Islands: TdC, Gough & Inaccessible (both - UNESCO World Heritage sites) and

Nightingale

• Size: TdC: 98 sq km• Access: (i) Fishing vessels (rock lobster concessionaire) 9 sailings per year; (ii) SA

Agulhas (SA meteorological vessel – one visit p.a.) ; (iii) RMS St Helena – occasional; or (iv) cruise ships (?). Depends on sea conditions: 60 to 70 days p.a.

• Resident population: 260 to 270• Governance: (i) Governor (St Helena); (ii) Administrator (FCO official); (iii) Island

Council (8 elected & 3 ex officio), including Chief Islander• Resources: (i) Marine (rock lobster & subsistence fishing); (ii) Land (horticulture &

livestock); & (iii) Other (water, wind & solar energy potential)• Infrastructure: (i) Calshot Harbour; (ii) paved roads (in Edinburgh & to the

“Patches”); (iii) rock lobster factory; (iv) energy (concessionaire); (v) TV & telecom.

9. Tristan da Cunha – Economic Data

• Employment: (i) 185 (70% of pop.) engaged full-time or part-time by Gov’t (81%) and fish factory (19%); (ii) supplementary (cargo handling, fish factory, projects, etc.); & (iii) informal self-employment (minor services, working plots at the “Patches” – potatoes and livestock)

• Economic activities: (no GDP estimates): (i) public sector activities; (ii) lobster fishing & factory; (iii) subsistence agriculture; (iv) handicrafts & souvenirs; & (v) tourism

• Fishing: rock lobster catch increased from 310 tonnes p.a. in late-1990s to 400 tonnes p.a. (45% from TdC)

• Tourism: (i) cruise ships (2 to 7 p.a.) – passengers landing 100 to 400 p.a. depending on sea conditions; & (ii) yachts

• Individual & household income 2007: (i) £2,850 per capita; & (ii) £7,230 per household (based on paid employment)

• External factors: performance impacted by: (i) exchange rates; & (ii) SA inflation

• Remittances and savings: (i) remittances - no figures; & (ii) savings – little information

• Other income: small volumes of stamps, coins and handicrafts

10. Tristan da Cunha – Finances10 years - 1997 to 2007:• Revenue:

– £964,000 in 1997 to £692,000 in 2007 – decline from: 169% to 81% of annual expend.– 2007: fishing 63%; post office 10%; overseas 12%; & local 15%

• Expenditure:– 1997: £570,000 in 1997 to £853,000 in 2007 – increase of 50%– 2007: public works 40%; medical & health 21%; & others 39%

• Surplus & Deficit:– Surplus 1997: +£394,000; Deficits: 2002: £113,000; & 2007: £160,000; and cumulative

deficit over 10 years of £486,000• Reserves: declined by 65%, from £2.4 million in 1997 to £1.5 million in 2002, & £862,000 in

2007

• Important issues:– Risk of further decline into need for budgetary aid– Future of fishing concession – Subsidies and Taxes: no income taxes or import duties

11. Tristan da Cunha – Challenges and Opportunities

Challenges:• Isolation and high transport costs• High dependence on fishing, especially rock lobster• Ageing population: over 65 yrs: (i) 1997 18%; (ii) 2007 24%; & (iii) 2017

30%+• Limited production resources, dependence on imported fuel & most basic

commodities• Need for Islanders to contribute more to TdC financesOpportunities:• Effective implementation of agreed development plan • More private sector development & downsizing of public sector• Exclusive economic zone (EEZ) – future marine & seabed opportunities• Development of wind energy• Immigration and skills development

12. Tristan da Cunha - Conclusions

Possibility that TdC will not require budgetaryassistance – if:• Rock lobster concession is well managed &

economic returns improve• Substantial increase in Islanders’ contribution to

TdC finances• Downsizing of public sector• Improved management of reserves, remittances

& savings

13. St Helena – Basic Facts• Location: mid-Atlantic: Angola/Namibia 1,930 km, Brazil 2,900 km• Size: 121 sq km• Access: (i) Sea: RMS St Helena (128 passengers and 56 crew) – av. of 18

voyages p.a., with at least 2 visits to St Helena per voyage; & (ii) Airport under construction, to be fully operational by 2016 - cost £247 million

• Resident population: 4,000, but has been declining (4,400 in 2000)• Governance: (i) Governor; (ii) Legislative Council (15 elected members every 4

years, Governor & 3 ex officio officers); & (iii) Executive Council (Governor, 6 members of LegCo & 2 ex officio officers)

• Resources: Limited productive resources: fishing, horticulture, livestock, coffee; (ii) natural environment; & (iii) other (wind & solar energy potential)

• Infrastructure: (i) Jamestown Harbour; (ii) paved roads to all inhabited areas + unpaved roads to other areas; (iii) energy (Rupert’s Bay power station & wind turbines); & (iv) TV & telecom.

14. St Helena – Economic Data• Employment: (i) 58% of pop. economically active (2,300 nos.): approx. 55%

by public sector & 45% by private sector; (ii) unemployment reported to be very low: 12% in 2000, 5% in 2004 & 3% in 2010; & (iii) informal sector (minor services, etc.)

• Economic indicators: (i) GNP (incl. remittances & interest): £13.9 million in 2000 to £19 million in 2009 in current prices; (ii) GNP growth rates in constant prices: 3.1% p.a. 2000-04 & -2.5% p.a. 2004-09; & (iii) per capita GNP: £3,140 in 2000 & £4,760 in 2009 in current prices, & growth rates in constant prices: 4.2% p.a. 2000-04 & -1.3% p.a. 2004-09

• Remittances and interest: (i) remittances: £2.5 to £3.4 million p.a.; & (ii) interest receipts declined from £1.2 million in 2000 to less than £100,000 at present

• Visitors & Tourism: (i) total arrivals 2,000 to 2,500 p.a.; & (ii) tourists 400 to 800 p.a.

• Household income 2011/12: (i) median: £8,230 p.a. & £680 per month; & (ii) low: £4,940 p.a. & £410 per month

• Other income: small volumes of stamps, coins and handicrafts

15. St Helena - Finances10 years – 2000 to 2009:• Current Account:

– Income: £11.1 million in 2000 (39% budgetary aid) & £17 million in 2009 (45% budgetary aid) – increase of 53% (+78% in budgetary aid)

– Expenditure: £12.3 million in 2000 & £23.4 million in 2009 – increase of 90%– Deficit: £1.2 million in 2000 & £6.4 million in 2009 – increase of 410%

• UK Aid:– Doubled from £10 million in 2000 to £20.6 million in 2009 – increase of 105%– Budgetary aid 37%; shipping subsidy 16%; development aid 36%; & technical coop. 10%

• Important issues:– High dependence on budgetary aid (recurrent & capital expenditure)– Over dependence on public sector– Lack of productive employment– High export of manpower and skills overseas

16. St Helena – Challenges and Opportunities

Challenges:• Isolation and high transport costs• Population decline and export of skills overseas• Over-dependence on public sector • Ltd production resources, dependence on imported fuel & most basic commodities• Promotion of private sector and tourism, plus financial resources to support

investment• Need for Islanders to contribute more to SH finances

Opportunities:• Maximise opportunities offered by Airport development (cf. TCI)• Partnership with SHELCO & sustainable air transport services• More private sector development & downsizing of public sector• Opportunities for skilled Saints to return• Development of local provisions for tourism market & limit import leakage

17. St Helena – Conclusion

Economic and financial future depends on:• Success of airport project• Ability of Enterprise St Helena to galvanise private sector &

promote local investment• Parallel investment by SHELCO in major hotel & villas + local

facilities. Focus on low volume/high value tourism• Forecasts indicate: initial volume of 7,000+ tourists p.a.

building up to 30,000 p.a. (500 to 900 per week) – for SH to become self-financing

• M&E will be crucial, especially years 2014 to 2018

18. GENERAL CONCLUSIONS

Key issues:• Isolation & high transport costs• High exposure to fluctuations in global economy• Limited resource bases• Small markets• Small & ageing populations• Over dependence on public sector and budgetary aid• Environmental issues

General Conclusions:• Pitcairn: high risk that Island will remain aid dependent• TdC: medium risk that Island may require budgetary aid• St Helena: medium risk that tourism development will not be as rapid as forecast• Aid dependency: consider stabilising aid to force “change”• General need for: (i) improved statistical databases; (ii) effective change management;

(iii) benchmarking; (iv) lessons learned from other islands/countries (v) improved M&E