Solomon Islands - Introductory economic report

Report No. 2553-SOL FILE COPY The Solomon Islands:O An Introductory Economic Report December 18, 1979 East Asia and Pacific Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS :urrency Unit = Solomon Islands Dollar (SI$) SI$1 = US$1.15 US$1 = SI$0.87 Representative rate in November 1979 FISCAL YEAR January 1 - December 31 SYMBOLS = zero = negligible n.a. = not available  FOR OFFICIAL USE ONLY This report is based on the findings of an economic mission which visited the Solomon Islands in February/March 1979. Its members were Edward K. Hawkins (Chief of Mission), Nizar Jetha (Deputy Chief), Swee Joo Khoo (Agricultural Economist), Kazuko K. Artus (Fiscal Economist) and Oscar de Bruyn Kops (Young Professional). The report takes account of discussions with Government officials on a draft of the present report in October/November 1979. This documnent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   THE SOLOMON ISLANDS: AN INTRODUCTORY ECONOMIC REPORT TABLE OF CONTENTS Page No. COUNTRY DATA MAP SUMMARY OF MAIN ISSUES AND RECOMMENDATIONS i - viii 1. INTRODUCTION . . . . 1 General . . . ... ...... ....... .......... ....... ....... . . . Government .... . . . . . . . . . . . . . . . . . 1 Economic Setting . . . . . . . . . . . . . . . . . . . 2 Decentralization ... . . . . . . . . . . . . . . . . 2 Development Planning . . . . .. . . . . . . . . 3 2. GROWTH, STRUCTURAL CHANGE AND INCOME DISTRIBUTION . . . . 4 Growth Performance in the 1970s.. . . . . . . . 4 Availability and Use of Resources . . . . . .. . . . 5 The Sources of Growth ... . . . . . . . . . . . . . . 7 Structural Change . . . . . . . . . . . . . . . . . . . 8 Income Distribution . . . . . . . . . . . . . . . . . . 10 Regional Balance ... . . . . . . . . . . . .. . . . 15 Conclusion. . . . . . . . . . . . . . . .. 17 3. AGRICULTURE: RECENT DEVELOPMENTS AND ISSUES . . . . . J 18 Agricultural Policy . . . . . . . . . . . . . . . 18 Subsistence Agriculture . . . . . . . . . . . . ... . 19 Performance of Commercial Agriculture . . . . . . 21 Major Constraints and Selected Policy Issues. . . . . 30 4. OTHER SECTORAL DEVELOPMENTS AND ISSUES . . . . . . . . . 33 Manufacturing . . . . . . . . . . . . . . . . . . . . . 33 Tourism . . . . . . . o. . . . .* . . . . . . . . ..................................... 33 Mining . . . .................................. ................. 34 Road Transport ... . . .. . . . . . . . . . . . . . 35 Inter-island Shipping ........ . . . . . . . 36 Health . ..... * * . 38 Rural Water Supplies . . . . . . ....*...... 39 Electricity . . . .. . . . . . . . . . . . 40 Telecommunications . . . . . . . . . . . . . . . . . . 40 5. POPULATION GROWTH, MANPOWER REQUIREMENTS AND EDUCATIONAL POLICY ... . ..... . . . . . . . . . . 41 Population Growth . . . . . . . . . . . . . . . . . . . 42 Manpower Requirements ... . . . . . . . . . . . . . . 43 The Structure of the Educational System . . . . .. . . 45 Recent Educational Developments and Selected Issues . . 46  Page No. 6. PUBLIC EXPENDITURES AND MOBILIZATION OF DOMESTIC RESOURCES . . . . . . . . . . . . . . . . . .. . . . . . 51 Public Expenditures and their Financing . . . . . . . . 52 Tax Structure and Policy . . . . . . . . . . . . . . . 55 Financial Institutions.. . . . . . . . 59 Mobilization of Rural Savings . . . . . . . . . . . . . 61 7. THE EXTERNAL SECTORAO................ 63 Balance of Payments . . . ... . . . . . . . . 63 Development Prospects: A Summary . . . . . . . . . . . 67 STATISTICAL APPENDIX  COUNTRY DATA - SOLOMON ISLANDS AREA POPULATION DENSITY (1976) 28,896 sq km 197,000 (February 1976) 6.8 per sq km Rate of Growth: 3.4% (from 1970 to 1976) POPULATION CHARACTERISTICS (1970) HEALTH (1978) Crude birth rate (per 1,000) 41 Population per physician 7,100 Cruae death rate (per 1,000) 11 Population per hospital bed 325 Infant mortality (per 1,000 live births) 78 /a ACCESS TO PIPED WATER (1976) ACCESS TO ELECTRICITY (1976) X of population - urban 93% X of population - urban 80% - rural 24% /b - rural EDUCATION Adult literacy rate (1970) 9% Primary school enrollment ratio (1978) 70% GNP PER CAPITA IN 1977: US$385/c GROSS NATIONAL PRODUCT IN 1977 GOVERNMENT FINANCE Central Government SI$ Mln. X GDP US Mln. x 1977 1977 1975-77 GNP at market prices 76.4 100.0 Current receipts 12.0 17.3 16.3 Gross domestic investment 10.6 13.9 Current expenditure 13.7 19.7 18.9 Gross domestic saving 6.5 8.5 Current deficit 1.7 2.4 2.5 Exports of goods, NFS 34.4 45.0 Development expenditure 7.6 11.0 10.9 Imports of goods, NFS 38.5 50.4 External assistance and other (net) 9.3 13.4 13.4 MONEY. CREDIT AND PRICES 1974 1975 1976 1977 1978 (Millions SI$ outstanding at end period) Money and quasi-money n.a. n.a. n.a. n.a. 33.1 Bank credit to public and private sectors /d 5.4 5.3 5.1 5.6 5.9 (Percentages or index numbers) Consumer price index (1970-100) 136.8 150.6 157.1 170.3 181.2 Annual percentage changes in: Consumer price index 18.9 10.1 4.3 8.4 6.4 Bank credit to public and private sectors /d n.a. -1.9 -3.8 9.8 5.4 BALANCE OF PAYMENTS 1975 1976 1977 1978 /e MERCHANDISE EXPORTS (AVERAGE 1975-77) (US$ Mln.) USS Mln. x Exports of goods. NFS 17.3 26.1 34.4 37.4 Imports of goods, NFS 36.3 34.9 38.5 46.5 Fish 7.3 30.0 Timber 6.7 27.6 Balance on current account -19.0 -8.8 -4.1 -9.1 Copra 6.5 26.7 Palm products 1.7 7.0 Investment income -0.4 -0.6 -0.7 -0.9 Cocoa beans 0.3 1.2 Current transfers 3.7 2.8 3.7 4.3 Other domestic exports 1.0 4.1 Re-exports 0.8 3.4 Balance on goods and services -15.7 -6.6 -1.1 -5.7 Total 24.3 100.0 Medium and long-term capital 14.0 14.0 12.8 19.0 Short-term capital 0.7 0.6 0.7 12.1 EXTERNAL DEBT, DECEMBER 1978 Overall balance -1.0 8.0 12.3 25.5 Increase in official reserves - - - 25.1 US$ Mln. Official reserves at end of year - - 3.0 28.1 If Public debt 1.2 RATE OF EXCHANGE 1974 1975 1976 1977 1978 DEBT SERVICE RATIO FOR 1978 L % SIS1.00 - US$ 1.4408 1.3102 1.2252 1.1090 1.1447 Public debt 0.04 US$1.00 - SIS 0.6941 0.7632 0.8162 0.9017 0.8736 /a First births only. /b Access to potable water supply. /c Calculated by the same conversion technique as the World Bank Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. /d Mostly private. le Preliminary. /f With the Australian dollar circulating as the domestic currency, the country held no official external reserves prior to 1977. /R Ratio of debt service to exports of goods and nonfactor services. November 13, 1979   o - .@t R A 2 < <+ f F .. _ . _. _. _ ._ . _ _. _ _ ._ . ZX S 9 O _ _ -- > _ m 5 _ __ _ __ __ gZ O '' Z-BO aqt-1i