Solomon Islands - Introductory economic report

A WORLD BANK COUNTRY STUDY PUBm2553 THE SOLOMON ISLANDS An Introductory Economic Report APRIL 1980   THE SOLOMON ISLANDS An Introductory Economic Report This report is based on the findings of a Mission that visited the Solomon Islands in Febru- ary/March 1979. The mission was composed of: Edward K. Hawkins, chief of mission Nizar Jetha, deputy chief Swee Joo Khoo, agricultural economist Kazuko K. Artus, fiscal economist Oscar de Bruyn Kops, young professional East Asia and Pacific Regional Office The World Bank Washington, D.C., U.S.A.  The World Bank issues country economic studies in two series. This report is a working document and is, as such, part of an informal series based wholly on materials originally prepared for restricted use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practitioners throughout the world. A second, more formal series entitled World Bank Country Economic Reports is published for the Bank by The Johns Hopkins University Press, Baltimore and London. Titles of these and all other Bank publications may be found in the Catalog of Publications, which is available free of charge from World Bank, Publications Unit, 1818 H Street, N.W., Washington, D.C. 20433. U.S.A. This report is a free publication. A small charge may be made if airmail postage is required. The views and interpretations in this report are the authors' and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Copyright (C 1980 The International Bank for Reconstruction and Development/The World Bank The World Bank enjoys copyright under Protocol 2 of the Universal Copyright Conven- tion. Nevertheless, permission for reproduction of any part of this report is hereby granted provided that full citation is made.  Preface This report was the first report prepared after the Solomon Islands achieved independence in July, 1978. A draft was discussed with the Government in October/November, 1979 and the present version takes account of those discussions. It should be pointed out that the authorities had already identified many of the points raised in the report, and were undertaking or consider- ing relevant courses of action. The report has also greatly bene- fited from the preliminary work undertaken for the draft plan.   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 . . . . . . . . . . . . . . .. . General . . . . . . . . . . . . . . . . . . . . . . . .1 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 MZanufacturing . . . . . . . . . . . . . . . . . . . . . 33 Tourism . . . . . . . . . . . . . . . . . . .. 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 Pequirements ... . . . . . . . . . . . . . . 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 SECTOR . . . . . . . . . . . . . . . . . . . 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 Cruce 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) % of population - urban 93% % 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. % GDP US$ Min. 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 SIS 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 je MERCHANDISE EXPORTS (AVERAGE 1975-77) (US$ Mln.) US$ Mln. v 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 goods and services -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 -O.9 Cocoa beans 0.3 1.2 Current transfers 3.7 2.8 3.7 4.3 Other domestic exports 1.0 4.1 Balance on current account -15.7 -6.6 -1.1 -5.7 Re-exports 0.8 3.4 Total 24.3 100.0 Menium 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 USS Ml. Official reserves at end of year - - 3.0 28.1 L Public debt 1.2 RATE OF EXCHANGE 1974 1975 1976 1977 1978 DEBT SERVICE RATIO FUR 1978 /g Z SI$1.00 - US$ 1.4408 1.3102 1.2252 1.1090 1.1447 Public debt 0.04 US$1.00 = SI$ 0.6941 0.7632 0.8162 0.9017 0.8736 /a First births only. /b Access to potable water supply. 7c 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. /e Preliminary. /f With the Australian dollar circulating as the domestic currency, the country held no official external reserves prior to 1977. / Ratio of debt service to exports of goods and nonfactor services. November 13, 1979   CURRENCY EQUIVALENTS Currency Unit = Solomon Islands Dollar (SI$) SI$1 US$1.09 US$1 = SI$0.92 Average rate prevailing in March 1980 FISCAL YEAR January 1 - December 31 SYMBOLS -= zero = negligible n.a. = not available   I BRD 14259 6
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