World Bank points to trouble areas

The World Bank has painted a less than rosy economic picture for some Pacific countries.

In its latest update on East Asia and the Pacific, the bank has highlighted some major challenges facing Papua New Guinea, the Solomon Islands, Fiji and East Timor.

The report said PNG was enjoying good flows of export income but it warned that the Government had to take much tougher action to improve its public sector.

"The outlook for production and the balance of payments in 2004 is expected to be favourable due to the continued buoyancy in global commodity process and positive developments in the minerals sector," it said.

"Concerns remain, however, about the budgetary situation in the absence of strong policy measures to address public sector reform."

In the Solomons, the World Bank said, spending on defence and police was 200 per cent above what had been originally budgeted.

The regional assistance programme had boosted the interest of aid groups to help the country, with assistance expected to reach between A$131 million ($143 million) and A$156 million this year.

But there was still concern about the nation's economic fundamentals.

"Real growth in 2003 was partly generated by unsustainably high levels of logging, debt and expenditure arrears have continued to increase, and private sector activity remains subdued," it said.

The bank has maintained its concerns about East Timor, which it said was heavily dependent on oil and gas exports.

Unemployment was still high among young people, and private sector wages were falling and would have to continue to decrease.

"The country now faces the challenges of nation-building with very limited human resources, embryonic institutions, a stagnant economy, high levels of poverty and unemployment.

"The gradual winding down of the international presence following independence and slow-down in reconstruction programmes has led to some contraction in economic activity, particularly in urban areas and in services that catered to expatriates."

The bank said one of the biggest issues facing Fiji was its high level of emigration by skilled workers.

Around 0.7 per cent of the nation's population of skilled workers were expected to leave the country.

Although the tourism sector is on target for record arrivals, other industries were being hit by a slightly stronger currency and internal problems.

- AAP