Economic reform

The objective:    To increase the standard of living and economic opportunity for all Solomon Islanders.

Creating an environment that encourages local and foreign investment and assists with Solomon Islands economic growth is a vital part of RAMSI's work in Solomon Islands.

RAMSI advisers are working alongside their Solomon Islands counterparts to help build strong foundations within the Solomon Islands economy. This work includes providing macroeconomic analysis and policy advice, modernising business regulations and improving financial services available to provincial and rural areas, together with reforming the operation of State-Owned enterprises which are responsible for providing many basic services to Solomon Islanders.

This work has already seen significant results. Two important economic policy units – the Economic Reform Unit and Financial and Economic Development Unit – have been established within the Ministry of Finance and Treasury, foreign investment increased seven-fold following the introduction of key legislation, over 15,000 bank accounts have been opened as part of the country's new rural banking program and Solomon Islands Gross Domestic Product (GDP) increased from US$815 per person in 2004 to almost US$1000 in 2011.

The strategy

RAMSI will work with the Solomon Islands Ministry of Finance and Treasury to:

1. Improve business regulation.
2. Improve financial services available to provincial and rural areas.
3. Improve the performance, governance and accountability of State-Owned Enterprises.
4. Improve the collection, analysis and publication of key economic and social statistics.
5. Improve professional skills of Ministry of Finance and Treasury staff.

To learn more about some of the specific targets that have been set for each strategy, download the Partnership Framework document.

The challenges

 Despite progress in recent years, Solomon Islands remain a complex country in which to do business. Costs can be high, regulatory processes slow and complicated and essential services can be unreliable and expensive. Exports from Solomon Islands also face high transport costs to reach the main global markets.

The expected decline of logging exports as a source of economic growth and government revenue, coupled with the significant influence the global economy has over demand for traditional exports and prices for imports such as rice and fuel, mean that the economy and livelihoods in Solomon Islands remain fragile.

Furthermore, the lack of comprehensive economic statistics in Solomon Islands makes analysis and development of economic policy difficult.

For average Solomon Islanders, the need for economic reform is urgent. Few Solomon Islanders have access to modern banking services such as bank accounts and loans, telecommunications services in Solomon Islands were, until recently, significantly overpriced and of poor quality, and many state-owned enterprises, such as water and electricity service providers, have not operated efficiently, resulting in poor levels of service being delivered to Solomon Islanders for many years.

RAMSI's work

RAMSI advisers work alongside their colleagues from the Solomon Islands Ministry of Finance and Treasury's Economic Reform Unit to build long-term skills in the Unit's staff, and to help drive reform of the Solomon Islands economy. Their work covers the following key areas:

1. Improving the business environment

Modernising the Solomon Islands economy is vital to the country's long-term future. RAMSI advisers are working in partnership with the Solomon Islands Ministry of Finance and Treasury to remove many of the procedures that have become roadblocks to economic growth in Solomon Islands. This work has led to:

• The development and implementation of a program of revenue policy reforms.
• The passage through Solomon Islands Parliament of new legislation making it easier to start a business.
• A reduction in costs and processing time for those seeking to register businesses.
• A rise in the number of new companies registered in Solomon Islands.

2. Rural banking

One of the major challenges in a country of over 1000 islands, where 85% of the population live in rural villages, is a lack of access to banking services. By providing greater access to basic banking facilities, the Solomon Islands Government with RAMSI's support - are aiming to provide more opportunities for more people to improve their living conditions and potentially start businesses. Key targets for this work include:

• An increase in the availability of banking services to rural enterprises.
• The ability for more Solomon Islanders to access credit through commercial banks.

3. State-Owned Enterprises

Improving the performance, governance and accountability of State-Owned Enterprises, in areas such as water and electricity, is critical to the delivery of quality, fairly-priced essential services to Solomon Islanders. The key targets include:

4. Telecommunications

Solomon Islanders have been frustrated by poor telecommunications service for many years. RAMSI's assistance is helping to open up the Solomon Islands to more competition and ensure service quality is scrutinised by an independent telecommunications commission. The key targets for this work include:

5. National statistics

RAMSI advisers will be assisting the National Statistics Office to improve the quality and frequency of many key national statistics, vital to the government's ability to analyse the economy and develop economic policy. Key targets for this work include:

Achievements so far

Significant reform of the Solomon Islands economy has occurred since RAMSI's arrival. Some of the reforms include:

Improving the business environment

• The implementation of a number of key legislative reforms:
  • Foreign Investment Act 2005, which resulted in an immediate seven-fold increase in the number of foreign investors in Solomon Islands.
  • The Secured Transactions Act 2008 was developed and implemented, to improve access to credit for Solomon Islanders.
  • Companies Act 2009 and Insolvencies Act 2009 passed by Parliament. These new Acts will make it much easier to set up and run a company in Solomon Islands. These Acts also allow the creation of 'community' companies, which are more appropriate for villages, communities, landowners and women's groups seeking to start a business.
  • Customs Valuation Act 2009, which – when passed by Cabinet – will help to improve compliance by businesses importing goods and align Solomon Islands Customs work with World Trade Organisation standards.
• The development of the first Solomon Islands macroeconomic model, a key economic analysis tool which allows the Ministry of Finance and Treasury to model the economic impact of policy changes or changes in economic conditions.
• Improvements to the Solomon Islands business environment, supported by RAMSI, supported by RAMSI, led to the country jumping ahead ten places in the most recent World Bank Doing Business Report.

Rural banking

• The introduction of the Solomon Islands Rural Banking Scheme and Small Business Guarantee Scheme, which provide financial opportunities to Solomon Islanders in rural areas. These schemes have been taken up with enthusiasm, with more than 15,000 bank accounts having already been opened in Malaita and Guadalcanal.

State-Owned Enterprises

• The State Owned Enterprises Act, which has been implemented to introduce a range of new procedures for State-Owned Enterprises including Solomon Islands Water Authority and Solomon Islands Electricity Authority.
• The privatisation of two moribund state owned businesses - Home Finance Limited and Sasape Marina.
• Major restructuring of the ownership of the Soltai fish processing business and Kolombangara Forest Products.
• The update and audit of State-Owned Enterprise financial accounts.

Telecommunications

• A licence being granted to a second entrant into the telecommunications market, which is now providing competition in Solomon Islands, and has resulted in significant improvements in communication throughout Solomon Islands and dramatically lower mobile phone costs. 
• The establishment of an independent telecommunications regulator.