Tag Archives: economics

The (Mobile) Ties That Bind

[This week’s Communications column for the Vanuatu Independent.]

It won’t come as news to anybody if I say that family is strong in Vanuatu. We’ve known it all along. But with the upcoming release of a new report on telecommunications liberalisation, we will see its influence illustrated in vivid terms.

The Pacific Institute of Public Policy (PiPP) will soon be releasing a report measuring the social impacts of telecoms liberalisation in Vanuatu. One of the main findings is that, in the months following the extension of mobile telephone service to the majority of Vanuatu’s population, families benefited more than businesses in terms of changed perceptions and real outputs.

We’ve suspected this for a while. In June of this year, I presented a talk to regional telecommunications providers. Titled ‘Network Effects: Social Significance of Mobile Communications in Vanuatu‘, it explains Network Effects and how they manifest themselves in village life, then looks at some obvious and not-so-obvious implications for network providers in the Pacific.

Briefly, my point is that village life features very tight communication loops from which no one is exempt. The one-to-one aspects of village communications are enhanced by mobile communications, and smart network operators should do what they can to enhance this effect. The result is that our island geography (and gestalt) creates more value per user than traditional business analysis might lead us to believe.

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Just Desserts – Reprise

[Originally published in the Vanuatu Daily Post’s Weekender Edition.]

Last week, I wrote about how our parliamentarians have yet to embrace the roles and responsibilities which they were elected to perform. Everyone is so intent on getting into government – or staying put, once there – that they ignore most of the political tools available to them.

On Thursday last week, distracted by a looming no-confidence vote, Parliament passed dangerously flawed legislation amending the Employment Act. The changes included improvements in maternity leave, adjustments to employer liability when a staff member resigns on short notice and changes to the way annual leave accrues.

But what got every employer’s knickers in a knot was a change to how severance is handled. The rate of accrual was increased by 300%. Worse, every worker, no matter how short their employment or the circumstances of their departure, is to be eligible.

The outcry was immediate, irate and, occasionally, irrational. Many employers immediately sacked all their staff, paid out whatever severance was due and re-hired everyone, sometimes at reduced rates calculated to discount the increased severance. Others requested that their staff resign, avoiding severance payouts entirely.

Expat workers were needlessly affected. In spite of being ineligible for severance, employment offers were shelved, contractors were shuffled between companies, salaries cut. Businesses closed briefly to process the artificial staff turnovers.

None of this was necessary. Not now at least, and in some cases not ever.

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Masters in our own House?

[Originally published in the Vanuatu Daily Post’s Weekender Edition.]

Economic hardship is expressed in the simplest terms in Vanuatu. The price of rice, of diesel and cooking gas, the selling price of copra and kava – all of these hit closest to home. The most pressing question facing our new government is how best to insulate Vanuatu from the worst of the economic turmoil affecting the world’s economies.

The question for all ni-Vanuatu is how to hold the new government to account.

Economists describe Vanuatu’s position as that of a ‘price taker’. In layman’s terms that means we don’t get much of a say in how prices are set. OPEC members have never heard of us, and are content to keep it that way. Commodity exchanges deal in volumes that give Vanuatu no more say over prices than a corner shopkeeper.

Nonetheless, government decisions echo throughout the local economy. It’s limited in what it can do, but what it does affects us directly.

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PACNOG Talk

One of the items in yesterday’s brain dump was a talk I presented to the Pacific Network Operators Group (PACNOG) at the Sebel Hotel. It’s titled ‘Network Effects: Social Significance of Mobile Communications in Vanuatu‘. It explains Network Effects and how they manifest themselves in village life, then looks at some obvious and not-so-obvious implications for network providers in the Pacific. Briefly, my point is that village life features very tight communication loops from which no one is exempt. The one-to-one (but not the one-to-many and many-to-one!) aspects of village communications will be enhanced by mobile comms, and smart network operators should do what they can to enhance this effect. The result will be that our island geography (and gestalt) creates more value per user than traditional business analysis might lead us to believe.

One of the questions that came up regularly when I asked for feedback on my talk was how people would be able to afford mobile services. Given that 5000 vatu (about USD 50) per month is not an unusual family income in the village, even topping up with 200 vatu credit (currently the smallest increment available) would be a burden, would it not? The answer is yes and no.

There’s an interesting relationship between commodity prices and agricultural production here in Vanuatu. When the price of commodities like coffee, copra and cacao rises, production actually decreases rather than increasing. The reason for this is that the need for cash in rural areas is quite limited. Once a villager earns enough to pay school fees, clothing and a few staples, there’s no more need to sell their crop. So when they can earn the same amount of money for less effort, they do so.

This is one of the factors leading to a kind of economic insulation for the average ni-Vanuatu. I wrote a bit more about other aspects of this phenomenon in this article for the Daily Post.The bottom line is that the cash economy remains small in rural Vanuatu because the cash economy is only a small part of the whole picture.

When mobile communications are introduced, the perceived need for cash increases. In the short term, this puts stress on the pocket book, but things can probably work themselves out through a nominal increase in the amount of cash being generated (e.g. through cash crops). Add to this the increased efficiencies that come hand in hand with better communications, and we’ll likely see more prosperity and economic activity – in cash terms – than less.

In other words, this is not a zero sum game.

That detail is still lost in many traditional planning processes. In fact, ignorance of this dynamic is a bigger inhibitor to growth than many other external factors. If people can’t forecast capacity properly, their estimates come out consistently low, and because products and services don’t meet the need, they don’t have the effect they’re intended to, so people don’t invest in them.

Very often, taking the last few years’ numbers and extrapolating linear growth creates a self-fulfilling prophecy in which growth remains linear only because that’s as much as it can grow. Unfortunately, it allows analysts to sit back and say, ‘See? I told you so.’

Update: Looking a little further down this continuum: Once the inherent economic elasticity in this system is used up, however, poverty sets in. An example would be people planting cash crops in places once reserved for food crops. It’s a fine line between building the cash economy and building dependence on the cash economy in such as way that a person’s outputs can’t meet their costs.

The Pacific Economic Survey

Earlier this week, Australia unveiled the Pacific Economic Survey here in Port Vila. Present for the event was a delegation from all around the Pacific Region, including Melanesia and Polynesia as well as senior politicians from Australia. AUSAid’s chief economist was also there to present the findings.

The report is the first of a series of annual surveys that will provide an overview and update of economic developments in the Pacific island region and Timor-Leste. It collates and summarises public data on various aspects of the region’s national economies, performs some comparative and collective analysis with the results, then provides a few basic recommendations.

The theme for this year’s report was Connectivity. The survey focuses on aviation, shipping and telecommunications. It argues that liberalisation, more input from the private sector, and a cooperative regional approach to the problems inherent in improving connectivity are keys to improving Pacific economies.

The findings in the area of telecommunications do much to validate the Government of Vanuatu’s market liberalisation strategy and provide every encouragement to expand upon them. It addresses some potential pitfalls that might be encountered, primarily where access to technical expertise is concerned. And that is where it risks missing the boat.

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