STATE OF THE SOLOMON ISLANDS ECONOMY & INVESTMENT CLIMATE: SETTING THE PLATFORM

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1 STATE OF THE SOLOMON ISLANDS ECONOMY & INVESTMENT CLIMATE: SETTING THE PLATFORM National Sustainable Tourism Investment Forum Heritage Park Hotel July 2017

2 Contribution to Growth The economy grew by 3.5% in 2016 and estimated growth to be around 3.4% for % 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Agriculture, Fisheries & Forestry Industry Services Overall Economic Growth

3 Contribution from productive sectors is dominated by logging and is levelling off. Need investment in non logging sectors to support the economy going forward 5, ,000.0 Productive Sectors Public Admin, Educ & Health Non Productive sectors GDP 4, , , , , , , ,

4 % of GDP Overall BOP position has been positive, expected to continue Projection Current Account Bal Cap&Fin Account Bal Overall Bal

5 $ 000 Potential earnings from tourism can increase by more than twofold if the 50,000 visitors target is achieved by Estimated actual earnings in 2016 was $427.7m (from BOP data). 1,000, , , , , , , , , ,

6 Tourism sector received 5.8 percent of total loans from the financial institutions. 5.8 Tourism Communication Construction Agriculture Fisheries All Others

7 Financial sector is stable. Non performing loans is among the lowest in the region and is trending downwards. NPL ratio is below 5%, of which Tourism accounts for 3 percent of total NPL as at March % 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

8 The World Bank s Doing Business indicator showed incremental improvements. Source: World Bank DB database

9 COST OF DOING BUSINESS Ongoing reforms (legislation, business processes, tax, etc) must continue. Source: World Bank DB database

10 As % of GDP Capital expenditure as a ratio of GDP is very low against other regional countries and needs beefing up Capital Expenditure Recurrent Expenditure Total Expenditure

11 Gross Fixed Capital Formation as % of GDP Gross Fixed Capital Formation as a percent of GDP for Solomon Islands is lower than other Melanesian countries. Need to ramp up investments in tourism sector and other productive sectors Fiji Van Sol PNG Melanesia excl Sol

12 Tourism accounts for less than 5% of foreign investment applications 0 0 Agriculture Communication & Information Technology Construction Distribution Education Entertainment & Catering Financial Institutions Fisheries Forestry Health Insurance Services Manufacturing Mining Oil & gas Professional & Other Services Real Estate Retail & Wholesale 36 Tourism Transportation Source: FID 2017Q1

13 Challenges Broaden Sources of Growth? Low accessibility to finance especially MSMEs Attracting genuine investors Attitudes and behaviours Need more proper trainings in hospitality

14 Opportunities Tourism, Fisheries, Mineral & Agriculture are our future sources of growth Revival of DBSI potentially positive for MSMEs but please do not default your loans Small Business Guarantee Scheme is still underutilised Support to tourism entrepreneurial/operators critical Adequate liquidity in the banking system

15 Final Remarks Our economy needs alternative sectors to sustain future growth Tourism can help to fill the logging gap Important to raise tourism earnings to improve our current account position Tourism needs more investment funding: NTF is there scope? We must invest in hospitality trainings Invest more in tourism infrastructures Thank you

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