STATE OF THE SOLOMON ISLANDS ECONOMY & INVESTMENT CLIMATE: SETTING THE PLATFORM National Sustainable Tourism Investment Forum Heritage Park Hotel 13-14 July 2017
Contribution to Growth The economy grew by 3.5% in 2016 and estimated growth to be around 3.4% for 2017-2019 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2012 2013 2014 2015 2016 2017 2018 2019 Agriculture, Fisheries & Forestry Industry Services Overall Economic Growth
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Contribution from productive sectors is dominated by logging and is levelling off. Need investment in non logging sectors to support the economy going forward 5,500.0 5,000.0 Productive Sectors Public Admin, Educ & Health Non Productive sectors GDP 4,500.0 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 -
% of GDP Overall BOP position has been positive, expected to continue 12.0 10.0 8.0 Projection 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 2012 2013 2014 2015 2016 2017 2018 Current Account Bal Cap&Fin Account Bal Overall Bal
$ 000 Potential earnings from tourism can increase by more than twofold if the 50,000 visitors target is achieved by 2027. Estimated actual earnings in 2016 was $427.7m (from BOP data). 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Tourism sector received 5.8 percent of total loans from the financial institutions. 5.8 Tourism Communication Construction Agriculture Fisheries All Others
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 2017. 10.0% 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 Q4 2010 2011 2012 2013 2014 2015 2016
The World Bank s Doing Business indicator showed incremental improvements. Source: World Bank DB database
COST OF DOING BUSINESS Ongoing reforms (legislation, business processes, tax, etc) must continue. Source: World Bank DB database
As % of GDP Capital expenditure as a ratio of GDP is very low against other regional countries and needs beefing up 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Capital Expenditure Recurrent Expenditure Total Expenditure
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Fiji Van Sol PNG Melanesia excl Sol
Tourism accounts for less than 5% of foreign investment applications 0 0 Agriculture 3 3 4 1 4 1 5 0 0 0 0 0 Communication & Information Technology Construction Distribution Education Entertainment & Catering Financial Institutions 2 0 0 1 0 Fisheries Forestry Health Insurance Services Manufacturing Mining Oil & gas Professional & Other Services Real Estate Retail & Wholesale 36 Tourism Transportation Source: FID 2017Q1
Challenges Broaden Sources of Growth? Low accessibility to finance especially MSMEs Attracting genuine investors Attitudes and behaviours Need more proper trainings in hospitality
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
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