Economic Myths (A Reality Check)
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Transcript of Economic Myths (A Reality Check)
Economic Myths(A Reality Check)
Presented by:
Fr. Fran Hezel & Chris Lightfoot
Economic Myths
1. Population Growth is a Problem
2. Out-migration Causing Brain Drain
3. Fisheries: Hundreds of Millions there for the Taking
4. Tourism: Build it and they Will Come
5. Agriculture: Under-performing
6. FSM must be Domestically Self-Reliant
7. Poverty is Prevalent / Non Existent
Myth #1
Population Growth is a Problem
Myth #1: Population Growth is a Problem
FSM Resident and Non Resident Population
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
194
5
195
0
195
5
196
0
196
5
197
0
197
5
198
0
198
5
199
0
199
5
200
0
Non Resident Population (est)
Resident Population (Census)
Source: Various Population & Housing Census from 1935 to 2000; consultants own calculations
FSM Resident and Non-Resident Population
Myth #1: Population Growth is a Problem
1987 1995 2004
In FSM 12,209 16,003 15,156
Overseas (est) 729 2,063 7,947
-
5,000
10,000
15,000
20,000
25,000
FY87FY88
FY89FY90
FY91FY92
FY93FY94
FY95FY96
FY97FY98
FY99FY00
FY01FY02
FY03
FY04e
Num
be
r E
mp
loye
es
Source: FSM Department of Economic Affairs. Note: e- data are estimates.
In FSM
Overseas
Wage & Salary Employment(all sources)
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
FY87FY88
FY89FY90
FY91FY92
FY93FY94
FY95FY96
FY97FY98
FY99FY00
FY01FY02
FY03
FY04e
Person per FSM jobs
Persons per total jobs
Persons per Job
1987 1995 2004
FSM Jobs 7.8 7.2 9.2
Total Jobs 7.4 6.4 6.1
Myth #2
Out Migration is Causing a Brain Drain
Myth #2: Out Migration is Causing Brain Drain
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Pro
po
rtio
n o
f P
op
ula
tio
n
High School Graduates x Place of Residence(2000)
In FSM Overseas
36.0%
53.0%
College Graduates x Place of Residence(2000)
In FSM Overseas0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Pro
po
rtio
n o
f P
op
ula
tio
n
5.0%
2.0%
Myth #3
Fisheries: Hundreds of Millions there for the Taking
Myth #3: Fisheries: Hundreds of Millions there for the Taking
Profit & Loss in FSM Public Owned Fishery Enterprises
Source: Matthew Jacobs, (2002) Micronesian Counsellor, Issue 40.
-$2.2m
-$5.4m
-$8.6m
-$2.7m
-$2.1m
-$6.1m
-$0.02m
-$10.0m
-$9.0m
-$8.0m
-$7.0m
-$6.0m
-$5.0m
-$4.0m
-$3.0m
-$2.0m
-$1.0m
$0.0m
1993 1994 1995 1996 1997 1998 1999
Myth #4
Tourism: Build it and They Will Come
Myth #4: Tourism: Build it and They Will Come
TourismInternational Arrivals
18,15917,083
14,275
15,512
20,038
15,494
18,700 18,49618,004
0
5,000
10,000
15,000
20,000
25,000
1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: FSM Department of Economic Affairs
Myth #5
Agriculture: Under-performing
Myth #5: Agriculture - Underperforming
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
FY87FY88
FY89FY90
FY91FY92
FY93FY94
FY95FY96
FY97FY98
FY99FY00
FY01FY02
FY03
FY04e
Subsistence Share of Economy
Source: FSM Department of Economic Affairs
Myth #5: Agriculture - Underperforming
Commodity 1992 1993 1994 2000 2001 2002 Copra 222 0 390 186 201 211 Banana 278 754 456 72 33 26 Citrus 15 8 9 44 23 28 Kava -- -- -- 152 160 241 Betel Nuts 94 267 252 625 908 888 Black Pepper 32 36 95 -- -- -- Root Crops 11 85 91 30 17 4 Other Fam Commodities 306 530 327 30 25 30 Total Agriculture Exports 958 1,680 1,620 1,139 1,367 1,428
Marine Products Offshore Fish 19,485 25,217 73,573 12,143 12,100 8,796 Reef Fish -- -- -- 75 101 110 Crab/Lobsters 65 75 97 172 178 206 Trochus Shells/Meat 524 3 430 -- -- -- Other Marine Products 39 30 13 42 3 26 Total Marine Exports 20,113 25,325 74,113 12,432 12,382 9,138
Other Products Garments 2,045 2,055 2,161 3,010 4,391 3,591 Handicrafts & Souvenirs 35 85 240 9 11 11 Cooked Food -- -- -- 191 232 251 Other Products N.E.C. 168 24 39 6 17 22 Total Other Exports 2,248 2,164 2,440 3,216 4,651 3,875
TOTAL EXPORTS 23,319 29,169 78,173 16,787 18,400 14,441 _____________________ Source:FSM Trade Bulletin No.9, Department of Economic Affairs, Statistics Unit, November 1998.
Exports ($ ‘000)
Myth #6
FSM must be Domestically Self-Reliant
Myth #6: FSM Must be Domestically Self-Reliant
Imports and Exports
-$160.0m
-$140.0m
-$120.0m
-$100.0m
-$80.0m
-$60.0m
-$40.0m
-$20.0m
$0.0m
$20.0m
$40.0m
1994 2004200320022001200019991998199719961995
Imports
Exports
Myth #6: FSM Must be Domestically Self-Reliant
Current Account Balance
$6.5
$35.4
$18.9
-$5.7 -$5.1
$4.7
$0.7
-$11.9
$16.2
$3.9
-$23.9
-$30.0
-$20.0
-$10.0
$0.0
$10.0
$20.0
$30.0
$40.0
FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
US
$m
Myth #6: FSM Must be Domestically Self-Reliant
“The Prescription” • Rule of Law Enforced• Stable Government• Functioning Markets• Non-Discriminatory Laws• Transparent & Consistent Governance• Secure, Transferable Property Rights in Land• Harmonised & Straightforward Investment
Procedures
Myth #7
Poverty is Prevalent/Non-Existent
What Does the Future Hold?Likely Outcomes• Remittances become a major source of income• Household production remains important support for
livelihoods• Extent of Government services will be closely linked to
Compact funding • Fishing Licence Fees Significant but Highly Variable
Possible Additional Outcomes• Increased Tourism• Development of Small Niche Industries
Likely Impact on Livelihoods
• No Significant Change in Livelihoods of FSM Residents• Increasing number of families moving overseas to find
work
Where to now?
What Should be Done?• Initiate Strategies to Increase Value of
Remittances• Establish Conducive Environment for Investment• Ensure Compact Trust Fund Achieves Potential
What Should Not be Done?• Pursue investment fantasies using limited Gov’t
funds• Allow the size of Gov’t to grow to unsustainable
levels