What are economists for in the Pacific region?

I want to discuss in this post the role of economists in SPC’s work. Perhaps this may have relevance for those working for Pacific Island governments as well. Please be warned: these are the disjoined ramblings of a young applied economist (me) trying to learn by doing and I would welcome any feedback from those who have been in this for longer than I have. I hope to touch on the following areas in this post:

  • What is economics for?
  • How should we do it in the real world to make an impact?
  • Examples of CBAs that I am doing or are on my long list

I would really welcome feedback on these questions, either as a comment or in my email inbox.

Economics for poverty alleviation and promotion of economic wellbeing

Some have been tempted to dismiss economic development in the Pacific region as an unimportant policy priority in the midst of a culture in which so many transactions are non-market, and in which the most common Non-Communicable Diseases such as heart disease and diabetes stem from abundance rather than scarcity. But poverty is a stark reality in the Pacific in which up to 40% of the population cannot meet their basic needs: an ADB report I read once put the proportion of people in Pacific Island Countries below a basic needs poverty line at between 16% (Vanuatu) and 39.6% (PNG, with three other countries at over 30%) with data missing for a few other countries or territories. Moreover, in relation to the relevance of economics, it is a reality that the Pacific region is becoming more market-oriented, and I don’t believe there is a good reason to neglect that element of human interaction just because non-market transactions through family, community and church are also highly significant here.

Economics can do much to advance poverty alleviation and economically smart policy implementation for greater economic benefit for lesser cost (and policy-making, but that’s not SPC’s job) in the Pacific region as long as we have a strategic approach and the discipline is well used.

Easier said than done

However this role of poverty alleviation and advancement of economic welfare through economic analysis is much much easier said than actually achieved, and the route to impact is often diffuse and does not give immediate satisfaction. It’s really hard and it takes a long term view. In a situation of data scarcity, with project leaders who don’t have the time or spare capacity or perhaps budget, if that is required, to go out and search for the data needed for economic analysis, it is easy to ignore the economics and focus on the ‘doing’ – getting those training workshops done or budget released for this or that building project or seeds disseminated or documents prepared.

But I think a good way forward for economists may be to find to somehow find those pieces of analysis whose results will be strategically positioned to make an impact in the future, and to integrate the use of economics more readily into the way we do business as a matter of course, so that opportunities for strategically placed analysis make themselves apparent. It is also important that there is a demand from key stakeholders for a certain piece of analysis otherwise it will not be listened to.  I understand that both the demand and the supply for cost-benefit analyses have been growing in the past ten years in the Pacific region. 

Perhaps the choice of strategically positioned CBAs for which there is a clear demand, could be achieved by sufficiently regular consultation between the economists and the program/project managers plus some process or criterion of prioritisation. Prioritising is important because it’s no use trying to do cost benefit analyses (CBAs) for EVERY project – with some CBAs you are simply going to have no impact, and with others, the cost of doing a CBA itself will be too high, so you have to pick the most important ones. And in terms of criteria of prioritisation of effort, the following factors should be considered:

  • larger sums of money
  • more people
  • more people living below a basic needs poverty line
  • similarity to other future projects which the analysis can inform
  • feasibility of analysis and availability or ease of collection of data
  • demand from key stakeholders

I list some examples below of work that I have found that needs to be done (although I don’t have the capacity to do it all!) relating to Land Resources Division, at least some of which I think could be useful.

How does economics tie in with the project cycle?

The scarcity of economists in the region made itself particularly apparent to me when I was asking myself questions about the exact nature of my own role back in early 2011, and was referred by another SPC economist to the UK Treasury’s Green Book which is essentially a handbook to the use of economics in government policy in the UK. The book makes clear that the use of a staple tool of economics, cost-benefit analysis, is at the heart of the monitoring and governance of much of what the UK civil service does.  Indeed, the Treasury states that “all spending proposals should be accompanied by a proportionate and well structured business case”.  You may be thinking that the UK is not a good comparison at all to the Pacific region – and be assured that I am not comparing it directly; moreover the Green Book may seem a terribly dull document.  But here in Suva I read it from cover to cover and found it a very useful starting point for thought. I say starting point because in the Pacific one can never just lift a policy ‘off the shelf’ and apply it, it must be adapted to context.  So I adapted the following diagram from the book which shows how economics work can mesh into the program or project cycle.

The project cycle is often not as linear as this but this is a reasonable representation.  It can apply to policy implementation anywhere in any country.  The economics points on the right are not all 100% necessary – indeed in the Pacific and with relatively small projects in terms of budget size it is either impractical or too costly to conduct all the steps for every project, particularly smaller ones.  This is why it is important to select those pieces of analysis that are likely to have the greatest impact; indeed as Resource Economist in LRD I have found that selection of the right pieces of analysis is a skill in itself and requires broad consultation and judgment.

Here are some examples either of my work or the long list of work that I have in my back pocket to do when I get round to it:

Projects I shall be working on in the next few months

This is not an exhaustive list:

• A cost-benefit analysis of Fair Trade certification of sugar in Labasa, Fiji Islands, that could shed light on the decision to extend fair trade certification to the rest of Fiji sugar.

• A cost-benefit analysis, from the farmers perspective and the perspective of a cocoa supplier, of Fair Trade certification of cocoa beans in Solomon Islands

• A cost-benefit analysis of the work of the EU-Facilitating Agricultural Commodity Trade to assist a cocoa supplier in the Solomon Islands

• A cost-benefit analysis of three different production methods of virgin coconut oil and possibly socioeconomic analysis (analysis of the distribution of the benefits) of each.

• Tonga Household Income and Expenditure Survey Data – poverty analysis, food consumption trends, nutrition analysis

• Fact-finding missions to fill in agricultural and forestry-relevant development indicators with relevant data, to Tonga, Samoa and Solomon Islands.  An LRD colleague is covering 3 other countries.

Projects that I discovered through interviews with the LRD Coordinators back in June that may be in the pipeline in future:

• Paper highlighting the economic and possibly the nutritional importance of increasing domestic consumption of domestically produced food as a % of total food consumption, and taking into account what drives consumer behaviour (probably convenience) when substituting for imports

• Study on agrobiodiversity and economic risk – how much agrobiodiversity is needed before economic risk/risk to sustainable livelihoods is decreased to an acceptable level?

• Cost analysis of imported foods versus locally produced foods

• The benefits vs costs of Integrated Pest Management vs no IPM

• Post-project impact assessment of ACIAR Taro beetle project which finished 2 years ago.

• ACIAR – Developing cleaner export pathways project: relatively simple assessment of costs and benefits of different production methods in the taro supply chain, for example: Use of crates vs bags between the farm and the pack house; Use of hot water treatment vs paying for fumigation

• CBA of an animal disease prevention strategy: would the expected benefits in terms of insurance against a pandemic, justify the costs?

• An investigation of the impact on farmers profit over time of sustainable land use practices. Would either require a large dataset or a case study of 8 farms – 4 sustainable, 4 business-as-usual – describing their costs and profits over a period of time e.g. 5-10 years. Same could be repeated in 3 or 4 countries – Polynesia, Micronesia, Melanesia.

I have put it all out there – I hope this has enlightened about how I see the role of economics in the Pacific region – I would welcome any feedback!

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