Paradise, the Samoan way

Samoa is a leader in another way. It has a population of about 196,000 people and limited resources, which have to be nurtured to guard against future shocks such as the next cyclone and new threats such as climate change.

This year's cyclone season – which runs from December to the end of April – was relatively quiet although two post-season cyclonic systems in May were closely watched. After all, the 2008 global financial crisis was followed by a tsunami a year later and a cyclone in 2012.

As the Asian Development Bank puts it, Samoa’s main challenge is to "maintain macroeconomic stability while responding to disasters and fluctuations in the global economic environment”.

Within your means

"As Samoa is vulnerable to disasters, it requires sufficient fiscal and foreign exchange buffers to finance disaster response and recovery," the ADB says.

For its part, the government is looking to rein in its budget deficit this financial year to be within the medium-term target of 3.5 per cent of GDP, which fits the Prime Minister's mantra of "living within your means".

"That's very, very important," the Prime Minister told bluenotes."You overspend in the budget and you can easily run out your foreign reserves and at the same time you fail to meet your international obligations debt-wise.

“On top of that there's the question of capacity. Although Samoa has high marks on capacity compared to other small island states in the Pacific, we still much to build up our capacity."

The Prime Minister is also canny in attracting international aid and more recently the concessional loans offered by China to small Pacific nations mostly used to fund infrastructure.

He is bullish about an ambitious, Chinese-backed proposal to shift Apia's port to a new location in a mixed development which would attract cruise ships, although there are sceptics about it within the local business community.

Samoa's economy has been travelling quite well, with real GDP growth last year of around 7 per cent, due to a new fishing venture and strong visitor numbers.

Growth is expected to fall this year to about 2 per cent, partly due to the closure of an automotive component maker, Yazaki, which supplies Toyota's soon to be shuttered Australian car plant.

Dissatisfaction

During the interview, the Prime Minister expressed strong dissatisfaction with the government's Virgin Samoa airline joint venture with Virgin Australia (a major local tourism operator, the Grey Investment Group, also holds a small stake).

He argues Virgin was focused on profitability while the government wanted more flights. Last month, these differences crystalised when the government told Virgin it was ending the joint venture.

The government is keen on reviving long-distance flights by a small, government-owned carrier, Polynesian Airlines, which has been restricted to short hauls to neighboring islands. Its operations were curtailed after a financial squeeze in the 1990s caused by directly leasing a Boeing 767 for flights to the US.

While the PM is confident about the future of Polynesia Airlines and for potential code-sharing with other carriers, the tourism industry needs bums on aircraft seats to keep earning almost $A400 million a year from tourism.

About 90 per cent of airline passengers to Samoa are said to be "VFRs" – visiting friends and relatives, rather than overseas tourists. The government has just opened a flash new airport terminal (with Chinese funding) and big hotel projects have come on line in Apia.

The biggest name in Samoan tourism is the Grey family, whose matriarch, the late Aggie Grey, began with a modest hotel and bungalow in the 1930s. The family now has the Sheraton Samoa Aggie Grey's Hotel in Apia, along with other interests.

Fred Grey, Aggie Grey's grandson and a director of the family company, believes more money should be spent marketing Samoa as a tourist destination and improving infrastructure to boost demand, while operators focus on lifting service standards.

"In general there needs to be more focus on activities for tourists and while there is an abundance of high quality aquatic activities, for example, it is not something Samoa is yet famous for," Grey said.

"On the supply side Samoa cannot grow its tourism sector until tourists have viable means of getting to Samoa. At present there are limited flights into and from Samoa. In particular there is a lack of cheap airfares from existing airlines."

Furthermore, Grey argues Samoa has to look beyond its traditional Australian and New Zealand markets to establish routes from Asia and the US.

"Flights from Asia and the USA would assist Samoa in growing its tourism sector generally but also solve the historical issue for operators in that Samoan tourism operators have historically had a crippling low season in the Southern hemisphere summer."

Remittances

Meanwhile, the Central Bank of Samoa is concerned about the future of remittances sent home to their families by members of Samoan diaspora – mostly in Australia, New Zealand and the US – which runs at around $A390 million a year.

The CBS Governor, economist and lawyer Maiava Atalina Emma Ainuu-Enari, says the Pacific is seen as a high-risk region for money laundering, particularly in the US, which caused tensions and scrutiny among correspondent banks and international monetary authorities.

These concerns saw Australian and New Zealand banks (including the ANZ, publisher of bluenotes) close many accounts of Money Transfer Operators (MTOs), which are typically cheaper than bank transfers.

Governor Enari argues decisions on each MTO should be made case-by-case rather than via wholesale closures of accounts, which has raised concerns over Samoans returning from overseas carrying more than the legal cash limit of 20,000 tala (about $A10,500).

She argues Samoan authorities have worked closely with Anti-Money Laundering (AML) and Anti-terrorist Financing (ATF) compliance programs, while Australian and New Zealand regulators looked at money transfers out of their jurisdictions.

"But really, it's a development-financing issue," Enari told bluenotes.

"It's our lifeline, that’s why we are so passionate about it. It's about 20 per cent of GDP."

The Governor argues the closing of MTO accounts also hurts the push for financial inclusion in the Pacific because they had a presence in rural areas where banks did not have their own infrastructure.

Her argument – which applies to other Pacific countries such as Fiji, Tonga, PNG and Vanuatu - fits in with changed guidelines issued by the Bank of International Settlements.

The BIS says a decline in the number of correspondent banking relationships is a concern because it may hinder international payments, or drive some payment flows underground, with consequences for growth, financial inclusion, and the broader financial system.

Cost-effective

ANZ's regional country manager of Samoa, Tonga and the Cook Islands Bernie Poort says the international banks, including ANZ, need to do more to enable affordable remittance solutions for Pacific Island countries.

Poort says the intention was never to purposely exclude money transfer operators but to comply with international law around Know Your Customer rules and Anti-Money laundering.

"ANZ are focused on finding a cost effective solution from Australia and New Zealand and we can look forward to some positive announcements in this regard over coming months," he said at the time.

(Post my visit, on 30 June, ANZ announced it had reduced the fees for international money transfers from Australia to five pacific nations, including Samoa, from $A32 or $A18 depending on how the remittance was sent, to a standard $A9.)

The final word should go to Prime Minister Tuilaepa - who has held office since 1998 – which makes him the elder statesman of the South Pacific since the retirement of PNG founding father, Sir Michael Somare.

The PM will chair the meeting of the Pacific Islands Forum in Samoa later this year, an event often marked by disagreement in years gone by.

Yet all Pacific countries and territories are united in the need for action on climate change, and were deeply upset by US President Donald Trump withdrawing his country from the Paris agreement.

Prime Minister Tuilaepa's message to Australia and New Zealand is to remember island countries are at the forefront of the fight against climate change.

It's a message which resonates across the Pacific and has grown louder with Fiji's presidency of the UN's COP23 climate change conference in Germany later this year.

"It means we are the first ones to go," the Prime Minster says. "When all these events do take place that follow the warming of the atmosphere and the sea level does rise, it means very likely over 50 per cent of our islands are sunk for good."

"Very likely there will be no more Tokelau, there will be no more Kiribati, there will be no more Tuvalu. And a lot of Tonga will be underwater."

"So, the vulnerability of the Pacific islands countries in the face of climate changes is still a major concern for all of us. And we would like New Zealand and Australia to give priority to climate change-related developments in their aid program over the next ten years."

And what about tourism?

"I have the same message,” he says. “This is the remaining paradise of the Pacific, come and see before it disappears."

Mark Skulley is one of Australia’s most-respected business journalists, a veteran of more than two decades at Fairfax Media including The Australian Financial Review. He travelled to Samoa with ANZ to run journalism classes for local journalists.