The Cook Islands is one of the Pacific’s success stories – but that success comes with its own challenges. Sam Sachdeva reports from Rarotonga on the buoyant state of the country’s economy and how that may affect its future.

The appeal of Rarotonga is impossible to miss.

Arriving at the island’s airport, Prime Minister Jacinda Ardern was greeted with the most boisterous reception of her Pacific trip, dancers and drummers abounding.

That atmosphere continued the next morning, with older women in an array of colourful clothing shimmying with delight as she walked in.

The people are not the only thing in fine form: an MFAT-commissioned report offered praise for the Cook Islands in 2016, saying it had “strong ownership of its development agenda” and was the least economically dependent of the three realm countries.

The country was the highest-performing small island state in the Pacific from an economic and human development perspective, the report said, with a GDP per capita of nearly $20,000 – “the third-highest in the region outside Australia and New Zealand”.

Cook Islands Chamber of Commerce executive director Lynne Samuel says the country’s economy was performing well, with a mentoring programme run by the organisation enlisting close to 400 businesses.

“They [the mentors] were seeing they can feel the atmosphere there, the buoyancy there …

“When they first came up it was damage control, now it’s getting them to expand businesses.”

A large part of that success is due to the country’s booming tourism sector: while in Rarotonga on Thursday (NZT), Ardern and her delegation took a trip around Muri Lagoon on “Captain Tama’s Lagoon Cruizes”.

‘The problem of success’

However, that strong economic performance brings a financial cost of its own.

The OECD is set to “graduate” the Cook Islands’ status from a developing country to a developed one by the end of the year.

That reclassification could make the country ineligible for financial support through the OECD’s development assistance committee, which provided the Cook Islands with US$51 million in funding for the 2017/18 financial year.

The country’s foreign affairs secretary Tepaeru Herrmann described the graduation to The Guardian as a “worst-case scenario”, saying the Cook Islands would be different from other developed countries due to its susceptibility to natural disasters.

“Graduation is not something that we’re scared of. For us, it is a compliment: it is an assurance, a confirmation that we are doing the right thing.”

However, Cook Islands Prime Minister Henry Puna was more optimistic when addressing the media with Ardern.

“Graduation is not something that we’re scared of,” he said.

“For us, it is a compliment: it is an assurance, a confirmation that we are doing the right thing, we’ve been on the right path for a while now, and our economy is on sound footing.”

For her part, Ardern said any change in status would not change the “unique” relationship between New Zealand and the Cook Islands.

“Often of course the concern is that aid withdraws at that point – from New Zealand’s perspective, that won’t happen.”

However, she would not be drawn on whether New Zealand would have to pick up the shortfall in the event of other aid dissipating, saying it was “a future conversation” for the two governments.

Jacinda Ardern is helped off a boat following a tour of Muri lagoon. Photo: Sam Sachdeva.

In the present, New Zealand is playing a major role in one of the Cook Islands’ largest ever infrastructure projects, Te Mato Vai.

The $60 million project is intended to deliver reliably clean drinking water to all of Rarotonga, replacing the pipe networks and upgrading water intakes.

It is also a tripartite aid project, with a $21m loan from China’s Eximbank accompanying $15m in New Zealand aid.

It has not been without its problems: in 2016, work stopped after landowners expressed grievances over a lack of consultation.

During his recent “Pacific reset” speech in Sydney, Foreign Affairs Minister Winston Peters said Te Mato Vai was “a rather bad example” of the benefits of trilateral aid projects.

“I can’t say why now but that’s a Chinese project and we’ve got problems is all I can say, big problems…

 “We can see a huge aid bill coming for us that should never have happened.”

“They grossly overvalue their work, and it’s shoddy workmanship – they may say it’s $12 million, then we get it valued at $3 million, so we’re signed up for a loan at $12 million then it falls apart in 12 months and they’re back here.”

Peters told Newsroom there was “serious testing” going on to determine the condition of the upgraded network, with some concerns around the quality of the Chinese construction.

“I’d have to be sure that the Chinese government knew about this…they may not be, and I don’t want to rush to judgment until I know.”

Samuel said she was aware of concerns about other Chinese-built projects in the Cook Islands, such as the police building and the justice department.

“They grossly overvalue their work, and it’s shoddy workmanship – they may say it’s $12 million, then we get it valued at $3 million, so we’re signed up for a loan at $12 million then it falls apart in 12 months and they’re back here.”

Puna conceded there were “some real concerns” about Te Mato Vai, but said it was too early to determine the extent of any problems.

“We are going through a process in order to establish those concerns on a very solid footing before we look at all the options that may be available to us…

“[Testing] will be completed at the end of this month, and that’s when we’ll be in a firm position to have a look at our options.”

Cook Islanders in New Zealand wanting to return home in old age will find plenty to smile about in the Government’s superannuation changes. Photo: Sam Sachdeva.

Then there is the common Pacific issue of depopulation, with about 62,000 Cook Islanders in New Zealand and only 15,000 on the Cook Islands itself.

Samuel said it was important to attract “the young ones” back to the country after they attended university in New Zealand, although she conceded that could be a difficult challenge.

They get over there [New Zealand] and see they can start on $25 an hour, but if they come back here and see the minimum wage is $7.”

For the older population, there has been a significant victory, with the Government agreeing to ease superannuation residency requirements for the three “realm countries” with New Zealand citizenship (the Cook Islands, Niue, and Tokelau).

Samuel believed the policy change could hold appeal for many Cook Islanders who currently call New Zealand home.

“You get to 50 and think, ‘You know, how many years have I got left, let’s look for an easier life’.

“ ‘I can go back to Raro and get some family land which costs nothing, only a little bit of legal fees, and I can build up here and I can work’, and I think that is going to help the economy greatly.”

How the Cook Islands balances that economic success with a change of development status remains to be seen.

Sam Sachdeva is Newsroom's national affairs editor, covering foreign affairs and trade, housing, and other issues of national significance.

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