The Militant(logo) 
    Vol.60/No.21           May 27, 1996 
 
 
Bosses Press Austerity In Pacific Island Nation  

AUCKLAND, New Zealand - The South Pacific nation of the Cook Islands, a former colony of New Zealand, is in a state of near financial collapse. The Cook Islands government has already defaulted on loans to Nauru and New Zealand. Nauru, another Pacific island nation, is itself on the verge of defaulting on bonds sold in Japan.

The government of New Zealand, which ruled the Cooks as a colonial possession until the islands declared independence in 1965, has refused to provide any further aid until the Cook Islands government implements a financial austerity plan that meets Wellington's approval. The residents of the Cook Islands, a nation of 18,000, are New Zealand citizens, and Wellington retains control of military and foreign affairs there.

The New Zealand government decided on a policy of "tough love," Foreign Minister Don McKinnon said, accusing the Cook Islands government of "profligate spending."

On February 28 McKinnon rejected a request by the Cook Islands Ministry of Finance and Economic Management for a $10 million emergency loan, demanding an austerity plan instead.

Cook Islands prime minister Geoffrey Henry outlined a plan on March 21 with an immediate across-the-board wage cut of 15 percent for government employees, "user-pays" charges for government services, and the sale of some state enterprises and houses. But McKinnon demanded harsher measures.

More deep-going cuts were announced April 23. These included a further 50 percent pay cut for all state workers in May and June. This means that in those months a primary school teacher, for example, will earn NZ$70 per week (NZ$1 = US$0.67), down from $155 per week in January.

A bailout proposal by the Asian Development Bank calls for 1,800 of the country's 3,000 state workers to be laid off as a precondition for new loans.

The financial crisis is being felt in other ways as well. Cook Islands television has been struggling to provide four hours of broadcasting a night since Television New Zealand refused to supply programs. TVNZ is reportedly owed $235,000. Petrol and medicines are reported to be running short. Lines form early on government paydays, for fear that the banks will run out of cash.

In 1994 the major Australasian banks Westpac and ANZ forced the Cook Islands government to withdraw the recently introduced Cook Islands currency, replacing it with strictly rationed New Zealand currency.

For most of this century the Cook Islands economy was based on exports of citrus fruits and pineapples. But in recent years these industries have declined, unable to compete with the cheaper products of Australian agribusiness, and tourism has become the mainstay of the economy. The last decade saw the number of tourists rise steadily to a high of 57,000 in 1994.

But last year tourism fell by 15 percent. Cutbacks by the airlines servicing the Pacific region ended flights to the Cooks from the United States. And a rise in the New Zealand dollar made it cheaper for tourists from New Zealand to travel further away.

The tourism crisis is epitomized by the huge, unfinished Cook Islands Sheraton Hotel. The project was left two-thirds finished in 1993 with debts of NZ$75 million - more than half the country's foreign debt. It is expected to be offered for sale, complete with a casino license, for about NZ$26 million - one- third of its replacement cost - along with two other state-owned hotels. McKinnon described the sale of the hotels as "a positive step."

Meanwhile, the financial instability of the Cook Islands is having political repercussions in New Zealand.

One of the means by which the Cook Islands government sought to solve its mounting financial difficulties in the late 1980s was to set up a tax haven for wealthy businessmen. Several major New Zealand companies took advantage of this scheme, including the Bank of New Zealand, merchant bankers Fay and Richwhite, and Brierley Investments.

In 1992 rightist politician and Member of Parliament Winston Peters began clamoring against this scheme, presenting Parliament with "a winebox full of documents" that he claimed were evidence of tax evasion and other corrupt financial operations by these corporations. Peters demanded a public inquiry.

The subsequent "winebox inquiry," and the reluctance of both the Cook Islands government and the corporations concerned to cooperate with it, have been a long-running issue in New Zealand politics, raising accusations of corrupt practices by the New Zealand Audit Office, and bolstering Peters's efforts to portray himself as a fighter against corruption. Peters is now the main leader of the right-wing New Zealand First party, which devotes much of its demagogy to railing against immigrants from the Pacific Islands and Asia.

Asserting that "the Cook Islands was instrumental in a massive raid on this country's revenue," Peters said that if the government of that nation did not cooperate with Wellington's inquiry, the New Zealand government should limit financial aid to it.

James Robb is a member of the Meatworkers Union of Aotearoa in Auckland.  
 
 
Front page (for this issue) | Home | Text-version home