The Solomon Islands is on track to receive a major economic boost in the run up to the Pacific Games being hosted in November and December this year. Business Advantage PNG reviews the major infrastructure spend in the lead-up to the Games, plus other investments and opportunities that are driving its economy forward.

The main stadium for the Pacific Games in Honiara, which are set to start on 19 November. Credit: Pacific Games 2023

Like most Pacific Island economies, the Solomon Islands has faced multiple challenges in the aftermath of the COVID-19 pandemic and the ongoing turbulence in geopolitics.

According to the Central Bank of Solomon Islands, its economy contracted by 3.6 per cent last year, with an average contraction of 2.5 per cent across all sectors.

However, bank Governor Dr Luke Forau can see definite signs of recovery, with his team predicting 2.1 per cent medium term growth. Forau expects headline inflation to remain high (over 5 per cent for now) before easing to 3 per cent by year end.

While foreign reserves are sufficient to cover imports for 10 months, well above the six-month threshold, this is primarily due to donor funds rather than trade or investment.

Agriculture, fisheries and mining upside

The Central Bank of Solomon Islands’ Dr Luke Forau

Assuming the country can successfully exploit its potential to build volumes in cocoa, coconut, and palm oil, Forau foresees agriculture exports tripling in the next five years.

He also envisages good recovery in fisheries. According to the International Finance Corporation – the lead investment advisor to the Fisheries Ministry – new investment in fisheries, including the multi-million-dollar tuna processing plant in Malaita Province, will boost revenues by S$3.5 million and create 5,000 new jobs.

In addition to being a major supplier of tuna globally, the Solomon Islands’ mining industry also remains a key driver of economic growth. Forau notes a positive outlook for the sector: the country’s gold, copper and nickel resources have attracted significant foreign investment and,  according to government sources, there are signs of fresh investment.

‘Long-term private investment will need to complement public investment to drive future growth’

Overall, ANZ Bank’s Pacific Economist Kishti Sen expects the country’s post-pandemic recovery to be slower, compared with other Pacific Island markets where tourism is a key driver of economic activity. But while visitor arrivals in the first two months of this year were 33 per cent down on the comparable period in 2019, the economy is benefitting from growth in inward remittances from seasonal workers engaged in Australia.

Major infrastructure spending

The mascot of the 2023 Pacific Games is a turtle. The character aims to bring awareness for endangered turtle. Credit: Pacific Games 2023

Assuming the 2023 Pacific Games can attract an expected 5,000-plus visitors in November and December this year, the government estimates around A$60 million in tourism revenue. (By comparison, the last Pacific Games in Samoa brought in A$45 million into its economy.)

The overall spend for the Games is A$540 million for construction and renovation of sports facilities, roads, airports, and other infrastructure necessary for the successful hosting of the event with athletes from 24 nations.

Kishti Sen expects the current infrastructure spend, along with significant private sector investment in accommodation and tourism – plus the reduced cost of doing business – to accelerate the country’s transition to a balanced economy.

‘Solomon Islands can have a thriving mixed economy sooner than some of its Pacific neighbours,’ he suggests.

Aftermarket potential

As one the country’s single biggest aid donors (A$161 million in 2021-22), Australia provides financial and technical assistance to significant infrastructure projects in sustainable energy generation and building climate resilience, plus roads and ports.

The long-awaited Tina River hydropower transmission system alone has A$32 million invested from the A$1.2 billion Australian Infrastructure Financing Facility for the Pacific. 

Sen also believes there’s significant scope for the Solomon Islands to build sub-contracting capacity, given the abundance of human resources. Other infrastructure developments aside, he expects the Pacific Games infrastructure alone to require facilities management for years, which can be provided by a locally-trained workforce.  

However, to best capitalise on these opportunities, Governor Forau reiterates the need for a post-Games financial strategy to manage these facilities and opportunities.

‘Long-term private investment will need to complement public investment to drive future growth,’ he says.