Diversification of the local economy could be the best thing to come out of the Covid-19 crisis, says Fletcher Melvin.
The Private Sector Taskforce chairman quoted Winston Churchill: “Never let a good crisis go to waste”.
He is urging businesses and government to start working on plans to look into investing in other industries apart from tourism.
Tourism, which contributes to about 70 per cent of the country’s gross domestic product, has taken a major hit from the Covid-19 crisis.
Melvin, who is also the head of the Chamber of Commerce, said reviving and stabilising the tourism industry was the immediate concern.
But he said equal attention should be given to longer term diversification of the local economy in order to be better prepared for future crisis.
“In our view the priority is to get people back to work, that’s short term, and to get the economy going again, get tourism back working. We know it is going to take so long to get back to where we were,” Melvin said.
“While that’s happening, we can actually put an emphasis on what are people doing in terms of supporting innovation, in terms supporting diversification because that’s the way we need to look at things now after this crisis.
“We recognise diversification is a long term commitment but we need to start at some point and I think this is the starting point, we should start now.”
Financial secretary Garth Henderson said diversification is a key part of the 10-year economic development strategy, announced last year.
“Diversification is not going to happen overnight. We shouldn’t be wasting our time on wild shots. Every time someone comes with a bright idea with no substance, if you have to go and fill it up, it’s a waste of time and resources,” Henderson said.
“There is time for it, and it’s not now. The reality about diversifying the economy in the next six to 12 months is not going to happen. We can look at what will work, research and collect the data and then we can come up with a game plan.”
Melvin conceded it would take up to 30 years for any other industry to develop and start contributing to the economy.
However he said the seed should be sown now in order to reap the benefits sooner than later.
Melvin said local companies which mostly relied on tourism were now looking into their websites to gain excess to the outside world.
His company Island Crafts have revamped their online presence, selling locally made handicrafts in international market.
“There are two other companies I know that are doing exactly the same thing, everybody are being forced to look at their websites. These are websites that have existed in the past but done small business and now they are the only window or door to the outside work.”
Opening language or medical schools in the Cook Islands and establishing a performing arts platform targeting online users could be other industries they could diversify into, he said.
Melvin also said government needs to start investing into a sovereign wealth fund from the returns they receive from the tourism and other industries for rainy days.
He used Norway as an example after the country who is world’s biggest sovereign investor decided to withdraw about $61.2 billion from its wealth fund to generate cash to offset the Covid-19 crisis.
“Norway took part of their funds from their major income earner which is oil and they invested into sovereign funds. I think the lesson there is when our oil, which is tourism, comes back, we need to make sure part of our funds are put in sovereign funds.
“As new industries come along, part of that is also put in our sovereign funds. I believe government have talked about it but it needs to happen sooner than later.”
Garth Henderson said they did consultations about sovereign wealth funds four years ago.
“To set up a sovereign wealth fund, you have to have wealth and that wealth was supposed to come with seabed harvesting programme we were running. What you do, you capture some of the returns from seabed harvesting and put it into the sovereign wealth fund for investment for future generation.
“Clearly we are not in the position now with a wealth fund but all the planning work has been done.”