‘OECD got it wrong’ – Henderson

Monday October 02, 2017 Written by Published in Local
Financial secretary Garth Henderson says the OECD’s case for Cook Islands graduation to developed status was fl awed. 17100204 Financial secretary Garth Henderson says the OECD’s case for Cook Islands graduation to developed status was fl awed. 17100204

The Cook Islands’ controversial graduation from Official Development Assistance (ODA) has been delayed until 2018, due to the absence of adequate data to support it.

 

And last week at USP, Financial Secretary Garth Henderson and former IMF and Australian Bureau of Statistics member Geoff Robertson discussed why they believed the Organisation for Economic Co-operation and Development (OECD) incorrectly assessed the case they made for the country’s graduation.

“In 2015 the government became aware that we were on the OECD graduation list, which assists countries based on their gross domestic income (GNI),” Henderson said.

“The OECD felt that we’d graduate from Official Development Assistance programme, effectively making us a recipient of aid no more.

“In 2016, we brought Dr Geoff Bertram over, through the assistance of New Zealand funding, and his role was to undertake an analysis of the possible implications of graduation.

“He looked at the economic statistics, and questioned them, and his assessment was that they were inadequate, and the Cook Islands should not be graduating.”

Bertram’s argument was that OECD uses a country’s GNI to determine their income status, something that the Cook Islands doesn’t have a measure for.

“They were basing it on gross domestic product (GDP) to determine the graduation status, which is wrong,” Henderson said.

“Throughout 2017, the Finance minister (Mark Brown) has worked with New Zealand’s ministry of Foreign Affairs and Trade, and we looked at crafting an argument to delaying graduation, based on the absence of GNI data.

“At that time, we were not clear on the impact of ODA graduation, and we really needed time to adapt to post-graduation.

“In July 2017, New Zealand made a presentation to the DAC committee, and they agreed to provide us with an extension, until the end of 2018, in which time we were expected to sort out our GNI data.”

Henderson noted how unusual the extension was, as the Cook Islands is only the second country after Nauru, to be granted one.

Robertson said GDP or GNI could be a bit bewildering to many people, so he described a possible situation that illustrated why the Cook Islands still needs the developmental aid money.

“One of the things that I think is an important issue is special circumstances.

“So say things could be fine, you get up to a good level of income, and then you get hit by a cyclone and you’re back down again,” Robertson said.

“I’m struck in many ways by the remoteness of the Cook Islands, which makes it potentially vulnerable. It does seem to be going through a boom, although in my experience booms and busts can run together.”

One of Robertson’s goals was to ensure the economic statistics that are being used are of good quality, as he believes that to be essential to good policy.

“In many countries you have no idea what’s happening in the economy, so it’s difficult to have any idea what’s happening. So statistics play a very important part.

“But for them to be a good quality, they must be timely, they must be fit for purpose, accurate and widely understood.”

Robertson also brought up a scenario to illustrate how the Cook Islands could be affected by graduation. It showed why it was important to produce trustworthy statistics about the economic situation, he said.

“Some of the concerns of people that we talked to about graduation was that (at present) you can get access to a lot of training courses because of the (country’s) developing status

“Now if you graduate, you may have to pay, which means the government won’t be able to afford it, so those courses begin to dry up.

“There have been queries about the accuracy of these statistics. There are a lot of things here that suggest that the statistics are inadequate.

“However, they are quite difficult to measure. If there is only one person working on these things, it makes it very difficult.”

Asked about the level of accuracy to expect from the statistics in the future, Robertson said that while 100 per cent accuracy was unrealistic, 85-90 per cent would be the aim.

The goal was to go back from 2011 onwards and plug the necessary gaps, so that by December, proper reports could be published about the economic situation in the Cook Islands.

“It will be pushing things, to come up with a more robust set of numbers in that short a period of time.

“But if we work under pressure, it will be better in the long run.”

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