Scoop Analysis: World Economy On The Brink
Analysis: World Economy On The Brink
How bad is the American financial crisis and stock market turbulence going to affect the rest of the world? Vincent Murwira focuses on Tuvalu - a tiny Pacific nation – as a symbol of how the world financial markets impact on small and developing nations.
Hundreds of hours of debates and discussions have been taking place throughout the world to answer this question. From Canada, New Zealand, Australia, the United Kingdom, to South Africa, the Philippines, Nigeria and Kenya, most countries have been assessing their exposure to the financial crisis unfolding in the United States.
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Graphic by Vincent Murwira.
There has been no easy or clear cut answer to this question. Even after taking into account a potential financial bailout of American financial institutions by the USA government, the full ramifications of this crisis on America, let alone the rest of the world are still unknown.
For developing and underdeveloped countries however, any new wave of disruptions to their economies are likely to have far reaching consequences. Most countries are yet to recover from the fuel and food crisis from earlier on in the year. Unlike America or other industrialized economies, most of them do not have huge Government coffers to rely on in times of crisis.
Nowhere is this better illustrated than the Pacific island nation of Tuvalu, population 10 000, which has been reeling from the effects of fuel and food price increases. Weeks before the Wall Street credit crunch, the island had appealed to New Zealand and Australia for financial assistance.
In an interview, The Prime Minister of Tuvalu Mr Apisai Ielemia said he had met leaders of both countries, Australian Prime Minister Mr Kevin Rudd and New Zealand Prime Minister Helen Clark and said both had agreed in principle to help.
It’s not quite clear yet whether New Zealand’s contribution was to be drawn from its recently launched $2 billion Pacific Development Strategy - a scheme created to assist Pacific Island nations from 2008 to 2015 with development assistance.
Mr. Ielemia, who also had Taiwan on his appeal list, said: “Huge increases in prices of fuel and food prices. That’s a very grave problem for us in Tuvalu. The budget that was set by our Government, by our parliament to run the nation for the financial year from January to December 2008 has been greatly disrupted by this down turn of the economy.”
“Because we’re very isolated, we depend very much on food stuffs to be imported by ships and very rarely will we be able to get our food stuffs by air. We are facing a lot of increases in price," Mr. Ielemia said.
"The end result is that when a commodity comes from Australia for example, when it gets to Tuvalu, the price will have doubled or sometimes be three times more than what you’d pay in Australia” he said.
Tuvalu is about 4000km from Australia and about 1000km from Fiji, where it imports most of its commodities.
Many more countries are in the same position as Tuvalu. Earlier on this year the United Nations expressed concern about the rapid increase in food prices globally and how this would impact on economies of underdeveloped and third world countries .
Tuvalu’s case is however aggravated by the fact that the country is very small and has very little economic activity.
Apart from revenue from fishing licenses to foreign ships from Japan and Taiwan, the second and most notable source of revenue is the marketing of Tuvalu’s Internet domain name through the American company TV Corporation. Since 1999, Tuvalu's unique suffix, "tv", has attracted interest from television companies around the world, and some have been willing to pay large sums for internet addresses such as www.china.tv or www.nbc4.tv. The scheme has generated millions of dollars.
According to Mr. Ielemia, food supply in Tuvalu is being affected by damage being done to food crops and vegetation on the island by rising sea level.
He says that whenever there are high tides coupled with some strong winds, the waves and the swirls go over the shores onto land, damaging trees, the plantations, and the vegetable gardens of the homes that are close to the shores.
“When the water comes in and goes out it leaves a lot of salt, contaminating our ground water which we use for drinking. Now that’s another problem we’re facing a shortage of water," Mr. Ielemia said.
Tuvalu believes that the rising sea levels are the consequences of global warming and is very concerned about the predictions that the island will be submerged in water in 30 to 50 years
Tuvalu's Prime Minister is appealing to the international community to understand his nation's plight: “So I am appealing to everybody, the governments, and the international community to give us a chance to tell their governments to adhere to the targets for emission. Because I think its 20 15 or 2012 which was set for everybody to reach those targets under the Kyoto protocol,” Mr. Ielemia said.
Many more countries in the Pacific, Caribbean or Africa have similar trade and social sets of conditions like Tuvalu, apart from size and global warming issues.
Most are reeling from fuel price increases and do not have sufficient government budgets to provide basic social services and necessities.
Most of all, many of them are surely hoping that there won’t be another wave of economic disruptions coming their way.
Vincent Murwira is a senior journalist formerly a reporter with the South African Broadcasting Corporation. He was the SABC's reporter inside Zimbabwe and reported extensively on the Mugabe regime's human rights abuses. For more see: BBC - Zimbabwe Quiet After Rioting Crushed
You can make contact with Vincent via vmurwira(at)gmail.com