Climate Change Impact and Structural Reforms in Kiribati
KIRIBATI
internet in Kiribati, reduce retail prices by 80 percent, and increase the available bandwidth by
6 times (WB, 2022a).
13.
Along with human and infrastructure capital, productivity enhancement reforms are
continued to be implemented. One effort of the government is to reduce the footprint of
state-owned enterprises (SOEs) in the economy, with a big merger and privatization of SOES
operating in the copra industry, telecoms, and hotel industries, reducing the number of SOEs from
initially twenty-five to sixteen in 2016.³ At the same time, a number of bills improving the business
climate and strengthening the financial sector were enacted recently, such as the 2019 Company Act,
the 2021 Financial Supervisory Authority of Kiribati Act, and the 2021 Kiribati Financial Institutions
Act. Fiscal reporting system is also expected to be improved by the publication of the Fiscal
Reporting Policy, including procurement reports. After the Leaders Code of Conduct Act was passed
in 2016, the Leader Commission was established in 2018 to fight corruption. Furthermore, the
establishment of the Outer Islands Development Fund could potentially give a boost to economic
opportunities in the outer islands. These reforms, accompanied with anticipated reforms in access to
credit and land, are expected to help diversify the economy, boost productivity and provide
employment for citizens.
D. Policy Recommendations and Conclusion
14.
A full execution of the 2020-2023 KDP could help attain the stylized growth and
development outcomes laid out in Section B. Specifically, the stock-taking in section C has found
that the KDP pays attention to the various elements that feature in the long-term growth model: (i)
human capital development, (ii) infrastructure development, and (iii) boosting productivity through
better governance and business climate. Some elements that require further analysis pertain to
gender equality and the role of the official development assistance (ODA) (in our model, captured by
FDI). Although the model's growth and poverty reduction outcomes are only indicative, they suggest
that an integrative policy could enhance Kiribati's potential GDP growth rate, while also reducing
poverty. Going forward, the government should continue to invest in infrastructure capital, especially
with a focus on basic infrastructure needs such as electricity, water, and internet. This investment not
only leads to higher living standard for population, but also supports the development of the private
sector. Investment in human capital through education and vocational training also needs to be
enhanced, especially English language skills (critical for labor abroad schemes and in ICT) and
improving working skills.
15. However, Kiribati's development outcomes may face severe constraints on both
horizontal and vertical diversification levels (Figure 4). Horizontal diversification means
diversifying into sectors with new opportunities; while vertical diversification is upgrading quality
within the existing sectors. IMF (2014) found that increases in income per capita in low-income
countries (LICs) are typically accompanied by a transformation in a country's production and export
structure through diversification into new products and trading partners as well as increases in the
quality of existing products. However, Kiribati's economy is dependent on a narrow range of
3 As of January 2023, Kiribati has 18 SOES, including 3 newly established SOES.
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