New Zealand’s engagement with the Pacific region in the years ahead was a particular focus for the National Party during our time in opposition.

In our first six months in office we have attempted to set the scene for a more ambitious mode of engagement with the region.

This task has taken on even greater importance when framed by the effects of the global economic crisis.

When Prime Minister John Key met with his Australian counterpart Kevin Rudd in March this year, a focus of their discussion was the impact of the global economic crisis on the Pacific.

Both leaders committed their ongoing support for Pacific island nations and announced a joint Australia-New Zealand study on the regional implications of the global economic downturn.

This will be completed before the 2009 Pacific Islands Forum meeting to be hosted Australia in August. 

Work is already underway on this, including collaboration with key international players in the region – the World Bank, the Asian Development Bank, the IMF and UNDP.

Already we are seeing the early impacts of the crisis on the region, including:

• a reduced value of exports;

• reduced numbers of tourists – although it’s pleasing to note that for the moment the numbers of Australian and New Zealand tourists visiting the Pacific seem to be holding up quite well, even though long-haul numbers have taken a hit;

• the value of Trust Funds – those of Tuvalu and Kiribati for instance – and pension funds have been significantly reduced;

• lower levels of foreign and domestic investment;

• job losses in many Pacific countries – such as those at the car cable harness factory in Samoa; and,

• as unemployment increases in the United States, Australia and New Zealand, job opportunities for migrants and remittance flows are likely to be affected.

Totalling over $690 million a year, remittances are a critical flow of capital into the Pacific. They will go some way to sustaining Pacific economies during difficult times, but all the indications are that remittances are shrinking in line with the world economy.

New Zealand has also encouraged the flow of remittances through the introduction of the Recognised Seasonal Employer scheme.

In the year to March just over five and a half thousand Pacific Islanders came to New Zealand to work in orchards and vineyards under the scheme. 

These Pacific workers are contributing significantly to improving returns in New Zealand's horticulture and viticulture industries as well as contributing cashflow and skills to Pacific nations.

I am pleased to be able to tell you that despite the economic pressures in this country, the Government remains committed to the RSE scheme, and indeed will be announcing some enhancements to it later today.

In many ways the current crisis compounds a set of structural challenges facing many countries in the Pacific.

Those countries most at risk from the current economic climate are those that were already facing serious economic challenges or weak governance.

Countries which had pursued more prudent policies – by reigning in expenditure on non-priority items and not allowing their bureaucracies to expand too much  -- will be much better placed to weather the storm.

New Zealand and others are ready to consider how we may be able to help.

The Government of which I am a part has a commitment to a step change in our level of engagement with Pacific nations.

That means doing more than just helping them weather the challenges created by the current global economic storm.

It means dealing with the challenges that existed before the global economic crisis came our way.

If our goal, through our development assistance programmes, has been to create increasingly sustainable economies in the Pacific, then by any objective measurement we have not succeeded.

And it is time that we faced the fact that if we keep on doing what we were doing, we will keep on getting what we have got.

The Government has taken, and will continue to take, bold measures to meet this challenge.

First, we have taken the structural decision to re-integrate NZAID into the Ministry of Foreign Affairs and Trade.

It is my clear view that if we cannot get our diplomatic and development assistance efforts working in harmony in the Pacific, we are all wasting our time.

Cabinet has now approved a new mandate for NZAID, requiring a greater concentration of effort within this region.

The new mandate also requires a much clearer focus on sustainable economic development as the objective of our development assistance.

These changes take place against the backdrop of an increase in the ODA budget from $472 million to $500 million in the coming financial year, and baseline increases that will lift the ODA budget to $525 million, $550 million then $600 million in subsequent years.

At a time when the New Zealand economy is actually shrinking, these ODA increases represent a very substantial assertion of commitment to our development role in this region.

Having made these changes, I am now signalling to MFAT and to NZAID the Government’s expectation that we will see the new mandate, reinforced by additional funding, translated into a more focused, more innovative, more successful, development programme in the Pacific.

There are one or two further initiatives worthy of mention to you today.

I have signalled for some time the Government’s interest in transport infrastructure within the region as a key element in developing trade and tourism.

In recent days the Cabinet has decided to make changes to the manner in which New Zealand’s shareholding in the Pacific Forum Line will be superintended.

In recent years that responsibility has rested with the Minister and Ministry of Transport.

We have decided to transfer that role to the Minister and Ministry of Foreign Affairs, so that it can be managed alongside the range of similar interests which affect the development of trade and tourism within the region.

I am also conscious that a significant sum of NZAID funding is allocated to regional organisations associated with the Pacific Forum.

These organisations carry important responsibilities for regional fisheries, energy, and environmental and other outcomes.

These are areas in which the New Zealand Government is keen to make significant progress over the next few years.

I have asked the Ministry of Foreign Affairs and Trade to have a careful look at how we might make more significant progress, more quickly, in these important areas, than we have seen in recent times.

In other words, the New Zealand Government will be looking for a significantly enhanced bang for its buck in relation to the funds that we invest in the development of energy, fisheries, and the environment within the region.

I am expecting this part of our work programme to move ahead in the period leading up to the Forum Leaders meeting in August of this year.

I have made it clear that the reintegration of NZAID into the Ministry was undertaken in order to achieve greater alignment between our development assistance and overall foreign policy goals.

Most important in this respect will be our ability to align aid policy with trade policy within our region.

For that reason, Trade Minister Tim Groser and I have adopted a joint strategy, along with our Australian counterparts, designed to achieve sustainable economic growth in the Pacific through an alignment of trade and aid policies.

We want to see the Pacific producing and trading more successfully with New Zealand, Australia and other trading partners. 

Trade remains a key driver for economic development in the Pacific.   In the year ended June 2008, New Zealand’s trade with the region was worth over a billion dollars.  

However when you look at these numbers from the perspective of individual Pacific nations they tell a different story.

For instance, New Zealand's exports to Fiji were worth $363 million last year, while imports reached only $71 million.

That excludes the considerable trade in services in Fiji's favour, which faces uncertain times given the current pressures on Fiji's tourism industry.

The story is similar for our exports to New Caledonia and French Polynesia, which in 2008 totalled $185 million and $184 million respectively. Imports from each totalled just $2.5 million.

While there has been some good growth taking place in two-way trade in Samoa, with exports reaching $97 million last year, imports were still worth only $6.7 million.

The story is similar with Tonga: exports of $50 million against imports of only $3 million.

Improving these statistics will take time, but I believe that over time measurable increases in imports from the Pacific will be an important gauge of the effectiveness of New Zealand's efforts to promote sustainable economic development in the region.

We need to work further on building the right kind of national and regional arrangements that will help the island countries expand and add value to their internal and export marketing efforts.

The Pacific Agreement on Closer Economic Relations (PACER) is the framework that will underpin the future development of trade across the region. 

This agreement envisages a much closer trade agreement between Australia, New Zealand, and Pacific Island countries.

But as we made clear to Pacific Trade Ministers in Auckland recently, this will not be a typical WTO-style free trade agreement.

Rather it will be one that complements our Official Development Assistance efforts to bring about sustainable economic growth in the Pacific, by assisting Pacific Island countries to capitalise on potential for trade to fuel their economies.

New Zealand’s vision for PACER Plus is an agreement that will equip Pacific Island countries to better withstand external shocks, to increase jobs and export capacity in the region and address the trade imbalance that currently exists between the Pacific and New Zealand.

Finally, I want to emphasise our commitment to working in close collaboration with Australia to maintain the position of understanding and influence we have in the region.

The recent emphasis the Australian government has placed on mutual accountability through its Partnerships for Development with Pacific nations is consistent with our own thinking.

Our approach is similar – with a New Zealand flavour.

The message I want to leave you with today is that these changes reflect the deep thinking and commitment this government has to the future of the Pacific region.

This presents many exciting opportunities and we look forward to working on those with you.