The Solomon Islands is at an economic cross roads and Australian government and mining interests are playing a big part.
Ten years after the end of the ethnic conflict, investors are now looking at the country’s mineral riches, from which it also takes its name.
Political and business leaders are meeting in Brisbane week to weigh up the prospects, but it is a challenging investment environment. As Stefan Armbruster reports, in the Solomons land owners are also taking stock.
The path of the once powerful Metapona River in Guadalcanal is blocked with a mass of dead trees. Its waters run from high in the mountains, giving life to leaf hut villages along its winding path until it reaches the sea.
Alfred Pago from the Matepona Downstream Association leads the way to what is call “the blockage” near the river mouth.
During the monsoon the Metapona break its banks with devastating results for the villagers.
“Before the mining we never experience that. We experience the flooding, from there it kills our crops on our farms, wherever we plant,” Alfred Pago says.
“This is the original Metapona River. We used to fish, we used to take shells, we used to drink water, we used to use this water for cooking and the livelihood of the people.”
Upstream is the Australian-owned Gold Ridge mine. It is the only one operating in the country. It recently reported record returns, though below expectations of parent company St Barbara.
The Solomons is one of the poorest countries in the world, with a booming population demanding better services. For Prime Minister Gordon Darcy Lilo mining is a priority.
“You have to understand it from this context: we are a least-developed country, but rich in natural resources,” he says.
“There’s no doubt about that. I think what should be at the forefront of our mission should be to avoid us plundering this resource that can bring about a good and prospective economy for our country.”
Business is good at the central markets now days in the capital Honiara.
Australia has spent two-billion-dollars over the past decade stabilising the Solomons with a peacekeeping mission.
It ended a brutal ethnic conflict known as the “tensions” and now investors are taking an interest.
“Mining has picked up and was the largest contributor to growth in 2011,” says Nicholas Coppel is the co-ordinator of the Australian-led Regional Assistance Mission – known as RAMSI.
“The economy grew by over 10 per cent, that was largely because of Gold Ridge coming into full production.”
Nicholas Coppel is an economist with Australia’s Department of Foreign Affairs and Trade.
“You take a country like the Solomon Islands which has a low level of economic development, a low level GDP per capita and it has quite a way to go to improving the livelihood of people,” he says.
“It’s a particularly difficult challenge in the Solomon Islands for the government to be delivering services. People live over 300 islands, infrastructure is very poor, the cost of service delivery to government is very high, so it needs a tax base.”
Dr Simon Albert from the University of Queensland is researching a planned nickel mine by major resource player Japan’s Sumitomo.
“It’s certainly boom times. There are both large and small investors actively working within the country, so in the next five to 10 years it’s likely to take off in a serious way,” Simon Albert says.
The Sumitomo project is already before the courts with another Australian company, Axiom, over who has the right to mine.
It is not the first resources boom in the Solomon’s.
There is a precedent that was mired in legal disputes and corruption.
“The timber industry has really been the foundation for the country’s economic development, and it’s been fundamentally a disaster on economic, social and environmental issues,” Simon Albert says.
Prime Minister Gordon Darcy Lilo has signed the country up for the Extractive Industries Transparency Initiative, a voluntary international mining standard for developing countries.
“(It’s) absolutely important, because the EITI has set the standards, the standard that you can get all the stakeholders engaged in how they share experiences, information, and data on how all stakeholders can manage the revenue flows out of this transparently, for the benefit of the economy, the people, and the country as a whole,” he says.
Gordon Darcy Lilo was one of the architects of the Gold Ridge mining agreement back in the 1990s.
“Well as you know the case of Gold Ridge, it’s the first gold mine and it is a very special one as far as we’re concerned because no sooner had we opened the mine,” he says.
“Then we went into the tensions and the last 10 years RAMSI has given us the opportunity to rethink and come up with an arrangement that can better the arrangements at Gold Ridge.”
The Prime Minister is under pressure from mine site land owners, who blame the government for irregular royalty payments from mine, the very issues the Extractive Industries Transparency Initiative addresses.
“In a way it is not the institutions, it is the personnel that has failed. The systems are absolutely so robust, tough and tight but it is the officers who are regulating those offices and institutions that neglect their duties,” Gordon Darcy Lilo says in defence of the administration.
A statutory minerals authority and trust funds for land owner royalties are now planned but colonial-era laws covering mining and the environment are still under review.
There are many critics of the government’s handling of the resource sector.
“The forum does not oppose mining. We would like to see it done in the best interest of the resource owners,” Ben Afuga from the civil society group Forum Solomon Islands International.
Ben Afuga has a stark warning, recalling the “tensions” and the trouble mining has caused in neighbouring Bougainville.
“The government has to listen to the people, we have seen it happening around the world when resources that were supposed to be given to the people are not distributed fairly, people tend to cause problems,” he says.
Dr Simon Albert from the University of Queensland is also critical of the Solomon Islands government approach.
“The principle driver of major social and economic disasters at the mining sites, where you ‘haves’ at the mine site and the ‘have nots’ downstream, suffering the impacts by not receiving the benefits,” he says.
“That’s exactly what’s happening at Gold Ridge and decades after other countries have learnt that lesson, the Solomon Islands and Gold Ridge particularly still haven’t learnt that lesson.”
What of the environment and the blockage at the Metapona River? Prime Minister Gordon Darcy Lilo is cautiously sceptical.
“I wanted to find out the validity of such a report because if you go to the land owners, they will give you lots of claims, brain sickness will always find opportunity,” he says.
“They might be absolutely legitimate but what I’m saying is that we need to have good and credible technical and scientific to verify those claims.”
Gold Ridge owner St Barbara decline to comment for this report.
The government has been refused it permission to empty its tailings dam, which villagers say would have poisoned them with cyanide and the pollutants.
Downstream land owners receive no royalties from Gold Ridge and so far no scientific study has been completed on if the mine did cause the blockage.
Alfred Pago of the Metapona Downstream Association has a warning for land owners.
“I have to say that, from the government, it should consider the first people, you have to agree with them, the land owners, and the affect and the speed of the mining, you have to consider them. We are the people.”