The relative size of those small Trans-Pacific states can be seen, in economic terms, when considering their comparatively low GDP. By way of example, in 2017 Fiji had a recorded GDP of US$5.06 billion; Samoa US$0.86 billion; Tonga US$0.42 billion; and Vanuatu US$0.86 billion. Even Papua New Guinea and the Solomon Islands came in at a mere US$21.9 billion and US$1.30 billion respectively. This can be contrasted with larger Asia-Pacific neighbours such as: New Zealand (US$205.9 billion); Australia (US$1.32 trillion); Indonesia (US$1.016 trillion); the Philippines (US$313.6 billion); and Singapore (US$323.9 billion).5
Data published by the World Bank indicates that in 2017, Fiji, Samoa, Tonga and Vanuatu received net inflows of FDI as a percentage of GDP in the amounts of 5.936%, 1.048%, 3.234% and 2.863%. Comparing this to the global statistic cited of 2.361% signals that these small state nations are not far off the world average.6 However, as noted above, there is a particular need for greater FDI in small states which suggests that such states perhaps ought to endeavour to exceed the global average for FDI by a clear margin. As the World Bank statistics demonstrate, the Trans-Pacific states are merely “average” participants in the global FDI market, which indicates that participation in international trade and occurrence of FDI to date has been something of a missed opportunity.7
Increase in FDI brings with it many tangible benefits aside from the obvious input of capital. These benefits include access to business skills and knowledge (management, production, product and process technologies), research and development, higher levels of employment and economy of scale efficiencies as well as, more generally, integration within the global trade community with much needed access to both import and export markets.8
FDI is of course not a cure-all for the problem. In fact, research indicates that whilst FDI is associated with higher rates of growth, the impact of FDI in the Trans-Pacific is lower when compared to global data.9 In other words, FDI has a positive influence on rates of growth in the Trans-Pacific, however, other factors mean that the rates of growth are less than might be expected when one evaluates the data from the Trans-Pacific Region as against global averages. Further research has also identified concerns regarding whether FDI is complementary to, or displacing of, domestic credit. The data analysed shows a distinction between different Trans- Pacific states, with findings made that, in some cases,10 the interaction between the two is complementary and, in others,11 recommendations are given that steps should be taken to minimise the displacement of domestic credit with FDI.12 Nevertheless, the net effect of FDI appears positive and, as such, the encouragement of trade and investment within the Trans-Pacific Region is generally a useful and advantageous goal. This brings us to the question of how greater FDI can be encouraged by better meeting the needs of foreign investors looking to engage in business with entities domiciled in states within the Trans-Pacific Region. As with any commercial activity, before investing cross-border, a foreign counterparty will undertake a detailed risk assessment to ascertain whether or not the investment is viable.