09 March 2011

New Caledonia Economic Issues Examined


But economy still slow after financial crisis

by Nic Maclellan

Buoyed by massive French grants and major reserves of nickel and other strategic metals, New Caledonia is a wealthy nation. The nation has an average per capita income greater than New Zealand’s and much higher than neighbouring Melanesian nations.

But these figures mask significant disparities between ethnic communities and also between people on public service salaries and those working in the rural areas.  A central feature of the Noumea Accord process is to promote economic and social “rebalancing” between the capital Noumea, the outlying Loyalty Islands and the rural areas of the main island Grande Terre.

Currently three quarters of all businesses are located in the Southern Province, together with the major industrial, tourism and energy infrastructure, while the rural areas lack many core resources for development.

Last year’s elections highlighted the gulf between Noumea and the bush: the failure of the anti-independence parties to win any seats in the Loyalty Islands Provincial Assembly and only two of the 22 seats in the Northern Provincial Assembly is a reflection of their inability to address core issues of social and economic development for these largely Kanak areas.

Nickel improves

Nickel mining and smelting is the backbone of New Caledonia’s economy, but has been affected by the boom and slump of recent years.  There has been a rising demand from China and other emerging economies, but catastrophic falls in pricing and production during the global financial crisis.

Global nickel prices rose sharply in 2005 and 2006 to a peak of nearly US$25 a pound by May 2007, but the 2008-09 crisis drove prices back to the level of a decade ago at US$4-5 a pound (the London Metals Exchange saw global nickel prices fall 43.3 percent in 2008 and 30.5 percent in 2009).

In the aftermath of this slump, nickel processing and production in New Caledonia slowly improved in the early months of this year, after significant falls in 2008 and 2009. As well as the long-running SLN smelter in Noumea, the industry is looking at two major projects in the north and south.

The Goro project in the south, run by Brazil’s Vale Corporation, has suffered a series of incidents that have delayed operations. Production was due to begin last year, but has been delayed several times.

The use of high-pressure acid leaching technology to process the nickel laterite has caused a series of environmental problems, including a spill of thousands of litres of sulphuric acid in April 2009. This killed fish and flora and threatened pollution of a World-Heritage listed lagoon.

In contrast, the Northern Province’s major hope is the Koniambo project: an open cut mine, nickel processing plant, 300MW power station, desalination complex, mining town and deepwater port at Vavouto.

The US$3.85 billion project is run by Koniambo Nickel SAS (KNS), a joint partnership between the Swiss conglomerate Xstrata and the province’s Société Minière du Sud Pacific (SMSP).

Driving towards the Northern Provincial capital Kone, a small rural town of 2400 residents, you come across a range of new public and private housing estates, as construction at the Vavouto project expands.

There will be significant shifts in population as workers move to take up employment in these new projects, creating a “VKP corridor” of development from Voh to Kone and Pouembout.

With some 4000 jobs available by the end of 2010, there is renewed debate about local employment, an influx of Asian labourers and the need for investment in skills and training.

There are numerous signs of the way the province is being transformed: road construction to link outlying tribes to Kone; new sporting, cultural and educational facilities; a new water reservoir above the provincial capital.

Along with the new Tieti Tera Beach Resort in Poindimie, the Le Néa Hotel opened its doors in Kone in December 2009, one of six projects created by a tourism offshoot of the province’s investment company, Sofinor.

Skills and training

There is a significant imbalance of employment opportunities between the provinces, with unemployment three times higher in the Loyalty Islands than in the Southern Province.
By March this year, the number of job seekers in New Caledonia had grown to 9,000 (10 percent higher than the year before).

There are relatively few Kanaks with higher degrees after 157 years of colonisation, although the Noumea Accord has promoted a range of training programmes for Kanaks and other New Caledonians.

The Cadre Avenir programme is a scheme funded 90 percent by the France Overseas Ministry and 10 percent by the local government, where New Caledonians receive scholarships to study in France or complete vocational and professional training. In 2009, the programme cost 706 million French Pacific francs (AU$8.2 million).

But there are also significant imbalances in the training provided by France under the scheme. Of the 957 trainees (out of 1,155) who have successfully completed their Cadre Avenir courses by the end of 2009, only two percent became self-employed entrepreneurs, while 60 percent took up public service positions.

According to figures released by the Institut d’Emissions d’Outre-Mer (IEOM, the central bank for France’s overseas territories), the number of public servants is slowly increasing. By December 2009, there were 14,522 permanent public servants and 9,016 contract workers (with the number of short-term contract workers increasing 7.4 percent in 2008-9).

This is a reflection of the imbalance of employment opportunities in the wage sector in New Caledonia’s distorted economy: out of 82,230 workers employed in 2009, 51,996 work in the services sector, but only 2,198 in agriculture and fisheries and 4,355 in the mining and smelting industry.


Each year, the tourism industry seeks to cross the symbolic mark of 100,000 visitors, but New Caledonia faces competition from other islands nations which have a range of airlines and much lower prices for restaurants and accommodation—tourism dropped below 100,000 in 2009 for the first time in years.

Tourism hasn’t bounced back after the financial crisis—in 2009, there was a four percent drop in the number of tourists compared to the previous year, with numbers down from France (-13.2 percent), Japan (-6.4 percent) and New Zealand (-21 percent).

After a steady increase in the number of cruise ships over the last decade, only 79 boats docked in 2009, 10 less than the previous year.

Even though tourism infrastructure is now expanding beyond Noumea to the North and Loyalty Islands, New Caledonia lacks diversity of tourism markets seen in competitors like Fiji (from backpackers to family-friendly hotels, golf courses to five star luxury hideaway islands).

In spite of this, changes to visa requirements and the signing of working holiday agreements between France and Australia have created increased opportunities for travel.

Australia remains the largest tourist destination for New Caledonians and wealthier residents of Noumea have significant property investments in Queensland.

More New Caledonians travel to Australia than to France each year, at a time when the number travelling overseas has increased from 69,477 (2000) to 111,598 (2008).

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