A Reappraisal of the Role of Agriculture in Economic Growth in Melanesian Countries

Abstract

Fortunes in the agricultural sectors of four of the largest South Pacific countries aretraced in recent decades by estimating the single factoral terms of trade index. The singlefactoral terms of trade are measured for agriculture in four Melanesian countries—Fiji,Papua New Guinea, Solomon Islands and Vanuatu—over the period, 1970 to 2002. Thisindex provides a useful method to assess changes in returns to factors employed inagricultural production in these countries. Except in Solomon Islands, farmersexperienced a deteriorating index, indicating that they have reaped progressively lowerreturns to their resources. In Solomon Islands, returns to resources are shown to haveincreased slightly.A sustained contribution by the agricultural sector to economic growth requires a majorimprovement in returns to farm resources. Of the three components of the factoral termsof trade index, product price increases and cost decreases are argued to be unlikely toyield great dividends in the foreseeable future. Most potential lies in increasing TFP,which will depend on more effective work from the national research and extensionservices, and greater transfer of improved technologies from international researchcentres than achieved to date.