The Solomon Islands Government officially detailed the structure of its economic stimulus package on Monday 4 May 2020 which should come as a relief to not only struggling businesses but also to ordinary Solomon Islanders.
Among measures included in the SBD309 million package is the reduction of electricity tariffs by Solomon Power and the removal of certain costs at Honiara’s main ports managed by the Solomon Islands Port Authority (SIPA).
These were among other recommendations the Solomon Islands Chamber of Commerce and Industry (SICCI) submitted to the Stimulus Package Committee for consideration which the Chamber believes would best assist businesses and the economy during this global pandemic.
“Reducing the cost of core utilities will reduce the immediate burden placed on individuals and businesses. Although the cost of electricity would be a deductible expense for businesses, a reduced tariff would provide immediate relief for businesses at a time when cash-flow is decreasing alarmingly,” SICCI said following the official launch of the Stimulus Package.
Under Soft Measures Component One of the package, Prime Minister Hon Manasseh Sogavare announced that utility providers will temporarily reduce the cost of utilities to households and businesses to improve their cash flow.
This means Solomon Power will reduce electricity tariffs by 16% in May 2020 in addition to the 44 cents reduction already being implemented which is expected to ease the immediate burden on households and businesses.
SICCI notes that cost of electricity is high in the Solomon Islands, but seems to have reduced comparatively in recent years.
This aligns what other countries in the region are doing to reduce utility costs for business and industry to mitigate impacts of the COVID-19 pandemic. Cook Islands for example proposed a 100 per cent discount for all domestic customers and a 60% discount for commercial electricity use for six (6) months.
SICCI appreciates that there was a 0.44/KWh reduction in the fuel component of the tariff for April, representing reduced fuel costs. This reduced fuel cost represented a $22 saving for a customer using 50KWh.
“In our presentation to government we had requested a 20% reduction to the electricity tariff. The COVID-19 Impact Survey we ran in April confirms that businesses are struggling. They are facing tough times with big drops in sales and revenue however, continued overheads such as rent, utilities, supplies.
“So, meaningful reductions in any of these parts mean that business and industry can keep paying workers and negative impacts on people’s livelihoods are minimized,” SICCI, the peak body representing private sector in Solomon Islands,” said.
“We had proposed that such reductions could be funded by a national dividend from Solomon Power to the Government, which is then used to fund the reduced tariff. The import duty collected on diesel could be used by the Government to fund a reduction in the electricity tariff.”
The Prime Minister on Monday 4 May also highlighted that under the Solomon Islands Ports Authority (SIPA), Domestic port charges have been removed for one month and will be extended to two (2) months beginning April, 2020, and subject to monthly review.
Storage period will be maintained and consideration will be given to local importers and exporters on case-by-case basis.
However, in its recommendation, SICCI had requested a 30% reduction in Port charges and fees, particularly for handling fees related to imports and exports.
“The reduction of Port charges will reduce the costs of doing business for those importing and exporting and would help with immediate cash-flow, but more likely to be very important in the COVID-recovery phase.
“A temporary reduction in fees and charges could be considered for a three-month period, aligned when business activity is in recovery phase and international shipping routes are less restricted,” SICCI said in response.
“SIPA is in a good financial position and seems to be consistently making good profits. Given its robust financial position, SIPA should be able to accommodate a temporary reduction in the fees and charges for the benefit of softening the COVID-19 impacts on business.
“Where appropriate, a subsidy could be provided to SIPA or government dividend retained by SIPA to cover any revenue loss. The last regional comparison of SIPA fees and changes (ADB PSDI 2016) showed that SIPA was charging extremely high fees comparative to other Pacific countries and was far less productive. A review of SIPA fees and charges would be timely,” the Chamber added.
SICCI had also recommended that freight costs associated with sending Cargo (fuel and goods) to provincial areas should be reduced.
“A direct way of achieving this would be via a direct Government subsidy. This measure would help to stimulate activity in provincial areas and reduce the price of staples for provincial consumers.”
Apart from utility costs, other recommendations SICCI submitted included timely Government payments to suppliers to help business with cash flow shortages; Tax Relief measures to improve business cash flow; support from Commercial Banks and targeted action to support small and medium businesses.