, and of tears. no, i believe that if one really aims at exchange rates that are irrevocably fixed, then one should go all the way, that is, one should opt for monetary union. as long as two currencies are distinct, their relative price might change. so the options boil down to a choice between purely flexible exchange rates and monetary union. needless to say, since switzerland is not a member of the european union, joining the eurozone is not an option worth discussing at this stage. far from being a second best solution, fixing the franc against the euro would rather cumulate all the negatives, by suppressing our monetary independence, and, at the same time, exposing us to all the dangers of speculative attacks by setting us up, the back against the wall, alone against the market. 3. our post - euro experience what has happened since january 1999 has proven very reassuring. our worst fears did not materialize, and indeed, in some ways, the outcome was even much more positive than we could have hoped for. first, let me briefly sum up our experience with regard to the fears of “ euroization ” and of the loss of our monetary degree of freedom. as expected, the swiss franc was not crowded out by the euro. sure, the euro circulates in switzerland, just like the swiss franc is being used in neighbouring france, germany, and italy, but the phenomenon remains marginal, and it does not exceed the use the french francs, german marks, and italian liras in the pre - euro world. this is not surprising for, even though the euros ( and dollars for that matter ) are happily accepted in swiss shops, cafes, and hotels, the exchange rate is usually unattractive and the change is given in swiss francs. shopkeepers and restaurant owners are not in the business of providing financial services, and foreign tourists are still better off changing their euros at banks or using their credit cards. true, swiss firms use the euro extensively, some do much of their billing in the european currency, and a few of them have even switched their accounting to euros. some natural hedging takes place as well, although it is not clear how efficient this is. it is worth pointing out, however, that some of our largest firms do much of their billing and their accounting in dollars, while others continue quite happily to use the swiss franc. the fact that “ euroization ” has not taken

trading barriers and forced small nations to compete for a market for their goods and services internationally. • weather and environment problems, beyond our control, hinder economic performances as disaster recoveries are costly. rising sea levels, a result of global pollution, is a major issue that are already forcing islanders from their homes. • capacity constraints in pacific islands include a lack of skills and resources, necessary for economic development. the migration of skilled workers, exacerbate these problems. • political stability is required to ensure an environment conducive for investment. 5. what is the single major challenge for pacific islands? • pacific islands need to lift their economic growth levels. • growth must be sustainable and inclusive driven by private sector investment. • long - term sustainable growth is the only way to create jobs, improve living standards and reduce poverty. • millennium developments goals must be pursued actively. 6. how can we raise growth sustainably? • private sector development is needed to become the engine for growth. there is currently too much reliance on governments for direct investment and employment creation. • private sector development can give our small island economies the sustainable platform that we need. • such development can also in the long term ease the burden on governments. • private sector development continues to be a challenge because of good governance issues, uncertainty of policy consistency by the government, poor infrastructure and the need for law and order. 7. role of the state • the role of state is to create an environment that encourages private sector development through appropriate policies, services and infrastructure. • they are responsible for the provision of public goods and social services. • “ the best government is the least government ”. it is ideal when employment is created by the private sector, not governments. 8. lesson from asia – what else is needed? • investment is the greatest hurdle. raising investment by seeking out its impediments and removing them. to reach the average level of investment of developing countries, that is, 25 percent of gdp, fiji needs an additional $ 400m in investment. • economic growth cannot be lifted sustainably without reforms. the benefits of reforms include improved delivery of service, better allocation of resources and reduced tax payers ’ burden. • a few challenges remain for fiji given its smallness and vulnerability. a. improving our exports level and base through diversification b. improve our competitiveness through greater capacity utilisation and resource allocation c. raising our productivity in order to improve our competitiveness d. political stability has to