ENABLING

ENTERPRISE

A 10 YEAR STRATEGY FOR

SME DEVELOPMENT IN THE
COOK ISLANDS

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1. INTRODUCTION
The vision for Enterprise

1.1 The ‘Te Kaveinga Nui’ (the long-term visionary framework of the Cook Islands)
foresees that by the year 2020, the Cook Islands will have achieved (Strategic Outcome
3), “Sustainable economic growth in harmony with our social values, culture and
environment”. Furthermore, the Cook Islands National Sustainable Development Plan
2007-2010 (Strategic Goal 3) aims for an “Innovative and well-managed private sector
led economy”. The challenge for the Cook Islands is therefore to mobilize resources
towards the achievement of the above goal and outcome.

1.2 In today’s modern global economy, the Cook Islands are disadvantaged because
of its their size, fragile environments and distance from markets. However, if we are to
survive in the modern global economy, we must change our mindset and view our
disadvantages as factors that challenge us to be much more innovative in everything that
we do.

1.3 Since the Economic Reform Program of 1996, our economy has become one that
is private sector-ledhas become more and more pivate sector-led. Small and Medium
Enterprises (SMEs) account for much of the enterprises activitye in the Cook Islands, and
they have formed the base for our private sector-led economy by creating incomes,
employment and growth.

1.4 The Cook Islands have enjoyed solid rates of growth during the period 2000 –
2007 driven primarily by tourism. However, it is inevitable that the current global
economic environment will have significant implications on our primary industry and
highlight the need the need to diversify the economic base of the country. Government
must respond with vigor by encouraging entrepreneurship. It is a given fact that
entrepreneurship comes with the right enabling environment. This strategy sets out the
Government’s enterprise vision to make the Cook Islands a great place to start and grow
business.

1.5 In the preparation of this strategy, Government has consulted with members of the
public and the business community, both in Rarotonga and in the Outer Islands, to
develop a better understanding of the challenges of building an enterprise-led economy.

1.6 Informed by this dialogue, we will focus our enterprise policies over the coming
years on five enablers.

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Enterprise enablers

Culture: Develop a culture where talent can be unlocked and flourish, reducing the
fear of failure that prevents start-ups and giving Cook Islanders the opportunity to be
entrepreneurial.

Knowledge and Skills: Ensure that individuals and business have access to and
are able to develop the best possible knowledge and skills to support their business.

Access to Finance: Enable new and growing businesses and those people seeking to
exploit their ideas have access to appropriate levels of finance and advice.

Regulatory Framework: Renew our focus to ensure that the regulatory environment
does not stifle or disadvantage small and medium business.

Business Innovation: Reinforce innovation’s role as a driver of enterprise itself

and at the root of all entrepreneurial activity, to complement the National Economic
Development Strategy.

Ambition of the SME Strategy

1.7 This sStrategy document presents important policy priorities relating to these
inter-related enterprise enablers, which will have a materially positive impact on business
in the Cook Islands. The enablers will shape the future priorities of the Business Trade
and Investment Board (BTIB) and other Government agencies that foster economic
development. In future years, the successful delivery of this strategy will see:

• A greater proportion of people with the ambition to start business;

• An increase in the proportion of SME’s making use of business advice; and
• An increase in the proportion of SME turnover due to new or significantly improved
products.

Situational Analysis

1.8 A review of NZAID’s assistance to the Cook Islands SME sector in 2006
highlighted the following constraints to private sector development in the Cook Islands:

• A shortage of skilled labour

• High transportation cost and unreliable services
• Costly or non-existence infrastructure
• Difficulty with legislative and regulatory compliance
• Legal and property rights
• Land tenure

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• The need for equity finance
• A small and fragmented market

The Business Trade and Investment Board (BTIB) (a merger between the Development
Investment Board and Small Business Enterprise Centre) was established to provide
support to address these constraints. The BTIB is mandated to promote, encourage and
support Cook Islanders in trade, investment and business. An Outer Island Development
Grant Fund (OIDGF) co-funded by the Government and NZAID is one of the SME tools
being used to assist Outer Islands enterprise development.

Promoting enterprise - a framework for Government

1.9 Government recognises that economic growth is created generated by the actions
of businesses. While it is not the role of government to duplicate or substitute for private
sector activity, there is an important role for targeted interventions to overcome market
imperfections to ensure that the market can deliver the best best social outcomes.

1.10 A country’s enterprise performance depends on a multitude of underlying factors.

This framework brings these factors together and groups them within five separate, but
closely inter-related themes or ‘enablers’; Culture, Knowledge and Skills, Access to
Finance, Business Innovation and Regulatory Framework. It draws on many important
contributions to academic literature on entrepreneurship, and the experience of many
other countries both regionally and internationally. Links between the enablers of
enterprise and the drivers of productivity are shown in Figure 1.1.

Figure 1.1

1.11 Consultations with the public and businesses have confirmed the importance of
these five enablers in business development. There is general consensus amongst

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stakeholders that a simple more coherent strategic framework is required – one that is
meaningful to businesses and also to the relevant agencies responsible to delivering
enterprise policy objectives.

1.12 The enablers and enterprise are driven by market demand. Market research,
information, access, promotions, opportunities and skills are critical to the SME
development cycle.

1.13 The enablers will provide a new focus for how we think about the development of
enterprise policies as well as informing our priorities in the same way that the five drivers
of productivity will continue to inform our broader productivity policies. We believe the
following enablers are key to delivering our enterprise vision.

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2. A CULTURE OF ENTERPRISE

Vision
“A lot of our people are akama [embarrassed] or they think that they can’t go into
business even though they may have talent or good ideas. They think people will aviri
[mock] them and that’s just the way we are…. We have to change the way we think and
get rid of the akama and the aviri.” (46 year old female, Rarotonga)

The Government’s vision is for many more people in the Cook Islands to have the
opportunity, aspiration and motivation to use their talent and initiative to be
enterprising and have an increased proportion of people starting business.
The Government will work to develop an environment in the Cook Islands where
attitudes to and aspirations about enterprise, are based on accurate information and
relevant role models and not on myths that lead to misplaced risk aversion.

Progress to Date
There has been very little work done in the Cook Islands on targeting ‘a culture of
enterprise’.
Very little formal data is collected and analysed on entrepreneurship and aspirations
to entrepreneurship.
Likewise very little formal data is available on aspiration for business growth.

Next Challenges
Very recent surveys indicate that while many people aspire to start business few of
them feel confident enough to turn these aspirations into reality.
The concept of ‘a culture of enterprise’ is a new one for the Cook Islands.

Strategy
Over the next 10 years, the Government’s strategy is to improve attitudes to
enterprise in the Cook Islands so that many more people feel they can use their talents
to start and grow businesses. In particular:
the Government will help more people to obtain accurate information on the returns
from and opportunities for enterprise;
women will feel that they have the ability and confidence to start a business, and
women in business will feel more confident in their ability to grow their business;
young people will be made aware of their potential to be enterprising and encouraged
to exploit this later in life;
people in the outer islands be encouraged to be participate in enterprise activity;
collectively these efforts will address the stigma of business failure across society.

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THE GOVERNMENT’S VISION

2.1 The gGovernment’s vision is for many more people in the Cook Islands to have
the aspiration, opportunity and motivation to use their its talent and initiative to be
enterprisingentrepreneurial, whether expressed through starting or growing a business.

2.2 Our young people are our future and Government efforts to put in place activities
around enterprise aspiration and motivation to encourage many more young people to
start business is needed.

2.3 The Cook Islands must have a great environment in which to start and grow a
business. Currently, as of 25 November 2008, there have been 72 new businesses
registered for value added tax (VAT). This has declined over the past three years, when
in 2005, total new business registrations for VAT were 123.

2.4 The GovernmenGovernmentt will work to develop an environment in the Cook

Islands where attitudes and aspirations around enterprise are based on accurate
information and relevant role models and not on myths that lead to misplaced risk
aversion. Success will be measured through a greater proportion of people with the
ambition to start and grow a business. This is measured through early stage enterprise
activity (the number of businesses less than three and half years old is a good proxy for
wider enterprise culture) and aspirations captured by new business surveys.

2.5 Other chapters will set the importance of equipping individuals with the capability
and skills and other resources to undertake enterprising activities. They will explain the
policy stance that Government wishes to undertake to encourage a supportive
environment for enterprise, to promote innovation as a core enabler of enterprise, to
enhance access to finance for entrepreneurs and to develop a supportive regulatory and
legal framework.

2.6 A more positive enterprise culture will not only result in more people wanting to
put their ideas into action by starting business in the future, but will also increase the
drive, creativity and flexibility of people working in businesses of all types. The benefits
for the economy are clear. However these benefits will be tempered unless there is a
positive cultural environment that motivates people to exploit their talent and rewards
them for acting on their potential to be enterprising.

THE CHALLENGE FOR THE COOK ISLANDS

2.7 The Government’s aim in developing a positive enterprise culture will focus on
informing and inspiring people about what can be achieved through enterprise including
the opportunities and rewards.

2.8 Developing an enterprise culture is not just important for stimulating higher levels
of entrepreneurship. It is also important in driving business growth within existing

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businesses and encouraging the flow of new ideas, innovation and competitive challenge.
Building positive aspirations for enterprise remains a challenge.

2.9 There are two aspects to this:

• individuals in the Cook Islands do not appreciate the returns or opportunities from
enterprise and overstate the likelihood and consequences of failure; and
• Society does not fully value entrepreneurial success and tends to over stigmatise
failure.

The fear of failure

2.10 Fear of failure is clearly linked to the extent to which people are risk adverse. In
surveys and consultations conducted many believe that a new business should not be
created if there is a risk that it might fail.

2.11 There is clear evidence that risk aversion is based on misconceptions about the
risk inherent in starting a business. Surveys conducted suggest there is a perception that
the majority of businesses fail in the first year.

2.12 Role models can shape what people understand in terms of the opportunities and
risks in enterprise. They are key in influencing whether someone capable of starting an
enterprise actually does. This is especially so for young people and those in communities
where enterprise is not the norm. Research elsewhere has demonstrated that young
people with parents involved in running a business are twice as likely as the average for
young people to start a business. Personally knowing an entrepreneur increases the
likelihood of having a suitable role model.

2.13 The literature on fear of failure or risk aversion often relates to starting a business
but the challenge is much wider than this. It impacts on the growth performance of
businesses.

2.14 In surveys conducted, the vast majority of businesses indicated low growth
aspirations. This is in part a reflection on the size of the Cook Islands economy but also
partly due to overestimating the risks involved in growing and developing their business,
including not having sufficient resources to manage growth, potential cash flow
difficulties, and so forth. It can also be due to a culture with the business that does not
encourage employees to be more creative and enterprising. There is evidence that the
development of such a culture can improve competitiveness and encourage employees to
take a greater interest in the growth and renewal of business.

GOING FORWARD

2.15 The enterprise enablers set out in subsequent chapters will also influence the
culture for enterprise in the Cook Islands but the measures below have a specific focus on
motivation and inspiration. The Government’s policy will have three main streams of
activity:

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• Inspiring young people

• Reaching those with low aspirations and unlocking their talent

• Addressing the environment that shapes fear of failure

Inspiring young people

2.16 The Government’s objective is to develop an environment where our people can
better understand the risks and rewards of enterprise based on accurate information and
not on unfounded myths. This can be pursued in many ways, but key to the Cook Islands
success is to develop a broader outlook and more positive aspirations at an early age.

2.17 The reality for the future generation of entrepreneurs is that in a global economy
opportunities are increasingly less constrained by country national boundariesborders.
Government therefore will explore and promote the avenues by which young people can
connect with activities around the world to encourage them to see enterprise opportunities
at an early stage in their lives.

2.18 Building on the success of Careers Week that has been run annually, where
students are exposed to various career choices, the gGovernment proposes
Entrepreneurship Week in which it is hoped that young peoples’ entrepreneurial talent
and ideas will be celebrated.

2.19 Government will also support the establishment of a pilot programme to offer
mentoring and work placements in SMEs. This is being developed in direct response to
suggestions from the community that it would benefit entrepreneurs who are targeting
new markets for business.

2.20 Government will work with the various Non-Governmental and Community
Organisations to build on enterprise promotion work.

Reaching those with low aspirations

2.21 Developments in the Outer Islands are currently heavily subsidized by Rarotonga.
Historically, income generation in the outer islands is generally based on employment in
the public sector. It is generally perceived that the Oouter Iislands are not conducive to
economic development. However, it is also generally accepted that income generation
activities in the outer islands is important for sustainable livelihoods and also for
stemming depopulation.

2.22 The gGovernment will build upon its communication strategies for reaching the
Oouter Iislands and encouraging participation in enterprise, particularly where low

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aspirations have become entrenched. Promotion of assistance available will be a priority
for Government.

Addressing the environment that shapes fear of failure

2.23 The institutional framework of government may seem a world away from
enterprise aspirations, but people pick up signals from its operation that shape their
perceptions around risk and failure. It is within government’s control to influence this.

2.24 It is generally accepted that the environment for business development must be a
‘level playing field’. The concept of ‘level playing field’ is about fairness, not that each
player has an equal chance to succeed, but that they play by the same set of rules. In the
Cook Islands, we have unique characteristics that challenge the concept of ‘level playing
field’ and require that government interference is required to bring about fairness. This is
particularly true in the case of outer islands. Government will consider ways that will
encourage the development of enterprise in the outer islands, whether this is by means of
reviewing Government employment policies and taxation policy to create a more
conducive environment for enterprise.

FUTURE ISSUES

2.25 In the longer term, the Governmengovernmentt will make sure that progress we
make with young people, especially girls and women feeds through to other sections of
society, particularly those in the Oouter Iisland s and girls and women. So that people
have an understanding of the different approaches to business. This will ensure that they
seize opportunities, commercialise bring ideas and innovation to fruition, and build
productive business relationships. The gGovernment will work with a range of partners
to foster an enterprising spirit in everyone.

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Culture: Key initiatives proposed
The initiatives proposed to tackle the remaining challenges and embed culture more
widely are:

Explore and promote avenues for young people to connect with enterprise activities
around the world.

Establish an Entrepreneurship Week.

Establish pilot mentoring and work placement in SME programmes.

Work with other key stakeholders to build on enterprise promotion.

Develop strategies for encouraging participation in enterprise.

Consider ways to create a more conducive environment for enterprise with

particular attention to the outer islands.

Strengthen the capacity of BTIB to facilitate, coordinate and support the SME
development.

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3. KNOWLEDGE AND SKILLS

3Vision
. KNOWLEDGE AND SKILLS
• The gGovernment’s vision is for many more people in the Cook Islands to have
the enterprise skills to successfully start and grow a business and for businesses
to be able to access the skilled workforce they require to grow.

• Success will be understood through surveys conducted by BTIB of people

believing that they have the skills to start a business and the delivery of
training programs.

Progress to date
• Over the past few years, the Ministry of Education, has implemented programmes
focused on enterprise education namely, the Life-skills projects in the Outer Islands,
Transition Programme in Rarotonga and Community Education in the Northern Cook
Islands.
• Department of National Human Resource Development is implementing NCEA
accredited programmes targeting the improvement of skills and training in hospitality
and trades.
• Business Trade and Investment Board have over the past years conducted a number of
training programs targeting business development and management.

Next Challenges
• Providing adequate business support
• Providing enterprise education for young people

Strategy
To meet these challenges Government will enhance the delivery of:
• Enterprise education in schools and colleges.
• High level skills and training in the workforce.
• Wider business support offered to business, including mentoring.
• Driving the development of enterprise and skills and knowledge for people in the outer
islands.

THE GOVERNMENT’S VISION

3.1 Government needs to ensure that businesses are able to tap into a skilled labour
force and to gain access to the training and skills development support they need.

3.2 The challenge for gGovernment is to embed the concept of enterprise education
within our education system and the delivery of post-school training programmes.

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Access to support that is relevant and appropriate to the needs of business must also be
provided. Government will gauge success across a range of programmes through a broad
range of measures that monitor performance.

PROGRESS SO FAR AND FURTHER CHALLENGES

3.3 Government recognises the importance of enterprise knowledge and skills. It has
in place programs in a number of key areas:
• Enterprise education in schools and colleges;
• Business support, advice and mentoring;
• Improving education and skills in the workforce.

However, it is acknowledged that more action is required in these areas.

Enterprise education in schools and colleges

3.4 The earlier that children are introduced to enterprise, even in the most general
sense, the more receptive they are. Government is committed to improving the level of
enterprise education, particularly at secondary level and will develop the Enterprise
Education Framework and create robust programs that will teach our children
entrepreneurial skills.

Business support advice and mentoring

3.5 Whilst there is business advice and skills training available, the provision of these
services has been rather sporadic due to both human and financial capacity issues. BTIB
is the gGovernment’s primary access channel for business support. Yet due to capacity
constraints it has not maximized its performance in the delivery of business support
advice and mentoring services. It has been difficult for businesses to assess the benefits
of well-tailored advice and support. This has implications on the business or
entrepreneurs because they may be missing out on advice that leads to having a better
chance of starting up or failing to exploit their growth potential. BTIB will work in
partnership with the private sector and NNon-GGovernment OOrganisations (NGOs) to
be able to provide the best support to business.

Improving education and skills in the workforce

3.6 Skills shortage is a primarily concern in the Cook Islands. Whilst programmes
have been developed to address the improvement of education and skills in the
workforce, employers have been slow to take advantage of the opportunities presented.
This is primarily due to the shortage of labour and the difficulty in releasing of staff to
undertake upskilling during working hours. It is evident that more innovative means of
delivery of training will have to be explored. Initiatives such as bringing training to the
workplace, at a time that suit the employers’ requirements is one such avenue that will
minimize cost to businesses.

3.7 Another area that requires attention is the improvement of education and skills in
the Oouter Iislands.

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GOING FORWARD: PROMOTING ENTERPRISE SKILLS AND KNOWLEDGE

3.8 Government’s challenge over the next ten years is to build on investment that has
begun and further foster and support the development of enterprise skills and knowledge
in the wider education system. Alongside thisIn addition, the gGovernment is committed
to strengthening the ability of businesses to access the support and skills development
they needrequired. Mentoring will play an enhanced role.

Enterprise education in schools and colleges

3.9 Building a successful enterprise economy starts with children in schoolsthe youth.
Government will be working towards making young people more aware of the
opportunities that exist and more motivated to engage in enterprise.

3.10 The gGovernment is committed on the development of programs that will embed
enterprise education into the mainstream by:

• Extending enterprise education across the whole school system and embedding it in the
curriculum;

• Promoting self-employment as a career option.

Business support, advice and mentoring

3.11 Improving enterprise education in our schools and the entire education system
will provide the platform for the future success of our businesses. But Nevertheless, this
needs to be complemented with measures targeted at businesses, a focus on mentoring
and access to wider business support.

3.12 In consultations with the public and business community, many say that the
advice they value the most comes from people they feel have real experience which they
are willing to share, i.e., – mentors. The Government will develop a mentoring program
that is aimed to increase the number the number of volunteer mentors and the volume of
those who benefit from the mentoring program.

3.13 BTIB will be positioned as the primary access channel for all business support
services. It will be the primary information, diagnostic, brokerage service to address
business needs. BTIB will focus on introducing businesses and individuals to the best
expertise from the public, private and voluntary sectors.

3.14 Simplifying publicly funded business support is about better service for
customers. One exciting area of providing better services is in the use of on-line services.
The capability to deliver support around the clock to businesses and individuals at work,
home or on the move is important to the business community.

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Improving education and skills in the workforce
3.15 The Cook Islands currently lacks a systematic approach to the human resources
development. Government will be actively working towards a systematic approach to
identifying employment and skills needs and the qualifications required to meet these
needs. A key element in accomplishing this will be to embed enterprise in the National
Human Resource Development Strategy and provide skills and training programmes that
meet the needs of enterprise.

LOOKING AHEAD: THE CHANGING LANDSCAPE OF BUSINESS SUPPORT

3.16 Improving enterprise knowledge and skills development provision will ensure that
key building blocks of a successful economy are put in place and the measures outlined
in this chapter will contribute to the delivery of this. However, there remains challenges.
Going forward we will need to respond to changing needs, engagement and learning
preferences of our business community. Government will also embrace new media and
technologies to better address the needs of businesses.

Knowledge and skills: Key strategies

• Extending enterprise education across the whole school system and embedding it
into the curriculum.

• Promoting self-employment as a career option.

• Develop a robust mentoring program.

• Offer accredited skills and training programmes that meet the needs of enterprise.

• Promoting the development of enterprise skills and knowledge of people in the outer
islands.

• BTIB to be the primary channel for business support services.

• Provide business support services on- line.

• Embed enterprise in the National Human Resources Development Strategy.

• Embrace new media and technologies to better address the needs of business.

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4. ACCESS TO FINANCE
Vision
“Some people have good ideas but they don’t have the money to start and this is what stops
lots of people from getting into business.” (31 year old male, Rarotonga)
• The Government’s vision is for more Cook Islands entrepreneurs and businesses to be
able to access the finance they need to enable greater levels of enterprise, whether
expressed through start up or growth.
• There will be particular emphasis on those with the potential to start dynamic new
businesses and those with the potential for growth.
• There will be particular attention paid to business start and growth potential in the
Outer Islands.

Progress to date
• The financing of businesses in the Cook Islands has been predominantly through the
commercial banks.
• Outer Islands Development Grant Fund (OIDGF) has supported business start up in
the Outer Islands.

Challenges
• Barriers to accessing finance persist.
• Those who are unable to access finance are likely to seek finance and likely to rely on
informal, expensive, sources of finance for start-up. They are more likely to be
undercapitalized at start-up.
• Ill-founded perceptions around accessing finance can prevent some people accessing
the finance they need to get.

Strategy
• In addressing these issues, the Government strategy is to address both the supply and
demand side of accessing finance so that entrepreneurs and businesses have the skills
and the opportunity to access the finance they need. In particular, the gGovernment
will ensure that:
- alternative financing mechanisms are in place for equity finance;
- early stage high growth businesses are better able to secure appropriate
sources of investment and finance; and
- all business and entrepreneurs are more ‘investment ready’ before
seeking the finance they need.

THE GOVERNMENT’S VISION

4.1 Business in the Cook Islands has primarily been financed by Westpac, ANZ and
BCI banks. While these banks have generally been supportive of businesses in the Cook

16
Islands, barriers to accessing finance persist. Over the past years, Government has taken
steps to help businesses get better access to finance through a range of services such as
financing advice, preparation of business plans, etc and so forth. Government realizes
that it in addition to providing these services, businesses must also make themselves more
‘investment ready’ for potential investors.

PROGRESS MADE SO FAR

4.2 Whilst local banks have generally been supportive of business there remain
barriers for some small viable businesses that require finance to start and grow. The fact
that some businesses do not obtain finance is not in itself an indication of failures in the
financial markets but rather banks acting rationally in not providing finance to some
business proposals. This means that some good business proposals find it difficult to
access finance because of bank’s use of collateral, financial track record and cost of due
diligence to access risk for small businesses.

4.3 In the case of the outer islands, there is a general reluctance to support business
start-up. The OIDGF provides an avenue for business to start up in the Oouter Iislands.

BRIDGING THE FINANCE GAP

4.4 Consultations with the public have indicated that targeted interventions should not
be limited to the Oouter Iislands only, but also include Rarotonga. Research has shown
that publicly backed equity funds have become an extremely important source of capital
for SMEs. These funds provide a complimentary role to the private sector in the
provision of equity finance.

4.5 Examples from abroad also show that the gGovernment can also use the tax
system to provide an additional incentive for investment in early stage and growth of
business.

CHALLENGE GOING FORWARD

4.6 A key challenge remains the lack of finance skills and knowledge amongst
entrepreneurs which can prevent them accessing to the sources of finance most
appropriate to their business needs.

Improving financial skills and knowledge

4.7 Many smaller businesses do not have their finances managed by a qualified
individual; and confidence in dealing with finance is not high compared to other aspects
of running a business. Some entrepreneurs can therefore lack skills and confidence to
access finance. As a result businesses can become inadequately capitalized and their
survival threatened. Some entrepreneurs have strong perceptions that accessing finance
can be problematic, which discourages them from applying for the finance they need.

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4.8 Some smaller businesses do not know how to turn their business proposals into
attractive investment opportunities. Furthermore, there is also a reluctance of ceding
ownership to second parties.

4.9 The Government wants to ensure that all businesses understand the full range of
ways in which finance and investment can be sought and raised. It also wants businesses
to be better able to engage a range of finance providers to successfully fund their business
development; in other words to be ‘investment ready’.

Ensuring business support is tailored to the needs of business

4.10 Future government interventions need to respond to the need of businesses. A
key challenge for the gGovernment is to respond to the different requirements of:

• Businesses that are high growth

• Businesses that more modest in their growth ambitions
• Business in the outer islands, which require a different set of supporting
measures.

4.11 This requires a holistic view of how various publicly funded measures can interact
with private sector provision across the supply of finance, advice and other resources for
business.

GOING FORWARD

4.12 Over the next ten years, the gGovernment will focus on ensuring that
entrepreneurs and businesses continue to have access to the finance and investment they
need and have the necessary skills and confidence to make their businesses investment
ready.

4.13 The management of the OIDGF will be strengthened and tailored to better meet
the needs of entrepreneurs in the outer islands. Additionally, the gGovernment will
explore the development of other funding mechanisms for entrepreneurs that experience
difficulties in accessing finance for business start-up and growth.

4.14 Ensuring that businesses are able to access specialist and expert help to manage
debt is critical to small and growing businesses in particular. The gGovernment is
therefore proposing that it will work together with banks to provide free, confidential and
independent advice to small businesses with cash flow or debt problems.

4.15 There is a strong correlation between the standard investment readiness of a

business and its success in securing external finance. The gGovernment has a role in
facilitating this by providing a strong framework for delivering finance and investment
readiness advice and supported, integrated with the wider business support landscape.

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Access to Finance: Key initiatives

• Strengthen and tailor OIDGF to better meet the needs of entrepreneurs in the outer
islands.

• Explore the development of other funding mechanisms for entrepreneurs that

experience difficulties in accessing finances for business start-up.

• In collaboration with banks, provide free, confidential and independent advice to small
business with cash flow or debt problems.

• Develop a strong framework for delivering finance and investment readiness advice and
support.

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5. REGULATORY FRAMEWORK

“…Private Sector development is the responsibility for all of Government…

entrepreneurship comes with the right environment….” (Steve Anderson, President, Cook
Islands Chamber of Commerce)

Vision
The gGovernment’s vision is for the Cook Islands regulatory environment to encourage
and enable enterprise activity, whether expressed thorough encouraging start-up or
growth, whilst continuing to protect consumers, employees’ rightss and the environment.

Progress to date
The Cook Islands enjoys the reputation of having an unrestrictive regulatory
environment.

Next Challenges
Recent developments in the Cook Islands have highlighted the need the need to put into
place a more robust regulatory framework that not only encourages enterprise, but also
protects consumers and employees.

Strategy
Government will identify, simplify or abolish unnecessary regulation.
Businesses will be able to place greater reliance on official guidance, particularly
around employment regulations.
Businesses will have much clearer information so that the anticipated benefits of
regulation are realized more effectively. Government agencies will constantly and more
effectively examine whether small businesses can be exempted from new regulatory
requirements or be subject to a simplification of enforcement.

REGULATION AS A DRIVER OF ENTERPRISE

5.1 All market economies need a certain extent of regulation. Regulation plays a
vital role in ensuring the efficient functioning of the market. Good regulation corrects
market failure, underpins competition, protects workers and consumers and promotes
enterprise.

5.2 Getting the type andthe necessary level of individual regulation and regulatory
framework right is essential for strong productivity growth – regulation has a bearing on
the five drivers of productivity. Therefore, it is essential that Government delivers a
regulatory framework which promotes competition, innovation, investment and supports
the formation of skills in the labour market. Regulation equally has an important part to
play in raising the level of enterprise in the Cook Islands.

20
5.3 As societies develop and become wealthier, the public tolerance of risk tends to
fall. Rising expectations of standards of goods and service means there is a growing
demand for regulation. Sometimes those calling for more regulation overlook the
potentially negative effects on the economy, especially in terms of cumulative cost.

5.4 Alongside the benefits it brings, regulation imposes costs, particularly on

business. These costs can be irritants for managers, owners and employees because of
the process required by regulation. In addition to the straightforward financial cost of
compliance can impact negatively on business, especially small businesses.

5.5 In addition to promoting market efficiency, and putting in place necessary

protections for consumers and employees there are other circumstances where it is right
for Government to regulate – for example, to protect the environment. The challenge for
Government is to strike the right balance. To help assess the advantages and
disadvantages of acting and to improve the quality of regulation, there is a need for a
robust impact assessment system. Impact Assessments will enable Government to ensure
decision making to be informed by an assessment of costs and benefits of acting.

PROGRESS TO DATE

5.6 The Cook Islands acknowledges the importance of the regulatory framework in
enabling enterprise, particularly in relation to the protection of the consumer and
employees.

5.7 The Development Investment Act 1995-96 promotes investment in the Cook
Islands and regulates the direction and scope of foreign investment.

5.8 It is hoped that the Consumer Guarantee Bill and Fair Bill will be passed by
parliament by the end of 2008.

5.9 The Cook Islands is currently undergoing a review of the Labour Ordinance Act
1964 with the view of putting into place new Employment Relation legislation to protect
employees that is reflective of the current and anticipated labour issues facing the
country.

THE CHALLENGE

5.10 The Cook Islands must be mindful that its business regulatory framework does
not stifle business start-up and growth.

5.11 While it is evident that Cook Islands is taking steps to ensure a regulatory
framework that protects business, consumers, employees, and the environment; it must

21
also focus on make certain that any new regulation shall not add unreasonable burden to
business.

5.12 Businesses often find the details of regulation complex and difficult to
understand. Good guidance that leads to understanding and compliance to regulation is a
must. Surveys indicate that provision of guidance, setting out in clear and simple
language what their business has to do to comply with a given regulation is very
important.

GOING FORWARD

5.13 Tackling outdated, redundant regulation is an important part of building an

enabling regulatory framework. Businesses should see the real change in how regulation
applies to them.

5.14 Government has already begun steps to putting into place a more robust
legislative and regulatory framework. It is anticipated that by the end of 2009, the
Consumer Guarantee Act; Fair Trading Act, Employment Relations Act will be passed by
Parliament.

5.15 Government is also examining how best to approach the issues of encouraging
competition and minimizing monopolistic situations, bankruptcy and, price control.
and so forth.

5.16 Most regulation is designed to change behaviour and can only be successful if
those affected understand what is required, and whywhat of them is required. If business
is not given clear guidance, then compliance is likely to be low. Government will
improve guidance and also channels of guidance more consistent and streamlined, and
raising awareness among employees. An online tool will be developed to guide
employers, business and employees on the requirements of legislations and regulations.

FUTURE ISSUES

5.17 Striking the right balance in imposing regulation and its associated costs on
decline in business activity remains a challenge for the government.Government –
whether it should impose regulation or not and the cost of doing or not doing so. Should
regulation be imposed Government must ensure that it does not place any excessive
additional administrative burden on businesses.

5.18 Communicating the concrete improvements in the regulatory framework and its
enforcement is important to shifting misconceptions about regulatory barriers (which are
often overestimated) thereby helping to promote enterprise, including business growth
and start- ups.

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5.19 The gGovernment will need to continuously monitor not only the regulatory
compliance but also the impact on businesses in light of changing global economic
environment.

Regulatory Framework: Key proposals

• The Government will ensure that the Cook Islands business regulatory framework
promotes competition, innovation, investment; and protects consumers and
employees; through the passing of appropriate legislations and regulations.

• Before passing legislations and regulations relating to enterprise, the gGovernment

will conduct and impact assessment of the cost and benefits of action. Government
will put into place a robust impact assessment system.

• Outdated and redundant legislation and regulations will be reviewed such as the
Price Control Act.

• Together with the Law Commission Government will examine issues of monopoly,
mergers, bankruptcy with the view of putting in place mechanisms that best
addresses these situations.

• Improve guidance and awareness requirements and effects of compliance to

legislation and regulation.

• Strengthen monitoring and compliance systems.

23
6. BUSINESS INNOVATION
Vision
• The gGovernment’s vision is to create an environment in the Cook Islands in which
innovation can flourish and where businesses identify and capture the benefits of their
innovation.

Progress to date
• Government policies have focused enough on innovation as a key enabler of enterprise.
To promote innovation vigorously is a new dimension in the gGovernment’s approach to
business development.
• Businesses that survive in the Cook Islands do so because they are innovative in the way
that they operate and the products they offer.

Next Challenges
• The focus on innovation as an enabler of enterprise has not been fully harnessed in the
Cook Islands. Yet it is key to diversifying the economy and for business survival in such
a small economy. The challenge is how to embed innovation into our business culture.

Strategy
The gGovernment’s approach for business innovation will target:
• An increase in the proportion of SME turnover due to new or significantly improved
products.
• Businesses increasingly looking externally to find ideas at each stage of development.
• Innovative firms – and increasingly service-based businesses – playing a greater role in
international markets.

THE GOVERNMENT’S VISION

6.1 Innovation – the successful exploitation and commercialization of new ideas – is

key in enabling enterprise activity; whether the driving force for business start-up or a
catalyst for growth.

6.2 Government’s main task is to maintain framework conditions in which business

can innovate and in providing direct support where the market fails.

6.3 A key measure of success will be the extent to which there is an increase in
economic growth due to new or significantly improved products and services of SMEs.

24
KEY CHALLENGES AND OPPORTUNITIES

6.4 The tourism sector remains at the heart of our economy. A thriving tourism
sector is essential for employment and for the economy. But as with other sectors,
tourism operators need to improve their competitiveness in order to succeed in the
tourism marketplace. Success depends not on only cutting costs, but on continually
creating goods and services that people want to buy, using innovation, investment and
good business practice.

6.5 We have entered a period of fundamental change in our economic environment –

the impact of global issues has facilitated the need to be more innovative. For the Cook
Islands, climate change and the need to ensure sustainable development have also
become significant drivers of business innovation.

6.6 Innovation is becoming an increasingly global process. The Cook Islands must
start taking innovation seriously if it is to survive in the global market place.
Undoubtedly, our size, isolation, small population presents us with seemingly
insurmountable challenges particularly when taking into account the challenges of global
competition.

6.7 However, if the gGovernment can ensure macroeconomic stability; an open and
competitive market; invest in people and knowledge; ensure that the infrastructure to
support development; we have the potential to unlock our people’s talents and be
innovative.

6.8 New technologies are providing huge opportunities to support innovation. The
growth of broadband and the convergence of communication technologies and new
information technologies are transforming the way products and services are developed
and marketed all over the world. They are also enabling the development of completely
new services.

GOING FORWARD

6.9 Government will work towards better understanding the barriers to innovation and
determine how the gGovernment may stimulate and support innovation.

6.10 The Cook Islands have not fully appreciated the role of research in influencing
business decisions. Therefore the role between research and product design and service
is weak. The gGovernment will take action in fostering these connections.

6.11 The Government will be committed to improving the ability of Cook Islands
businesses to access gGovernment contracts. This will bring more innovative solutions
to government and also reinforces and nurtures the innovative behaviour of businesses.

25
6.12 Government will put together a cCommittee that will have a key role in
supporting innovation in the Cook Islands. This committee will bring together key
players and partners (public and privateGovernment and Business) to look at major
societal challenges and market opportunities with a view of increasing business
investment and innovation.

6.13 Business needs innovative people with skills and entrepreneurial drive. The
gGovernment has a unique and essential role in supporting business innovation by
ensuring that there will be a stock of science, technology, engineering and mathematics
graduates and a flexible labour market for them to enter.

6.14 It is vital that our communications infrastructure meets not only today’s demands,
but also provides the platform for creativity and innovation to support our future
economic growth. Government will explore the best way forward in ensuring that our
communications infrastructure matches our aspirations in business innovation.

Business innovation: key initiatives

• Government will work towards better understanding barriers to innovation and

how innovation can be stimulated and supported.

• Foster connections between research, product design and service.

• Establish a committee on innovation Innovation Committee.

• Ensure science, technology, engineering, mathematics tertiary education

scholarships are offered to our young people.

• Explore the best means of improving infrastructure such as communications,

transportation, public utilities, ports, etc.

26
7. THE WIDER BENEFITS OF ENTERPRISE
Vision
The Government’s aim is through enterprise (measured by self-employment rate), to
bring significant social and economic benefits to Cook Islands, and in particular to the
Outer Islands.

Progress
In 2003, there was a total of 134 new business registered for VAT; in 2008 (as of
November 25th ), there are 72 new business registrations. This demonstrates a decline in
businesses registered for VAT.

Next Challenges
To increase businesses registered for VAT.
Communities in the outer islands have most to gain from the wider benefits of
enterprise, yet they are most lacking in skills, culture and the resources needed to enable
enterprise.
A key challenge for many is accessing finance to support enterprise activity.
A further challenge is embedding social enterprise as an accepted form of enterprise.

Strategy
Government is wants to re-focus its role in delivering economic development, including
support for enterprise. In the coming years, Government’s strategy is for:
More businesses and individuals in communities that are underserved by traditional
finance sources can access the finance they need.
Disadvantaged groups, including young people, women, outer islanders, etc can obtain
better and more relevant forms of business support.

THE GOVERNMENT’S VISION

7.1 The gGovernment’s vision is that every Cook Islander, irrespective of where they
live, their gender, age, or any other differences, can be part of and enjoy the benefits of a
dynamic and growing economy. It is essential that if we are to succeed as an economy in
a globalizing and competitive world, we are able to use everyone’s talents and abilities to
generate growth and increase productivity.

7.2 The chart 7.1 below, demonstrates that since 2005, the number of new businesses
registered for Value Added Tax (VAT) has been on the decline (note that number for

27
2008 is up to November 25, 2008). This indicates that Government must work hard to
foster and support business development.

Chart 7.1

New business registered for VAT

160
140
No of business

120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Years

LOOKING AHEAD

7.3 Most of the reasons for lack of enterprise in any community are common across
the whole country. However, local differences in economic historic, geography,
demographic mix, give rise to a variety of issues and therefore call for an appropriate
variety of policy responses. In the coming years, the gGovernment will pursue a range of
policies aimed at empowering local communities to boost economic development in their
areas, and tailored measures to improve access to finance for those who find it difficult to
secure finance from commercial banks.

28
Wider Benefits of enterprise: Key considerations

Government to put into place funding mechanisms for those who cannot secure
funding through commercial banks for business start-up and expansion.

Government will operate and manage a separate funding mechanism targeting the
outer islands.

The gGovernment through BTIB will target and provide more intensive support
to those currently under-represented in enterprise.

Government will develop mechanisms to help young people realize their talents
and potential through raising awareness of enterprise and the role it can play in
their lives and in building communities.

29
DELIVERING THE STRATEGY
A CULTURE OF ENTERPRISE
OUR GOALS
To inspire our young people to be
entrepreneurial
To reach those with low aspirations
To promote enterprise amongst
women
OUR STRATEGIES
• Enterprise education in our schools
•Establish a pilot programme to offer
mentoring and work placement in
SMEs.
• Explore and promote avenues for
young people to connect with
enterprise activities around the
world
•Establish a Entrepreneurship Week
• Develop strategies to encourage
outer islands participation in
enterprise
• Develop enterprise assistance
targeting women
OUR TARGETS
• Increase enterprise programmes in
our schools
• Improve pass rate in enterprise
programmes in our schools
•Increase participation in pilot
programme
•Increase number of young people
connected with enterprise activities
around the world
• Number of young people
participating in Entrepreneurship
Week
•Increase number of enterprise in the
outer islands
•Increase number of women in
business
OUR DRIVERS
• Ministry of Education
•Business Trade and Investment
Board
•Business Trade and Investment
Board
•Ministry of Internal Affairs (Youth
Division)
•Business Trade and Investment
Board
•Ministry of Education
•Ministry of Internal Affairs (Youth
Division)
•Business Trade and Investment
Board
•Ministry of Marine Resources
•Ministry of Agriculture
•Cook Islands Tourism
•Department of National Human
Resource Development
•Ministry of Internal Affairs
•Business Trade and Investment
Board
30
To address the environment that
shapes fear of failure
To strengthen capacity to support
SME
To build effective partnerships to
promote SME support
•Review policies to create a more
conducive environment for
enterprise (regulatory, infrastructure,
finance, marketing)
• To develop systems to disseminate
information effectively and
efficiently
•Strengthen Business Trade and
Investment Board capacity to
facilitate, coordinate and support
SME development
•To develop tools and systems to
inform customers
•Work in partnership with Private
Sector, NGOs and the community to
promote enterprise
•To establish a mentoring and
empowering programme with
partners to promote and support
enterprise.
•Policies for conducive environment
in place and increase in enterprise
•A fully capacitated Business Trade
and Investment Board
•Effective partnerships to promote
•Business Trade and Investment
Board
•Ministry of Finance and Economic
Management
•Ministry of Internal Affairs
•Office of the Prime Minister
•Ministry of Infrastructure and
Planning
•Ministry of Marine Resources
•Ministry of Agriculture
•Cook Islands Tourism Authority
•Business Trade and Investment
Board
• Business Trade and Investment
Board
•Private Sector
•NGOs
31
KNOWLEDGE AND SKILLS
OUR GOALS
To ensure that many more people in
the Cook Islands have the enterprise
skills to start and grow business and
for businesses to have access to a
skilled workforce
To have a high level of skills and
training in the workforce
To provide in an effective and
efficient manner business support,
advice and mentoring
OUR STRATEGIES
• Develop the Enterprise Education
Framework
•Promote self-employment as a
career option
•Embed enterprise in the National
Resources Development Strategy
•Offer accredited skills and training
programmes that meet the needs of
enterprise
• Build the capacity of BTIB to be
able to effectively and efficiently
provide business support and advice
• To provide business support on line
•Develop a robust mentoring
programme in partnership with
private sector and NGOs
•Embrace new media and
OUR TARGETS
•Extend enterprise education across
the whole school system
• Quality enterprise education
programmes in our education
curriculum
•Increase number of self-employed
people
•Embed enterprise in National
Resources Development Strategy
•Increase number of people
undertaking and successfully
completing skills and training
programmes
•Increase number of people utilizing
the services provided by BTIB
• Increase number of people utilizing
BTIB business support on line
• Number of people taking part in
mentoring programme
• Increase media and technological
OUR DRIVERS
• Ministry of Education
•Business Trade and Investment
Board
• Ministry of Education
• Department of National Human
Resource Development
• Department of National Human
Resource Development
• Business Trade and Investment
Board
• Department of National Human
Resources Development
• Business Trade and Investment
Board
•Business Trade and Investment
Board
•Office of the Prime Minister (ICT
Division)
•Business Trade and Investment
Board
•Private Sector
•NGOs
• Business and Trade and Investment
32

To drive the development of
enterprise skills and knowledge of
people in the outer islands
ACCESS TO FINANCE
OUR GOALS
To ensure that there are alternative
financing mechanisms to support
those who cannot access finance from
regular financing sources
To ensure that all businesses and
entrepreneurs are more ‘investment
ready’ and are better able to secure
appropriate sources of investment and
finance
technologies to better address the
needs of business
• Promote the development of
enterprise skills and knowledge of
people in the Oouter Iislands
OUR STRATEGIES
• Provide alternative financing
mechanisms to support enterprise
•Provide access to finance for outer
islands entrepreneurs through
financing mechanisms targeting
outer islands
• Work with NZAID to strengthen
and tailor Outer Islands
Development Grant Fund to better
meet the need of enterprise in the
outer islands such
• In collaboration with banks, provide
free, confidential and independent
advice to small businesses
• Develop a strong framework for
delivering finance and investment
avenues to assist and support Board
business
• Increase number of people utilizing
media and technological avenues to
address business needs
• Increase number of people from the •Business Trade and Investment
outer islands undertaking and Board
successfully completing skills and •Department of National Human
training programmes Resource Development
•Increase number of enterprise in the
Oouter Iislands
OUR TARGETS OUR DRIVERS
•Increase number of people in •Business Trade and Investment
enterprise utilizing alternative Board
financing mechanisms • Ministry of Finance and Economic
Management
• Bank of the Cook Islands
•Increase number of enterprise in •Business Trade and Investment
outer islands Board
• Ministry of Finance and Economic
Management
• NZAID
•Increase in enterprise activities • Business Trade and Investment
Board
• Banks
33

REGULATORY FRAMEWORK
OUR GOALS
To ensure that our regulatory
environment encourages and enables
enterprise activity
readiness advice and support
OUR STRATEGIES
• Promote competition, innovation,
investment; and protect consumers
and employees thorough the passing
of appropriate legislations and
regulations
• Review and outdated and redundant
legislation and regulations related to
enterprise activity
•Consider the costs and benefits of
passing legislation and regulation
relating to enterprise
•Examine the issues of monopoly,
mergers, bankruptcy with the view
of implementing mechanisms that
best address these situations
• Provide information and guidance
effectively and efficiently to
businesses on compliance with
legislation and regulation
• Strengthen monitoring and
compliance systems
OUR TARGETS
•Increase enterprise activity
•Increase enterprise activity
•Increase competition
• Decrease in business bankruptcy
• Increase utilization of official
channels for information and
guidance on compliance with
legislation and regulation regarding
business activities
• Decrease in non-compliance
OUR DRIVERS
•Business Trade and Investment
Board
• Ministry of Finance and Economic
Management
•Ministry of Internal Affairs
•Crown Law Office
•Business Trade and Investment
Board
• Ministry of Finance and Economic
Management
•Ministry of Internal Affairs
• Crown Law
• Private Sector
• Business Trade and Investment
Board
• Cook Islands Law Commission
• Ministry of Internal Affairs
• Ministry of Justice
• Crown Law Office
• Ministry of Finance and Economic
Management
•Business Trade and Investment
Board
• Cook Islands Law Commission
• Ministry of Internal Affairs
• Ministry of Justice
• Crown Law Office
34
 incidences • Ministry of Finance and Economic
Management
BUSINESS INNOVATION
OUR GOALS OUR STRATEGIES OUR TARGETS OUR DRIVERS
To better understand how innovation •Foster connections between •Increase enterprise turn over due •Business Trade and Investment
can be stimulated and supported to research, product design, marketing new or improved products Board
drive our enterprise activity and service

•Establish Innovation Committee •Increase enterprise turn over due •Business Trade and Investment
new or improved products Board

To improve our infrastructure to
support enterprise innovation and
development
• Ensure that science, technology,
engineering, mathematics tertiary
education scholarships are offered to
our young people
• Explore the best means of
improving infrastructure –
communications, transportation,
public utilities, ports, etc to support
enterprise
•Increase in number of scholarships
in these areas and success of those
undertaking scholarships
• Have in place the necessary
infrastructure to support enterprise
innovation and development
• Department of National Human
Resources Development
• Ministry of Education
•Business Trade and Investment
Board
•Ministry of Infrastructure
•Ministry of Transport
•Island Administrations
•Minister of Telecommunications

This Strategy will only succeed through the collaborative efforts of many government agencies and the different sectors of the
community.

Government agencies identified are expected to mainstream the strategies contained in this ‘10 year Strategy for SME Development’
into their various strategic and annual business plans. The overall agency responsible for ensuring the delivery of the strategy will be
the Business Trade and Investment Board. The targets identified will be monitored by the various agencies and will be evaluated by
the Central Policy and Planning Office of the Office of the Prime Minister.

35