The Economic Competitiveness of Norfolk Island

Is Norfolk Island competitive? With the globalization of markets, the increased mobility of corporate assets, and the need for productive human resources, this question has become all the more complex to answer. This report was prepared to tackle this question by focussing on certain fundamentals: financial performance and labor productivity. In the former case, we are essentially interested in the degree to which firms operating in Norfolk Island have fundamentally different financial structures and performance compared to firms located elsewhere. With respect to this view of competitiveness, if one were to invest or operate in Norfolk Island, how would the firm s asset structure likely vary compared to a firm operating in some other country in Oceana or average location in the world? In Norfolk Island, do firms typically hold more cash and other short term assets, or do they concentrate their assets in physical plant and equipment? On the liability side, do firms operating in Norfolk Island have a higher percent of payables compared to other firms operating in Oceana, or do they hold a higher concentration of long term debt? The structure of the income statement is also telling. Do firms operating in Norfolk Island have relatively higher costs of goods sold, operating costs, or income taxes compared to firms located elsewhere in the region or the world in general? Are returns on equity higher in Norfolk Island? Are profit margins greater? Are inventories held longer? Chapters 2, 3, 4 and 5 are designed to answer these and similar questions that naturally affect one s decision to invest or operate in Norfolk Island. In many instances, people make all the difference. In addition to financial competitiveness, this report considers the extent to which labor deployment and productivity in Norfolk Island differs from regional and global benchmarks. In this case, we are interested in the amount of labor required to operate a typical business in Norfolk Island and the likely returns on this human investment. What is the typical ratio of short-term and long-term assets to employee? What are typical capital-labor ratios? How different are these ratios to those in Oceana in general and the world as a whole? What are the average sales and net profits per employee in Norfolk Island compared to regional benchmarks? Again, these and over 50 other measures of labor productivity are considered in Chapters 6, 7, and 8. The goal of this report is first to assist managers in gauging the competitive performance of Norfolk Island at the global level. With the globalization of markets, greater foreign competition, and the reduction of entry barriers, it becomes all the more important to benchmark Norfolk Island against other countries on a worldwide basis. Doing so, however, is not an obvious task. First, one needs to aggregate across firms in Norfolk Island. Second, one needs to control for exchange rate volatility. Finally, one