Case Studies

Above: Staff attends to a customer's inquiry at a payment center in Rarotonga, Cook Islands.

PSDI has supported the development of a new suite of business laws that make it easier to do business and access finance in the Cook Islands. 

“It’s really about reducing the red tape and freeing up entrepreneurs.”

So says Financial Secretary of the Ministry of Finance and Economic Management of the Cook Islands, Garth Henderson, of the major reforms to foundational business laws that his ministry and the Ministry of Justice have been working on with PSDI since 2014.  

The reform process began with a comprehensive review of the existing Companies Act, which had not been updated since the 1970s. Following this, the Government of Cook Islands asked PSDI to support the development of a new companies bill. After initial diagnostics, the government decided to prepare three new bills, with further PSDI support: a companies bill, a personal property securities bill, and an incorporated societies (amendment) bill.

Mr. Henderson describes these reforms as critical to fostering a more enabling environment for businesses and maximizing the private sector’s contribution to the Cook Islands’ progress towards outcomes articulated in the National Sustainable Development Plan. The reforms were aimed at “modernizing the business environment and bringing archaic legislation up-to-date and in line with what everyone else is trying to do,” says Mr. Henderson.

The Companies Act, Personal Property Securities Act, and Incorporated Societies (Amendment) Act were passed by Cook Islands Parliament in 2017 and were fully implemented with the launch of an associated online Companies, Incorporated Societies, and Personal Property Securities Registry in December 2019.

The registry allows users to file, access, and search company records, incorporated societies, and personal property securities records from one integrated resource. This makes it easier for lenders to take advantage of the Personal Property Securities Act and provide finance to businesses using moveable assets. It also simplifies business registration, reduces time and costs, and eliminates the need to travel to register a business in person—a significant benefit, especially for businesses outside Rarotonga. Mr. Henderson commented on how the registry makes it easier and more efficient for businesses to operate.

“For any economy, efficient, functioning business sectors are a key requirement. (These reforms) make it easier to start a company and maintain that company during its entire lifecycle. It makes it easy to file and meet legal requirements. Online filing creates greater efficiencies and frees up mental space for businesses to get out there and do business. Things like the collection of information for monitoring and compliance all become simple. Businesses can focus on developing ideas and making money—and eventually paying tax.”

Alongside the business law reforms, PSDI supported passage of the Telecommunications Act and Competition and Regulatory Authority Act, part of government preparations for launch of the 3,600-km Manatua submarine telecommunications cable. The cable will significantly increase the speed, reliability, and affordability of internet access in the Cook Islands, French Polynesia, Niue, and Samoa, offering significant private sector development opportunities. The reforms, passed by the Cook Islands’ Parliament in December 2019, provide a framework for pro-competitive telecommunications regulation that ensures the cable’s transformative benefits reach business and consumers. Mr. Henderson says that the PSDI-supported telecommunications reforms represent “one of the greatest things the government has done in recent times, one of the most significant things.”

Mr. Henderson points out that the Cook Islands reforms are yet to include a policy on foreign direct investment. “When each of these pieces of legislation stands by themselves, you don’t see improvements. They all link together. So, you have the new legislation and the improved ease of doing business, but one of the big gaps is a foreign direct investment policy, and we haven’t resolved that. We don’t have the clarity about (if we are) open to foreign direct investment or not, which means there’s a gap in the package we’ve put together.”

The Government of Cook Islands has requested PSDI support to address this gap, with work on a foreign direct investment policy anticipated to begin in FY2020/2021. Mr. Henderson believes the government can expand on its emerging online capacity and build further efficiencies by developing an extended registry that captures all business structures as well as foreign direct investment data. This data could then inform the development of a strong foreign direct investment policy.

This rapid and significant progress towards a more enabling business environment in the Cook Islands highlights what is possible when governments initiate and facilitate locally-led reforms.

These reforms also demonstrate critical aspects of the PSDI modality in action: long-term engagement, flexible and timely responses to support requests, and high-quality, expert technical advisory services. Through its partnership with PSDI, the Cook Islands government has been supported to implement legislative reform and technology solutions that strengthen the business enabling environment and make it easier for the private sector to operate in the Cook Islands.