Cohen: High Cost of Living in Islands Caused by Limited Private Sector

Cohen says cost of living on islands high due to limited private sector participation
By Gemma Q. Casas
Variety News Staff
12/7/07

THE federal official in charge of overseeing assistance and programs for American insular areas says the cost of living in island communities is high due to limited private sector participation.

David Cohen, the U.S. Interior Department’s deputy assistant secretary for insular affairs, was the keynote speaker at the Annual Conference of the Island Government Finance Officers’ Association held on Tuesday in Honolulu, Hawaii.

He said “in most of the insular area economies, there is an unsustainable imbalance between the public and private sectors.”

A strong private sector propels a healthy economy, he said. This way “jobs are created and taxes are collected to fund essential services for the public.”

But many islands do not have economies dominated by the private sector. “In many island economies, this model is turned on its head: The economy is dominated by the public sector. Since the public sector generally is a consumer and not a producer of wealth, this type of economy can only be sustained with outside subsidies. I have referred to these island economies as being “upside down in the middle of the ocean.” They will have to get right-side up in order to get their heads above water,” said Cohen.

However, the odds are against the island communities because of their remote locations and susceptibility to extreme weather conditions. “These communities tend to have small populations, few resources and remote locations. That means they are heavily dependent upon transportation systems to bring people and goods to and from their islands, and that transportation is likely to be significantly more expensive than it is in more populated areas. This, in turn, tends to make everything else on the island more expensive. The cost of doing business is therefore high.”