December 7, 2007

Coup did no favours on Fiji economy: Academic

05 DEC 2007 -
As Fiji marks the one year anniversary of the military coup, local academic Professor Ron Duncan says that all indications point to the country’s economy being in worse shape than it was a year ago.

“No doubt the coup led to the development of perceptions about personal insecurity that adversely affected the tourism sector (Fiji’s major foreign exchange earner),” notes Duncan, the executive director, Pacific Institute of Advanced Studies in Development and Governance at the University of the South Pacific in Suva.

Exactly one year ago today, military commander and now interim Prime Minister, Commodore Voreqe Bainimarama deposed the Qarase government in a bloodless coup, citing corruption and racial bias and claiming he would clean up the corrupt practices of the previous government.

How much of this the interim Government has managed to achieve is not clear.

Still as far as the economy is concerned, Duncan says the heightened political instability has not helped the investment environment and the substantial decline in investment is reflected in the fall in GDP.

He noted that the sugar industry has reported another poor year, while the closure of the gold mine and the reduction in garment production and employment has also
contributed to the poor year.

But as he points out, the events in gold mining, sugar and garments cannot be blamed on the coup.

Duncan says that given the Budget report on the estimated drop in investment, the investment climate has suffered over the past year.

But he says that some of the things that the interim Government has done should be helping to improve the investment environment.

In particular, he noted the opening up of the telecommunications sector which he says is a boost for business and investment right across the economy.

More, the announcement that the interim Government will vigorously pursue privatisation of the inefficient, loss-making government business enterprises should also give a positive message to investors, as these costly enterprises are crippling business activity and are a burden on the budget, he added.

There have also been positive things happening with respect to land leases, Duncan says.

On how has Fiji’s standard of living fared over the past year, Duncan believes that it was inevitable that the standard of living has declined, given the decline in GDP.

“There have been job losses reported across most parts of the economy but especially in gold mining, garments and tourism.”

Duncan also expressed his disappointment that the interim Government continues with the policy of raising revenue through increases in tariffs.

“We hear all the time from the Reserve Bank of Fiji and the Ministry of Finance about the need to expand exports, but it needs to be understood that a tax on imports is effectively a tax on exports.

“I know that this is a difficult concept for people to understand but it is so critical that it be understood.

“For example, we need improved infrastructure, particularly roads, to increase exports and we need construction of resort hotels to earn more export income.

“Why then do we see a huge increase in tariffs on heavy equipment, even when there is no heavy equipment industry to protect,” asked Duncan.

On whether Fiji under the military was managing well, Duncan says he believes that the interim Government has managed reasonably well under the circumstances.

“Because of the travel ban, there is clearly a limited pool of skilled people to draw from for appointments as ministers and permanent secretaries,” Duncan noted.

But he again reiterated that the policies followed by the Ministry of Finance and the Reserve Bank have made Fiji’s economic situation worse than it needed to have been.

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