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Trade Agreement Strengthens Fiji's Ties with Australia

Australia Network News

The Fijian government has welcomed the extension of a trade agreement with Australia, saying it will boost its textile, clothing and footwear industry.

Australia's Labor government has approved an extension of the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) with Fiji despite remaining "deeply concerned about the human rights situation in Fiji."

The deal allows certain textile, clothing and footwear products which are predominantly Fijian-made to be allowed into Australia duty free under SPARTECA.

Australia's Acting Trade Minister Martin Ferguson said in a statement the decision to extend the agreement was consistent with its position of continuing support for the people of Fiji.
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ADB Pacific Monitor Report caution Fiji to brace for impact in 2012

Posted on Raw Fiji News - 14 December 2011

The Pacific Economic Monitor provides an update of recent developments in the region and explores topical policy issues. The ADB publication uses data from Australia, New Zealand, US, and Asia to supplement data from the region and to provide up-to-date assessments and better understanding of the Pacific Island economies.

Fiji  

Recent developments

The Government revised its 2011 growth forecast from 2.7% in April to 2.1% in November. This was higher than the 2011 budget forecast of 1.3% and ADB‘s estimate of 1.5%. The recovery in 2011, which followed 2 years of contraction, was driven largely by a post-cyclone rebound in agriculture (mainly taro, pawpaw, and sugarcane production), manufacturing, and increased tourism.

The medium-term outlook is less encouraging. Slower growth in major economic partners is expected to affect exports and tourism, exacerbating structural weaknesses in the domestic economy. ADB‘s growth projection for 2012 is 0.7%, which is closer to the average growth rate over the past 6 years. New construction activity and capital purchases linked to mining investments could boost growth. For example, investment to date for the Namosi Copper Mine has been equal to about 2.2% of GDP, or $86.2 million of a planned total of $1.1 billion. However, this has largely been spent on exploration and feasibility studies, and much of the capital is expected to be imported, so it is unclear how much impact the investment will have on growth in Fiji.

The current account deficit is expected to remain at around 10% of GDP in 2011, driven by the country‘s persistent trade deficit. This is forecast to moderate slightly in 2012 although a rise in consumer spending could lead to more imports and worsen the trade balance. Foreign reserves remain at comfortable levels in 2011, at around $880 million and are sufficient to cover about 5.1 months of imports.

Key issues

 The Fiji government‘s stronger fiscal consolidation bodes well for debt reduction, but achieving long-term reductions in the country‘s debt burden rests upon the achievement of revenue and growth targets.

 In 2011, the government increased the balance of its offshore sinking fund by 9.0% (to $37.2 million) in order to ensure it is well placed to repay the international bond issue of $250 million maturing in March 2016. However, there is a risk that these funds may be used to finance current expenditure, particularly if revenue targets are not achieved.

 The 2012 Budget aims to stimulate economic activity through tax cuts to boost spending, but this objective will not be met if consumer and business confidence does not improve due to lingering political and policy uncertainties.

 Structural reforms are critical to improve growth prospects. A recent ADB assessment of private sector development in Fiji identified the following strategies for improvement: creating a stable policy environment, minimizing the role of the state in the economy, and streamlining business regulatory processes.

Standard and Poor’s

There is a special article from Standard and Poor’s embeded within the ADB Report on the sovereign credit rating of Fiji in light of prospects of weaker global growth and financial market volatility in 2012.

S&P warns that despite the lifting of Fiji’s credit quality to B from a B- on August 5 2011 due to a revision in its own methodology and Fiji’s improved external position, Fiji’s reliance on Tourism to spur growth quite apart from domestic inflationary pressures would undermine its credit quality in the new year. Fiji issued a US$250m bond in March to replace the US$150m issue that matured in September.

S&P noted that its “ratings also reflect Fiji‘s challenging political and policy environment, diminished institutional transparency and independence, and decrees that weigh on civilian and media freedoms. Standard & Poor’s expects these to weaken prospects for investment and for donor re-engagement, and thus the nation’s growth prospects.”

The full text of the ADB Pacific Monitor dated 14 December 2011 can be downloaded here.

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Survey Reveals Sick Fiji Economy & Getting Worse

by Sai Lealea

Sugar Industry - destined to collapse

A recent survey has revealed what we all know to be the case - A sick Fiji economy and it is getting worse by the minute the longer the current illegal regime stays in power.

Authored by a group of economists at the University of the South Pacific, the report confirmed the bleak prospects for economic growth as a result of the political situation in Fiji and made worse by external global economic realities. The dire situation facing the sugar industry is there for all to see with the current regime's attempt at revitalisation destined to fail. As well, dilapidated infrastructure will stifle long term investment opportunities in tourism and other key areas.

In the other words, Fiji's situation has been made extremely difficult by the draconian policies of the current illegal regime, including restrictions on media freedom and human rights.

Again as everyone have noted, the solution identified by the report is a return to democratic government to ensure political and economic stability. This in turn would ensure effective and well-constructed policies that promote economic growth.

The Concluding Remarks of the Report are as follows:

• The short-medium term prospects for Fiji on both the political and economic fronts look less than promising. On the economic front, GDP growth rates have not increased despite the numerous promises. While poor growth between 2007 and 2009 can be explained partly by the impact of the global economic crisis, natural disasters and some inherent weaknesses, the continued forecasts of low growth between 2010-2013 reflects the continuing state of poor investment caused by lack of confidence in the country. The imminent collapse of the sugar industry should be a serious concern and it appears that the current government’s game plan may not work. The sugar industry has a long-history of networks which may have sounded political but it is those networks that allowed farmers to keep the interest in the industry. The destruction of some of the historic institutions of the farmers may not augur well for the industry. The current media censorship and lack of dialogue with the stakeholders is likely to be harmful to the industry which is already on the brink of collapse.

• While the prospects for better outcomes from the tourism looks realistic, the government’s tight fiscal position may provide very little room for any serious investment undertaking to improve the infrastructure needed urgently in Fiji.
   
• The short-medium term prospects for Fiji on both the political and economic fronts look less than promising. On the economic front, GDP growth rates have not increased despite the numerous promises. While poor growth between 2007 and 2009 can be explained partly by the impact of the global economic crisis, natural disasters and some inherent weaknesses, the continued forecasts of low growth between 2010-2013 reflects the continuing state of poor investment caused by lack of confidence in the country. The imminent collapse of the sugar industry should be a serious concern and it appears that the current government’s game plan may not work. The sugar industry has a long-history of networks which may have sounded political but it is those networks that allowed farmers to keep the interest in the industry. The destruction of some of the historic institutions of the farmers may not augur well for the industry. The current media censorship and lack of dialogue with the stakeholders is likely to be harmful to the industry which is already on the brink of collapse.

• While the prospects for better outcomes from the tourism looks realistic, the government’s tight fiscal position may provide very little room for any serious investment undertaking to improve the infrastructure needed urgently in Fiji.
   
• The answer to Fiji’s serious economic problems may incidentally lie in a political settlement. The link between good economic growth, democracy, media freedom and rule of law cannot be underestimated. There is no substitute for well-constructed policy when it comes to economic growth and development. Previous governments in the last three decades have made similar mistakes about growth policies. There have been very limited successes to count particularly towards long run economic growth prospects and at this point in Fiji’s history any bandaid approach will not do any good. Firm commitments and definite steps are needed to build that confidence that has been lost. The much demanded open dialogue must start immediately and the media freedom be established by relaxing the emergency law and the current censorship of the media.

• The government has a good opportunity now to open up dialogue with the political parties, external partners and organisations such as the UN and the Commonwealth to move Fiji towards a Constitutional democracy, good economic growth and development. 

CLICK HERE FOR A COPY OF THE REPORT

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Fiji Economy in Doldrums Since 2006 Coup

by Sai Lealea

01 August 2011

Despite attempts to hide the real picture of the Fiji economy by the current interim regime, it is clear it is in the doldrums!

Using every indicator there are, Fiji's economy is in dire straits and unless political stability and long term solutions to its current political situation are implemented, the downward trend will continue and with disastrous consequences.

IMF data in the presentation below, provides proof of this sad and diabolical situation for Fiji. To make it worse, reforms carried out by the current regime are having the opposite effect to that intended as:

•  the sugar industry is reeling under lack of investments in infrastructure and low productivity as farmers leave the industry for more profitable sectors.
  
•  tourism earnings, once the rising star for Fiji, remain patchy despite ongoing discounts and attempts at new and non-traditional markets.
  
• government debt level continues to soar as unproductive sectors of government such as the military, soak up expenditure.
  
• productivity and economic growth therefore will remain stunted and will be made worse if workers and their unions are subjected to punitive restrictions from planned draconian degrees by the regime. 

Poverty level will rise as prices increase on basic items. Job numbers has not been able to keep pace with demand from a growing population of new entrants into the labour market. To placate the population it is more than likely that further borrowings will have to be made through various channels as has become the norm via Chinese loans.

No wonder there has been a concerted effort to open up Fiji's natural resources for use through mining, forestry and other forms of mineral and sea bed extraction. While resource owners have been enticed with dollars flashing past their eyes in quick exchange for their consent, the lack of proper investigation and due diligence for environmental impact is bound to have long term and costly impact on both owners and their resources. Worse still, the doubtful nature and lack of confidence in the court system to oversee and enforce just resolutions over resulting disputes and conflict will further disadvantage resource owners when matched against corporations and conglomerates.

Ongoing political instability and uncertainty can only favour fly-by-night investors keen only on extracting maximum return at minimal cost and least time. These are investors with one eye on their bottom line and the other firmly counting down to the the return to democratic rule at which time they would be existing Fiji to enjoy their ill-gotten gains. It is no surprise there has been widespread reports of kickbacks to key regime figures as these investors seek to unblock bureaucratic log jams holding up their operations on the ground in Fiji. Then again one cannot blame them if such tactics have become the modus operandi to doing business deals under a restrictive environment. Sadly though it is the Fiji economy and its people who lose out in the end from such cavalier attitude and wanton greed on the part of some.

Click here for presentation on Fiji's worsening economic situation since Coup 2006.


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ANZ's New System to Ease up Money Transfer

Fiji Live News - 27 July 2011

New methods of sending money from Australia to Fiji are expected to make sending remittances home much easier.

ANZ Pacific CEO Michael Rowland said a new system of transferring money, the Pacific Money Transfer Card would be introduced in October.

He said the new system would allow customers ease of access to money being sent from Australia.

“This two-card solution is an effective option to reduce the costs of remittances because the system allows a person in Australia to upload funds to the card for immediate access for a small one off cost,” said Rowland.

“The nominated person in the Pacific can access the money as soon as the money is uploaded via our ATM network and through EFTPOS.”

He said the card would allow people in Australia to make regular small payments instead of sending lump sums of money.

He also said the system would be introduced first to Tonga, Samoa, Fiji and PNG as residents there received the highest volume of remittances.

The Pacific Money Transfer Card will be introduced across the Pacific in 2012.

Rowland said the overall cost for sending and receiving money through the new systems would go down from 20 per cent to around 6 percent.

Meanwhile, Australia's parliamentary secretary to the Treasurer, David Bradbury, this week told Pacific Forum Economic Ministers meeting in Apia that major companies involved in transferring cash, Western Union, Moneygram and the ANZ, are reducing their fees.

By Tevita Vuibau

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2011 will be Challenging for Fiji says Central Bank Chair

Fiji Live News - July 2011

Fiji’s Governor and Chairman of the Reserve Bank Board, Mr. Barry Whiteside says developments abroad as well as the success of its reform programs will influence the country’s performance in 2011.

And given the downside risks including high crude oil and food prices, unemployment in advanced countries and possible overheating in emerging economies which could dampen global growth prospects, Whiteside said, “Early indications show that 2011 will be another challenging year for Fiji.”

In its 2010 Annual Report which was tabled by the Prime Minister and Minister for Finance, Commodore Josaia Voreqe Bainimarama in Cabinet on July 19, showed that economic growth of 0.6 percent in 2010 was broad-based.

Whiteside said the 2.7 percent growth anticipated for 2011 is expected to be driven largely by the turnaround in the agriculture and forestry, manufacturing and fishing sectors. 

A statement issued by RBF said, “The twin objectives of monetary policy remained intact in 2010. Foreign reserves reached a new historical high of $1,307.4 million in November 2010 before falling slightly to $1,302.7 million by year-end, adequate to cover 4.1 months of goods and non-factor services. Inflation rose from 6.8 percent at the end of 2009 and peaked at 10.5 percent in April last year, before moderating to 5.0 percent at the end of 2010.”

Despite these outcomes, the Governor cautioned that monetary policy formulation has become increasingly challenging as the Reserve Bank attempts to balance the risks imposed by high commodity and food prices on local prices with the need to grow the domestic economy.

The 2010 Annual Report also highlighted the Reserve Bank’s focus on its wider role of developing the economy, with the creation of the Import Substitution and Export Finance facility to support domestic agricultural production and the establishment of a National Financial Inclusion Taskforce to promote greater financial inclusion in Fiji. 

Initiatives to develop small and medium enterprises, in partnership with private and public stakeholders, also continued via microfinance expositions during the year. The Reserve Bank also drove the implementation of the e-Money Fiji project and oversaw the establishment of Local Advisory Boards of commercial banks. 

Governor Whiteside noted that despite the macroeconomic challenges, Fiji’s financial system remains strong and continues to grow. Total assets of the financial system (excluding the RBF) rose by 1.9 percent to $10.5 billion in 2010.

The Report also noted that the Reserve Bank transferred $38.9 million to Government. This comprised its entire profit of $21.5 million for the financial year ended 2010 and one fifth of the balance of the Revaluation Reserve Account of $17.4 million.

Governor Whiteside said monetary policy would be continuously assessed with the view to revive the economy as well as maintaining macroeconomic stability.

“Domestic reforms that are now being implemented need to continue their momentum. We need the cooperation and support of Government, financial institutions, relevant stakeholders and all citizens in order to achieve better growth for Fiji and a higher standard of living.”

By Lavenia Vuadreu

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If All Goes Well, First Fiji Sugar Export in August: FSC

Fiji Live News - 07 July 2011

The Fiji Sugar Corporation (FSC) is expecting to make its first export of 29 thousand tonnes of sugar in August.

Speaking to FijiLive, FSC executive chairman Abdul Khan said the FSC was looking to make the export in early to mid August.

He said the export would go to Tate and Lyle’s sugar refinery in London where it would be refined before being distributed.

Khan also said the FSC was confident of meeting its export target of 190,000 to 200,000 tonnes of sugar this year.

Meanwhile he revealed the Rakiraki, Ba and Lautoka mills had so far crushed over 125,000 tonnes of cane.

By Tevita Vuibau

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