Modest Growth for Fiji in 2008 - ADB

Modest economy growth in 2008: ADB
www.fijilive.com Tuesday March 27, 2007

The Asian Development Bank says Fiji's economy is seen to emerge from a recession in 2008 with a growth of 1.3 per cent.

ADB regional director based in Suva, Sirpa Jarvenpaa said this is predicated much on the recovery of the tourism numbers between six to eight per cent in 2008.

She made the comments while releasing the Asian Development Outlook, the ADB's annual economic publication.

Jarvenpaa said while Fiji's foreign reserves will continue to be under pressure, the tight fiscal and monetary policies are expected to contribute to financial stability.

"But to generate the necessary level of growth for sustainable employment expansion against the subdued growth achieved over the last five years at 3.4 percent and 3.4 per cent in 2006, development challenges call for major structural changes. Particularly to attract more private sector investment.

Jarvenpaa said Fiji faced many economic challenges even before the 2006 coup and 2007 looks as if it would be a difficult year.

She said the 3.4 per cent growth last year was achieved on the back of agriculture, particularly sugar production, forestry, fisheries sectors and expansion in construction, and growth in services stimulated by consumption demand particularly in electricity and water sectors.

"Growth was achieved despite a decline in the tourism sector and the closure of the country's gold mine."

Jarvenpaa said economic performance in 2006 was affected by the continuing loss of preferential access in textile export markets reflecting in a steep decline in clothing industry in 2006 where production was reduced by 25 per cent.

"Imports grew by 12.7 per cent in US dollar terms in 2006 and exports fell by 1.8 per cent.

"While the surplus on services and transports increased primarily due to the personal remittances this was insufficient to offset the widening trade gap."

Jarvenpaa said exports remained weak last year and current account deficit widened, placing pressure on the reserves.

On private sector investment levels, Jarvenpaa said this remained low at the equivalent of eight per cent of Gross Domestic Product (GDP).

She said private investment should comprise the largest share of total investment that should exceed 25 per cent of GDP to generate the necessary level of growth.

Coup affects EU negotiation

By MAIKA BOLATIKI
Political Editor - www.sun.com.fj - 27 March, 2007.

The illegal removal of the Laisenia Qarase-led Sosoqoqo Duavata ni Lewenivanua’s multi-party government could surely affect Fiji’s negotiation on theEuropean Union’s new economic partnership agreement (EPA). The EU has strongly opposed the military takeover on December 5, 2006. The EU has still not changed its stand and maintained the coup had not been in the best interests of the people of Fiji. It has called for the urgent and full restoration of democracy, as well as a return to civilian government as soon as possible. As a result of the takeover, the EU considers that there has been a violation of the essential elements of the ACP-EU Partnership Agreement (also known as the Cotonou Agreement), to which both the EU and Fiji are signatories.Where provisions of the essential elements of the agreement - regarding democratic principles, the rule of law and human rights - have been breached, a process is provided for under Article 96 of the Agreement whereby the authorities of the country concerned are invited for consultations, with a view to seeking solutions acceptable to both parties. If, following such consultations, acceptable solutions are not found, appropriate measures are taken. Such measures can include the suspension, or partial suspension of EU-funded aid programmes, including - in the case of Fiji - suspension of the assistance to the sugar sector that, prior to the coup, the EU had committed itself to providing. A letter was sent by the EU on February 27, addressed to the President of the Republic of the Fiji Islands, stating that it wished to conduct formal consultations with the Interim Government before any such measures were taken. The consultations are designed to give the Interim Government the opportunity to set out its plan for the return to democracy, as well as its future intentions as regards respect of the rule of law and of human rights. The Cotonou Agreement provides for the consultations to begin no later than 30 days after the issuing of the letter of invitation, and the consultation procedure should last no longer than 120 days. A first meeting is expected to take place, in Brussels very soon. The measures to be taken with regard to aid suspension will be decided by the EU only as a result of the conclusion of the consultation procedure.At a meeting with EU Trade Commissioner Peter Mandleson at Brussels last Monday (March 19) said the EPA was the way forward for the 78 African, Carribean and Pacific (ACP) countries.He said with the Cotonou Agreement coming to an end in the very near future, ACP countries had been given time to think of the EPA.In fact the EPA concept had been floated around in the last seven years.Mr Mandleson said non-governmental organisations (NGOs) had been quick to criticise the EPA but had offered no alternatives.
We had the opportunity of meeting with Oxfam International at their office in BrusselsOxfam said free trade agreements could impose radical tariff liberalisation, threatening the livelihood of small farmers and preventing governments from using tariff policy to promote manufacturing. Citing an example Oxfam said through the EPA. Europe proposes to oblige the poorest countries in the world to reduce a very large part of their tariffs to zero.
At the same time FTA’s do not address the adverse impacts of rich country subsidies on poor countries through dumping, or the plethora of non-tariff barriers that continue to impede access to rich country markets.Mr Mandleson says the EU wants to complete new trade agreements with ACP countries by the end of the year despite opposition from developing countries and NGOs. “This means we will have to significantly increase the tempo of negotiations in some regions,” said Mr Mandelson.The EU had talks with development ministers and representatives of 30 ACP states in Bonn, Germany.
The EU wants economic partnership agreements with the ACP to replace the preferential treatment it gives to ACP imports, which the World TradeOrganisation says is discriminatory and has to stop by the end of this year.The new pacts see the creation of six regional markets, the diversification of local economies and a gradual opening up of ACP markets for EU services and exports.ACP countries fear a market opening could damage existing economic structures and harm their economies, but Mr Mandelson said this would not be the case because there would be a lengthy transition period of years, in some cases decades.The trade commissioner said he expected a deal to be reached with Caribbean nations in July and with the other regions before the WTO deadline expires at the end of the year.Mr Mandelson said the EU had a responsibility to ensure that the ACP nations were “not left in the state of underdevelopment in which they currently find themselves.”He said they needed help to realise their potential.
The ways to achieve this were to invest more, improve integration of regional markets and increase access to EU markets, he said.
In addition to fears of economic hardship, the ACP countries also want the EU to provide them with more funds to introduce the reforms needed for the new pacts to become effective.Mr Mandelson warned the ACP nations that they risked being decoupled from the global economy and left on an island of steadily declining exports of natural resources. Promising a completely new partnership, he said that negotiations would be difficult because of fears of change as well as misunderstandings on both sides. On March 1, Pacific ministers met with EC Commissioners in Brussels to take stock of the progress of EPA negotiations between the Pacific and the EU and to provide political impetus and guidance for the next steps in the negotiation process. The Pacific delegation was led by Samoa’s Associate Minister for Trade Negotiations and the Acting Lead Spokesperson of the Pacific Regional NegotiatingTeam, Hans Joachim Keil, and included Minister Martin Tofinga of Kiribati. The EU was represented by its Commissioner for Trade and its Commissioner for Development, Louis Michel. Both sides recognised the special situation and features of the Pacific region and agreed that the architecture of an EPA must reflect this while ensuring WTO compatibility and meeting the deadline of December 31,the 2007. Both sides agreed that negotiations must be accelerated. In so doing, the immediate focus must be on making rapid progress concerning the key issues of interest to the Pacific, ie goods including rules of origin, fisheries, investment, development cooperation and services.The Pacific and the EC agreed on the importance of converging quickly towards mutually acceptable outcomes that would allow for an EPA to be concluded by the end of 2007. In Fiji’s case, a quick return to democratic rule will see the release of development funds.Funds have been on hold awaiting the Government’s presentation on the case here in the country. As a result of the takeover, the EU considers that there has been a violation of the essential elements of the ACP-EU Partnership Agreement Let us all hope, EU assistance to Fiji will not be affected.

Tough Year Ahead for Fiji

Tough year ahead for Fiji: Economist

Wednesday, March 28, 2007 - www.fijitimes.com

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ANZ senior international Economist Jasmine Robinson addresses the media at the Holiday Inn in Suva yesterday

THE Fiji economy is expected to contract by an estimated 2 per cent this year, according to a leading bank's senior economist.

ANZ Senior Economist Jasmine Robinson said the modest decline in growth was expected to be led by the tourism sector.

"Investment prospects are likely to remain uncertain until the interim Government provides greater clarity over macroeconomic policy and investment directions," Ms Robinson said.

"Recent downgrades to the outlook by major ratings agencies will weigh on investment decision. However, the revised budget goes some way in identifying measures to improve the business climate."

She said the persistent problems in two top major export groups sugar and garments were likely to remain unchanged as the garment sector continues to face stiff competition from the Asian manufacturing bases.

Sugar restructuring will need to feature more prominently as the industry adjusts to the phased reduction in the European Union sugar subsidies, she said.

"One bright spot will be tourism where recovery in visitor numbers will likely follow the calmer security situation. We expect a modest pick up in economic activity in 2008 led by recovery in tourist related activity," she said.

"However, the Fiji tourism sector would benefit from an added injection of support today to continue to uplift is international profile." She said further reforms were needed for a number of industries but guidelines should be considered to format this in a move to assist foreign investors and "get out of this weak position."

Fiji Chamber of Commerce acting president Swani Maharaj said Ms Robinson missed a vital point Fiji had learnt to bounce back on its feet after three previous coups.

"I'm not a doctor of gloom and doom," he said.

"I enjoy a positive outlook. I have faith in the interim Finance minister (Mahendra Chaudhry), who has introduced measures which will turn the economy around by November."

Mr Maharaj said the level of commitment from the people and the government was evident and promising.

He said if the EPA negotiations with the EU over the sugar trade did not materialise in Fiji's favour, the fall back plan would be to cut imports and prevent substandard items being dumped locally.

"For those migrating, there should be tighter control in paying out money," Mr Maharaj said.

"It shouldn't be paid in lump sum, but on a piecemeal basis for such cases.

"And foreigners who want to invest in Fiji need to borrow a maximum of 40 per cent locally, not like Natadola and Momi Bay where they borrowed everything they needed locally."

ADB Aid On Hold

$212m aid on hold

FREDERICA ELBOURNE
www.fijitimes.com- Wednesday, March 28, 2007

THE Asian Development Bank has suspended $212million in funds earmarked for capital projects.

In a statement yesterday, the bank said the interim Government must provide assurance that it would resume its international responsibilities before it could resume funding.

ADB regional director Sirpa Jarvenpaa said the matter with the interim administration was likely to be settled in the next few days which would enable the resumption of project funding.

She said the assurance needed from the interim Government included a commitment to provide an environment that would ensure the successful completion of the four major development projects the ADB had invested in.

The conditions also included counter-funding and adequate staffing in anticipation of the restoration of such terms "soon".

Part of the government commitment included covering past loans not only to ADB but to other banks and international organisations, she said.

The four projects covered by ADB include the third road upgrade, which cost about $65million of which $55.8m had been spent, the ports development project which cost $27.6million, all of which has been spent, the Suva-Nausori water supply upgrade which cost $77.3m of which $29.6m had been used and the Alternative Livelihood Project, which cost $41.4million of which several thousand dollars had been used.

Ms Javenpaa said the cost of doing business in Fiji needed to be scrutinised to improve the investment climate where better access to capital was enabled.

Other measures which served as a challenge for the economy included the need for funds for infrastructure services which would be vital for economies of scale and other benefits and relevant education, she said.

Further challenges in the need to shift gear smoothly included markets that supported labour mobility and flexibility alongside affordable social protection and arrangements that lower risks and uncertainty for business and allow new firms to enter and old firms to exit. Ms Javenpaa said the removal of at-and-behind-the-border impediments to integration were other crucial elements.

On the highlights of the ADB's outlook for 2007, she said Fiji was among two Pacific Island countries whose performance grew by 3.1 per cent and enjoyed a faster expansion while elsewhere in the region was not the same.

"Even before the coup, Fiji faced many challenges and 2007 looked as if it would be a difficult year.

"But now the attrition of confidence and loss of new aid flow may push the country into recession.

She said stabilisation was a key challenge for Fiji.

Modest Growth for Fiji in 2008 - ADB

Modest economy growth in 2008: ADB
www.fijilive.com Tuesday March 27, 2007

The Asian Development Bank says Fiji's economy is seen to emerge from a recession in 2008 with a growth of 1.3 per cent.

ADB regional director based in Suva, Sirpa Jarvenpaa said this is predicated much on the recovery of the tourism numbers between six to eight per cent in 2008.

She made the comments while releasing the Asian Development Outlook, the ADB's annual economic publication.

Jarvenpaa said while Fiji's foreign reserves will continue to be under pressure, the tight fiscal and monetary policies are expected to contribute to financial stability.

"But to generate the necessary level of growth for sustainable employment expansion against the subdued growth achieved over the last five years at 3.4 percent and 3.4 per cent in 2006, development challenges call for major structural changes. Particularly to attract more private sector investment.

Jarvenpaa said Fiji faced many economic challenges even before the 2006 coup and 2007 looks as if it would be a difficult year.

She said the 3.4 per cent growth last year was achieved on the back of agriculture, particularly sugar production, forestry, fisheries sectors and expansion in construction, and growth in services stimulated by consumption demand particularly in electricity and water sectors.

"Growth was achieved despite a decline in the tourism sector and the closure of the country's gold mine."

Jarvenpaa said economic performance in 2006 was affected by the continuing loss of preferential access in textile export markets reflecting in a steep decline in clothing industry in 2006 where production was reduced by 25 per cent.

"Imports grew by 12.7 per cent in US dollar terms in 2006 and exports fell by 1.8 per cent.

"While the surplus on services and transports increased primarily due to the personal remittances this was insufficient to offset the widening trade gap."

Jarvenpaa said exports remained weak last year and current account deficit widened, placing pressure on the reserves.

On private sector investment levels, Jarvenpaa said this remained low at the equivalent of eight per cent of Gross Domestic Product (GDP).

She said private investment should comprise the largest share of total investment that should exceed 25 per cent of GDP to generate the necessary level of growth.

Fiji Tourism Figures

Tourism figures

Letter to Editor; www.fijitimes.com - 28 Feb 2007

WHILE the FVB and Tourism Action Group are doing a commendable job, the general optimism published and broadcast widely in the media on Fiji's tourism recovery in Fiji in 2007 should be viewed with some caution.

It seems to be based on visitor numbers rather than on the more useful economic measure of financial yield that is, a visitor's monetary contribution to Fiji.

Painting such an optimistic picture on recovery of visitor numbers could lead to complacency on the industry's part on the one hand and funding reduction to the FVB and TAG by the Government on the other.

As a simple illustration on the fallacy of basing tourism recovery on visitor numbers, let's say a thousand visitors buy a net $500 package each will contribute $500,000. Whereas, a thousand visitors paying the 40 per cent discounted package now offered to the market will earn Fiji only $300,000.

Therefore, to make up the difference in dollar terms ($200,000), we need to attract 667 visitors over and above the one thousand visitor mark. In other words, it is simply not enough just to get back to the visitor numbers experienced in 2005/6.

As per the illustration above, Fiji needs some 66.7 per cent more visitors on the discounted packages just to get back to square one, let alone move forward to the billion-dollar goal.

I, therefore, predict that the full recovery of 2005/06 levels in dollar terms is still some 12 months away, provided of course that TAG's and FVB's concerted efforts continue.

And provided that the Government's policies and actions promote international goodwill that will eventually lead to the complete withdrawal of damaging travel advisories.

As I see it, the only real benefit of the resurgence of comparatively lower yield visitor numbers is more word of mouth advertisement if they return home after a Fiji holiday experience. The other and perhaps more important benefit is the greater ability of tourism employers to re-employ laid-off staff and restore full working hours for others as a direct result of restored visitor numbers.

I'll be very happy indeed if tourism financial yields in the next six to nine months prove me wrong.

Radike Qereqeretabua
Nadroga