Development plan


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Development plan

  1. 1. Development planIn September 2002, the government announced a 20-year development plan. Among otherthings, it aims to give indigenous Fijians a great stake in the economy. The plan envisages tax-relief to businesses owned or managed by ethnic Fijians, along with greater protection forindigenous land and fishery rights.A major aim of the Fijian government is to achieve self-sufficiency in rice production. Cattlefarming, fishing, and forestry (especially pine trees) are being encouraged in order to diversifythe economy; the leading manufacturing industries involve the processing of primary products.On 14 April 2005, the Cabinet approved Prime Minister Laisenia Qarases proposal to develop abiofuels industry. Under the plan, ethanol is to be developed as a complement to the sugarindustry, with the hope of alleviating Fijis dependence on imported fossil fuels such as petrol.On 15 August, Qarase said that the United Nations Development Programme (UNDP) hadgranted assistance to Fiji to develop its biofuels project. Transformation of the Fiji SugarCorporation into an energy and sugar company would result in a turnover of F$1 billion by 2025,he said, and would cut imports of crude oil, generate export earnings, and provide a source ofelectricity. Energy could be produced from copra, forest, and agricultural products, as well assugar. He touted the scheme as necessary for diversifying and strengthening the sugar industryfor its own survival and the nations economic good. He said that the government of India hadloaned F$86 million for the upgrading of Fijis sugar mills, which would be completed in timefor the 2007-2008 crushing season.On 28 December 2005, John Teiwa of the Coconut Industry Development Authority announcedthat a 20-year plan for the coconut industry would be launched in 2006. Finance frominternational investors, including the government of India, would be sought to develop theprocessing of virgin and extra virgin coconut oil, with a view to venturing into foreign healthmarkets. The government expected an annual profit of F$120 million from the venture, FijiVillage reported. Trials for the generation of fuel from coconut oil were also in progress, Teiwasaid.[edit] TourismTourism has expanded rapidly since the early 1980s and is the leading economic activity in theislands. More than 409,000 people visited Fiji in 1999 (excluding cruise ship passengers). Aboutone-quarter came from Australia, with large contingents also coming from New Zealand, Japan,the United States and United Kingdom Over 62,000 of the tourists were American, a number thathas steadily increased since the start of regularly scheduled nonstop air service from LosAngeles. Tourism earned more than $300 million in foreign exchange for Fiji in 1998, an amountexceeding the revenue from its two largest goods exports (sugar and garments). The effects ofthe Asian financial crisis led to a sharp drop in the number of Asian tourists visiting Fiji in 1997and 1998, which contributed to a substantial drop in gross domestic product. Positive growthreturned in 1999, however, aided by a 20% devaluation of the Fijian dollar. 2005 was a record
  2. 2. year for the tourism sector, with 9% growth according to Viliame Gavoka, Chief Executive ofthe Fiji Visitors Bureau.[edit] TradeFiji runs a persistently large trade deficit. Imports in 1998 accounted for US$721 million, andexports for US$510 million, resulting in a US$116 million deficit. Tourism revenue yields aservices surplus, however, which keeps the current account of its balance of payments roughly inbalance ($13 million in 1998). Australia accounts for between 35% and 45% of Fijis trade, withNew Zealand, the United States, the United Kingdom, and Japan varying year-by-year between5% and 15% each.Foodstuffs, machinery, mineral fuels, beverages, tobacco, and manufactured goods are theprincipal imports. The two largest exports are sugar and garments, which each accounted forapproximately one-quarter of export revenue in 1998 (roughly $122 million each). The sugarindustry suffered in 1997 due to low world prices and rent disputes between farmers andlandowners, and again in 1998 from drought, but recovered in 1999. The Fijian garment industryhas developed rapidly since the introduction of tax exemptions in 1988. The industrys output hasincreased nearly tenfold since that time. Fish, lumber, molasses, coconut oil and ginger are alsoimportant exports, although the last two are in decline. Forestry became important as an exporttrade in the mid-1980s, when the pine plantations planted in the 1950s and 1960s began tomature. Gold and silver are also exported.Australias Trade Commissioner Ross Bray revealed on 26 January 2006 that Fijis exports toAustralia are achieving an annual growth rate of 5 %. More than 31,000 Australian companieswere trading in the Pacific, half of them in Fiji, Bray said.[edit] InvestmentThe governments policy of awarding tax concessions to large multinational companies investingin Fiji has not proved universally popular. The Asian Development Bank (ADB) has criticized it,saying that the concessions have been abused and have not generated long-term investment. The2005 report of the ADB accused foreign entrepreneurs of leaving as soon as their concessionsexpired, and alleged that administration of the concessions encouraged corruption and bribery.Fiji Labour Party leader Mahendra Chaudhry joined the ADB on 31 December 2005, saying thatforeign companies repatriated much of the profit made in Fiji, rather than investing it locally,while taking advantage of the infrastructure funded by Fijian taxpayers without paying any taxesthemselves. This discriminated against local businesses, he claimed.[edit] Economic problemsFijis economic difficulties have been compounded by the effects of three coups over the last twodecades.
  3. 3. [edit] EmigrationSince 1987, when the country was destabilized by two military coups, Fiji has suffered a veryhigh rate of emigration, particularly of skilled and professional personnel. More than 70,000people left the country in the aftermath of the coups, some 90 % of whom were Indo-Fijians.With the continuing expiration of land leases and ongoing instability in the aftermath of anothercoup in 2000, a further outflow of skilled workers has taken place.A 2004 report of the Organisation for Economic Co-operation and Development, published on29 June 2005, found that 61 % of Fijis skilled workers have either emigrated or gone abroad asguestworkers. Fijis loss of skilled workers was the worlds fourth highest, behind Guyana,Jamaica, Haiti, and Trinidad and Tobago. Fijis Bureau of Statistics recorded 3595 workers ashaving left the country between January and August 2004. Of these, 414 held professional ortechnical jobs, 263 were in administrative or managerial positions, and were clerks, supervisors,or related workers, and 118 were sales workers. Indo-Fijians comprised more than 90 % of thoseleaving.Fijis economy is increasingly reliant on remittances from citizens working overseas. Personalremittances now run to more than F$200 million a year, earning more than traditional sectors likesugar and garment manufacturing. Recruitment of Fijians by foreign private military companiesis a growing source of revenue. By mid-2005, there were over 1,000 Fijians working in Iraq andKuwait as soldiers, security guards, drivers and labourers. In addition in 2006 there were morethan 2,000 Fijian soldiers in the British Army, and in 2004 the British defence ministry even sentrecruiting teams to Fiji to do initial fitness and aptitude tests, cutting the costs of selection forpoor Fijian villagers who could not afford to fly to London to sign up.[1][edit] Property laws and investment problemsLow investment has been a long term problem in Fiji and property rights are sometimes thoughtto be part of this problem because, by law, five sixths of the land is owned communally byindigenous Fijians and may only be leased, not purchased outright. However, the leaseholdsystem is often misunderstood.Leasehold tenure has not been a problem for the property sector. Houses all over Fiji oncommunally owned land are on 99 year leases, which have proved satisfactory as a basis forhouse ownership. Hotels also enjoy 99 year leases. The prestigious Denarau developmentinvolving major hotels and resorts and luxury properties is situated on communally owned land.It delivers significant income to native owners and secure title to developers and theircustomers.[2]In agricultural sector, there have been problems, even though agricultural leases are mandated at30 years, following the extension by legislation (the Agricultural Landlords and Tenants Act orALTA) of all ten year leases to thirty year in 1977. The problem experienced in agriculture is thenon-renewal leases as landowners have been unhappy with the provisions in the ALTA forindexing of rents to cope with inflation. This is an on-going problem which calls for urgentattention.[3]
  4. 4. [edit] Natural disastersDrought in 1998 further damaged the sugar industry, but its recovery in 1999 contributed torobust GDP growth. Further damage to the economy (estimated at US$30 million) was wroughtby a cyclone that hit the northern island of Vanua Levu in January 2003. Apart from theeconomic devastation, there were food shortages and outbreaks of disease due to the pollution ofthe water supply.[edit] Tourism woesThe aftermath of the political turmoil in 2000 resulted in a 10-percent shrinkage in the economy,as investor confidence plummeted and tourist numbers dropped sharply. An estimated 7500 jobswere lost. There has been a gradual recovery since 2001, when the 1997 constitution wasrestored and free elections held. The possibility of a return to a racially discriminatoryconstitution led to fears that Fiji might forfeit its preferential arrangements with the EuropeanUnion for its sugar exports, and with Australia for its clothing industry, but those fears havelargely (but not entirely) subsided.[edit] HomelessnessA June 2003 survey revealed a disturbingly high percentage of squatters - about one in ten Fijiancitizens. An estimated 82,350 individuals in 13,725 households lived in 182 squatter settlements,with Suva and Nausori being the worst-affected areas. The number of squatter settlements hadincreased 14 % since January 2001, and 73 % since 1996. Urban migration, unemployment, theexpiry of land leases, and the breakdown of nuclear and extended families were among thefactors blamed for the trend. The report projected the population of squatters to grow to 90,000in the Suva-Nausori corridor by 2006, putting increasing strain on supplies of water, electricity,sewage, and road services. On 14 September, Prime Minister Qarase said that the squatterproblem had become so serious that the government was looking abroad for funding.[edit] Human Development IndexOn 11 September 2005, the publication of the United Nations Human Development Indexdowngraded Fiji from 81st in 2004 to 92nd in 2005, behind Pacific neighbours Tonga andSamoa. Incomes had improved, the report said, with Gross Domestic Product rising from F$5440to F$5880, but other aspects of the quality of life enjoyed by Fiji Islanders had deteriorated. Lifeexpectancy had declined from 72.9 in 2000 to 69.6 in 2004 and 67.8 in 2005, while literacyremained unchanged at 93 %.Joji Kotobalavu, the Chief Executive of the Prime Ministers Office, branded the report "a joke."His dismissal attracted a strong reaction from Opposition Leader Mahendra Chaudhry, who saidthat whereas Kotobalavu was paid to be the Prime Ministers spin doctor. the HDI report was puttogether by professionals who had no hidden agendas, and should therefore be taken veryseriously.[edit] The withdrawal of Shell Oil
  5. 5. The Shell oil company announced on 22 November 2005 that after several decades of operationin Fiji, it would be selling its Fijian concerns in order to concentrate on much larger investmentsin Asia. The decision also affected the companys operations in Tonga, the Solomon Islands, theCook Islands and New Caledonia.[edit] Gold mining layoffsOn 28 December 2005, the Emperor Gold Mining Company Limited, Fijis largest privateemployer, announced that it would be laying off 374 workers at Vatukoula the following day.The redundant workers would be reemployed if conditions improved, General Manager SeanOConnor said. On 3 January 2006, however, the mine agreed to reinstate 141 of those maderedundant.[edit] Economic statistics[edit] IncomeGross National Product (GNP): US$101.48 billion; US$1820 per capita (2000)Gross Domestic Product (GDP): US$1.64 billion; US$2031 per capita (2000) purchasing power parity - US$5.9 billion; US$7300 per capita (1999 estimate) GDP - real growth rate: -6.6% (2008 est.) GDP - composition by sector: agriculture: 8.9% industry: 13.5% services: 77.6% (2006 est.) [1] Population below poverty line: NA% Household income or consumption by percentage share: lowest 10%: NA% highest 10%: NA% [edit] Inflation rate (consumer prices) 1.6% (2002 est.) [edit] Workforce Labor force: 335,000
  6. 6. Labor force - by occupation: subsistence agriculture 67%, wage earners 18%, salaryearners 15% (1987)Unemployment rate: 6% (1997 est.)[edit] Budgetrevenues: $540.65 millionexpenditures: $742.65 million, including capital expenditures of $NA (1997 est.)[edit] Industriestourism, sugar, clothing, copra, gold, silver, lumber, small cottage industriesIndustrial production growth rate: 2.9% (1995)[edit] ElectricityElectricity - production: 550 GWh (1998)Electricity - production by source:fossil fuel: 20%hydro: 80%nuclear: 0%other: 0% (1998)Electricity - consumption: 512 GWh (1998)Electricity - exports: 0 kWh (1998)Electricity - imports: 0 kWh (1998)[edit] AgricultureAgriculture - products: sugar cane, coconuts, cassava (tapioca), rice, sweet potatoes,bananas, ginger, taro, kava; livestock: cattle, pigs,, Shrimp, pickles,goats; fish[edit] ImportsUS$721 million (1998)Imports - commodities: machinery and transport equipment, petroleum products, food,chemicalsImports - partners: Australia 35%, Japan 4.8%, Singapore 19.2%, New Zealand 17.1%(2003).
  7. 7. [edit] Debt and aid Debt - external: US$136 million (2000) Economic aid - recipient: $40.3 million (1995) [edit] Currency 1 Fijian dollar (F$) = 100 cents Exchange rates: Fijian dollars (F$) per US$1 – 1.72565 (August 2006), 1.9654 (January 2000), 1.9696 (1999), 1.9868 (1998), 1.4437 (1997), 1.4033 (1996), 1.4063 (1995) ramadon calendar yearF i j i : C o u n t r y P r o f i l eCountry Profile | 18 Mar 2011 The economy continues to grow a t a sluggish pace.Problems include political uncertainty, flagging business confidence and a slumpindonor aid. Investment amounts to less than 10% of GDP and could fall further inthe medium term. Government debt must be reducedsignificantly in order tomaintain macroeconomic stability but the task of financing this debt will beproblematic. Emigration of skilledlabour is creating labour shortages.KEY POINTSsReal GDP is expected to grow by 2.0% in 2011. Foreign investment in the tourist industry andpublic investment in infrastructure will bethe main economic drivers.sThe central governments debt rose to 56% of GDP in 2010. This is high byregional standards. Fiji will face a very difficult task of financing its deficits in themedium term.sUnemployment continues to edge upward and would be even higher were it notfor substantial emigration. The exodus of manpowerhas led to an erosion of theskills base.sThe current account deficit was 9.7% of GDP in 2010 and will widen to 13.8% in2011. This leaves the country especially vulnerable toany external shocks.F A C T S A r e a18,330 square kilometresC u r r e n c yFiji dollar (F$ = 100 cents)LocationFiji lies in the South Pacific, about 1,600km north of New Zealand and northeastof Tonga. The country comprises 332 islands and some500 atolls and reefs, of
  8. 8. which about 100 are inhabited. The terrain is mainly low -lying, though there arelarge volcanic ranges on most of the larger islands. The climate is warm andtropical, with some risk of cyclones.CapitalSuvaGOVERNMENTHead of StatePresident Epeli Nailatikau (2009)H e a d o f G o v e r n m e n tVoreqe “Frank” Bainimarama (2006)R u l i n g P a r t yThe government is formed by United Fiji Party (SDL) and the ConservativeAlliance Party (MV).Political StructureThe House of Representatives is now made up of 71 members elected for a five -year term in single-seat constituencies, divided into 23Fijian communal, 19 Indiancommunal, three general communal, one Rotuman and 25 open seats. The Senatehas 32 members, electedfor a five -year term: 14 members elected by the Councilof Chiefs, nine members appointed by the prime minister, eight nominated bytheleader of the opposition and one Rotuman rep resentative. The president iselected for a five-year term by a college of chiefs. In2009, the president repealedthe present constitution, sacked the judiciary and postponed new elections for upto five years.Last ElectionsElections to the House of Representatives occurred in March 2006. The SDLreceived 32 seats, the Fiji Labour Party won 25 seats and theremainder weredivided among several parties. Bainimarama, the leader of the armed forces,staged a coup in December 2006 and laterassumed the prime ministers post.Nailatikau was elected president in November 2009. He replaced Ratu JosefaIloilo who retired earlierin the year.Political Stability and RisksFiji is a racially divided country with just over half the populati on claimingancestry back to antiquity, while the rest are descended fromIndians who cameto the island in the 19th century. Racially -inspired riots have been common in thepast. A return to democracy in themedium term seems unlikely since the regimehas stated that new elections will not be held before 2010.The incidence ofpoverty appears to be on the rise owing to long -term declines in the sugar andclothing industries.I n t e r n a t i o n a l I s s u e sThe Commonwealth suspended Fijis membership in September 2009 a fter thegovernment refused to schedule elections by October 2010. This was the third timethat the countrys membership had been suspended. Fiji has cut relations with both Australia
  9. 9. and NewZealand and says they will only be restored in 2014. Fijian relati ons withKiribati have been strained as a result of the protracted bid bythe residents ofBanaban Island in Kiribati to secede and to have their island placed under theprotection of Fiji.ECONOMYE c o n o m i c S t r u c t u r e a n d M a j o r I n d u s t r i e sTourism is Fijis leading sector, with tourism receipts accounting for nearly one -fifth of GDP. After falling in 2009, the real value of touristreceipts grew by 6.0%in 2010 and gains of 1.5% are expected in 2011. Slow rates of growth (less than3% per year) are forecast for thenext several years.The agricultural sector hasmade moderate gains in recent years, though it has suffered from occasionalclimatic setbacks. In 2010, thegovernment allocated US$3.8 million for crop andlivestock rehabilitation and infrastructure devel opment following flooding inDecember2009. A delay in reforms in the sugar industry has led to a drop inoutput.The manufacturing sector is stagnating owing to losses in the clothing andfootwear industries. Both industries have lost their preferredaccess to majormarkets. The sugar industry, which provides a direct source of employment formore than 10% of the economicallyactive adult population, faces an uncertainfuture. The EU has substantially cut sugar subsidies. About 6,000 sugarcanefarmers have leftthe industry, and some 154,000 workers (18% of the countrys population)are expected to move out of the sugar industry in the future.The service sector isexpanding at a relatively slow pace. Retail and wholesale trade is growing at anannual rate of around 3%.Construction activities have weakened as investorconfidence has eroded.O v e r v i e w o f t h e E c o n o m ySlowed by political uncertainty (including the military coup in December 2006),erratic efforts at reform and deteriorating terms of trade,Fijis econom y hasperformed poorly in recent years. Real GDP fell by 2.2% in 2009 owing to theglobal recession as well as floods thathurt farmers and damaged infrastructure inthe tourist industry.Deterred by the political situation, investment has steadilyfallen and is extremely low by international standards. Real growth of GDPwas just 1.8% in 2010.Public debt has been rising since 2007, and without a changein policies, will continue to do so. Debt servicing requirements could sooncreatea foreign reserves crisis, nullifying the gains made via the recent devaluation.E c o n o m i c P r o s p e c t sReal GDP is expected to grow by 2.0% in 2011. Foreign investment in the tourist industry andpublic investment in infrastructure will bethe main economic drivers.After droppingsharply, tourist arrivals have begun to recover, aided by a devaluation of theFijian dollar. Investment amounts to lessthan 10% of GDP owing to weakerbusiness confidence and is expected to decline further in the medium term.Anyrecovery depends crucially on the interim administrations willingness to holdnational elections. The move would probably unblockmuch of the EU aid whichhad been earmarked for reform of Fijian industry. The resumption of aid may beunlikely in presentcircumstances, however, as offici als have delayed
  10. 10. elections.The central governments debt is high by regional standards; it rose to56% of GDP in 2010. Fiji will face a very difficult task of financingits deficits asthe global economy recovers. Officials hope to limit the budget deficit to around3% of GDP in 2011. They will also raisesome taxes to bolster revenue generation. Private final consumption has been growing at a sluggish pace. In real terms, itrose by just 0.6% in 2010 and gains of 1.6% areexpected in 2011. Slightly higherrates of growth are expected in the medium term.Unemployment is steadily risingand would be even higher were it not for substantial emigration. The exodus ofmanpower Fiji hasexperienced over the past decade has led to an erosion of theskills base in the labour force.The external position has seriously weakened sinceexports fell by 28.4% in 2009 and relations with western countries havedeteriorated.The current account deficit was 9.7% of GDP in 2010 and will widento 13.8% in 2011. This leaves the country especially vulnerable toany externalshocks.E v a l u a t i o n o f M a r k e t P o t e n t i a lIncreases in liquidity raise the prospect of accelerated inflation while high levelsof government debt and associated liabilities (amountingto around 70% of GDP)threaten fiscal sustainability.Economic growth should gradually rise in themedium term but will remain below historical trends. Key areas for immediateattentioninclude a reversal of emigration of skilled labour and resultant labourshortages and improvements in the perf ormance of governmentutilities and theregulatory environment for labour and product markets.Uncertainties centre onhow the sugar and clothing industries will fare in their quest to remain viable andwhether alternatives will emergeto maintain growth, emp loyment, and taxrevenues. Government debt must be reduced significantly in order to maintainmacroeconomicstability.B U S I N E S S E N V I R O N M E N TA large portion of the economy is state -owned and many of these establishmentscontinue to lose money. Their continued funding haspushed up the governmentsfiscal deficit. Skilled labour is leaving the country and there are labour shortages.Political uncertainties andturmoil further detract from the business environment.Sweeping reforms are planned in order to liberalise prices and boostemployment.Reforms of the pension system, the civil service and publicenterprises are all planned. However, sustainable growth will primarily dependonthe creation of a healthier climate for development of the private se ctor ingeneral.Table 1 Indicators of Business Environment: 2010IndicatorEase of doing business rank (out of 183)  62   S tarting a BusinessCost (% of GNI per capita) 23.8Time (days)  Dealing with construction permits 46Time (days) 135Cost (% ofGNI per capita) 47.4   E mploying workersMinimum wage for a 19 -year old worker or an apprentice (US$/month) 290.8Ratio of minimum wage to average value added per worker  0.56  rate  T ax
  11. 11.   tax rate (% profit) 39.3abour tax and contributions (% of commercial Total Lprofits) 10.2Time (hours per year) 163 Exporting   Documents for export(no.) 10Time to export (days) 22.EconomyFijis fertile soil yields sugarcane, coconuts, cassava, rice, sweet potatoes, bananas,pineapples, and lumber. Cattle, pigs, horses, and goats are raised. Sugar, whose processingaccounts for a third of Fijis industrial production, is the main export. The industry has sufferedsince the late 1990s because of low world prices, drought, and inefficiencies, and thegovernment is seeking to diversify the islands commercial agriculture. Tourism and mining areimportant to the economy, as are remittances from Fijians working abroad. Sugar, clothing,gold, silver, timber, fish, molasses, copra, and coconut oil are exported. Imports consist largelyof manufactured goods, machinery and equipment, petroleum products, foodstuffs, andchemicals. Australia, Singapore, the United States, and New Zealand are the main tradingpartners.