The Fiji Islands, "the economic hub of the Pacific"

from WINNE website

THE EXPORT PLATFORM IN THE PACIFIC RIM

The Fiji Islands, located in the heart of the Pacific Islands, is currently undertaking important economic and political reforms to modernize its society and economy. Fiji's regional ties are getting stronger and this country will be soon a major regional hub. Fiji is becoming what the international business community is calling "the export platform in the Pacific Rim".

THE SOUTH PACIFIC GAMES. FIJI ORGANIZING INTERNATIONAL HIGH LEVEL EVENTS

The hosting of the South Pacific Games in 2003 in Suva confirms Fiji's capacity to organize high level events and will show the Fijian healthy business climate.

Fiji will host the next South Pacific Games in June 2003. Fiji will deliver to the people of the Pacific the most harmonious, athlete focused and culturally enhancing South Pacific Games, reflecting the Pacific at its best.

4,000 athletes will participate from countries like American Samoa, Cook Islands, Federated States of Micronesia, Guam, Kiribati, Marshall Islands, Nauru, New Caledonia, Niue, Norfolk Islands, Northern Marianas, Papua New Guinea, Palau, Samoa, Solomon Islands, Tahiti, Tokelau, Tonga, Tuvalu, Vanuatu and Wallis & Futuna.

2003 NATIONAL BUDGET:
Business friendly budget to secure sustainable growth.

Friday, 8th November 2002, HE Ratu Jone Kubuabola, Honourable Minister for Finance, National Planning and Communications of the Fiji Islands, presented the 2003 Budget which overriding concern is to maintain a sound and stable macroeconomic climate that is conducive to investment.

Within the context of a world economic recovery¹ and its five main trading partners looking positive and promising, Fiji predicts a growth for 2003 of 5.7% of the GDP. Tourism will lead this growth as well as the building and construction sector, as a result of hosting the South Pacific Games. The international rating agency of Moody's has recently completed consultations in Fiji. The existing Moody's assessment for Fiji indicates that our credit rating remains stable.

But the outlook for 2004 and beyond is below 5% of the GDP. The Strategic Development Plan for 2003-2005 promises a "Peaceful and Prosperous Fiji" in two years time but to achieve this, Fiji needs an increase of investment from current 11% to 25% of GDP, a very ambitious plan. The 2003 National Budget contains measures specifically designed to compete with other countries for the same investment dollar in order to sustain a growth of at least 5% of GDP for the years beyond 2003.

¹ The IMF projects a world growth in 2003 to rise to 3.7% from 2.8% forecasted for 2002.

I. PRIVATE SECTOR, PUBLIC SECTOR AND AID AGENCIES HAND IN HAND

Besides the full review of the Foreign Investment Act 1999, that will facilitate foreign investment reducing the time lag involved in approving Foreign Investment Certificates and encouraging local participation, the government is committed to do their own efforts. This 2003 National Budget has allocated F$240 million towards capital expenditure, this excludes the F$58 million in Aid-In-Kind projects.

An "allied" private sector

Private sector participants recently informed that there were close to F$1 billion of investment projects in the pipeline. This investor friendly Budget provides the right environment for these projects to proceed. The Government recognises that the private sector is needed to take the lead role in partnership with Government to achieve this. "We will do all we can to create an environment where the private sector is able to commit investment funds," said Ratu Jone Kubuabola, Minister for Finance & National Planning.

The efforts on the public front

The Fiji Investment Corporation, responsible for providing capital to start up eligible ventures that have difficulties in raising funds, has been allocated with a total amount of F$11 million. The Fiji National Provident Fund is setting up a Private Equity Trust as a vehicle to spearhead their participation in investment projects.

Corporate and personal tax rates have been reduced from 32% to 30% and a tax exemption on non-resident pensions has been announced. The review of the 1999 Foreign Investment Act and its Regulations will address the effectiveness of the Act in facilitating foreign investment. The report is currently being examined to see how best the recommendations can be implemented next year.

The Financial management reform that aims to enhance accountability and transparency will also begin next year as well as a progressive implementation of the e-Government. What better describes why this government is headed by Mr. Qarase, a former businessman, is a Public Enterprise Reform that attempts to improve efficiency in performance, productivity and accountability of all the public enterprises and selected government departments. A progressive implementation of proposals for the "corporatization" of some public enterprises is needed to reduce the financial burden on taxpayers, attract investment and create jobs. A progressive sale of shares in state owned commercial entities ahs also been declared.

Aid agencies, partisans for growth

The Government has expressed in several its appreciation to all donor agencies for their development assistance to Fiji. The total amount of aid projects for 2003 is estimated at F$61 million. The aid programmes for 2003 support for provision of infrastructure, poverty alleviation related programmes, rural education, health delivery services, good governance, law and order, human rights, human resource development and sustainable development.

More Information about the 2003 National Budget

II. TOURISM, THE ENGINE FOR GROWTH

Tourism will keep being the major sector contributing to growth. This government is convinced of the need to market Fiji abroad, projecting the inherent advantages such as the pristine environment, isolation and the hospitality of the Fijian people to a wider segment of the global market. The Government has set aside F$13 million to market Fiji. But this is not enough. The arrival of tourists to Fiji has been increasing since September 11th and after the terrible events in Bali Fiji is a favoured destination in the South Pacific region. Therefore, the need to increase the accommodation capacity is an urgent priority. The Government is mindful of this and in 2003 it has allocated F$11 million for Tourism Infrastructure Projects.

This will provide infrastructure support like roads and bridges to major tourism investment projects like the Natadola Project, the nicest beach in the Pacific. The Hotel Industry has obviously welcomed this measures but the cherry on the cake is the Hotels Aid Act that increases carry forward of hotel aid investment allowance from 8 years to a period of 13 years.

III. THE SUGAR INDUSTRY, A SWEET RELIEF

The necessary Sugar Industry Reform is at last going to make it more commercially viable and globally competitive by addressing issues of land access, improvement in milling efficiency, farm level productivity and the present transport system. The Government will allocate F$20 million in next year's Budget to assist the restructuring efforts but Qarase's cabinet recognises that this is not enough. Government will also be writing off F$34 million in loans to the Fiji Sugar Corporation as part of the restructuring of the industry. The agricultural land lease issue will bring about public confidence and stability and will promote efficiency of lease issuance and security of tenancy. The Native Land Trust Board is currently undertaking a review of their operations to improve their services to land tenants and examining the establishment of a market friendly land tenure model. The proposed model will be fair to both landowners and tenants.

IV. FINANCING THE ECONOMIC ESCALATION

In the Financial front, the Reserve Bank of Fiji further relaxes exchange control back to where they were before May 2000, in line with the performance of the economy and better economic prospects for 2003. Relaxations for 2003 include further increases in the delegated limits to commercial banks and foreign exchange dealers, the removal of limits on certain current and capital transactions and the streamlining of the investment process by the delegation to the Fiji Islands Trade and Investment Bureau, the authority to process applications for issues and transfers of shares.

These changes will assist investors and contribute to the further deepening of Fiji's financial system. Besides this, the Export Credit Guarantee will provide assistance to exporters by guaranteeing receipts of their export proceeds against certain sovereign risks. There is ample liquidity in the financial system but the commercial banks risk assessments rose following the events of May 2000. Now, the weighted average commercial bank lending rate has continued its downward trend and is currently around 8%. Fiji National Provident Fund has grown to become a very significant player in our financial system and will continue to grow. The Reserve Bank will undertake the prudential supervision of the FNPF and the superannuation industry as a whole. This measure is simply a precautionary one as the FNPF remains financially strong as ever thanks to sound and prudential management. The deregulation of the "Superannuation" Industry will provide greater competition, encourage capital market development and greater innovation. Monetary and financial settings continue to be supportive of Fiji's economic expansion and this stability provides the framework for sustained future growth.

A favourable fiscal policy for private enterprise

The 2001 and 2002 Budgets provided fiscal stimulus to help restore stability and economic growth. this has been achieved. total debt level will be around 46 percent of GDP this year. Next year, as a result of the lower deficit, debt will be reduced to 43% of GDP. achieve medium term target of below 40% of GDP by the end of 2005. Government expenditure this year is estimated at $1,273 million. For 2003, expenditure is forecast at $1,295 million, an increase of $22 million or 1.7%, well below the forecast rate of inflation. This represents a tightening of expenditure. total expenditure will be 31% of GDP. In 2003, it will be 29%, This financial strategy confirms that the Government is prudent. stimulating investment in order to consolidate our fiscal position, there is a need to raise more revenue beyond what can be raised through better compliance.

The Stock Exchange Market of the Pacific Rim

Capital market development is fully supported in the agenda of Prime Minister Mr. Qarase. Raising capital at lower interest rates will facilitate an efficient transfer of financial assets between investors. The Government will also provide support to the development of the capital market by continuing the sale of government shares in profitable entities.

V. FIJI LINKED TO THE WORLD

The potential of Fiji via the Southern Cross Cable Network provides the impetus for 'bridging the digital divide' and optimising the opportunity Fiji has to become the hub for information and communication transmission in the South Pacific Rim. To this end, the Government will develop a comprehensive national strategy to provide the roadmap for all future development. The reduction in telecommunications prices should come about as a result of liberalisation of this sector in the medium term and appropriate telecommunications pricing and suitable regulatory framework will be developed.

VI. FIJI, THE "HOLLYWOOD" OF THE PACIFIC

In relation to the Audio Visual Industry, the Government also intends to review the current incentives in order to encourage more non-resident investors. The Fiji Audio Visual Commission has high hopes of attracting big production budgets to Fiji.

Note: WINNE cannot be held responsible for the content of unedited transcriptions.