Thinking … Not Sleeping: Critical but Helpful Ideas on How to Take Fiji Forward

Parts 1–6. Running a Government with Bad Advice

Continued from yesterday
Sorry Croz, This is a bit long but started last night and kept going. In parts so I can post. Publish if you think it will be of interest.

1. The military completely underestimated how hard it would be to run government.

In the early days after the coup I joined a meeting with the new PM and his military council talking to business. They seemed genuine in wanting ideas on what they could do to fix various things. What became very clear though was they had absolutely no idea about even the most basic principles of business or economics. I am talking absolutely no idea. The complete naivety scared me even more than their guns.



2. Early on the new FB government took on a lot of bad advice
I saw their naivety as a concern but others saw it as opportunity. An opportunity to get back at competitors, an opportunity to push personal issues, an opportunity to get advisory jobs. Many of the early mistakes of this government were because they took poor advice. Even their choice of finance minister was terrible. The first thing Mahen did was target those he perceived had hurt him in the past. His policies where disastrous – tax on water, attacks on the tourism industry, an increase in all investment fees, remittance taxes on profits. You can’t pretend to be pro-business and have a anti-business finance minister. It was Fiji Water's decision to close their factory (for just one day) that finished Mahen. The corruption charges like many other things could be brushed away.

3. Most ‘good decisions’ now are a reversal of poor decisions earlier
It was Fiji Water that perhaps the most brought home the message to government. They took the bold step of closing their factory. Only for a day but it was enough to shake the living day lights out of them. Most of the perceived ‘good decisions’ this government has made recently are actually reversing the poor decisions made early on. Mahen is now gone, sensible water tax agreed, remittance tax gone…after stinging the corporate world for two to three years worth.

4. Now they take little advice

The downside of taking on board poor advice early is that government now listens to very few. They are suspicious of everyone. There are a couple of exceptions. The AG of course and more recently the new Reserve Bank governor. The former is skilled in debating and speaking. The later has told the government what they want to hear. The new RBG governor actually came to power by promising to get things done but most importantly to start putting a positive spin on events, numbers. The way the military saw it, the RBF should be ‘spruiking the economy’. Thankfully recently they seem also to be listening to the IMF.

5. We can’t blame them for everything

We can’t blame them for the cyclone or the world economic crisis. We can’t blame them for the poor decisions of governments past. We can’t even blame them for poor FNPF investment decisions. We can’t blame them for the poor performance of the public sector. We can’t blame them for the world changes in the tourism sector.

6. But they should acknowledge...

Their coup (just like previous ones) had a devastating and immediate negative impact on the economy. Their immediate response to the coup under finance minister Chaudhry made things worse, not better. They have done little to restore investor confidence.

They have made many wrong decisions. FNPF is not all there fault but they did appoint all the board members who completed Natadola way way over budget. They sacked them later.

Click "Comment" below to comment and see others' comments.

Continued tomorrrow ...

Comments

Riding the next Recession said…
No business whatever its size can withstand arbitrary and 'off the cuff' decisions or regulation. Small to medium size businesses (the backbone of any economy anywhere in the world) will fail in such a climate. This is plain commonsense but it is also available knowledge. Any Business School of standing will vouch for this : so will any Chamber of Commerce worth its salt. The Chambers of Commerce in Fiji (once the dirty businessmen have been cleaned up) should look to France or to the UK for their pattern of standing within the community. They have a special role in France and they are treated with consumate respect in UK. However, they must earn this respect through sound and proper governance and by keeping party politics out of the equation. Business must survive and prosper to pay the taxes and to create the jobs that the economy requires. Only hardwork and consumate honesty and diligence will produce this. We have fooled ourselves into thinking that business can get on with the job of wealth creation no matter how it is treated. At least the latest Budget saw a reduction in corporate tax to 20%. Yes, that is welcome and should show a measure of regard for how many businesses in Fiji have had to crisis-manage over more than three years. If there is a double-dip to the Global Recession, many will come under stress again and will have to cut costs. It is difficult to see how taking on extra labour which is not specifically trained to their interests and that of their clients will help? A new recession will require stringent cost-cutting and stringent efficiencies in place - just to ride it out. Labur must now see to it that they are equipped and ready to enter the workplace for immediate, productive employment and that they will "ADD VALUE" to any business. Not the other way around!
MJ said…
There has been much of criticism lately on the tight budgets Chaudry implemented immediately after the coup. Wishful thinking, a recent economic paper and several other comments have all suggested that Fiji should have spent more during this time, not less, and we would have been in a better position now. Many counties around the world used economic stimulus spending to minimise the effects of the economic crisis. Australia is the best example, and was able to avoid a recession with its large spending. However, the critics are missing one important point - all of the countries that were successful in this strategy had the money to spend to start with, or could safely borrow. Their economies were all in great shape from the boom years prior to the crisis and could afford to go into temporary debt (or increased debt). Australia had billions of dollars in surplus it could use due to the mining boom. Countries that had a bigger debt/deficit prior to the stimulus spending have not fared so well - Greece and Spain are the most prominent. Eventually the debt becomes unsustainable, the country can't repay or the interest payments become too big, and draconian cuts must be made to spending or huge tax rises, or the country goes broke. Basically they become worse off than they would have if they had not done the stimulus spending.

So in Fiji's situation we had the Qarase government who in the six years after 2000 was basically treading water financially - small economic growth funded by increasing government borrowing (and little capital improvement to show for it). Fiji had missed the economic boom of rest of the world due to the 2000 coup (without the Bali bombing, which caused a revival of the Australian tourist to Fiji, Fiji would have even been in much worse position). So for Fiji to have increased spending to off-set the economic crisis, this would have been a disaster in the long term as the debt would become unsustainable. There are many signs that despite the negative impacts of the 2006 coup (lose of EU and other funding, reduced tourism due to travel warnings etc) the economy is still doing better than if the Qarase government had continued on its course of high government borrowing. Fiji would have ended up much worse than Greece without the responsible budgets of first Chaudry and then Bainimarama, and the other measures taken by the reserve bank.
MJ said…
This comment has been removed by a blog administrator.
MJ said…
.... cont Part 2

So in Fiji's situation we had the Qarase government who in the six years after 2000 was basically treading water financially - small economic growth funded by increasing government borrowing (and little capital improvement to show for it). Fiji had missed the economic boom of rest of the world due to the 2000 coup (without the Bali bombing, which caused a revival of the Australian tourist to Fiji, Fiji would have even been in much worse position). So for Fiji to have increased spending to off-set the economic crisis, this would have been a disaster in the long term as the debt would become unsustainable. There are many signs that despite the negative impacts of the 2006 coup (lose of EU and other funding, reduced tourism due to travel warnings etc) the economy is still doing better than if the Qarase government had continued on its course of high government borrowing. Fiji would have ended up much worse than Greece without the responsible budgets of first Chaudry and then Bainimarama, and the other measures taken by the reserve bank.
Anonymous said…
Why do we need investor confidence? We need investors' money. And large sums. How do we get it? It is actually quite simple: Have a low political risk profile, protect investors' interest and first and foremost have a legal system with credibility.
Wishful Thinking said…
Croz
Reading this has reinforced my view that the Fiji military is part of the problem, not part of the solution.
Until the military return to the barracks, Fiji will not move forward. Democracy is not perfect, but it is certainly better than men with guns who quite clearly have no idea at all about running a country.
The continuing devastating effect of military coups on Fiji cannot be underestimated - to do so is to continue keeping the nation of Fiji in a straightjacket.
Regime Rhetoric said…
@ croz
The sugar industry is collapsing around us and a 'high level' group of the military junta are off on another trip to china? For what? Rhetoric and pretense? Fiji needs more than just words and talk!
Do you, Father Barr, Alen Lockington, and others who support this junta appreciate how serious the impact of the collapse of the sugar industry will be on Fiji and its rapidly increasing poor?
Are we in total denial about the devastating effect of yet another unnecessary military coup on the future of Fiji?
A March of Folly said…
@ Regime Rhetoric

Hang on a minute: we must be fair. The Sugar Industry was well on its way to collapse in 1990. The EU and PM Margaret Thatcher for UK had already made it patently clear that sugar subsidies were 'out of order', unsustainable and, in the case of UK, the largest sugar mill in Europe was making sugar from beet in East Anglia. So, ACP sugar was already 'on notice'. Get your act together and become more efficient, produce the highest cane sugar for a niche market or else...days are numbered. No one in Fiji was listening. In the aftermath of a horrible coup (the first of many) people were reeling and still on a high of violence and thuggery. Why pay any attention to world trends or to what those who will be paying you are saying? This has been the picture all along since then. No full attention to the economic data and trends, no grasp of political history of the countries which make the decisions in Europe, the US, France and Germany, Japan & now China. That is not good enough in a globalised world where within half an hour the entire world is on-line with the latest economic news. THe Fiji Times never assisted here. It never had any focus on economic data or world economic issues of importance to Fiji, Asia Pacific or anywhere else much. The level of ignorance has been deplorable and much of the Fiji media has followed suit: Daily Trivia wastes the times and the attention of the young and dumbs down most of what it touches. We deserve our fate, frankly (not a pun). Shall we do better soon? We cannot afford to wait and see now........
Anonymous said…
@ MJ

I fully endorse all the remarks made by MJ. Former PM Chaudhry weas never equipped to understand what crisis management of an economy would demand in a bid to save businesses and thus employment. He made a huge error as may now be appreciated from the US management of the Global Crisis by President Obama. Now there is a debate about how we make the next move: but Fiji has not choice in this debate. Fiji has little disposable income because it has squandered many small businesses and entrepreneurial savoir-faire through arbitrary and costly decision making in the area of commerce. Reform is essential but businesses must be consulted (and they are all very different in their requirements)and imposed solutions on wage levels and staffing levels will not do. The whole economic framework is too fragile and the previous two governments were also disasters waiting to happen (they did). There needs to be some seamless and careful weaving of decisions by those who know the intricacy of enterprise not only academically but also "hands on". Wishful Thinking will not do. Hard and fast decisions have to be made and planning must be allowed once more to be done beyond the next six months. Why waste money on a Five Year Business Plan when the next five weeks might prove tricky?
MJ said…
Sorry about all the repeat posts. I kept getting an error message and thought the post was not getting through due to a size restriction. So then I split it in two.

Croz, can you delete these please?
Cr said…
@ MJ ... For you it is always a pleasure.
Anonymous said…
@ Regime Rhetoric

It is (and will be) a matter of debate as to where we were headed with the last Qarase administration. One uses the term administration because one's own experience of the election process on the ground made plain that corruption was taking place and crude intimidation. However, given that the elections were severely compromised, that three Bills were being prepared for enactment, all of which were obviously unconstitutional, that the budget was voted for by parliamentarians who could not possibly have understood the implications of the vast swathes of spending they were assenting to and that a most imprudent loan was sought in US$150m (payable with interest in 2011), we were careering towards the abyss. Many refused then and still refuse to see this. We shall never know that outcome: for better or for worse? But when any intervention of any kind is made, the possibility of global economic crises which will have impact downstream must always be "factored in". It is in this crucial "factoring in" that the questions of interest must be raised. Who factored in what? Now we are in unprecedented territory on the ground in Fiji and also globally. The Ship of State needs careful and prudent steering into calmer waters and confidence is vital for investors that it is: trust, "My Word is My Bond" (Yes, so Old Fogeyish but it matters!) must return along with common sense and more "Plain Speaking". We note that UK PM David Cameron has got himself into hotwater for plain speaking in India about the role of Pakistan. Well, why beat about the bush (pun intended)? Terrorism wears many faces. Those who must confront it cannot afford to have allies who look in both directions. This holds good wherever terror raises its ugly face.

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