As Economy Falters, Fiji Becomes a Volatile Paradise

Wall Street journalist Neil Sands paints a gloomy picture of the Fiji economy to which a reader adds a comment calling for more transparency and more education so that ordinary people know what's going on, and why. The original article was published in the Wall Street Journal, part of the same Rupert Murdoch stable that owns the Fiji Times.

(Wall Street Journal/Pacific Media Watch): The outlook for Fiji, one of the world's most famous tourist destinations, appears increasingly grim as the international community bickers with its military leader and its economy falters under heavy government debt.

The South Pacific island nation has lurched from crisis to crisis under military ruler Commodore Voreqe Bainimarama, who seized power in a 2006 coup. The US, Europe and Australia have condemned his government and called for national elections, but Bainimarama has resisted, saying the earliest he will return Fiji to a popular vote is 2014.

The government did not respond to requests for comment.

Fiji's fate matters to its neighbors in Asia and the South Pacific, a region of a dozen countries that has relied heavily on tourism in recent years as other mainstay industries such as agriculture and minerals have remained flat. Fiji's economy is larger than those of many of its island neighbors combined, and it is a primary educational center for the region with the largest university.

Australian officials have expressed concern that Fiji's influence could trigger a "coup culture" in other South Pacific nations. Many of the island nations face serious economic challenges; if their troubles worsen, it could trigger flows of immigrants into Australia.

More-optimistic analysts have said Fiji could become a driver of growth in the Pacific if it gets back on track. But in the meantime, some predict another year of negative growth, after Fiji's economy contracted 2.2 percent in 2009. Government officials have approached the International Monetary Fund about a bailout of between $400 million and $500 million to cover $150 million in debt repayments that mature next year. The IMF has signaled that any such bailout will require austerity measures such as slashing the civil-service budget, tightening monetary policy and imposing more fiscal discipline on state-owned enterprises, which could add to Fiji's short-term economic pain..

Fiji remains a tourist draw, attracting nearly 550,000 visitors a year. Tourist numbers have largely bounced back after the 2006 coup, though the ADB says this has been achieved through aggressive price discounting.

Although Fiji's government predicts 1.8 percent growth this year, Keith Leonard, a Fiji-based South Pacific regional director for the Asian Development Bank, says a 0.5% contraction is more likely.

The ADB and World Bank cite Bainimarama's regime as a factor in Fiji's sluggish economic performance. The IMF forecasts foreign direct investment this year will be $264 million, down 36 percent compared with 2006.

"Given Fiji's endowments and its role in the region, I'm not saying it should be an Asian tiger, but it should be the Pacific equivalent" with annual growth of 4 percent to 5 percent, said Leonard. He cited the country's tourist attractions, agricultural land and fisheries, and its work force, which is well-educated compared to that of most Pacific island nations.

Some 40 percent of Fiji's population of 850,000 lives below the poverty line, the ADB says. Export earnings from two of Fiji's main industries have collapsed, with the once-thriving sugar sector hamstrung by poor management and garment manufacturers unable to compete with global players, analysts say. Government debt has ballooned to 70 percent of gross domestic product, well above the ADB's 40 percent target for developing countries.

Human-rights group Amnesty International says foreign investors have been deterred by reports of abuses and alleged efforts by the government to undermine judicial independence and muzzle the media.

When the government abrogated the constitution in 2009 it dismissed all judges and replaced them with hand-picked officials.

A government decree in late June mandated that all Fiji's media must be 90 percent locally owned within three months. The decree threatens the viability of News Ltd.'s wholly owned subsidiary The Fiji Times, the country's largest-circulation newspaper. News Ltd. is an Australia-based unit of News Corp., owner of Dow Jones & Co., which publishes The Wall Street Journal. News Corp. has said it would be forced to dispose of its Fijian newspaper as the military regime continues a crackdown on the media. A News Ltd. spokesman said the unit was "in the process of actively considering our options at the moment."

The government has denied any human-rights abuses. Bainimarama, an indigenous Fijian, has said that hard-line military rule is the only way to implement measures needed to eradicate institutional racism and corruption endemic in the country before he took power, and to prepare Fiji for democracy.

"This is not an ordinary government, we're trying to bring about reforms and changes, and for that [it is] understood that at some stage we'll need to shut some people up, and stop this from bringing about instability," he said in an interview this month on Australian television. Important changes "will never happen if we open everything out to every Tom, Dick and Harry to have their say."

Revenues in the sector declined about 12 percent last year from 2008.The roots of Fiji's political problems lie in its history as an outpost of the British empire. The British brought Indian laborers to work in sugar plantations, leading to racial divisions with the native Melanesian population after Fiji became independent in 1970.

Ethnic Indians, who form about 40 percent of the population, have traditionally dominated the economy, with indigenous Fijians gravitating toward government and the military. Tensions flared when the Fiji Labour Party gained political ascendancy in the 1987 elections, sparking a series of military coups aimed at reasserting ethnic Fijians' control.

When Bainimarama, an indigenous Fijian, seized power, he said his aim was to prevent ethnic Fijians from imposing policies that discriminated against Indians and to end the country's political turmoil.

Australia and New Zealand have led efforts to isolate Fiji internationally to pressure the government to restore democracy. Canberra and Wellington have imposed "smart sanctions" such as travel bans on the regime's top civil servants, while maintaining aid programs.

Bainimarama has responded by expelling Australian and New Zealand diplomats, including Australia's Acting High Commissioner Sarah Roberts, who was deported in July after being accused of "conducting unfriendly acts" that undermined Fiji's sovereignty. He has also sought increased aid and investment from China in order to minimize the impact of the rift with Fiji's former allies.

Last year, Bainimarama scrapped a pledge to hold elections by 2009 and suspended the constitution, invoking emergency powers that allow him to rule by decree until 2014. His actions broke an agreement with the European Union and cost Fiji more than €60 million in EU aid.

With talks on an IMF-led bailout set to resume in September, the ABD says a major economic overhaul is needed, warning that some painful reforms are necessary to spark long-term growth.

Patrick Barta contributed to this article.
* The Wall Street Journal is owned by News Corp, whose Australian-based subsidiary, News Ltd, owns The Fiji Times, the country's largest-circulation newspaper.

PACIFIC MEDIA WATCH is a media and educational resource compiled by the AUT Pacific Media Centre for the Pacific

To which a reader commented:

In the main, the economic analysis is up-to-speed with minimum spin (what one would expect of the Wall Street Journal and its economists).  The prediction of a contraction for the economy AGAIN is very, very disturbing. Government debt at 70% of GDP ditto.
 It seems to me now that transparency is becoming more essential – not less – about this situation. The people must feel that they are being fully and properly informed. Not too many have access to The Economist or the WSJ or the Financial Times.  Macro economics and its impact must be explained in simple terms. No sure outcomes can be predicted but variable outcomes can….and WHY.
 Accountability within the governance is extremely important as public money is being used to fund government. There was always an insufficient understanding of this in Fiji and that has been seriously detrimental to the entire political process here. There can be no move towards greater liberalization without a concomitant rise in the level of what is termed now ‘financial literacy’.  But I am asking for ‘economic literacy’ (a tall order).   We must learn how the Fiji economy fares in the wider, globalised world. And this, of necessity, demands an understanding of how businesses work: small, medium and large.  How diverse they are, what their needs are and why they MUST MAKE PROFITS to survive and to prosper.  Without such an understanding, private enterprise will never be able to perform to the required level and to reduce the import/export disparity.
 Government must demonstrate that it fully understands how businesses must be free to make the best decisions in the interest of their customers and their shareholders.  Yes, they require a measure of regulation but that regulation must be : equitable, sound and reasonable.  It must also be brought in with sufficient lead time and with consultation which is real and meaningful.
 Without any of the above taking place, Fiji is destined towards a crippling lack of inward investment and eventually local investment will dry up as it begins to be understood that there is no real intention of liberalizing the economy and offering the measure of full support and encouragement required.  In will come the Carrion Crows (from: China, Malaysia, Korea, Taiwan, Indonesia and maybe Australia).  Corruption will go on increasingly encouraged because impunity will not have been competently addressed.  Serial and ongoing decline?
We must expect this if no very clear and transparent policies are put in place and then implemented to deter it. At present we are simply tinkering usefully but we must demonstrate the intention to move into wholesale reform. This demands stability and……  Where will this money come from if we are yet again to move into a contracted economy?
Former Cabinet Minister David Pickering in the Rabuka second government once said Fiji requires an annual growth rate of  6% just to make sure that employment is there for school leavers of 15,000 pa (then).  We have been off this benchmark for years – 15 years!  This cannot go on and the people should be told why and how it must be addressed. They need to know that they may benefit from reforms.


MJ said…
This article is basically correct in what it says, but leaves so much out that it becomes meaningless. The comment is made that "ADB and World Bank cite Bainimarama's regime as a factor in Fiji's sluggish economic performance" but the article focuses only on the coup and makes it seem that it is the major cause of the econimic performance, not just a factor. No mention of the Jan 09 floods that devastated Nadi, the center of the tourist industry. Tourist numbers dropped more during and after this event than they did for the coup, and the cost of rebuilding roads etc was far greater. There is also no mention of the performance of the Qarase government, who took out the US$150M loan that is due, and only hit 4-5% GDP growth in 1 out of 6 years in power. Ave growth during Qarase rule was only 1.5%, and he didn't have to put up with Aust/NZ trying to undermine the tourist industry whenever possible.
SOE said…
Could not agree with MJ more. Who in their right mind would contribute to a paper which so blatantly leaves out the most important factors? And, the argument is an economic one so that factoring in the full range of figures based on past decisions and policies is essential. "Garbage in, garbage out". For heaven's sake, let us have some common sense in these debates. The November 2006 Budget and who voted for it the full story. That is where it all began to completely unravel. Even the Opposition x Two voted for this dishonest and ridiculour budget: including the US$150m loan which only economic illiterates would have considered taken on. No politician of any party spoke against it. What does that tell us, pray? It speaks the whole story: all 36 Cabinet members acquiesced in folly: A March of Folly. They believed they would benefit: to hell with their constituents!

Popular posts from this blog

Lessons from Africa

Fijian Holdings Scandal: Betrayal by their trusted sons