IMF Happy with Work of the Commerce Commission

(Monday 31st October 2011, No:1989/CC) IMF applauds Fiji Commerce Commission The International Monetary Fund (IMF) applauded the Fiji Commerce Commission’s efforts in stabilising the economy, remove bottlenecks to economic growth, and ensure that firms do not undertake unfair trading practices and engage in anti-competitive behaviour.

The commission met with a delegation from the IMF and the World Bank last Friday to discuss the work that commission is undertaking with respect to mergers and acquisition, setting prices of regulated industries goods and services, controlling prices of selected basic food items, hardware products and essential drugs and the freeze in residential rents.

While the IMF raised concerns on the imposition of a freeze on rent for the residential sector and the control of price for basic food, hardware and essential drugs, the commission responded  that rent was not really freezed. The commission added that when a tenant vacates any rented premises, the landowner can test the market. The commission responded that owners could charge the rent if they have done any improvement on the premises. However it was not wise to raise rent because to inflation in the economy.

The IMF also suggested the rent freeze should be lifted to allow the market to set the rent. The commission said that while there wasn’t a competitive market to allow this, there were several government projects which would push a large number of flats and houses into the market next year.

This would then allow the market to set reasonable rents. It is then that the freeze can be lifted.

The IMF also raised concern on commission’s approach of controlling prices thus not taking into account the business model of individual firms. The commission responded that prices were set for each firm taking into account their cost structure and not an industry wide price. The IMF also suggested that instead of controlling prices, the government could adopt targeted means of assisting the poor. The commission responded it would be disastarous to adopt this approach without first getting the prices right.

The commission noted if the prices were exhorbitantly high, then subsidies designed to help the poor would end up with the traders due to the exorbitant prices and not with the poor for whom it was intended for.

The commission said that while it took full note of concerns raised by the IMF and the World Bank, both parties do not have full and relevant information of the inherent features of a small state economy which made standard text book solution redundant.

The commission is happy to do regular briefings and updates to both institutions at their request.