Bainimarama's shadow darkens Fiji's economy: a Lowy Institute Assessment

by Danielle Romanes - 27 October 2011

  An informative and useful article. My only question is shouldn't Australiaa take some of the blame for Fiji's economic problems? Ed. 
 
Danielle Romanes is an intern with the Lowy Institute's Myer Foundation Melanesia Program.

Since taking power in 2006 Commodore Frank Bainimarama has made much of his plan to eschew 'neo-colonial' development partners and to adopt a Look North foreign policy premised on engaging emerging economies in the region. While the new relationships are undoubtedly good for Fiji, it's clear that emerging interest in Fiji is too limited to fully rescue its flailing economy.

At present Fiji is benefiting from a moderate level of emerging economy investment into its infrastructure and across a wide range of its industries. Russian mining giant Rusal is looking to explore its bauxite reserves, and this year China has opened a hotel and financed a $4 million fishing vessel, a $20 million government data facility, and a number of roads and ports.
India is present in Fiji as both a creditor and an investor, with Bollywood set to film three productions in Fiji this year, and India's EXIM Bank in talks with the government to revive the Fijian copra industry. Georgia recently held a series of bilateral talks with the Fiji Government about enhanced cooperation, and Indonesia has made noises about doing the same.
While foreign investment is more important to the Fijian economy than official development assistance, it's worth noting that Bainimarama's preference for non-traditional donors is selling the Fiji people short. Aid from emerging economies has primarily come in loan rather than grant form, and left Fiji indebted by a US$50.4 million line of credit from India, and a total of US$253.4 million in Chinese loans (the latter accounted for 8.35% of GDP in 2009).
Development loans are valuable if they actually yield development, but Bainimarama is no Lee Kuan Yew. GDP growth over the last few years has been marginal if not negative. The Asian Development Bank has warned that Fiji's government debt is dangerously high. Rather than diversifying the economy, Bainimarama's leadership has led it to become increasingly reliant on tourism, a sector vulnerable to exogenous volatility.
Bainimarama's intransigence on democracy and human rights has led the Fiji people to miss out on multi-million dollar post-sugar protocol aid from the European Union, and on ongoing financing from the Asian Development Bank, which hasn't approved any new projects there since 2006. Even China is reportedly wary of engaging too extensively in Fiji lest it upset Australia and New Zealand — though this wariness speaks far more to the relatively low marginal gains to be had from engagement in Fiji than it does to China's fear of Antipodean wrath.
Beyond relatively limited mineral resources, its vote in diplomatic wrangles, and a booming but low-profit tourism industry, Fiji just doesn't have that much to offer in its present state. The Commodore's heavy hand isn't helping, with a recent World Bank report showing increased difficulty in every evaluated aspect of doing business in Fiji. That the regime felt the need to falsify its ranking in the report is unlikely to inspire much further investment interest.
Bainimarama's 'Look North' foreign policy offensive is driven by a lack of options in the region and a need to justify authoritarianism at home, but the regime has failed to sell Fiji's people on the relative value of the new emerging economy relationships over the old ones.
Bainimarama may find this task increasingly difficult if his administration doesn't yield tangible development gains soon, because there are clearly limits on emerging economy interest in his regime. For all the rhetoric about South-South cooperation, developing economy donors have their own poverty problems to address and any development assistance they shell out internationally is going to be strongly premised on mutual gains.
Fiji has geo-strategic and infrastructure advantages it should be leveraging in this 'Asian century' to stimulate record economic growth and opportunity for its people. That it is failing to do so is an indictment of Bainimarama's leadership.
Photo by Flickr user Magpie372.


Comments

Wadan is my Hero said…
I am sure Australia would be happy to take some of the blame in the dip in the economy. It means their sanctions are having an effect.

The quickest way to get this economy back on its feet is ensure there are robust checks and balances in place to stop the regime from passing its more arbitrary and ill thought out decrees.

Only then will we have investment confidence.

If we can have elcetions as well then we might start getting some of that EU Sugar millions before they have to divert it all to Greece.
When the facts change, I change my mind....... said…
Sick of 'Blame Games'. Blame Games are a waste of disposable energy. It is Job Creation that counts in the modern world. Employing people so that they may feed their families, improve their self-esteem (Mental Health) and add value to GDP. Fiji's GDP is parlous. For at least fifteen years it has fallen below the rate at which all school leavers who merit work may receive it. This is a huge waste of human resources. Yet, we continue in the mindset that "All is well in the best of all possible worlds" (Voltaire's "Candide")? Have we got news for you: this is quite mistaken. Do we know what our current rate of Youth Unemployment is? Do we even know what our Annual Rate of Inflation is? It is at least thirty per cent and a recent Chamber of Commerce Seminar confirmed this. Asking a few quiet questions of business men and women who smartly measure their business performance (daily if required) confirms this. GDP is grossly inadequate. And government debt is too high. This equation will not work. It will not wait for the young and those who must work to feed themselves and their children. Spain has measured Youth Unemployment at 45% of its population of 80m. Its overall rate of jobless is 21%. Only the economy matters in the end. Any moron might know that? If they do not, then they must and soon. Ask the Greeks! And then ask Italy, Spain, Portugal. The EU is now struggling to maintain its single currency based solely on these factors.

"When the facts change, I change my mind. What do you do"?

(John Maynard Keynes - Economist and the first to respectably posit Quantative Easing for Global Economic Crisis)
Steve Jobs and jobs! said…
"Doing their bit for poverty"?

Said Mr Govind Sami, Permanent Secretary for Social Welfare in Wonsolwara page 3 Sunday Sun November 2011.

Mr Sami, it will take a great deal more than 'Doing their bit' to turn around the incrementally advancing situation of poverty in Fiji. The Jobs deficit proves this. The deficit of employment may be measured: it may be measured daily even hourly in any SMART business today. If you and your Department are unable to achieve this, then rely on others to inform you who can.

You can throw any number of F$m or even billions at poverty. Creating Jobs with Value is what is required. And those jobs are needed NOW. Your policies of imposed wage orders is the wrong end of the equation. You are putting a cart ahead of a donkey. Have you never 'done' business? Almost certainly you have not. And studying business is no substitute for doing it. Ivory Towers are insufficient in teaching business including MBAs. It is a practical and not only a theoretical exercise. An overemphasis on theory is killing us as a country.

The poverty of imagination in your area of governance astounds us. You are also required to be consistently creative. If you cannot be either, better join the conspiracies of silence!

Call on and pray to the late Steve Jobs. "Mr Wow"! He knew how to 'Add Value' and create not only magical technology leading to wealth but also sustainable employment. Apple became the wealthiest company in the USA under the drive and vision of a Creative Genius.

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