Snippets: Regional Security; the Economy; Fiji Holdings Ltd; Wages

(o+) Pacific Security Discussed Without Fiji

There's a hole in my bucket, dear Liza, dear Liza
There's a hole in my bucket, dear Liza, a hole
Then mend it, dear Goofy, dear Goofy, dear Goofy
Then mend it, dear Goofy, dear Goofy, then mend it ...
-- Burl Ives (photo credit)

The latest, almost laughable Burl Ives-ish, case of "cutting off your nose to spite your face" is provided by the Pacific Islands Forum.

Fiji, suspended from the Forum, could not be invited to the two-day Forum Regional Security Committee (FRSC) that met in Suva last week to discuss "transnational crime and counter-terrorism to political and security challenges." So the meeting proceeded without its second largest Island member whose geographic location and network of air, sea and yacht services put it at the very centre of likely criminal activity and exchanges in the south-central Pacific. Isn't this something like going for a wide-out try instead of scoring between the posts or patching several small holes in a car tyre while leaving the big hole unpatched? Or not mending a hole in a bucket? Based on report by Fiji Live.

(o) Economy Down but Reserves Up

The Reserve Bank of Fiji predicts the economy will contract by 0.3% this year, less than its major trading partners, and modest recovery is expected next year. Were it not for the January floods, the country would have recorded marginal growth. Foreign reserves had improved from $440m to $640m as a result of the devaluation. Liquidity in the banking system had grown to $150m., from a low of $15m. in late March, and was expected to be further assisted by various reforms in areas such as civil service, public enterprises and public financial management. "Government is committed to restraining the fiscal deficit to the budgeted level of 3 percent of GDP," the bank said."Revenue collections, which were above target during the first quarter, will assist Government in restraining the fiscal deficit this year." These would be further strengthened when visitor arrivals pick up in the coming months, said the bank. Based on report by the Fiji Times.

(B) Fiji Holdings Ltd

This item illustrates the potential hazards of too-close a relationship between Fijian institutional and Fijian business arrangements, and between Government and these "institutional businesses."

Fiji Holdings Limited was formed in the late 1980s with a $20m. loan from Government. Its aim was to "bring indigenous Fijians fully into the mainstream of the country's economic life" through the purchase of shares in major private companies. Shareholders include Fijian institutions, tikina, village groups, the 14 Provincial Councils, and family-type trusts registered as limited companies.

FHL has not been without its share of controversy. A paper in 2001 asked for an independent enquiry when it was revealed that individuals, families and other groups owned 70% of the shares, and the Provincial Councils, the originally intended major beneficiary, owned only 30%. Furthermore, individuals and their limited liability companies held most of the class A shares that had voting rights and attracted high dividends, while the Councils and large Fijian institutions, such as the Fijian Affairs Board (that owns 67% of all shares), owned mainly Class B shares with no voting rights and lower dividends. One major shareholding was registered in the name of former PM Laisenia Qarase's family, purchased apparently when Qarase was the managing director of the Fiji Development Bank (that financed the purchase of most "individual" shares), a member of the FHL Board, and an adviser to the FAB. The complainant thought Qarase had a conflict of interests.

FHL holds a well diversified portfolio of 24 firms in manufacturing (Goodman Fielder; Fiji Sugar Corporation; and the recently sold Forster's Group), building and construction (Asian Paints, Fiji Industries, cement, Humes; tourism (Blue Lagoon Cruises); property (several multi-stories); media and communications (Amalgamated Telecom, Fiji TV, Fiji Sun); retail (New World, RB Patel), and miscellaneous enterprises including Fiji's only private hospital.

FHL's major shareholder is the Fijian Affairs Board, now a part of the Ministry or Provincial Development, Indigenous and Multi-Ethnic Affairs. The Minister is PM Bainimarama who, within his rights but not necessarily wisely, has replaced most old board members in both institutions with his own nominees.

It is this Board that purchased RB Patel, sold its interest in the Forster Group for $F40m.to reduce local bank loans, and has all but concluded arrangements to purchase BP SW Pacific Ltd service stations and other operations for $190m. It was reported earlier than FHL sought Fiji National Provident Fund money to help the BP purchase. Most loan money will come from international banks.

Comment
I have three concerns about FHL and similar Fijian enterprises that are even more important in today's political climate.

First, I think there are genuine reasons for concern at the possibly undue influence of Government, on Board appointments and on business decisions. For very good political and economic reasons, most governments have no or only limited, indirect influence on business, even those they partly own.

Second, there could be an "unhealthy" overlap of personnel on the boards of these Fijian institutions. Some overlap permits the diffusion of ideas across institutions but too much limits the number of people engaged and, in becoming a sort of old boys' or old girls' club, could lead to croneyism and corruption. A conflict of interests was alleged when Qarase sat on several boards. It is no less a possibility with some of today's board arrangements.

Third, I do not see how ordinary indigenous Fijians are being brought into the mainstream of economic life by the purchase of shares in private companies, except perhaps by the use of dividends to provide scholarships and training schemes. The Fijians mainly helped are the older urban elite and the emerging Fijian middle class, well educated, urban-based and far removed from ordinary grassroots. This may or may not be a good thing in the early stages of indigenous economic participation but the time should soon come when THL (and other Fijian institutional) money helps a significant number of individuals or groups of Fijians establish themselves in business, and where this money is used to "create" new economic activity.

(o) Wages Council Hopes Government Will Stick to its Decision

Wages Council Chairman Fr Kevin Barr is hopeful Government will stick to its earlier decision to implement the new wage rate on July 1. The new rate, initally timetabled for February 1, was deferred at employer request. Since then the economic situation has worsened, affecting both employers and employees. The new wage rate would help an estimated 60% of employed people, in nine industries: garment, hotel and catering, manufacturing, printing, security, building, civil, electrical engineering, road transport, wholesale and retail and saw milling industry.