Leadership and the Economy

Speech by Professor Biman Prasad, Professor of Economics and Dean of the Faculty of Business and Economics at the Lions Club Dinner on Saturday 28 May 2011 at the Peninsula Hotel, Fiji.

I thank you for the invitation to speak this evening. I am really pleased to be here and also to take the opportunity to speak to such a distinguished audience. It is not easy for people like us these days to find an audience of this stature to say what we want to say given the emergency laws and the strict media censorship that we have in Fiji. It is a delicate situation, to say the least.

I want to concentrate today on leadership and the economy, and what is in store for us. Let me begin by making few remarks on the economy.

Economy
In the first decade of independence, we achieved better economic growth. Much of the infrastructure development, such as roads, airports, water supply, schools, agricultural projects and health facilities were built during the first decade and half between 1970 and 1985. However, since the 1987 coups we have struggled to achieve acceptable levels of economic growth except for a brief period between 1997 and 1999, when Jai Ram Reddy- former National Federation Party leader and Sitiveni Rabuka, the SVT and 1987 coup leader, negotiated the 1997 Constitution.

If anything, the Reddy-Rabuka negotiation and its outcome underlined the importance of dialogue. It showed Fiji can overcome any adversity if our leaders put their people before their egos, have a vision for peace and are willing to talk and compromise. Peace and prosperity, ladies and gentlemen, go hand-in-hand. No peace, no prosperity, regardless of race or religion. Fiji has not had lasting peace for over two decades. So it should not surprise anyone that the economy has not done well, and living standards have steadily declined.

The average economic growth in Fiji over the last 25 years has been around 2 percent. This is very low and modest. Fiji can do so much better. Why did we not do well? There are several factors, including political instability and coups, which have fractured our young and developing nation, and taken a heavy toll on the well being of its people.

The 1987, 2000 and 2006 coups led to a break down in basic law and order. They entrenched racial discrimination, which led to decisions in government not made with reason and on merit but on emotions and ethnic considerations. While the economic reforms undertaken soon after the 1987 coups were long overdue and did help the country move towards and more robust and export oriented economy, it was not sustained. Fiji tottered along on the path to recovery, but all the progress was destroyed by George Speight and his so-called civilian coup in 2000. Fiji was lucky to escape without any major bloodshed, even though the economy was set back by at least 10 years. Fiji went through another uphill struggle but just when things appeared to be moving in the positive direction after 5 years of poor management and ethnically driven state policies under Qarase regime, we had the 2006 coup and continued military rule until today.

Our economic performance since 2006 has been dismal. While we can argue that the impact of the global economic crisis since 2008 has made the situation worse, the clear economic down turn started after the 2006 military coup. We all have to accept that we should and can move forward. Before I go on to talk about confidence and how we need to build that in Fiji for economic prosperity let me say a little bit about how we compare with other smaller countries which have similar economies such as ours. Fiji once upon a time was a leader in economic performance. Fiji then had political stability and was a generally peaceful nation. People were not migrating in droves. There was confidence in the country. But more recently we have lost our leadership status to countries like Papua New Guinea, Vanuatu and even the Solomon Islands which have had better economic growth rates over the last four years. More importantly, however, is the comparison with countries like Mauritius. Like Fiji, Mauritius relied on sugar as its main export and for over 4 decades that was the main stay for the economy.
However, since 1987, Fiji has slipped downwards and Mauritius kept a steady pace of growth. Our savings and investments compared to Mauritius declined and remained low for the last 24 years. Mauritius grew a rate of more than 5 % annually for more than 30 years. The effect of sustained economic growth is reflected in its development indicators and its ability to provide services to its people. Mauritius has a population of 1.3 million people and today its GDP per capita is around $US13,100 compared to Fiji’s $US4,300. It provides free education to all up to University level, free transportation to school children, and free health care for all including heart surgery. Eight seven percent of Mauritians have their own homes and this is no mean achievement compared to some of the developed economies. 

What did Mauritius do to reach that stage? It is not a resource rich country. According to the Nobel Laureate in Economics, Joseph Stiglitz, the ‘Mauritius miracle’ came about because “Mauritians have chosen a path that leads to higher level of social cohesion, welfare and economic growth and to lower level of inequality. Stiglitz further points out that unlike other small states, Mauritius decided that military spending is a waste. The complete opposite of what we have done in Fiji since 1987. We have wasted millions of dollars in military spending after the 1987 coups. In addition, Mauritius put a lot emphasis on its people and saw the people as their asset. It invested heavily through better education and health. Again in these areas, we have failed in Fiji. 

Like Fiji, Mauritius is not a homogeneous society. It has diversity in terms of religion, ethnicity and political differences and it also had the potential of being exploited on this basis. Yet, Mauritians chose the path of political stability, commitment to strong democratic institutions and cooperation between workers, government and employers. The result is a prosperous and harmonious country. We in Fiji have a lot to learn from Mauritius. We have to stop listening to troublemakers, such as political leaders who put race before everything else for their own personal political gain.

We as a nation need to understand that economies are built on some fundamental principles. One of these is the creation of ‘confidence’ in the minds of the economic players, consumers, investors and farmers. Confidence about security, about laws, about economic policies and about certainty and expectation of the future will determine how people behave in an economy. Unfortunately for Fiji, we have not been able to inspire confidence in the country over the last twenty five years. More than 100,000 Fiji citizens have left with their experience, skills and savings since 1987 and the recent trends show that this is continuing. Many would argue that some would have left anyway. That is true. But many would have also stayed if we had less fighting and more togetherness. Many would have stayed if the leadership in Fiji had recognized the idea of inclusive development based on justice and fairness, and promoted social cohesion instead of social and racial division, and by extension, economic chaos. When you have large numbers of your own citizens leaving the country, it does not send a good signal about the state of affairs in the country, and about the future of that country.

How can we move away from the present economic malaise? We need leadership. What sort of leadership?


Political leadership
Political leadership is necessary and critical for any country’s progress. We can debate the kind of systems from which we can derive political leadership but for us here in Fiji a strong democratic system that recognises every citizen’s right is necessary. We had that until 1987. We need to bring it back as our economic and political links are mainly imbedded in context of the democratic nations around us.

You will recall that the outcome of the Rabuka-Reddy talks was the 1997 Constitution, which was internationally hailed for its fairness and inclusiveness. The adoption of the 1997 constitution was a feat in itself. Many believed that we had laid a foundation for a stable political environment and brighter future when both sides of Parliament approved the 1997 constitution. But he sense of optimism and hope was dashed by the 2000 coup. Fiji is known as coup-coup land by the international media with another coup in 2006. It is now more than four years and we continue to live under an interim arrangement where the military continues to play a dominant role. 

When the coup happened in 2006, there was opposition but also ambivalence about what Commodore Bainimarama will do as part of his political reform agenda. Many believe that the charter will provide a framework for change and the strategic framework for change adopted by the Interim Government still seem to be guiding the decisions of the government. However, in the absence of a free media and an emergency law it is not possible for all the people to see clearly where the government is heading with its agenda.
Some saw no choice but to accept that a coup had happened, and floated with the idea that it may provide an opportunity for major reforms which could lay a better foundation for Fiji’s progress. Some still believe that this could happen. However, for it to happen, the Prime Minister will have to lead a process of change which will include a new Constitution. We are now at a departure point for two directions- one that could move the country towards unity and progress and the other could lead to further fragmentation, disharmony and slide towards further economic destruction.

While the Prime Minister has assured that elections will be held in 2014, we will need to move towards discussing the way forward now. For a successful adoption of new Constitution and an election based on it, we would need to engage in inclusive dialogue to arrive at an acceptable level of consensus about the nature of the Constitution. Fiji might be small but our politics and society is complex and change in these circumstances can come through a ‘short circuit’. Many expected this change after 1987 through the 1997 constitution which focused on cooperative, multi-party rule. 

But this was not to be, and we can thank George Speight for that. We are now hopeful about positive change to come out of the 2006 coup. However, if sustainable change for good is to happen, we will need leadership. Leadership that can persuade the masses to unite and accept change. To get people to support change for future development and prosperity so that our children can live together in peace is crucial at this stage of our history. There is a window of opportunity for the government and the Prime Minister to provide the leadership and move the country towards democratic elections.

A start of this process can be made through lifting the media censorship, lifting the emergency laws and starting dialogue both with different groups and political parties in Fiji and our international partners. The media has an important role to play in terms of uniting this fractured nation. While it is important that we have a free media, it is equally important on the part of the media to get a proper grasp of its role and responsibility in a developing, multi-ethnic nation such as Fiji. Media needs to become a force for unity, not disunity as we have sometimes seen in the past. Fiji needs a strong media like perhaps never before.

The delay in progressing towards a Constitution is hurting the economy in a significant way. Despite the efforts of the Interim Government, the economy remains in tatters. The sugar industry is on the verge of collapse. It urgently needs large amounts of funds to restore confidence in the industry. The funding that was supposed to come from the European Commission in 2007 could rescue the industry. But we need to make political progress before we can access that fund. The construction industry is down and other export sectors are not doing well. While tourism numbers are picking up, the actual earnings have not been commensurate with numbers. The down turn in the economy is not sustainable and we could be heading for a long-term damage to the economy, which will take years to recover. Already, we can say that even if the election is held in 2014 it is likely to take a few more years to restore the confidence in the economy.

The government seems to be preoccupied with the final outcome in terms of what it wants to achieve by way of the reforms. Achieving a good outcome rests on a good process. The media, public opinion and all stakeholders must feel part of the process and if they don’t, any final outcome will not be sustainable.


Fiji is at a departure point and this government has an opportunity to move it in the right direction and leave a lasting legacy but it cannot happen through coercion. It can only happen through persuasion and open dialogue. This requires leadership and I hope that the people of Fiji will have the benefit that soon.
Thank you.