Tuesday, December 01, 2009

Budget 2010 : The Great Cover-Up

December 1, 2009

Professor Wadan Narsey – University of the South Pacific, Suva

This 2010 Budget would have been outrageously scandalous had it been delivered by an elected Minister of Finance, assisted by a Permanent Secretary of Finance appointed normally by the Public Service Commission, and a lawfully appointed Attorney General.

But none of the above persons are lawful appointees. Hence the 2010 Budget Cover-up is doubly scandalous.

Following the April Court of Appeal judgment and the purported abrogation of the 1997 Constitution, this 2010 Budget (in contrast to those delivered in 2007 and 2008 under the legal protection of the Gates, Pathik and Byrne judgment), is now without any shred of doubt, an illegal budget.

This Budget has been delivered by persons who have no lawful, legal or moral authority to take more than a billion dollars in taxes from the people of Fiji and to dispose of these massive sums, as they wish, without any accountability to the tax-payers.
That is what this Military Government continues to do, lining their own pockets, while the rest of the country suffers, and more burdens are passed on to future generations through increases in public debt.

It is scandalous that Bainimarama’s Budget Address and the text in the Budget Supplement, totally ignore the detailed statistical data which hides from the ordinary readers, the real decline of the Fiji economy.

The continuing tragedy is that supposedly decent citizens, like ECREA’s Father Kevin Barr and Chantelle Khan, or CCF’s Yabaki, refuse to see the national disaster that is unfolding before their eyes, as long as their small pet projects (like housing and bus-fares for school children) get some of the tax-payers funds, ignoring even the sad reality, that even these minor funds are unwisely and inefficiently used.

One should no longer be surprised at the continuing support of this military government by businessmen who have got their lollies in this 2010 budget.

Continuing real economic decline

Economists know that the final indicator of a government’s performance is the real growth rate of the economy.

Following the huge drop of 6.6% in 2007, the barely 0% growth in 2008, it is now confirmed that we are looking again at a large 2.5% decline in GDP for 2009.

Over the last three years, the people of Fiji have lost more than $800 million dollars in national income because of the decline in GDP and failure to grow at the pre-2007 rates.

Government has lost more than $200 millions in tax revenues and potential expenditure.

But ECREA’s Father Barr and Chantelle Khan do not see these losses. They are pleased as punch to be supporting this military government which is giving a mere $10 millions of tax-payers’ funds to housing (for the middle classes) and a mere $10 million to bus-fares for children in a disastrously designed scheme.

The economic projection in the last budget of a plus 1.9% growth was an airy-fairy dream. Will it be any different this coming year?

What growth? The FTIB’s Data

Tucked away in the Budget Supplement is a Table 9.1 which shows that from 2006 to 2008, the number of investment applications approved dropped from 441 to 398 to 245.

The value of the investments approved dropped from $1,015 millions to $495 millions to $405 millions.

There is no data on actual investments implemented.

Any first year Economics students would know that if approved investments are declining so drastically, the actual amounts of investments being implemented will be even less. And there is unlikely to be any great growth of GDP, unless local investors miraculously put their money where their mouth is (now is that likely, when the cash cow FNPF is there for the taking?).

In other words, the 2010 Budget expectation of a 5% growth of GDP per year is in cloud cuckoo land- wishful thinking by this Military Government.

The decline of the real economy

It is extraordinary how the 2010 Budget Address does not comment on the horrible trends that are implicit from the data on real production.

There is no mention in the Budget Address by the Military Finance Minister that sugar cane production has steadily declined from 2006 to 2009 by 34 percent, while actual sugar produced has steadily declined by 40% (because of increasing mill inefficiency).

Put together the data in Table 8.1 with the data in Table 8.2, and you will see that between 2006 and 2008, the production of papaya, ginger, cassava, rice, beef and dairy products have all declined.

Indeed, despite all the rhetoric of “import substitution” these two tables show that the shares of local production in total consumption have significantly declined from 2005 to 2008 for rice (37% to 19%), dairy products (32% to 16%) and beef (42% to 39%).

Even tourism, which has received massive boosts in funding for marketing, shows a 2% decline in tourism arrivals between 2006 and 2009.

But of course, this 2010 Budget gives the great rosy growth projections for the future.

Note that agricultural import substitution and export promotion favouring the rural poor, gets a total of $5 millions, while those in tourism who are already in the top 5 percent of Fiji’s population, get a massive grant of $23 millions.

And despite the all-important sugar industry collapsing around us, there is no special attention to the sugar industry (and the cane farmers) who can continue paying 3% export tax. Chaudhry, who supported the 2006 coup, is now out of sight, and out of mind.

For decades, the media personalities and millionaires from tourism have been far more influential on Government Budgets (legal or illegal) than uneducated and illiterate rural farmers.

The real re-allocations

When a budget comes out, ordinary journalists give the usual spiel: “education gets the most” or “duties go up on this”, or “duties go down on this”.

Of course, these detailed changes are important. Yes indeed, why eliminate duties on luxuries (like cosmetics, watches etc) which will not only reduce government revenues, but also worsen our balance of payments? Yes indeed, why remove duties from export of unprocessed timber which will mean even less will be value added locally?

And yes indeed, why remove price controls from essential food items whose price will now be set by monopolies? The businessmen who called the 2010 Budget a “breath of fresh air” were no doubt already feeling the breeze of the extra dollar notes flying into their respective tills.

But the Bainimarama’s budget address did not indicate to the ordinary public how tax-payers’ funds are being re-allocated between different departments and ministries, unless you go into the detailed Budget Estimates for several years. Well, how about the following?

Compared to the allocations for 2006 (approved by the last lawfully elected parliament) and 2009, this Military Government has increased the annual allocation to the Military themselves by $28 millions- a 40% increase. Most of the increase to the military has been to the salaries of military personnel (43% increase) thereby hoping to buy their allegiance for this illegal military government. (Not to mention all the military personnel who have been seconded to other ministries and whose salaries are now part of other ministries’ budgets.)

Over the same period, the increase to Health has been only $11 millions or an increase of 8%, with health personnel receiving a mere extra 3%, barely covering inflation. Tough luck for our doctors and nurses, eh? They can keep migrating.

The public needs to note, that in addition to the $68 millions which was already in 2006 a generous military allocation for a small island in the Pacific (are the Tongan invaders still coming?), this Military Government, over the next ten years, will be spending an extra $280 millions on themselves- about the same as the annual education budget. Which future government will dare to reverse this disastrous changes in the relativities between the salaries of the military personnel and ordinary civil servants like nurses?

Note also that between 2006 and 2009, the Police have been given an increase of $13 millions (or a 20% increase). Is that to reduce crime? Well, first have a look at all the refurbishment going on to police offices and quarters, and the dozens of new Police vehicles zipping around Suva, while the Ministry of Health personnel struggle with their jalopies, and the collapsing ambulance services are out-sourced. Not to mention the large numbers of military and police now guarding the Commander and the Police Commissioner. Guards guarding guards!

Who’s funding all this?

In a period when the economy has not been growing, when total government revenues have not been growing in real terms and will not grow (whatever the rosy projections), where does all this increased expenditure for the military and police come from?

From borrowing of course. For 2010, this Military Government is going to borrow $497 millions domestically, most of which will of course be from our pension fund, the already struggling FNPF, chaired by the illegal Permanent Secretary of Finance himself. How lucky, and transparent and accountable to be the borrower and the lender at the same time! Who cares that the IMF recommends otherwise?

And who will pay for all this?

Not the wealthy in our society- corporate taxes are being reduced. The poor will of course pay an increased amount through the ever-buoyant VAT.

But worst of all, it is the future generations who will pay because the Public Debt is being steadily increased from 50% of GDP in 2007 to 52% in 2009.

And Fiji will face even greater difficulty paying off this debt because the foreign debt component has increased while our export earnings are stagnating.

Government’s Economic Ineptitude

It would be tempting to look at a few little good things in the budget.

But to do so would be to distract attention from the horrible and costly economic ineptitude shown by this Military Government, and their callous disregard from professional advice from civil servants, who everywhere are being questioned by military appointees.

Despite the advice of knowledgeable civil servants, the ignorant powers, on the basis of advice by energetic NGOs with totally deficient knowledge of public policy implications, impetuously decided to pay for bus rides for all students in the country. Common sense would have indicated that only the children who take buses would benefit (not the thousands of the really poor who take carriers or punts); that children who walked or previously went by parents’ cars would line up for the bus fares; that bus companies would make windfall gains (which they did and are now ardent supporters of the military government); and that extremely valuable teachers’ time would be taken up going to banks, making sure they had enough change, and counting it out to each and every student who turned up to claim bus fares.

Take the decision made by The Fiji Development Bank (chaired by the same individual who is the Secretary of Finance and friend of the Military Attorney General) to lend $17 millions to the Fiji Broadcasting Corporation (whose CEO is the brother of the Military Attorney General and rabid supporter of the coup). Will this loan, to set up a television company, be able to repay this loan through profits made from the private sector, when there is already a well-established and struggling Fiji TV and Mai TV?

Of course not. The FBC’s profits will come from Government paying for their propaganda, using tax-payers’ funds, to repay the loan from the FDB, also guaranteed by the tax-payers’ funds. What a lovely wasteful circular movement of tax-money.

Take the decision to retire civil servants at age 55. Who cares that many of these are the experienced people absolutely essential to wise decision-making? In any case, this retirement rule does not apply to the Commander of the RFMF, the Prime Minister, the Finance Minister, the President, other Ministers etc etc who possess rare skills which cannot now be retired, can they?

A Pliant Reserve Bank

It is another tragedy for Fiji that the key institution of the Reserve Bank has become a hand-maiden of the Military Government.

Reserve Banks have historically had the privilege and the responsibility of being independent custodians of the country’s money supply, and being totally independent scrutinizers of the government’s fiscal and monetary policies.

That independence has now been totally compromised by the Military-appointed Governor Sada Reddy, who not only gave total support to the Charter initiative of his friend and once business partner John Samy, but is in total support of any policy and budget being articulated by this Military Government and its appointees.

Did the Military Governor go along with all the unnecessary loosening of the exchange controls, and the reduction of duties on luxury imports? When it is totally unclear whether there will be any major increase in export earnings while the imports will continue to rise?

And no doubt leaned upon by the last IMF visitors, he has also beaten a hasty retreat on his alleged control of the “interest rate spread” of commercial banks: banks will now merely have to “justify” their changes in interest rate policy!

Transparency and accountability

This 2010 Budget again repeats the lies of the Military Government’s Charter that a key objective will be to “strengthen accountability and transparency”. What a laugh.

The Military Finance Minister still refuses to release the most recent Auditor General’s Reports on Government expenditure and over-expenditure by the military. The Regimental Funds, which most of the previous Commanders of the FMF have controlled, will not be audited. Also never to be audited will be the huge amounts that Bainimarama has paid himself and the military personnel over the last three years.

Indeed, no one from the public or the media may even raise any questions at all about what is happening to their tax money and public assets, through any media.

And because of the total censorship, no one knows nor can question what is happening to major public assets and how they are being disposed.

No one knows who are the new lawyers, accountants, auditors and business persons who are now getting the lucrative state contracts. Although one can guess from the TV images of those continuously hovering around the Military Ministers.

And all the “do-gooders”- Mataca, Barr, Arms, Yabaki, Ricketts, Janiffs, Maharajs, Aryas, Moores, Thompsons, etc etc (the list keeps getting longer) do not care at all that this Military Government which they have propped up for three years, is denying the citizens of Fiji, our basic human right of freedom of assembly, information and speech. While destroying our economic future.

One can now better understand how Stalin and Hitler were able to continue their pillage of basic human rights while the rest of society either looked on, or actively gave support. A recent Aljazeera program on Zimbabwe’s Mugabe was too chillingly close to home.

The continuing facade of honour

Such scandalous budgets could not continue, if the ordinary people of Fiji did not continue the facade of honouring this Military Government, its Ministers, and all those who are committing treason against the people of Fiji.

At a recent National Food Summit where I made a presentation (censored from the media) participants and organisers, including WHO consultants and the well-known local MC Yarrow, kept referring to the words of wisdom from the “Honourable” Prime Minister and “Honourable” Minister. Why worry about a little matter of treason?

A prominent golf club, several of whose members (including a Governor of the Reserve Bank) have suffered ignominious unfair dismissal by this Military Government, has a plaque honoring the opening of its new facilities by an “Acting President” appointed by the same Military Government.

While the Great Council of Chiefs refused to elect Nailatikau as Vice President, he accepts appointment by the Military Government, as President. Supported by most of his friends at social clubs, grog gangs, and his Old Boy Network, this Military President calls on the country to “move on” and “put the past behind us”. How convenient.

Some academics write a petition to the “Prime Minister” begging him to allow local and foreign academics their “academic freedom of expression”. Tough luck about the rest of the country who are muzzled.

And the many coup-supporters (local and abroad) keep mouthing the mantra that this Military Government is to be supported because it stands for “racial equality”.

Who cares that all races (including Indo-Fijians) are being impoverished; that public debt is being wastefully increased; that a military machine is being strengthened throughout the civil service, from which there will be no recourse; who cares that scholarships will continue to be awarded on the basis of ethnicity, not need; forget about racial balance in the military; forget about merging Class A and Class B shares in the FHL (too many Ministers and friends have Class A shares?); and please forget about the sugar industry, on which the largest numbers of poor rural Indo-Fijians depend.

Just keep repeating the mantra “racial equality”; and at annual budget times, just keep repeating “this is a pro-poor budget”.

The long-suffering and apathetic Fiji public ought to get used to hearing these mantra for several years (2014? duh!) if not many more years (2020), until “things fall apart”.

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