Thursday, July 22, 2010

Future of Fiji economy "bleak"

Posted on - 21 July 2010

The advice from economists in Fiji does not paint a rosy picture of the current state of its economy.

Fiji's interim government has indicated in its statements things are positive.

But it is hard to get an accurate picture of the economic situation in the island nation.

On Tuesday in Suva the latest update on the state of the economy was presented by the Dean of the Faculty of Business and Economics at the University of the South Pacific, Professor Biman Prasad.

His paper, titled "Global Crisis, Domestic crisis, or Crisis of Confidence: which is the way forward for Fiji?" has been published in the Pacific economic bulletin by the Australian National University.

Presenter: Campbell Cooney

Speaker: Professor Biman Prasad, Dean of the Faculty of Business and Economics at the University of the South Pacific

PRASAD: I think we've seen the economic decline since the 2000 coup and between 2001 and 2006 the economy recovery was very, very sluggish, and to take it further we had the 2006 coup, and that was a big shock. And we experienced a negative six-point-six-per cent growth in 2007. And then we got hit by the global crisis by 2008, and that has made matters worse for Fiji.

And if we look at the projections for 2010 and 2011, from the government itself, I mean they're talking about positive one-point-eight and two-point-five per cent growth, but compared to other Pacific Island countries such as Vanuatu, which is projected to grow by more than four per cent. And in fact Vanuatu has experienced a steady growth since 2003, and partly because of growth of tourism, very stable political and macroeconomic stability. And that is the key I think for Fiji, though we have not been able to bring about that political and macroeconomic stability since the last three or four years.

COONEY: Tourism of course is a major issue and it's one of the big industries, but you also in your presentation addressed the issues of the sugar industry and the garment manufacturing industry. And it does seem that there is some major issues with both those?

PRASAD: That's correct, in fact sugar still accounts for about 25 per cent of the total exports, and if we look at the figures for the last three years it has been on a continuous decline. And it is expected that it will decline further, and my prediction in the paper is that if there is no major investment into the sugar mills, which is very, very inefficient, and if there is no attempt to rehabilitate the farms and keep the farmers there, then the future for the sugar industry looks very, very bleak. And I suspect that if we do not inject major funding within the industry in the next two years, we could see the collapse of the whole industry in the next four to five years.

COONEY: How bad is the situation when it comes to foreign investment? It certainly, looking at some of the figures in the charts that you've got there it doesn't look good?

PRASAD: Foreign investment you're right it has always been bad, in fact foreign investment since 1987, and this is something that people forget in this country that we have lost 20 years of development progress as a result of the political instability in 1987, in 2000 and 2006. And it is about confidence, and we have not been able to inspire that kind of confidence amongst the foreign investors.

And one of the things after this coup is that we've seen local investors, investors who had confidence after the '87 and 2000 coup, after 2006 coup some of them are now diversifying their risk and are investing in other countries. For example, one of the major hotel owners who never invested anything outside of Fiji, has begun to invest in countries like Samoa. So when people, our own local investors begin to move out of the country, that shows the lack of confidence in the country and in the future of the country. And this is why when I talked about building confidence, start to build confidence, this government has been in power for the last three and a half years, and there's no visible protest in the streets, there is no issues about this government in control.

I think it's time that this government actually let it go it should lift the emergency laws, it should talk about getting people together and building that confidence to ensure that we move forward with the roadmap to democracy, so that people can see that we are going to have elections soon and that there will be a constitutional process, which will be inclusive. All this is going to inspire confidence, and economics is directly related to, economic activity is directly related to the kind of political stability that people can expect in future.

COONEY: Just one question I must ask in relation to foreign investment and that is the Fiji Times issue, is it sending a bad message as News Limited is saying to investors?

PRASAD: I think it does because there are legislations or decrees the government has been putting out which has been done without consultation, and if investors feel that their investment is not going to be secured by law through the courts, and if there is any uncertainty or doubt about that then that is going to have a serious impact on foreign investment in the country.

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