Fiji's economic summit - roadmap or talkfest?

Fiji is experiencing an unprecedented economic crisis, with the World Bank reporting its debt levels reaching 90 percent of GDP last year.

The country is experiencing high levels of inflation which is exacerbated by low economic growth as a result of the global pandemic.

To top it all off Fiji has been hit by multiple severe tropical cyclones over the past three years and now the flow-on effects of Russia's invasion of Ukraine are being felt in the Pacific.

The Fijian government's answer to the crisis?

A two-day National Economic summit attended by five hundred public and private sector representatives, workshopping solutions to help the coalition government escape the financial hole they have inherited.

Unity the path forward

Prime Minister Sitiveni Rabuka, while opening the Summit, extended a message of unity.

Rabuka told government and business leaders that reshaping the future means more than just promoting economic growth and development.

"A brighter future for our nation requires our communities to be united and to move away from divisions." He said.

"We all know those divisions have not worked any good for us. Let us be reminded that we can all work together to seek solutions to challenges and maintain our different political viewpoints."

Minister for Finance Biman Prasad said the way forward was through 'rising incomes sourced through economic growth'.

"However, short-term measures, such as directed and targeted assistance for lower-income households, could be improved with increased Government revenue created by a growing economy," Prasad said.

"Economic growth is the key - and this summit is an important first step in a united, people-driven approach to achieving a better economic future for all," he added.

But sentiments expressed by the Fijian public leading up to the event suggested they had their hopes set on seeing more immediate relief for their pockets through a slashing of the cost of basic needs and services.

Economist Neelesh Gounder best explained the disconnect between economic policy and daily realities.

"There's a mismatch between the cost of living, the inflation rate, and what exactly consumers and households are feeling on the ground," Gounder said.

"A total review of the cost of living index and how the cost of living basket is calculated is needed."

Need to fill national coffers

Despite the Fiji Government's best intentions the fact is to boost the economy it first needs money.

But a Fiscal Review Committee, tasked with developing appropriate expenditure, revenue and taxation regulations for the country, has revealed that Fiji is faced with a 'Triple Threat'.

Committee chair Richard Naidu gave the lay of the land.

"Excessively high government debt, delayed investment in critical infrastructure and the impact of unforeseen shocks from climate change and other global and local risks require urgent attention,' Naidu said.

Naidu claimed these threats stem from the FijiFirst government's mismanagement of funds over its 12-year democratic tenure as well as its rule as interim-government after the 2006 Coup.

"We took a whole lot of growth gamble by reducing the tax take and all against increasing government spending. And, in essence, that gamble, in our view, has not paid off," Naidu said.

He said the high debt levels restrict the government from borrowing funds to address current social and economic needs.

The committee suggests raising revenue through increased tax collections to address the nation's economic woes.

Naidu recommended increasing Value Added Tax to 15 percent and removing zero VAT ratings on basic items.

"We have to re-target that money," he said.

"So it is not just about increased welfare spending, but it's actually targeting those lower-income households and finding a way to deliver cash back to them."

Naidu added that Fiji Revenue and Customs Service is losing $FJ160 million in revenue to zero VAT ratings.

However, Neelesh Gounder warned the government needs to also consider socio-economic impacts.

"Any tax reform should look at all the offers on the table. So not just VAT, personal income taxes, or company income taxes," Gounder said.

"It would be a good idea to put all the taxes on the table and see how we could reform taxes to consider increasing government revenue or creating a more efficient system," he said.

Its not all doom and gloom

According to the Asian Development Bank Fiji's economic growth is projected to surge by 6.3 percent this year before levelling out to 3 percent in 2024.

The permanent secretary of the Ministry of Finance, Shiri Gounder, told the summit delegates the economy is currently experiencing a projected rebound of 15 percent over the pandemic recession.

"Tourism industry has done very well," Shiri Gounder said.

"If you look at the recent arrivals in January, February and March for this year, compared to pre-pandemic levels, we are already beating the pre-pandemic mark. So if this trend continues for the next 12 months, tourism will return to 2019 levels," he said.

Shiri Gounder says that based on the arrival trends of this year - Fiji's tourism industry will make a potential full recovery by the end of this year.

An updated projection figure chart will be released in the upcoming national budget.

Summit resolutions - saving grace or flawed conclusions?

Participants of the summit agreed to 14 resolutions that they deemed in need of immediate attention for the private sector, civil society, academia, industry leaders and government.

But the head of an award-winning New Zealand-based accounting and business consulting firm, Aurora Financials, claims the system used to workshop solutions was inadequate.

The firm's Fijian founder and chief executive Jonathan Maharaj told the Fiji Sun a government workshopping ideas it should have come armed with going into the election does not inspire confidence.

"Issues are interconnected. An economy doesn't operate in a silo," Maharaj said.

"Outcomes in Theme 2: Key Growth Sectors - Construction relies on infrastructure in Theme 12: Energy / Electricity. Construction projects cannot finish on time if the root causes of power cuts are not addressed," he explained.

Maharaj said a few hours of discussion could not replace the insight from existing Government data.

Biman Prasad acknowledged all of the advice and ideas put forward over the two-day National Economic Summit but made it clear to participants the final decision on the way forward for Fiji would be made by the government.

The14 key resolutions from the National Economic Summit

• Trustworthy leadership
• Good governance practices
• Maintaining fiscal discipline
• Prioritizing human development
• Supporting rural and outer island communities
• Boosting agriculture and fisheries
• Advancing technology-based education
• Empowering Fiji's indigenous population in commerce
• Improving water supply and waste management
• Upgrading land, marine, and transportation systems
• Enhancing electricity supply
• Emphasising evidence-based policymaking
• And promoting continuous collaboration among all stakeholders even beyond the conclusion of the Summit.