Professor Wadan Narsey, Adjunct Professor at the Cairns Institute at Australia's James Cook University, says it's not usual for the IMF to be calling on a government to hold elections.
He also says that a close look at the report shows that there's been no real positive signs for growth in Fiji's economy.
Heather Jarvis spoke to Professor Wadan Narsey and asked him for his analysis of the IMF annual report on Fiji.
Presenter: Heather Jarvis
Speaker: Professor Wadan Narsey, Adjunct Professor at Australia's James Cook University
NARSEY: First of all, we have to keep in mind that the IMF focus on policies in developing countries is a very limited focus. They're usually worried about financial conditions, about exchange rates, prices, monetary conditions, the Reserve Bank restrictions and all that. They don't venture usually into areas of poverty and governance. And what is unusual in this report is that it has been produced together with the World Bank, which is far more interested in poverty issues than development issues and also in consultation with other organisations. It is throughout the developing countries, and including Fiji, you've got a lot of international organisations whose brief on development is much broader because the ILO talks about interested in labour conditions, UNDP interested in development in general. So this is indeed a bit of a new thing for the IMF to be suggesting that they need to have concrete plans to hold elections in 2014. And what they're not saying bluntly I think, the IMF is always very diplomatic, they can't go out and be to rough on developing countries and governments. What they are not saying clearly, but it's there in their report is that investment has absolutely sunk right down and it's not just a question of foreign investment, which has declined since 2006, but also local investment, and there are no real positive signs for positive growth in the economy. What the IMF does say is that the military government's expectations are much, much higher than what their own staff estimates are. So I think there's a lot of reading between the lines we need to do. The facts are very clear, what the IMF have produced and the World Bank have produced, one is that the GDP of the country, the real GDP is lower in last year than it was in 2006. So you've had negative growth which has just barely been counteracted by the two per cent growth for last year for 2011, so you're still worse off compared to where you were in 2006. And one area where they have relied on World Bank analysis which I think is wrong is that, World Bank analysis of poverty in Fiji is that rural poverty hasn't worsened, whereas if you use the correct in my opinion methodology of accessing poverty which is by income measures and not expenditure, rural poverty have gone worse by every indicator. So the poverty measures that people are looking at are comparing figures with 2002 with 2008 and 2009 which is three years ago.
If you talk about urban poverty going down, well that was true may be up to 2008, but if you talk to Father Kevin ... who works with the Wages Council in Fiji. He will tell you that urban poverty has gone much, much worse and his efforts have been pretty well not fruitful at all.
JARVIS: So in this report, I mean is the IMF really making a comment on Fiji's affairs? I mean you're saying that they're not you have to read between the lines, but it does seem to be out of character as you say for them?
NARSEY: Yes, but I think that they basically have come to agreement with the World Bank and others that really you need to restore investor confidence in Fiji, you need to have good governance. I mean, they don't mention, for instance, that for the last five years they've been no auditor-generals reports on government spending in Fiji, so people have no idea whether these numbers that we've been given about government revenues and expenditure are correct or not. One thing is for sure, the IMF is saying the government revenue forecast are going to be very difficult to achieve, especially when they've reduced corporate taxes by 30%, 30% or 40% and also income tax is at the high end. So their spending has kept on rising and the IMF doesn't say that the fiscal stimulant was due to an increase in salaries expenditure in the security forces, in the police and the military, because it's hardly the kind of fiscal stimulus that you want to see happening.
They do talk about the slow pace of structural reforms and especially they refer to the sugar industry, where the reality there is that a very large sum of money has been spent and the mills productivity has remained low, or has reduced. So I think the IMF is giving some very, very good advice in some areas, but the advice may get lost because they're, the IMF usual method of being very, very polite and diplomatic.
JARVIS: Mmm. So it sounds to me like there are some pretty fuzzy figures being bandied about and also you talked about structural reforms and the report says that Fiji needs concrete plans, it needs structural reforms. What's meant by structural reforms, what sort of things?
NARSEY: Well, I think the IMF usually try to encourage privatisation of government-owned enterprises. In the SSC, for instance, which is probably one of the largest public enterprises, the government has gone the other way.
JARVIS: That's The State Sugar Corporation?
NARSEY: Yeah, that's right, yeah. They've completely taken it over. And the thing about public enterprises is the reason why we are in trouble is because the heavy hand of government control and government bureaucrats and ministers and civil servants. They're not entrepreneurs, so they are not going to be in a situation to bring around any reversal of inefficiencies in public enterprises. So the IMF really would rather that they let go of all of these controls of public enterprises, but they find it difficult to say so. They do say, for instance, that there are far to many price controls in the place and you've got to admit that this Commerce Commission doesn't have the capacity to go and check on the prices of a thousand items every week and regulate it. The IMF says that the government is wrong and the Reserve Bank is wrong in trying to lay down credit growth targets for banks, because it can't force banks to lend, when there is a lack of bankable projects in place. And the reason why you have a lack of bankable projects is because the private sector doesn't have the confidence, that the military regime is not going to pass a military decree which says that you can't take your legitimate grievances to court and they have done that in a number of cases, including the well known case of the Pension Fund, with pensioners who signed contracts with the Pension Fund which have now allegedly by military decree been virtually halved and the military decree also says you're not allowed to go to court to challenge these measures. So there are other places where military decrees have sort of appropriated property. I think there was a case of the foreign investment in the Momi Bay and the company that went belly up in New Zealand and basically the decree said those efforts are going to be taken over by the FNPF. So the IMF it does say lots and lots of good things. You have to read between the lines to see where the good things are and it also says a lot of very, very worrying things, which are not given prominence in the summaries and the worrying things are all there. If you read the report with a good microscope.