Think-tank predicts Pacific economic crisis due to Fiji instability
Updated
One of the Pacific's leading think-tanks is predicting this week's political events in Fiji have triggered an economic crisis which threatens to engulf the entire region. A report released on Thursday by the Sydney-based Lowy Insitute comes up with a series of recommendations on how Australia's Prime Minister, Kevin Rudd should handle the situation.
Presenter Jemima Garrett
Speaker: Lowy Institute Report Author Jenny Hayward Jones
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JENNY HAYWARD-JONES: The rest of the region is certainly highly dependent on Fiji as a hub for inter-regional trade and for connections with the outside world. Kiribati and Tuvalu, for example, are heavily reliant on Air Pacific and other Fiji-based airlines to serve them, they're heavily reliant on shipping that comes through Fiji, they rely on the University of the South Pacific for their tertiary education and for other services, they rely very heavily on regional institutions which are based in Suva, so this is going to affect them pretty hard. We've already seen some effects of the global financial crisis in the region affecting the trust funds in the micro states and affecting tourism elsewhere, so this is just another difficulty they're going to have to deal with.
JEMIMA GARRETT: Just how deep and long-lasting could the economic impact of the situation in Fiji be if Fiji stays on its current track?
JENNY HAYWARD-JONES: I think it has the potential to be a long-running disaster for the region. As we've seen with the shocks of the global financial crisis, it's very difficult to predict the fallout from events elsewhere in the world and I think the same applies to Fiji. The closeness of the economies and the dependence of the region on Fiji will mean that the region suffers in some way and unless something is done to shore up Fiji's economy the region is going to suffer for a long time.
JEMIMA GARRETT: Well, the solution to the situation in Fiji is clearly political. You say that the events in Fiji present Australia's Prime Minister Kevin Rudd with the most significant foreign policy challenge he's faced in the region. What do you see as the specific challenges facing Australia?
JENNY HAYWARD-JONES: Well, the problem is, Jemima, that Australia has to be seen to be condemning Bainimarama's actions. It is really quite unacceptable from an international perspective and certainly from Australia's perspective that actions such as dismissing the judiciary and imposing censorship and deporting Australian journalists and sacking Reserve Bank Governors is clearly unacceptable behaviour so Australia needs to condemn it. At the same time if we do nothing to help Fiji's economy we're going to see spiralling disaster that will affect the whole region and I think then affect Australia's regional standing. The region looks to Australia to help it solve problems and to lead and if Australia stands aside now I think the region is going to remember that.
JEMIMA GARRETT: You have come up with a series of recommendations yourself on how Australia should tackle the situation in Fiji. What are you suggesting exactly?
JENNY HAYWARD-JONES: Basically I'm suggesting that Australia needs to work with third parties, the international financial institutions, the IMF, the Asian Development Bank and the World Bank to assist both the region to cope with the effects of the global financial crisis and the fallout from Fiji and to offer a package of assistance to Fiji. Now I know this could well be seen as a reward for Fiji but realistically unless financial assistance is offered we're going to see much more rapid decline and fairly quickly. The problem is that the Australian and New Zealand Governments fund much of the activities of the three financial institutions in the region so any move by the financial institutions to lend would need to be approved by Australia and New Zealand so I'm recommending that Australia should relax its opposition to lending. I'm also arguing that Australia should encourage China to channel any further assistance to Fiji through the international financial institutions. This idea of providing assistance to developing countries was agreed at the G20 meeting and both China and Australia were there so I think this is a good opportunity for PM Rudd to remind China of its responsibilities and suggest that they work through the international financial institutions which would help put pressure on Bainimarama to reform but also leave him with only one option and that is to deal with the international financial institutions rather than pick off donors and perhaps go to China, which may be more damaging.
