'Good budget' as compared to balanced Fiji budget
Updated
In Fiji last Friday interim Prime Minister and Minister for Finance, Commodore Frank Bainimarama, handed down the 2010 budget. Apart from the 30 minute speech by Commodore Bainimarama, no budget papers were released and therefore not much independent analysis has been able to take place.
But the Program Director of the Myer Foundation Melanesia Program at the Lowy Institute, Jenny Hayward-Jones, has looked at the initial statements of some of the major accouncy firms for some guidance. And the budget speech, recorded by Fiji Village, provides further insight.
Presenter: Geraldine Coutts
Speaker: Jenny Hayward-Jones, Program Director of the Myer Foundation Melanesia Program at the Lowy Institute; Commodore Frank Bainimarama, Fiji interim Prime Minister and Minister for Finance
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HAYWARD-JONES: It is not highly unusual to have the budget released a day or two afterwards, that is to the general public, but it is unusual that people in Fiji have not received them. We heard Waden Narsey say the other day he could not even get them from the government printers which is highly unusual, but I expect they will be released today, yeah I am not quite sure for the reason for the delay.
COUTTS: Have we been able to find out much about it then?
HAYWARD-JONES: Well, some local accounting firms have done some analysis, so presumably someone has papers, I just assume they have not been released to the general public and they are certainly not on the internet and available for everyone to see. So yeah, certainly there is some analysis are there are some figures around.
COUTTS: Alright, we might just have a listen to what Commodore Bainimarama had to say, a little bit about it anyway. Here we go.
BAINIMARAMA: In the 2010 budget, the government has opted again for a prudent fiscal position and is continuing to build on the good results achieved in the 2009 year.
COUTTS: So are we saying there is a balanced budget and that Commodore Bainimarama has got figures that no-one else has because no one else has seen that the budget is anywhere near healthy at this stage?
HAYWARD-JONES: Well, he has not actually claimed to have a balanced budget. He has claimed to have a good budget. There is cettainly a deficit and problems which the government has admitted to, but it certainly some of the figures look more optimistic than the IMF and others have been quoting in recent months.
COUTTS: So normally we would say things like who are the winners and who are the losers, but do we know?
HAYWARD-JONES: Well, I think it seems to be a pro-poor budget, that is probably the best thing I can say about it. There is a few stimulus elements in there for local businesses and for tourism, so the winners I would say are the tourism industry and local businesses certainly and those suffering from poverty. I mean it's good to see that the Fiji Government has recognised increases in poverty in Fiji and devoted extra assistance to families, to care and protection and to a food voucher program and also to a free-bus fare system.
COUTTS: And Commodore Bainimarama had a bit to say on poverty himself.
BAINIMAMARA: Ladies and gentlemen, the government from 2010 shall give food vouchers to the value of $30 a month to those on the current Family Assistance Program. This will translate into an annual allocation of 7.44 million. This targeted decision will mean that identified individuals and families will be able to access essential and healthy food items on a monthly basis. It will mean that the private sector will be able to participate in this initiative. It also signals that government will henceforth move to targeted assistance.
COUTTS: Does the Fiji Government have the way with all to carry that out?
HAYWARD-JONES: Well, not if you look at the figures coming out of Fiji over the last few months. Certainly government revenues have not been increasing, but the devaluation earlier this year has seen foreign reserves recover and some debt has been paid off so I yes they do have some room to move in the budget to extend this assistance and there have been a number of cuts to budgets in many public sector agencies in public sector reform is ongoing, so the money presumably will come from those continuing cuts to public sector expenditure in other areas.
COUTTS: Such as?
HAYWARD-JONES: Such as health, actually has been cut, primary industries has been cut by over 20 per cent, a number of smaller departments, even the military has been cut slightly. So there are some savings to be had, but my concern with the public sector reform is that the lowering of the retirement age to 55 has seen many more people retire and become more dependent on the Fiji National Provident Fund which in itself is in trouble this year.
COUTTS: So you have mentioned health care. Can a country such as Fiji afford to cut health spending?
HAYWARD-JONES: Well, I think it sends a particular negative signal when they have increased police spending and have created 470 more police posts in the same budget which is the allocation to health, while health indicators appear to be declining in Fiji. So no, I don't think Fiji can afford to send a signal like that.
COUTTS: We're going to go onto a business now, but again this is what Commodore Bainimarama had to say about it in the budget speech.
BAINIMARAMA: This would mean that 1,000 families can benefit from this scheme, based on an average cost of $100,000 for a basic house. This grant scheme has the potential to generate a 100 million dollars into the economy.
COUTTS: So where again we talked about before, will they get this kind of money? I mean are they looking to stronger ties with China and aid donors to help them in that area?
HAYWARD-JONES: Well, I don't think Chinese aid so far has delivered that kind of money and we have seen Chinese aid go into dams, into road building. But I don't think it's given them the flexibility to spend on a scheme like this, but presumably if they were to allocate the housing assistance scheme to builders who were perhaps subsidised by Chinese loans that is a possibility. It is similar in a way to Australia's own first homeowners grant and it really does surprise me that Fiji thinks it has the money to do this.
COUTTS: And he has also commented on price control?
BAINIMARAMA: Let me make it abundantly clear in removing price control, government will not tolerate any curtailing, collusion or anti-competitive behaviour. The recent cabinet approval to match PIB and certain sections of the Department of Fair Trading, will not only result in efficiency, but it will ensure that controls over anti-competitive behaviour shall be curtailed through one agency armed with modern day laws. Liberalistation of the economy must benefit all levels of society.
COUTTS: Commodore Frank Bainimarama in his budget speech.
Jenny Hayward-Jones, from the Lowy Institute, do you agree with those sentiments?
HAYWARD-JONES: Well, I think certainly Fiji has to stimulate the economy in some way and the interim government has the right idea in that, but the way it has gone about it is a little bit strange. There are a lot of inconsistencies in the budget. It seems to be a pro-business budget. When you have a look at it, there is a reduction of one per cent in corporate tax of 28 per cent, there are incentives to induce more companies to list on the Fiji Stock Exchange, there is a repealing of the branch profit remittance tax, all these things are positive, but in the same breath, he is also amended the non-resident dividend withholding tax and also the non-resident miscellaneous withholding tax which is going to be an impediment to foreign investment and may even drive some foreign-owned businesses out of Fiji in an already challenging environment for foreign investment.
COUTTS: Well omissions, the ailing sugar industry barely got a mention. Does that mean that they are just letting it go and are not going to throw good money after bad there?
HAYWARD-JONES: Well, I think they are still dependent on possibly the EU coming through which I think is a little bit of a dream, but Commodore Bainimarama's visit to Brussels a couple of weeks ago just shows how much he is holding onto that possibility. It is strange that sugar was not mentioned at all. Sugar used to be a main stay of the Fiji economy and is still a very important export and the fact that it was not mentioned at all in his speech is rather odd. He did mention that the Fiji Sugar Corporation would be reviewed, which is important and that is something that has been needed for sometime. But despite the emphasis on promoting agriculture, we are still seeing underdevelopment in agriculture and the reduction in the allocation to the Department of Primary Industries is odd while you are trying to promote agriculture. So it is yet to be seen how he is going to achieve that.
COUTTS: And corruption also got a mention.
BAINIMARAMA: The Office of Accountability and Transparency - OAT, saw administer the soon to be introduced code of conduct and freedom of information decrees and any other appropriate new laws. We have and we will continue to modernise our laws which inter alia makes us compliant with international conventions and standards. The implementations of these laws will require a specific resource which has been catered for in the 2010 budget, including increased allocation for the judiciary.
COUTTS: Well a lot has been spoken about corruption in the presidential decrees have been introduced and the Commonwealth, even CHOGM was saying that the military regime needs to restore civil democracy without delay, to ensure the protection of human rights and or all other areas of the society there. Corruption laws, how much is this affecting business and therefore impacting on the budget?
HAYWARD-JONES: Well, it is one thing to have corruption laws, anti-corruption laws, but when you don't have free speech, you don't have any means of public accountability, it is very difficult to see whether these anti-corruption laws are working and who exactly they are targeting and you still have not seen any successful cases of corruption brought before the courts. We're now seeing a judiciary that is severely comprised, so it's quite difficult to see how they will work. But it is important and Bainimarama came to power promising to get rid of corruption in Fiji, so he has got to make an effort and may be this is a move towards that. Let's just hope that he can implement it.
COUTTS: Well, they have been in power now, the interim government for some years now. Are some sections of the business community saying oh well, it's such a long time now, let's just get down to business and just get on with it. Is there any evidence of that yet?
HAYWARD-JONES: Well, I think that's probably true of the majority of people in Fiji Geraldine and certainly of local businesses and to a degree foreign-owned businesses. They have to get on with business in Fiji. They have got to make a profit to survive somehow and there is no sign of this government going anywhere so I think they have decided they have to get used to it and they are doing what they can to lobby the government for special arrangements for them, as I think we have seen in this budget, with some special arrangements for local businesses, we have certainly seen those lobby groups listened to and we've seen local businesses have a reduced corporate tax of 20 per cent, so there seems to be certainly a lobby group of local businesses who are succeeding with the interim government. Foreign investors not doing so well, perhaps they are not speaking so loudly.
COUTTS: So why do you think going back to a point you made earlier, and what message do you think it is sending that the military budgets allocation is down on the last one?
HAYWARD-JONES: Well, the explanation is that the allocations for I think a couple of the foreign missions and one is the Sinai and I think the other one might have been Iraq have been reduced and so presumably they are not sending as many soldiers, so it may not be a big signal, but I think the IMF on their visit there to Fiji last week encouraged the government to think about balancing out their spending. So it perhaps was a response to the IMF to say that well, we are not going to spend as much on the military as on other more important state services. But the increase in police does still show that security sector, expenditure is very important for this government.
COUTTS: And lastly, there was mention of land tenure which is also an important issue. This is what Commodore Bainimarama had to say.
BAINIMARAMA: In the area of reforms, the government has put together a task force that has already commenced the facilitation of the utilisation of other land for productive use. The negotiations with key stakeholders have commenced. We plan to have the first lots of land available on new and attractive terms and conditions for both leasers and leasees by the end of the first quarter of 2010. The budget has allocated 15 million dollars for the commencement of this reform agenda. It should be noted that the multilateral agencies also believe that land tenure reform is critical to achieving and strengthening the foundations of economic growth and prosperity.
COUTTS: And we are just about out of time, Jenny Hayward-Jones. But a brief comment on that?
HAYWARD-JONES: Well land reform is certainly crucial and it is something that the international financial institutions and development partners have been encouraging in Fiji for sometime and it is also something that Bainimarama claimed he would do when he came to power. So I think again the implementation is important here. We have heard a lot about land reform, but the actual implementation of what he says he is going to do will be vital and I think this is where he may strike a little bit of resistance from ethnic Fijian landholders who may not agree with his plans.
