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Thursday, 02 September 2010

  • RESERVE BANK OF FIJI RELEASES 2009 INSURANCE ANNUAL REPORT

    1 September 2010

    ENP Newswire

    English

    (c) 2010, Electronic News Publishing. All Rights Reserved.  

     

    Release date - 30082010

     

    The Prime Minister and Minister for Finance, Commodore Josaia Voreqe Bainimarama tabled the 2009 Insurance Annual Report in Cabinet on 31 August, 2010.

     

    The Report includes a review of the performance of the international and local insurance industry in 2009. Highlighting the developments during the year, the Governor of the Reserve Bank of Fiji, Mr. Sada Reddy stated that 2009 was a year of recovery for the international insurance market. The impact of the global financial crisis subsided, as insurers and reinsurance companies had written off most of the direct exposures to the financial crisis. Fundamental to the recovery of the global insurance market was the lower level of catastrophe losses in 2009 compared to previous years.

     

    On the domestic front, Mr. Reddy said that the insurance market continued to be resilient despite the natural catastrophes and the challenging economic conditions. The insurance market continued to operate in a prudent manner, reporting an adequate solvency position in 2009 and playing a very important role in assisting the economic recovery of the nation after the devastating effects of two major events, the January floods and Cyclone Mick.

     

    The Governor further highlighted that the industry continued to grow, with gross premiums increasing by 2.2 percent in 2009 to $206.1 million. Much of the growth stemmed from the life insurance sector primarily due to the underwriting of investment-linked policies. Overall, the insurance industry recorded an after tax surplus of $44.6 million, representing a growth of 32.2 percent in 2009.

     

    According to Mr. Reddy, the outlook for the domestic insurance industry remained positive, consistent with the anticipated economic recovery. The role of the insurance industry in the sustainable development of Fiji continues to be of paramount importance.

     

    In conclusion, Governor Reddy acknowledged the stakeholders in the insurance industry for the stewardship and cooperation in supporting the country through trying times in 2009. Mr. Reddy encouraged the insurance industry to also focus their attention on the uninsured sectors of the economy. Expanding coverage for the micro to small and medium enterprises and agricultural sectors are some areas that the industry could consider. Mr. Reddy also stated that the Reserve Bank will continue to align its prudential supervisory efforts to ensure that our insurance industry is developed to an internationally reputable status. A culture of good governance will ensure that the insurance industry will remain sound and stable.

     

  • Latest Shit from Eni F.H. Faleomavaega in the U.S. of A

    Faleomavaega Participates in Pacific Islands Forum in Vanuatu

     

    31 August 2010

    Targeted News Service

    English

    Copyright 2010 Targeted News Service ALL Rights Reserved  

     

    WASHINGTON, Aug. 31 -- Del. Eni F.H. Faleomavaega, D-American Samoa, issued the following news release:

     

    The Chairman of the House Foreign Affairs Subcommittee on Asia, the Pacific and the Global Environment, Eni F.H. Faleomavaega, participated in the 22nd Pacific Islands Forum's post-forum dialogue on August 6, 2010. In an interview with the Samoa Observer, he described the results of the Forum as well as his views on U.S. policy towards the Pacific Islands.

     

    "I want to thank the editor-in-chief of the Samoa Observer, Sano Malifa, for allowing me the opportunity to share my views on matters critical to the Pacific region. I also want to thank Mr. Mata'afa Keni Lesa for his time and hard work in conducting the interview," Faleomavaega said.

     

    "As I have maintained for more than two decades, U.S. engagement with the Pacific Islands is critical not only for the region but also for U.S. interests. That's why I am pleased that the United States Agency for International Development will finally reopen offices in the Pacific in both Fiji and Papua New Guinea," Faleomavaega added.

     

    "I want to thank Secretary of State Hillary Clinton and the Assistant Secretary of State for Asia and the Pacific, Kurt Campbell, both for ensuring that USAID returns to the region and for enhancing U.S. engagement with Pacific Island nations," Faleomavaega said.

     

    The full text of the interview is pasted below.

     

    Eni speaks his mind

     

    Tuesday, 10 August 2010 11:02

     

    by Mata'afa Keni Lesa

     

    The streets of Apia are deserted. It's nearly 4pm on Saturday afternoon and knowing that tomorrow is Father's Day, it's likely most town dwellers have either returned to the village or Savai'i for the long weekend.

     

    Not this writer though. An appointment at Apia Central Hotel with a member of the United States of America's Congress was reason enough to enjoy the relatively traffic-less streets as we sped through to get there on time. "Faleomavaega?" asked the receptionist, who looked like he had been expecting me.

     

    Yes please. He handed over the phone - which I found totally unnecessary - since Faleomavaega's voice was clearly audible from the reception area. His room was two steps away.

     

    "How are you Keni, good to see you again," he beamed as we walked to a table in the middle of an empty bar and restaurant area. Sporting long pants and a University of Utah sweater, the Congressman opens a CD case.

     

    "Is the stereo working?" he asked a hotel staff. "Can you play this for us?"

     

    It turned out the music was one of his finest collections of Hawaiian songs.

     

    "I love music," he tells me. "This how I relax, I like to listen to a few songs and I love Samoan and island music. I take my music everywhere with me."

     

    We could've kept talking about music. I knew Faleomavaega has one of the finest voices in both Samoas and was quite keen to hear from him.

     

    But we had more serious things to discuss. The Congressman is in Apia for a night on his way to American Samoa. He attended the Pacific Islands Forum meeting held in Vanuatu, last week.

     

    "I wanted to come [to the Forum] because of my continued interest on the situation in the region, the situation with Fiji and the latest development on the situation in West Papua," he tells me.

     

    He is controversial about his view on Fiji.

     

    "I've been very critical of New Zealand and Australia's approach to engaging Fiji," he says. "Of course we all don't agree with Fiji not having a democratic form of government but I also believe that we have to appreciate and understand the complexities facing Fiji.

     

    "I've always said that. In the course of 20 years, Fiji has had four military coups, one civilian coup and three constitutions. I honestly felt that this is the time for the Pacific nations to pull together and to engage Fiji."

     

    New Zealand and Australia's approach to punish Fiji has caused some 'bad developments,' the Congressman points out.

     

    Faleomavaega and Governor Togiola Tulafono (right) are key people in the territory.

     

    "I respect Prime Minister Tuilaepa's position. He is certainly entitled to his point of view but I still believe that we should continue to engage in Fiji. The man is down and I don't think kicking him in the head is going to help the situation in Fiji."

     

    But is it anybody's fault that 'the man is down,' the Congressman is asked.

     

    "I think it is the development that happened in Fiji's politics," responds Faleomavaega.

     

    "I think we have to appreciate that Fiji is not like other countries in the islands, we have to understand that Fiji has had a very colonial legacy from the time of the British control.

     

    "We have to understand that Fiji is not a homogenous society. Some 350,000 Indians now live with some 400,000 Fijians and unfortunately the British just took off in 1970 leaving the poor Fijians and the Indians to fend for themselves and try to figure out their future.

     

    "In the time of Prime Minister Mara, he was able to work coalitions, work it together with the new system but after his leadership, things kind of became a little unstable and that's what happened."

     

    Faleomavaega says what's reported in the mainstream media is not necessarily what's happening in Fiji.

     

    "One of the things that is really amazing is the way the media played Fiji being under a military administration. You'd think that there are barriers on the roads/streets with police, military army and soldiers all over the place. You don't see one, not in Nadi not in Suva. And here's the one thing that is really surprising, the tourism industry in Fiji is going by leaps and bounds."

     

    You have been very outspoken on your views to engage Fiji, but if you look at stuff coming from the American embassy in Suva, you seem to be contradicting them?

     

    "Well I've been very public," he says. "Of course our ambassador is simply following whatever Washington is saying and Washington knows that I have been very public about my views. I was very critical of US foreign policy towards the Pacific region.

     

    "We don't have a policy towards PI countries, our policy only includes Australia and New Zealand.

     

    "And whatever New Zealand and Australia want done, we just simply follow it.

     

    "I totally disagree with that."

     

    When Secretary of State, Hillary Clinton visited the Pacific, Faleomavaega says she ignored most Pacific countries.

     

    "When she announced visiting Australia and Papua New Guinea only, I said well I'm really glad she wanted to come to the Pacific but what about the rest of the island nations. Don't they count as well?

     

    "I was very frank about the idea that we now a new foreign policy towards the Pacific called Fly by Diplomacy?"

     

    China's growing influence in the region doesn't seem to bother the Congressman too much.

     

    "Washington seems to have expressed some concerns about China's presence in the Pacific," he admits.

     

    "I congratulate and commend China for its efforts in helping the Pacific islands nations because what is America doing about it? Nothing.

     

    "One thing I will say is that I'm glad that finally with the Obama administration, secretary Clinton and Campbell have made this announcement at the Forum that USAID is going to be re-established and the office is going to be based in Fiji and also I think in Port Moresby. For seven years, I've been complaining about the fact that we don't even have USAID presence in the region."

     

    The United States should not view China as an adversary, he warns.

     

    "I look at China not as an adversary but as a partner to work together with the USA in solving some of the global issues that we're now confronted with," he says.

     

    "There is no way that the United Nations and the USA can do anything without China being involved."

     

    The Congressman has also been very outspoken about the issue of West Papua.

     

    "We are very concerned about some of the developments that have come out of West Papua in terms of the Indonesian government and its treatment of the West Papua people.

     

    "I met with Indonesian leaders who attended the forum on the post dialogue and I've been waiting very patiently for how many years now thinking that the implementation of the special autonomy law since 2001.

     

    "Almost nine years now, it seems to be a very slow process on how the Indonesian government has done this

     

    "I know a new President has just been elected and he's trying his best under the circumstances but at the same time, the situation in West Papua I believe is something the Obama administration should not neglect or dismiss."

     

    Issues in American Samoa are very dear to the Congressman. His facial expression changes from being relaxed to a more serious look when he is asked about the tuna cannery issue - StarKist especially.

     

    "We've had some very interesting developments," he says. "The last 40 or 60 years, the whole tuna industry, not only globally but even here in American Samoa has changed completely.

     

    "Some 20 countries now compete for the same market. Right now Thailand is the number one tuna canning country in the world exporting some 360 million dollars worth of canned tuna to the USA, employing well over 20,000 workers.

     

    He talks about three major canneries in the United States being Chicken of the Sea, Bumble Bee and Star Kist owned by the Don Wong Company out of Korea

     

    "What I mean by the change of the way tuna has been processed is that for years, the basic operation out of Pago was to buy the whole fish and then the cleaning of the fish -which is very labour intensive business. Approximately 90 per cent of the value of the canned tuna, comes out of the process of cleaning.

     

    "What's happened is this American company called Bumble Bee changed its tactic by buying their loins that are being produced out of, Thailand, Fiji where the workers are paid about 70 cents an hour.

     

    They bring it over and they simply can it in California and sell it, literally almost duty free.

     

    "So by doing that, it puts companies like Star Kist at a disadvantage. That's why I'm arguing to salvage the only tuna cannery that is willing to stay in Samoa.

     

    "I'm having a battle with the Bumble bee and other companies like Chicken of the Sea because they are pressuring Star Kist to do the same.

     

    "The latest development now - if the reports are correct - is that a company called Tri- Marine is in the process of negotiating with the ASG local government for a long term lease agreement on the facility that Chicken of the Sea left.

     

    "That they are now negotiating with Chicken of the sea for the lease remaining (three years) on what they need to do because I think what the Governor wanted to do was buy the lease from the Chicken of the Sea for $5 million dollars.

     

    "I said we should sue Chicken of the Sea for leaving us the way they did. As far as I'm concerned, we don't owe them a penny.

     

    "The thing that really upset me was the fact that they just stood up and left without even a courtesy of letting us know of the concerns they had. And that really upset me."

     

    The tuna industry is important to American Samoa, he says.

     

    "That's why I proposed this bill called ASPIRE. The problem is that the other two canneries, Bumble Bee and Chicken of the Sea objected strongly against what I was trying to do on some sense of balance to help a company like StarKist [and keep 2000 jobs in American Samoa]."

     

    There is potential for StarKist and other companies to set up shop in (Western) Samoa.

     

    "I encouraged Star Kist to look to Western Samoa. There is also another canning company I encouraged to come to W. Samoa to set up shop because this company has the capacity. Not only can they can and process tuna, but they can also process vegetables And things where there is tremendous potential here.

     

    Western Samoa has got more land capacity to grow crops, agricultural production things that can be canned not just tuna but canned vegetables and fruits."

     

    Faleomavaega suspects StarKist plans to establish a loining plant here.

     

    "It would provide jobs for our people here to process the tuna," he says. "Since so many of our people (working in American Samoa) are from W. Samoa - I would say 70 to 80 per cent of the workers - the plant will help them tremendously.

     

    The cannery issue though is not the only one troubling the territory. The economic prospects for the future are not promising.

     

    "From last year since Chicken of the Sea left, I don't know what long term economic development plans is in place," the Congressman says.

     

    "All I'm trying to do is to salvage, to cut the bleeding of our economy in such a way by bringing in some more federal aid.

     

    "But even if I do this, it may be good for the next 10 months."

     

    The absence for forward plans worries Faleomavaega.

     

    "What I did was 15 years ago, I said don't depend too much on tuna industry because the time is going to come when they are not going to be around and we better prepare for this. Have a plan B in place.

     

    "D-Day did come and what happened was that there was no plan. So that's what really concerns me. I think we can really pull out of this and we just have to tighten our belt.

     

    "Two things are most paramount in any government, transparency and accountability.

     

    "I think these are the two fundamental issues that we have to work towards. And then also with a proposed long term economic development plan so that we could all pitch in and work."

     

    The Constitutional Convention held recently brought to the fore some critical issues.

     

    "I was selected to be a member of the convention through my village of Leone. There were proposed changes in the constitution there were some very controversial ones too," he says.

     

    "I think one of the serious issues or questions that was never really resolved in the Constitutional Convention was the apportionment of the members to the senator as well as the house.

     

    "The other controversial issue was the Governor offering a proposal to the extent that Am Samoa will have the right to refuse to apply any US law (federal law) that the US passes to the territory.

     

    "The question of political status was never clear. I thought we were going to debate the issue but we never did. The other problem too was that we had this political status report that was issued four years ago cost $1.4 million and we hardly used it from the constitutional convention the organising committee prepared the documents, I think they only used four provisions of the recommendations of this political status."

     

    The recent shooting in American Samoa where a police officer was killed outside the Court house should be a wake up call.

     

    "It came about as a surprise but I say why should we be surprised?" asks Faleomavaega.

     

    "There seems to be a lot of connection with the drug trafficking and I think this is something our leaders have to take some stronger action.

     

    "What happened here was that the lady that was indicted is the mother so when you look at things like this, it hits right at the heart of our Samoan culture

     

    "Our police officers don't carry handguns simply because it only encourages criminal elements."

     

    The drug trade is deadly business, he points out. In Mexico for example, at least 20,000 killed are killed every year as a result of drug trafficking.

     

    "There are serious implications about the presence of drugs," says Faleomavaega.

     

    "My question is; are our local law enforcement capable, do we have the sufficient resources to counter this?

     

    "People say they are shocked [by the shooting] and I say this tells you something about the drug trafficking that's going on in Samoa.

     

    "What this man did was to preserve the honour of his mother in a very difficult situation so now we have to make some very serious decisions.

     

    "Are we going to arm our officers and do we have enough resources to put down the trouble with drug trafficking."

     

    Asked if he supports the death penalty against the alleged offender, the Congressman says it's difficult to say when the hearing is pending.

     

    Two years after the Obama administration, Faleomavaega is pleased with the progress being made by the new President.

     

    "He has brought a lot of credibility, a sense of willingness to engage, both countries that are adversaries and all those countries that allies," he says.

     

    "I think he has also tried to appeal to Muslim countries and to those who are believers of the Muslim religion that they should not look at America as an enemy. The speech he gave in Cairo, I believe was very telling in terms of how he felt about Muslim issues.

     

    "When he took office, our economic situation was really going down the tubes, very difficult times where he has had to make some very difficult decisions.

     

    "Today, while our economy is levelling, the jobs have been very difficult to come through in this situation.

     

    "The American people, I think what our president and even the democrats are saying is that we must remember what condition this country was in before president Obama came in."

     

    As the first coloured President, Faleomavaega says there is still that stigma in America.

     

    "A report I read somewhere says that that it's 400 times the efforts made to assassinate this president than any other president.

     

    "Obama is 49 years old, he's holding up very well, personality wise. He is not like the others, very different, very methodical and very thorough in his doing."

     

    Obama's election typifies the freedom available in the United States.

     

    "Only in America can you have someone whose father is from Kenya and whose mother is a white woman from Kansas to marry then his father leaves him when he is only two years old and he was raised by his white mother and white grandparents. He was raised in Hawaii in which he was never exposed to the race issues.

     

    "I say it with a sense of pride about the uniqueness of the American democracy."

Tuesday, 31 August 2010

  • Chinese Cosy Deals at State Level in Pacific Does NOT Solve Grassroot Problems

    Business - Opinion & Analysis

    Avoiding getting burnt

     

    JOHN GARNAUT  

    31 August 2010

    The Age

    English

    © 2010 Copyright John Fairfax Holdings Limited.  

     

    Chinese investors are finding that the centralised, top-down approach does not work in the rest of the world.

     

    THE map of China's overseas resource investments is not a pretty picture. In the developed world, Chinese investors are tangling with unfamiliar regulations, labour markets and technologies.

     

    In unstable nations, particularly in Africa, they are aligning themselves with transient regimes. In South America and the Pacific Islands, which have pugnacious traditions of local community rights, they are finding that doing cozy deals at the state level does not solve grassroots problems.

     

    So they are encountering huge cost overruns and delays in Australia; a rolling tangle of violent landowner disputes and now court injunctions in Papua New Guinea; ugly labour and environmental disputes in Peru; a violent backlash against Chinese workers in Angola and a fraught alliance with a brutal dictator in Sudan.

     

    Chinese corporate leaders are not accustomed to paying for impartial advice, preferring instead to pay commissions to middle men who can lead them to overpay for the wrong assets. Some are exposing themselves to corruption investigators abroad and also at home for huge kickbacks paid and received.

     

    It is only a matter of time before such antics are exposed in Australia. And in Africa, unlike China, they don't often get what they pay for.

     

    "Chinese businessmen buy off officials in China and this approach has been thoroughly replicated," army general Liu Yazhou wrote in an article recently published by Hong Kong's Phoenix Weekly. "However, African governments are far less capable in terms of governing society, so money can only satisfy officials but not the general public."

     

    It is, of course, neither reasonable nor workable to lock the world's biggest consumer of most key resources out of world investment markets forever. This is why the China Minmetals experiment in Australia is as important as it is remarkable.

     

    China Minmetals' purchase of most of the worldwide assets of OZ Minerals, including the Century zinc and copper mine in Queensland and the Sepon copper and gold mine in Laos, is probably China's most successful operating overseas resource investment.

     

    It is successful because Minmetals president Zhou Zhongshu was acutely conscious of what he didn't know. He sought and listened to good advice before and during the acquisition and then left the new assets in an Australian subsidiary, MMG, under the management of veteran miner Andrew Michelmore.

     

    He appointed only one senior Chinese manager to work with the Australian team. Zhou holds no fantasies about importing teams of cheap Chinese labour either to Australia or Laos. It is "not possible", says Zhou.

     

    And gradually he has come to accept that adroit international mining companies require Australian-style delegation of responsibility rather than Beijing-style committees.

     

    "Over the past year we have learned a lot from MMG, especially in terms of management expertise and mining technology," says Zhou. "Actually I have already asked the operating departments of China Minmetals to learn from MMG because MMG is already a very mature, experienced and successful mining company."

     

    The process of learning and learning to trust had to be mutual. It required a generous dose of humility and cultural perceptiveness on the Australian side, too.

     

    "The process of having another group come through and question us forces us to think through our processes, rather than just take them for granted, and improve them," says Michelmore. It wasn't an easy process. Michelmore was accustomed to setting the strategy and then delegating management responsibility, including on sizeable expenditures. Zhou was used to central control.

     

    "MMG sometimes just approves exploration and investment projects within its own budgets," says Zhou. "But for China Minmetals, we need to approve any exploration and investment one by one, by our investment committee. So when we discussed this issue we discovered the MMG practice was more reasonable and effective and finally we decided to adopt the MMG model."

     

    The executives of Chinese state-owned enterprises and the large overseas investors are all state owned or strongly state backed are generally intelligent and hard working but ill-equipped for profitable life outside the Communist Party hierarchy in which they were trained.

     

    Their years of centralised, top-down decision making, which requires relentlessly cultivating superiors for opportunities, resources and insurance when things go awry doesn't count for much outside China. They are moving into a world where the state cannot snap its fingers and "solve" environmental, local community or even engineering challenges.

     

    China's Communist Party leaders and their corporate executives now have to adapt and learn as fast overseas as they have learnt in coming to terms with the market economy at home. China Minmetals, with its Australian subsidiary, is the model they should follow.

     

Monday, 30 August 2010

  • Pacific Islands Chiefs of Police Resolve to Continue Suspension of Fiji Police

    'Local issues, local solutions, regional cooperation'

    30 August 2010

    NZPAME

    English

    (c) 2010 New Zealand Press Association  

     

    The annual meeting of the 39th Pacific Islands Chiefs of Police (PICP) was held in Brisbane, Australia on 24 - 26 August 2010. The theme for the conference was "Local issues, local solutions, regional cooperation" and was hosted and chaired by the Australian Federal Police (AFP). The Chiefs were officially welcomed to the country by song woman 'Maroochy' and were provided with a cultural performance by the Nunukul Yuggera group.

     

    The conference was officially opened by AFP Commissioner Tony Negus who stated in his opening address that it was important for jurisdictions in the Pacific to take a whole of Government approach at a national level and he encouraged cooperation between jurisdictions in their fight against transnational crime.

     

    Policing the Pacific often presents unique challenges and forums such as the PICP promotes regional cooperation in addressing the criminal environment, managing emergencies and disasters and policing in general. During the conference a range of issues were discussed including criminal deportees and their impact on Pacific nations, sharing of information and data regionally, police forensic support, and youth issues.

     

    The conference had presentations from the Tongan Police Force, Commander Chris Kelley, relating to the sinking of the Princess Ashika Ferry in 2009 and from the Samoan Police Force, Commissioner Lilomaiava Fou Taioalo relating to the tsunami tragedy in September 2009. These presentations highlighted the importance of agency and international coordination in disaster response. It provided the opportunity for Pacific nations to share lessons learnt in responding to these types of incidents.

     

    The Chiefs took part in a workshop and began work on developing a set of broad principles that would guide them and their organisations when dealing with disasters and emergencies.

     

    The Chiefs further endorsed the work of the Pacific Police Domestic Violence Programme and the work it has completed over the last four years. The Chiefs desire to have this work continue was reinforced during discussions at the conference.

     

    The conference reconsidered the suspension of Fiji Police from the PICP and resolved that this should continue. The effect of the suspension has been that PICP continues to interact with Fiji Police on humanitarian and operational issues such as HIV/Aids and Human Rights as well as disaster response development. The PICP has not engaged with Fiji Police on any new projects or initiatives.

     

    The outgoing Chair, Commissioner Gari Baki of the Royal Papua New Guinea Constabulary awarded the chairman's award for outstanding service to Police Officer 1 Virginia Gay Umayan from the Bureau of Public Safety in Palau. The award recognised her commitment and outstanding service in the area of public safety and transport reform. It also acknowledged her exceptional performance and dedication to the United Nations Mission in Darfur whilst deployed in 2008 and 2010.

     

    Regional organisations including the Oceanic Customs Organisation, Pacific Immigration Directors Conference, Pacific Islands Forum Secretariat and the Pacific Islands Law Officers Network also attended the conference and provided updates on their activities over the past twelve months. They also identified opportunities for these regional bodies to work together on regional issues such as deportees and border security and common training needs. Representatives of the International Association Chiefs of Police from the United States also attended the conference to further develop their relationship with law enforcement organisations in the region.

     

    The Pacific Islands Chiefs of Police will meet again in the Federated States of Micronesia in 2011.

Thursday, 26 August 2010

  • Fiji: Country Outlook July 2010

    FROM THE ECONOMIST INTELLIGENCE UNIT

    OVERVIEW: Although Fiji remains diplomatically isolated, Fiji's military commander and prime minister, Commodore Voreqe (Frank) Bainimarama, has been consolidating his political influence at home. He has also undermined the influence of the Fiji Labour Party (FLP), by destroying the affiliated National Farmers Union (NFU), the main sugarcane farmers' union. In mid-June the government announced a review of the 2010 budget on the grounds that two cyclones early in the year necessitated unforeseen reconstruction projects. Meanwhile, the Reserve Bank of Fiji (RBF, the central bank) has tightened liquidity by raising commercial banks' statutory reserve requirement and removing the ceilings on bank lending rates and spreads. Following a slump in the first half of 2009, tourism has recovered, driven by a surge in Australian visitor arrivals. According to the RBF, merchandise exports fell by 16.4% in 2009, while imports were down by 22.3%. As a result, the merchandise trade deficit narrowed to F$1.6bn (US$816m), from F$2.1bn in 2008.

    DOMESTIC POLITICS: The prime minister, Commodore Bainimarama, remains an outcast internationally, suspended from both the Commonwealth and the Pacific Islands Forum (PIF, the region's main political grouping). Commodore Bainimarama, who led a military coup in December 2006, has been touring Fiji's provinces and far-flung islands, seeking to get his reformist message across to rural Fijians. Two years ago Commodore Bainimarama launched a People's Charter that promised electoral reform and the creation of a multi-ethnic society. However, the document was heavily criticised by ethnic-Fijian leaders. Since then, he has emerged triumphant from showdowns with traditional chiefs and, in August 2009, with the powerful Methodist Church. In April 2009 the constitution was abrogated and the date for elections was put back to September 2014. Emergency regulations and heavy censorship of the media were implemented and have remained in place. A new media decree was passed on 28 June 2010 that will impose heavy penalties on journalists who breach a new media code and will restrict foreign ownership of newspapers. It is thought that a local newspaper, the Fiji Times, which is owned by an Australian tycoon, Rupert Murdoch, is a particular target of the new decree. The Fijian government will host a meeting of the Melanesian Spearhead Group (MSG, a subregional group) on July 22nd-23rd, and, unusually, has issued invitations to other countries beyond the other core Melanesian member states of Papua New Guinea, the Solomon Islands and Vanuatu (although so far only the Micronesian state of Kiribati has accepted). If other Micronesian states, or the slightly larger Polynesian states, choose to attend, this would challenge the claim of the PIF to be the region's premier political organisation. Unlike the PIF, the MSG, which in 2008 opened its Chinese-built headquarters in Vanuatu's capital, Port Vila, does not include Australia and New Zealand. In the immediate aftermath of the December 2006 coup, Commodore Bainimarama had strong support among Fiji's ethnic-Indian population, which comprises 37% of the population, but little backing among ethnic Fijians, who make up 57% of the population. The ousted government, led by the previous prime minister, an ethnic Fijian, Laisenia Qarase, was much despised by the Fijian Indians, which explains their sympathy for the military takeover. The FLP, which obtained over 80% of Indian votes at the last election in May 2006, at first backed Commodore Bainimarama's interim government. A month after the coup, the then FLP leader, Mahendra Chaudhry, joined the interim government and accepted the finance portfolio, but in August 2008 he fell out with the Military Council and was encouraged to resign. Since then, the FLP has become increasingly critical of Commodore Bainimarama and his government. Commodore Bainimarama has sought to destroy the influence of Mr Qarase and, since 2008, Mr Chaudhry. He is also aiming to undermine the FLP's support base in the sugar industry and among the cane farmers' unions. In January 2010 the government removed the automatic deduction of dues for Mr Chaudhry's NFU. In April the government appointed a new unelected body to replace the Fiji Sugar Cane Growers Council, an industry consultative body that had previously been dominated by elected NFU representatives. In May the NFU was forbidden from holding its annual general meeting. In June the FLP ridiculed Commodore Bainimarama's claims that all was well in Fiji, insisting that poverty had soared to include 45% of the population, the Fiji Sugar Corporation (FSC) was insolvent and the post-coup regime was "the most oppressive and draconian the people of Fiji have ever experienced". The party called for a national referendum on the government's decision to delay elections until 2014.

    INTERNATIONAL RELATIONS: International donors, led by Australia and New Zealand, will continue to exert economic and diplomatic pressure on the government until an election is held. In May 2009 Fiji became the first country to be suspended from the 16-member PIF, after Commodore Bainimarama ruled out an election before the end of that year. In September 2009 Fiji was also expelled from the 53-member Commonwealth. Some aid has been withheld, and travel bans are in place against military personnel and those who have accepted appointments under the regime. The EU has withheld funds intended to facilitate the restructuring of Fiji's sugar industry as it adjusts to the ending of European price subsidies. In March 2010 the EU suspended for six months further development assistance worth about €30m (US$40m) and subsidies to cane farmers for that year worth around €115m. Aid due to be disbursed in 2008 and 2009 was cancelled. So far, however, there has been little sign that the pressure is paying off.

    POLICY TRENDS: The 2009 economic recession hit tax revenue. Nevertheless, severe cuts to recurrent expenditure and delays in capital spending kept the budget deficit reasonably narrow in 2009, although the IMF views some of those spending cuts as "not sustainable". The 2009 deficit stood at the equivalent of around 3% of GDP and the government's 2010 budget forecasts a deficit of 3.5% of GDP. Deficit financing continues to depend largely on the country's state-owned pension provider, the Fiji National Provident Fund (FNPF). Worryingly, central government debt is expected to have reached 53% of GDP by the end of 2009, although 87% of this is domestically financed. In mid-June 2010 the government announced a review of the 2010 budget on the grounds that two cyclones in the early part of the year necessitated unforeseen reconstruction projects. The additional expenditure is expected at F$30m (US$15m). Further difficulties are also on the horizon. The governor of the RBF, Sada Reddy, acknowledged in June that Fiji will have difficulty in repaying a US$150m commercial loan that falls due in 2011. In May the RBF tightened liquidity by lifting the reserve requirement of commercial banks to 5­7% of deposits and removing the ceilings on bank lending rates and spreads, which will allow rates to drift upwards. An IMF team, including the Fund's managing director, Dominique Strauss-Kahn, visited Fiji in April, after the government expressed interest in a US$500m loan, but no agreement has yet been announced. The IMF board's report on Article IV consultations, which was issued in May, expressed concern at the high level of central government debt and liabilities to the state-owned enterprises, and warned of the inflationary dangers of financing by the RBF. The report also recommended a shift to a more flexible exchange-rate regime, through widening the permitted fluctuations around the Fiji dollar's current peg against the currencies of major trading partners. The government says that it wants an IMF loan to fund its reform programme, which includes changes t0 land leasing arrangements (which would be enacted on the advice of the World Bank), revisions to the administration of the FNPF and a downsizing of the civil service (which would be performed on the advice of the Asian Development Bank, ADB).

    ECONOMIC GROWTH: Fiji's economy shrank by an estimated 2.5% in 2009. The ADB expects a further decline of 0.5% in 2010, while the IMF predicts growth of 2% owing to an improvement in the tourism industry, rebuilding in the wake of cyclone-induced floods in early 2010 and as a result of a broader global economic recovery. Following a slump in the first two quarters of 2009, which was also experienced by other resort-rich Pacific island countries, visitor arrivals recovered strongly from the middle of the year, driven by a surge in Australian visitor arrivals, but the Fijian tourism industry has remained in difficulty. Post-cyclone reconstruction has not traditionally been a strong driver of Fijian GDP growth. Aside from tourism, Fiji's key industries are poorly positioned to take advantage of a global economic recovery. The traditional mainstay of the local economy since the 19th century, the sugar industry, is in major trouble, partly for reasons beyond domestic control. The industry has long been protected by artificially high prices paid by the EU for sugar delivered to a UK company, Tate & Lyle. However, World Trade Organisation rules have required the EU to phase out its price subsidies, and EU assistance to Fiji to facilitate the transition to world market prices has been cancelled as a result of the 2006 coup. Prices have fallen by 36% since 2006, but planning for that adjustment has been poor. Restructuring at Fiji's four sugar cane mills (at Lautoka, Ba and Rakiraki on the main island of Viti Levu and at Labasa on Vanua Levu) was facilitated by an F$86m (US$43m) loan from India, but the newly procured equipment has proved incompatible with existing machinery, leading to a big fall in the rate of mill conversion of cane to sugar and a 19.4% decline in sugar output in 2009. The state-owned FSC has continued to borrow domestically from the FNPF, commercial banks and, controversially, from the RBF. In June 2010 Mr Reddy acknowledged that the FSC's position was "dire to say the least". The IMF has advised the closure of non-viable mills, and the privatisation of the remaining viable mills. Other sectors of Fiji's economy are unlikely to drive strong GDP growth. The gold mining industry, centred on the Vatukoula mine on Viti Levu, performed poorly in most of 2009, but began to recover by the end of that year. The RBF has reported a strong performance in early 2010, with 10,000 oz produced in the first two months of the year. However, there are now only around 750 employees at the mine, one-third of the level employed prior to a brief closure at the mine in 2006-07. Fish exports have remained reasonably strong, partly owing to closure of a cannery in American Samoa. The garments industry has contracted sharply since the 2006 coup, and bottled mineral water—which was previously a significant growth industry—has faltered due to negative publicity in the US market.

    INFLATION: Although price pressures receded at the start of 2009, inflation accelerated again following the 20% devaluation of the Fiji dollar in April 2009, reaching 10.5% year-on-year in April 2010. The RBF expects inflation to slow to 2% year-on-year by end-2010, but concedes that the risks to its forecast are on the upside. The Economist Intelligence Unit expects consumer prices to rise by an average of 6.1% in 2010.

    EXCHANGE RATES: The Fiji dollar will remain under pressure. On April 15th 2009, in response to significant pressure on the external accounts that led to foreign-exchange reserves falling to the equivalent of less than two months of imports, the RBF imposed capital controls and devalued the Fiji dollar by 20%. The RBF removed capital controls on January 1st 2010, as foreign-exchange reserves had begun to recover following the IMF's decision in August 2009 to approve a general allocation of special drawing rights (SDRs) equivalent to US$250bn in response to the global recession, of which Fiji's SDR allocation was equivalent to around US$95m. However, the wide current-account deficit will continue to weigh down on the exchange rate.

    EXTERNAL ACCOUNT: According to the RBF, merchandise exports fell by 16.4% in 2009, while imports were down by 22.3%. As a result, the merchandise trade deficit narrowed by 26% from its level in 2008. A structural current-account deficit equivalent to around 18% of GDP has emerged in the past decade, aggravated in recent years by a deterioration in the terms of trade, as EU prices for Fiji sugar have fallen and oil prices have risen. The foreign-reserves position has improved in the past year, mainly owing to a recovery in remittances from overseas workers, the repatriation of foreign assets owned by the FNPF, and an IMF allocation of SDRs equivalent to F$188m (US$94m) in third quarter of 2009.

    July 01, 2010

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