Economic cancer and coronavirus
By Hon. Prof. Biman Prasad - Leader of the National Federation Party.
Opinion Piece was published in the Fiji Times on:-
Saturday 7th March 2020
“A coronavirus mini-budget” so hinted a Managing Editor and veteran journalist of the other daily newspaper on Wednesday and Thursday of his column, “Between The Lines”.
Essentially, he hints at the Fiji First Government introducing a mini-budget during the next sitting of Parliament in 9 days’ time (16th March). In socializing this proposal of a mini-budget, he further suggests that international agencies are impressed with Fiji’s preparedness to deal with coronavirus or COVID-19. That remains debatable in our view.
If true, it means more dinau, karz or as we all know loans or more debt that can be easily accessed. At least that’s what government thinks. That further means a sharp increase to Fiji's already astronomical debt level.
By that intimation, it means COVID-19 (coronavirus) will be branded as the sole reason for Fiji’s severe economic downturn and the stagnation of many key sectors that haven’t been performing for more than a decade. Instead their acute under-performance, drowned by a consumption-driven economy, last described as the “Bainimarama Boom”, has grinded to a boombastic halt.
Fiji's economic cancer which has spread to all sectors of the economy, actually happened years before COVID-19 surfaced towards the end of last year. We can only give all credit where it is due on this -- the ill-conceived policies of both the Bainimarama regime and Fiji First government, which have arbitrarily ruled Fiji for over 13 years.
As the saying goes, the chickens have come home to roost. The flagrant mismanagement of the economy has resulted in the stagnation and present decline of the economy. This will only be exacerbated by COVID-19 as the Chinese economy takes a battering, and the rest of the world’s economies make decisive decisions to stay afloat and become resilient.
But not so in the case of Fiji. Any coronavirus mini-budget (if ever presented) is not going to resolve Fiji’s economic ills, especially if one is being formulated in a depressed economic climate, while already 8 months into the Government’s financial year.
The economic cancer of Fiji First in the form of its policies aggressively spread its cancerous tentacles a few years before any catastrophe struck the globe. Because Fiji First policies did not generate real growth and investment. It merely delivered consumption-driven economic growth, driven largely by public sector spending.
The initiatives undertaken by Fiji First such as roads, streetlights, distribution of freebies etc before the general elections did not generate wealth through real economic advancement. It generated consumption, but failed to trigger productive capacity in the economy.
While COVID-19’s mortality or death rate is 3.4% worldwide, a consumption-driven policy immediately reduces the life-span of the economy by almost 25%, with a reduction of about $1 billion in revenue and expenditure in the current budgetary year. And this will worsen in the 2020-21 financial year, with Fiji Revenue & Customs Service already announcing at the end of 2019, that for the first five months of the current financial year, revenue fell by a massive 20%.
There was no COVID-19 or coronavirus then. So what caused this massive reduction?
Fiji First economics
During the debate to thank the President for his address last November, I had said:
“For the last 10 years the Fiji economy has been run like a really bad magic show. It has not even been entertaining. Because we can all see how the magic tricks are done. Borrow money. Spend money. Give out freebies under any name”.
“It does not matter, as long as you spend. It does not matter if the spending is good or bad, as long as you spend. It does not matter if roads you fixed once have to be fixed again in three years, as long as you spend. It does not matter if the money is wasted, just spend”.
“That is Fiji First economics. That is the Bainimarama Boom. The “Bainimarama Boom” has now become a national joke. And all of this economics of illusion has worked to fool the people for 10 years. But now it is the end of the party”.
Basically, the two-man Government has run out of ideas. And it has run out of money. Yet, we have a Minister for Economy who while opening a complex in Nadi in last month describing the investment as a sign of economic progress, while rubbishing those who were rightly concerned about the rapid economic decline.
Nadi is the hub of Fiji. It is known as the Jetset Town for a reason – because of tourism and the Nadi International Airport.
When the President of the Nadi Chamber of Commerce says that businesses are bracing themselves for tough times and that brisk business was not seen during Christmas and New Year, as well as school holidays, anyone with an iota of intelligence, more so one is responsible for economic policies of a government, should pay attention.
When the head of the Nadi township’s business organisation says that 25% taxes (VAT, STT and ECAL) is hurting tourism, especially now that COVID-19 is restricting travel from traditionally high-spenders and destinations with most visitor arrivals, anyone vested with the responsibility of a nation’s economy and finances should give them their undivided attention. Nadi revolves around tourism which is Fiji’s largest foreign exchange earner and largest contributor to GDP.
After all, Nadi has Fiji’s premier hotels and resorts.
But instead of taking advantage of a global crisis that has affected some key tourist destinations by offering attractive packages and reducing taxes, the Fiji First government has made tourism a highly expensive commodity and an anti-tourist destination, thereby hitting tourism oriented businesses in their guts.
The coronavirus is a non-issue as far as Fiji’s domino-affected economic stagnation and decline is concerned.
But coronavirus may prove to be the final nail in the “boom to bust” two-man ruled economy, if nothing is done. This doesn’t require just economic resuscitation, but a political solution as well.
The worst is yet to come
We will face a bleak economic future. This means no attention being paid to :
• reducing the cost of living that is becoming oppressive
• reducing our debt levels
• fixing our basic utilities and infrastructure
• fixing our deteriorating public hospitals and medical services
• arresting the magnified rates of lawlessness and crime
• growing our declining sugar industry to pre-coup levels of over 3 million tonnes of sugarcane and 300,000 thousand tonnes of sugar per season
• improving our weakening dollar that is contributing to the increase in prices of food and medicine
Last week, the Prime Minister stated that fiscal consolidation was important. Too little, and way too late. He ignored the financial bonanza offered to all and sundry in 2018 before the general election.
He turned a blind eye to the spending spree in the name of freebies and handouts, costing millions of dollars under any "Care" program that one qualified for.
Put very simply, he encouraged electioneering.
The result of electioneering
In my New Year’s message for this year I had said:
“We begin 2020 in the grip of a cyclone. Perhaps it is a reminder that hard economic times are ahead. We have little confidence in our current government to solve our problems”.
This reality is now set in. We are in for a rough and bumpy ride because the driver is a cash-strapped patchwork Government only good at strategizing about low-hanging fruits while on Level 9 of Suvavou House, while completely oblivious to the stark realities of the taxpaying public outside.
This year 2020 and beyond will be a bleak and difficult year for all our people due to a sharp decline of the consumption-driven economy brought about by the governance of the current Fiji First government,
Unfortunately, this is the sad and unmistakable reality. We cannot gloss over the declining economy where all fundamental sectors are either fighting to breathe, or are being severely affected by lack of investment from the Government.
Yet somehow the State’s coffers have no problem in finding an abundance in funds to pay several thousands of dollars for overseas travel allowances, to the Prime Minister, Cabinet Ministers and their delegations.
It is truly amazing how it is conveniently ignored that every month, the Government needs over $50M to make good on all our loan repayments. More than half of that repayment amount, is interest alone.
Core infrastructure such as roads, water supply and electricity supply are deteriorating. Affected people have to wait for days for normal supply of water because water cartage is not being done on time.
The budgetary allocations by this government over the years have either been mismanaged in terms of prioritisation, or simply not provided.
The 'My Way or the Highway' style of governance despite Fiji returning to parliamentary democracy more than five years ago, has resulted in Fiji now being in a state of social, moral, political and economic decay that is affecting the livelihood of every citizen.
COVID-19 is an example of what the International Monetary Fund had warned about in its extensive report very early last year. In many ways it is worse than experiencing a natural disaster.
It dangerously has the real potential of debilitating a stagnant and declining economy. And Fiji’s economy, unfortunately, is a leading contender by offering itself as a sacrificial lamb due to the failed policies of the Fiji First government.
After any general election, irrespective of the election result, the economy is boosted due to confidence. But this was not the case after November 2018. Any government in hiding for 48 hours without any notice, and with heads of "independent institutions" seen swanning in and out of the building where the government barricaded itself, so soon too after winning an election, created all sorts of perceptions.
And those perceptions, whether right or wrong, have directly or indirectly contributed to the economic morass that the nation is in today.
What we need is confidence and economic resilience to overcome the double jeopardy of a self-inflicted economic mess, and the threat posed by COVID 19.
It needs a political solution to inspire confidence. A genuine show of marching ahead in unison, cooperation and consensus.
It is time that Government shows magnanimity and agrees to work in bipartisanship with the Opposition in Parliament to solve the ill's plaguing our beloved nation. We are ready to help.
Professor Biman Prasad is the Leader of National Federation Party. The views expressed here are his own and not necessarily that of the Fiji Times