Opposition Reply to the 2015 Budget by NFP Leader Professor Biman Prasad: Shadow Minister of Finance
Tuesday December 2, 2015
(Please Check Against Delivery)
1. Introduction Madam Speaker, May I first of all thank the Honourable Leader of the Opposition and SODELPA Leader (Ro Temumu Kepa) for giving me this opportunity to address the House on the 2015 Budget, as the Opposition Spokesperson on Finance while being the Leader of the National Federation Party.
I thank the Minister for Finance for the budget address. I also thank all the senior civil servants for their work and input in the budget. It is of some relief that our national budget can finally undergo some semblance of public scrutiny after 8 years of a military dictatorship. We remain hopeful that the establishment of parliamentary democracy will bring about confidence and we do expect investors to expand the scope of their investment so that Fiji can realize better growth in the future. However, this confidence could erode quickly if we are not able to quickly bring about media freedom, the removal of fear, removal of the some of the draconian decrees and overbearing micro-management of the economy.
Madam Speaker, Before I move on, I must record the Opposition’s dismay at the lack of respect shown to members of Parliament and tax payers who foot these costs by the Minister of Finance in not making his budget speech and budget estimates available to parliament on time. Many of us did not receive the Budget Estimates until 22 November and the budget speech came six days later on 27 November, which is a clear departure from the rules set out both in our Standing Orders and the Constitution. I don’t think this has ever happened in the history of Fiji. Of course this allows the Finance Minister to get undisputed praise for all the positive aspects he talked at length about, without the Opposition Members and the public being able to criticize weaknesses.
Only yesterday Madam Speaker, the Minister for Finance once again tried his excellent salesman skills by telling us that the Supplement to the Budget Estimate was in fact THE official Budget Document. Nothing can be further from the truth. During his maiden speech he displayed his lack of mathematics knowledge. Yesterday in Parliament the Minister showed his lack of understanding of vocabulary.
The document that he referred to yesterday was the Supplement to the Estimates. Surely Madam Speaker, the Minister knows that Supplement means completing or enhancing something. Just like Vitamin Supplements or Supplementary Questions that have been asked in this Parliament. This Supplement to the Estimate contains details of programmes. The Estimate, Madam Speaker is THE official budget document. It outlines the total Appropriation Bill from Head 1 to Head 52. This Parliament, like our predecessors will have to scrutinise each individual Head and programme in the Committee of Supply, as stipulated in the Standing Orders. Even the publication of the Supplement is not a normal practice but a waste of taxpayer funds.
This document, Madam Speaker, the 2014 Budget Estimates is the complete document. It contains the full Estimates of individual Heads and programmes. This long-standing budgetary practice was adopted by his predecessor and Prime Minister as well as other former Finance Ministers. Therefore it is grossly misleading that the 2015 Estimates say in bold print “As presented to Parliament” because it NEVER was and this is a breach of the 2013 Constitution and the Standing Orders.
Madam Speaker, There is great room for improvement by this government to display magnanimity after winning the election. It continues with its egotistic, know-it-all, dictatorial and vindictive attitude and has presented a budget, which in the medium-to-long term is going to make our future even bleaker. It is a budget, which is going to increase the gap between rich and poor. It is a budget that is going to increase income inequality continuing with previous tax policies, such as the increase in VAT and reductions in income and corporate tax, brought in by previous budgets. Above all it is a budget which is unrealistic and unsustainable in the medium term based on likely recurrent revenues. As I said in my maiden speech, Fiji today is a work in progress and my hope was that this budget was going to give the country a vigorous impetus to turn back the negativism that we have seen in the last several years and build the Fiji of tomorrow despite the uncertain and somewhat unpredictable global environment.
Madam Speaker, In the first part of my response, I will deviate from the norm of just looking at the allocation on which a lot of time was spent in the budget speech. A budget of 3.3 billion dollars comprising, water subsidies, electricity subsidies, subsidies on medicine, free education, bus fare to students are all positive features that have been continued from last year and we welcome this. But these alone cannot be the only thing one can talk about in reply to a national budget.
Madam Speaker, A national budget is a central political process. It is not only a process which lays down the expenditure and income of the government but provides a platform for a long-term vision for our country, political credibility and confidence for the future. It is about achieving resilience in the face of adverse conditions and improving Fiji’s fiscal position so that we are not caught in the headlights of global capital market concerns with high and rising debt. The budget is about mobilizing the people’s creative energies to collectively move the nation forward. It is essentially about building trust in the economy.
There are elements in this budget that can be measured quantitatively. They are important but they are not everything. Issues such as vision, leadership, governance, genuine democracy and the quality of life of people on a sustained basis are equally important. A budget is an opportunity to sow the seeds of inclusivity by reaching out to all the people with sustainable economic and social policies.
2. Need for good governance to implement the budget successfully Madam Speaker, In the last 8 years we have seen a rapid breakdown of state institutions, and the ineffectiveness of them to work for the benefit of the people. Minister after Minister admitted in their maiden speeches that not all has been good in their Ministries these last eight years during which the Bainimarama Government has had total control without having to account to tax payers of Fiji. The Minister for Health laid down a number of problems in the health sector: lack of doctors, lack of nurses, equipment, lack of timely services, lack of drugs in hospitals and so on. The Minister for Education has already started in earnest with reforms in his Ministry and has pointed out things like the lack of commitment from teachers and an inadequate curriculum. He has already announced the reintroduction of exams which were abolished by the previous Bainimarama Minister for Education, as well as other major changes.
Others also pointed out problems in their various ministries. It is a clear admission that the Interim Government had lost its way in many areas. It is a clear demonstration of the failure of governance, reform and policy over the last eight years for which they were predominantly in control. Esteemed Madam Speaker, allow me to remind the Minister of Finance of the famous words of Albert Einstein: “Not everything that can be counted counts And not everything that counts can be counted”
At the heart of our country’s problem in the last 27 years and indeed exacerbated in the last 8 years has been the lack good leadership and appalling standards of governance at virtually all levels. The unleashing of bad governance, lack of accountability and transparency after all the coups has become a norm. Good governance is not merely a cliché and catch phrase. The principles of it are logical, equitable, transparent and of critical importance for the progress and prosperity of our beloved nation.
Government has talked about the civil service reform and that is welcome. However, the civil service deterioration and militarization has been presided over the interim government. Public service must always remain an independent and impartial implementer of government policies. The government of the day makes policies and the civil service implements it. The role of the Public service commission has been destroyed. The decision to give permanent secretaries powers for the recruitment, promotion etc is a regressive step. The government must revert back to the old principles and robust and consistent Public Service Commission and it should be given the responsibility to manage the public service in the public interest.
Government has talked about the civil service reform and that is welcome. But reforms must empower public servants to undertake decisions regarding implementing policies made by Government. What we have today is a civil service that is besieged, that is demoralized and fearful. Many senior civil servants feel terrorized and insecure about their jobs should they disagree with their masters, and are unwilling to make decisions or are simply not allowed to make decisions. The reform must there put in processes and policies where civil servants take ownership of implementing and enforcing policies in an independent and impartial manner. There can be no room for an overlord mentality.
Madam Speaker, Let me say a bit more on governance at the Executive level, the Cabinet. The imposed Constitution clearly mandates the Attorney General as the Chief Legal Adviser to the Government. That is why in most parliamentary democracies, the Attorney General comes from outside the elected members but when they come from the elected members, they hold only that portfolio. What we have in Fiji today is that the Attorney General will end up advising himself and making the decisions himself as Minister responsible for Finance, Planning, Statistics, Public Enterprises, Public Service, Information, Civil Aviation, Parliament and Elections. Might I also hasten to add that the Attorney General is also the General Secretary of the Fiji First Party.
Madam Speaker, If anyone wants to see and understand the paradox of good governance they should study Fiji now. There is more than one PhD thesis possible! Continuing on the paradox of good governance, we have a litany of examples of nepotism in appointments in the civil service, statutory organisations, appointments of boards and their chairman. The Government worryingly continues to hold Executive Chairmanship of a number of key organisations.
Madam Speaker, Please I repeat what I said in my maiden speech in October. The continuation of regressive and draconian decrees will render meaningless all talk of Fiji once again being a genuinely democratic nation. The Media Industry Development Authority Decree, the Essential (Employment) National Industries Decree, the Political Parties Decree must be repealed by Parliament because they curtail the rights of the media, ordinary workers, trade unionists, and ultimately our people.
Madam Speaker, The fight against corruption is an important element of Good Governance. The setting up of FICAC is an important development but FICAC must be allowed to operate independently and must not be used by government to intimidate and harass its opponents. On a score of 4 out of 10 Fiji was ranked 55 out of 159 countries in 2005 and we don’t have the scores for the last several years. Fiji also had below average integrity ratings as measured by the Annual Corruption Perceptions Index. This means that most people think at corruption level in Fiji is very high.
3. Discussion of the Budget Madam Speaker, We were looking for a vision in this budget, something to spark the imagination of the people. A clear vision of a worthwhile future that stretches beyond what we have in this country today. This budget and this government have gone into what we would call a brain glitch because they cannot truly see the basis of the future for this country. They talk about mandate, yes they may have the mandate of 59% of the voters in this country but Madam speaker when Governments after winning begin to talk about mandate, you know that they have simply lost the plot and have no original ideas.
We can understand what might have happened in the last 8 years. We are not even going there. There is this strange view that business as usual in governance would be good. Some supporters in the media parrot the view that if they talk about following Singapore’s model, Fiji could become like Singapore. What utter nonsense and shallow journalism! Singapore’s context is totally different and there is no relevant comparison to Fiji’s circumstances. If there is any country we should try to compare and emulate, it is Mauritius. If we have to learn anything on good governance we should learn from Mauritius. A country with a genuine democracy, a country with a good sugar industry, a nation that welcomes millions of tourists, which attracts large foreign investments; a country which has free education from pre-school to the University, free medical for every citizen including heart surgery. A country, which has an unregulated media and where the media freedom, is not under threat from draconian decrees. A country where trade unions flourish and defend worker’s rights. A country where an electoral system rules under which free and fair elections are conducted. A country which had an average growth rate of more than 5 percent for more than 30 years. The heart of Mauritius’s economic and social success is Good Governance and genuine democracy, and the absence of a powerful military that does coups every few years, and retards the country by decades, every time it does so.
Madam Speaker, Unfortunately, the government seems to have looked for a bad example from Mauritius and that is to follow their model of government acquiring fuel in bulk, and supplying it to private companies. This is a bad decision in which the specific details of the benefits to the taxpayers are absent, while an initial investment of $250,000 is to be made that will for sure – and we will all be witness to this come next year – suggest a more taxing burden of even more public funds in such a huge, volatile and investment-intensive sector. This is yet another example of government trying to meddle in the economy unnecessarily. What we can already envisage happening, is that it will eventually lead to increase in fuel prices and it would be very difficult to control. It will be open to abuse and control and manipulation by a few. Energy security is central to the economy of any nation and any central control over the supply of it should always be treated with great caution. We suggest that if the government’s sole objective is to stabilize fuel prices, then, there is a better way of doing it. Government should set up a Stabilization Fund through a levy which can be used to do that. This will avoid the set up another state venture and the yet unknown flow-on associated costs.
Madam Speaker, This budget lacks clarity in direction and depth. There does not seem to be a coherent link between vision and action and between strategy and objectives. There is confusion and inconsistency between the economic policies and some ill-devised populist policies. We are talking here about a budget of a nation and not a company. As stated by Nobel Laureate in economics, Paul Krugman ‘A Country is not a Company’. This means that a national budget must be based on some general principles and not some specific strategies that are normally used by private companies. For example, responsible governments do not make tax policies targeted at certain individuals or companies, offer tax breaks to some and not others, duty concessions to some and not to others. There have been several cases of this in the last 8 years and I see that being continued. The only difference this time around is that there will be vigilant oversight from the Opposition.
4. Reforms and Cost of doing Business Madam Speaker, For the last 8 years Government claimed that their reforms have improved the business environment in the country. However, the IMF in its recent report says that deeper and more rapid structural reform is needed to lift Fiji’s potential growth and reduce external vulnerabilities and reduce poverty. The report further states that ”priority should be given to improving the investment climate by streamlining government regulations, relaxing price controls while protecting the most vulnerable and further enhancing of the use of land and upgrading infrastructure.”
The last World Bank ranking on Ease of Doing Business puts Fiji last among the top 81 countries. We have actually dropped eight points, from the previous rank of 73. Fiji’s ranking dropped in nine of the 10 categories which the world bank uses to rank countries such as: ‘starting a business; dealing with construction permits; getting electricity; registering property; getting credit;, protecting minority investors; paying taxes; trading across borders; and resolving insolvency).
Fiji’s rankings on starting a business, highlights the number of procedures for starting a business and the numbers of days to register a business have all increased in 2013 compared to 2012. These suggest that compared to other economies, bottlenecks for starting a business have increased in Fiji. The aggregate ranking on the ease of doing business for Fiji in 2013 was 60 out of 185. In 2014, Fiji’s ranking went down to 73 and further decreased to 81 for 2015. In terms of starting a business, we rank 160 out of 189. Investments cannot be expected to thrive in Fiji under these conditions.
Madam Speaker, We can only improve our business environment and the cost of doing business if government stops micromanaging the economy. It has it hand in every aspect of the economy and has created unnecessary bottlenecks at all levels. Those responsible for facilitating business are in a state of paralysis. At one time in India they used to describe these conditions as “Inspector Raj”. In Fiji, we have ended up with a ‘decree raj’ or as some say the ‘Attorney General’s raj’. Government really has “no business being in business” neither is that what they’re being paid to do.
5. Economic Growth Madam Speaker, One of the strangest aspect of this government’s eight years is that they have been “business as usual”, without a single major government initiative to create new industries with good incomes.
There are two areas which we economists have been advocating for more than a decade which are call centre and data processing industries (which require cheap telecommunication charges which we have failed to deliver), and a retirement homes industry which requires specialist medical services for the elderly, which Fiji currently lacks. There are some good moves in the latter direction with FNU initiatives, Madam Speaker, but we have been hearing this since 1999 when Apollo Hospitals first approached Fiji, and little has been done since.
On the retirement homes front, Madam Speaker, this government has put a spanner in the works, by banning the sale of freehold residential land to foreigners, which will actively discourage many overseas retirees to Fiji, and the employment and capital they have been bringing.
This government has continued to claim unprecedented growth and they have claimed credit for it. It appears that the word unprecedented has been misused in an unprecedented manner. Government claims a lot of credit for recovery in the economy and they make it sound as if this is the only government which has done something to achieve high growth rates. Nothing could be farther from the truth. In fact, Fiji in the first decade of independence, grew at an average of more than 5%. If we did not have a coup in 1987, if we did not have another one in 2000, we would have grown at an average growth rate of more than 5% for the last 30 years. That would indeed have been an unprecedented achievement.
But more importantly, Madam Speaker, let us be clear where this moderate growth over the last four years is coming from. Is it coming from the private sector? Is it inclusive? Has it created many jobs? Is it coming from our local businesses, big, medium and small?
Madam Speaker, much of the growth between 2012 and 2014 has been borrowed growth and public sector investment with very little private sector commitment. The Bainimarama Government has freely borrowed from FNPF (whose board it totally controls), and even increased our borrowings from abroad, thereby increasing our overseas expenditure.
The only thing unprecedented and historical about these past 8 years, part from the propaganda and hype from government ministers, is the increasing bondage of debt our people have been placed under, and sweetened only by the meagre freebies that are not really free but paid for by themselves, and VAT in particular whose burden falls on the poor and middle classes. Never in the history of this country have we used such unprecedented expansionary policies based on borrowing. The Honourable Prime Minister keeps talking about the NBF saga and he is right in saying that we should not repeat that. The $220 million loss from the NBF saga indeed was a big hole in the nation’s coffers and had to be paid for by increased public debt, financed by the $253 million sale of government’s ownership in ATH shares.
But Madam Speaker, the massive infrastructure spending last year and the allocation of more than 630 million for next year funded through borrowing and planned asset sales of more than 500 million could leave the biggest dent yet in our budget and it is our people who will be shackled by the burden of debt. This is unprecedented.
Also unprecedented, Madam Speaker, and bigger than the NBF disaster, is the massive losses made by Bainimarama controlled boards of FNPF investments at Natadola and Momi, where more than $350 million have already been written down, and more will probably be written down in the future, as this government experiments with building five star resorts, which function should be left to our tourism industry and the private sector. It will be interesting if not painful for taxpayers to see if this Government will lose more of their money in the investments at Momi.
6. Revenue and Expenditure policy Madam Speaker, If we analyse the revenue and expenditure policy between 2009-2013 we find that government has increasingly relied on indirect taxes. In 2011 government increased the VAT to 15%. VAT is a regressive tax and the burden of this tax falls more heavily on the poor. In addition, from 2010 government also increased fees, fines and charges, which are again a huge burden on the every day person in this country.
In 2013, the capital budget was underspent by $140 million and similar patterns are bound to be found in 2015. I expect that in 2015, the $653 million allocated to Fiji Roads Authority will not be spent and if it is spent it will be spent in a hurry at the end of the year, just as it was done this year, with much wastage. Inflating expenditure and not delivering it has been the strategy used by this government to take the people for a ride. This budget priority for the second year running must ensure that the bulk of these funds remains in Fiji and the money is used for the purposed that it was intended. We will vigilantly monitor from this side of the House to see that it is so.
In 2014 for example, about $400 million from asset sales has not been realized. But the government still claims that its deficit will be only 2% of GDP. How did they arrive at this? The only conclusion we can draw is that they would not have spent what they told the people in the budget. Most funds are under requisition and government has used that to withhold expenditure and probably used that to manage its cash flow. For example, the $10m for first home buyers in 2014 has not been used by many people and I am aware that just prior to Election’s there were showy newspaper advertisement but there was never any intention to actually spend that money.
7. Government Debt Position Government debt has increased by $1.136 billion between 2006 and 2014. This represents a 39 percent increase over that 8 year period. Debt as a percent of GDP has fluctuated between 48 to 53 percent during the same 8-year period.
There was a sharp increase in deficit (as compared to previous years) in 2009. This increase also reflects the fact that the government moved away from a position of fiscal consolidation adopted in 2007 and 2008.
Government guarantees and contingent liabilities are fiscal obligations contingent on the occurrence of particular events. These obligations are not budgeted and accounted for or considered in conventional fiscal analysis. However, to have a complete scenario of the fiscal position, government obligations outside its budgetary system should be considered.
Between 2006 and 2012, guarantees and contingent liabilities have increased by $748 million or 56 percent. In 2012, it stood at 28.8 percent of GDP. Therefore, one can add 50.9 percent (% debt to GDP) and 28.8 (% guarantees and contingent liabilities to GDP) and argue that total stands at 79.7 percent of GDP.
Although the debt (without contingent liabilities) should not raise immediate concerns, the government should outline a debt policy for sound and effective management of public debt to a sustainable debt position in the medium to long term.
There is another serious question to the government’s contention that the deficit for 2014 is 1.9 percent of GDP. If we exclude the revenue from the sale of government assets, the budget deficit would be 7.8 percent of GDP. Is the government deliberately using the old Government Financial Statistics (GFS) standards instead of new Financial Statistics?
This is a pertinent question because if the government had used the new Government Financial Statistics of 2001, then the sale of government assets would not have been treated as revenue and the budget deficit would be 7.8 percent of GDP in 2014, not the 2.0 percent they are boasting about.
Madam Speaker, Another notable trend is the steady increase in overseas borrowings. Repayments for these borrowings would have to be in foreign exchange. The global bonds of USD $150 million was a standby facility at 6% interest rate under the SDL government. The interim government used it. When it was time to pay, they went and borrowed an additional USD$250 (F$452) million at an interest rate of 9% when there were clearly options for it to borrow at a lower interest. This bond payment is due in 2016. By 2016 government would have paid $207 million in interest alone. This is $207 million that would have gone a long way towards state services such as education and health, or welfare payments. The continued overseas borrowing will require additional foreign exchange earnings. In addition, the Government must top up the sinking funds which stood at about $182 million at the end of 2013 because the sinking fund is what enables Fiji to ensure that it is able to meet its debt repayment.
Madam Speaker, The long and short of this is that the people of this country are and will continue to pay for it. Based on 2013 figures, each woman, man and child had a debt burden of about $4,440. A child born today automatically inherits a debt of $4,440 upon birth – before they’ve even opened their eyes, grown their first tooth or taken their first steps. Each household would have a debt burden of more than $20,000. Every family will forego the opportunity to buy a $20,000 car or invest $20,000 in a house because they presently and against their will owe and be indirectly paying off $20,000 towards the servicing of these loans. They are already paying for it from increased prices, poor health services etc because large amounts of funds are going towards paying our debt including interest payments. There has never been a time when the need for sound financial management has been more critical! We should set clear targets on debt and concise clear targets for borrowings. How do we spend public funds? Is spending another $12 million dollars on hosting an international a golf tournament next year the best use of public funds when it could be used to build 600 homes for our people in the squatter settlements? I take this opportunity to suggest to the government to conduct cost benefit analysis of major spending to provide clear thinking to the taxpayers regarding the worth of how their funds are spent.
8. Trade Policy An import duty of 32% placed on all importers bar one which gets a zero duty to import cream/milk and sell them to consumers at a price which many are not able to afford, makes the argument by government to protect the local dairy industry pretty hollow. This favoured company which has got zero duty has no incentive to promote the local industry when it can continue to rake in millions of dollars by simply importing. This too is at the expense of the ordinary consumers who are paying very high prices for milk and milk products. One on hand when government is giving millions of dollars to one private company, it is trying to provide milk to class one students thereby putting more profits into the pockets of the same company.
The simpler and more sustainable policy for government would be to reduce the duty on cream and milk. This would allow every child and every family to afford milk.
The gimmicky nature of this policy by the Minister of Finance is easily seen when you ask, if tax payers are going to provide milk to class one students, why not to pre-school students who probably need milk more? What about class two students? Every child needs milk and milk products. Indeed, I would like to ask the Minister for Finance if he consulted with the Fiji Food and Nutrition Centre, whether this was the best way to tackle malnutrition among our children, throughout the length and breadth of Fiji. ￼ There are some ridiculous discretionary tariff policies adopted by this Government, quite at odds with our commitment to WTO trends.
We urge the government to immediately review this policy. If it wants to help the dairy industry, we would suggest that it should be through direct support to the farmers in improving their pastures, breeding, infrastructure and close extension and advisory support to the farmers.
When we talk about trade policy we are not only taking about export policies and strategies. Good trade policy puts emphasis on good import policies. Protecting one company to promote local dairy industry by assisting their imports, will be a colossal failure. Import substitution policy is an age-old policy which has failed elsewhere, it has previously failed in Fiji and there is no doubt that it will fail in this case. The losers will be ordinary consumers and dairy farmers in this country.
The same kind of cronyism and favouritism in trade policy continues in this budget. It is an immature and irresponsible decision to raise duty to 32% on printing and photocopying papers and exercise books! It is preposterous to put a special rate of $1 or 32% whichever is greater on exercise books. A 200-page exercise book costing $1.70 now will cost $2.70 as a result of the increase in duty. What good then is free milk, education and bus-fares when any savings will then be diverted towards buying exercise books and paying higher prices for paper for all the children at all levels, primary and secondary, including those in tertiary education?
Another example of lack of any economic logic is the duty of $5 on blank DVD, supposedly to help protect against privacy. Again this is to protect one company. But is this simply an admission of the total failure of the Government in prosecuting the dozens of music and video outlets which sell pirated products?
Again, what is the rationale for this action. Who is this government trying to help at the expense of consumers?
It is critically important for the Fijian government to continue with the trade liberalization that it began in the 1980s. A reversal of trade policy in this area will not provide support for broad-based economic growth. Fiji’s experience from the past suggests that it cannot go back to an inward-oriented strategy by providing protection to domestic firms in order to encourage production and employment. The potato example is strongly relevant in the case against an inward-oriented strategy such as the import substitution policy. Despite the subsidy from the government to encourage farming, the industry has failed to take off. Just these last few days, we hear that the Ministry of Agriculture were importing seed potatoes from NZ, a temperate country, when we should have been importing the red pontiac variety from tropical Australia. Goodness, did our decision makers in the Ministry of Agriculture not know this simple basic geographical fact? Or were they experimenting with our farmers?????
Trade restrictions will end up restricting growth and produce a loss of real income. This will go on as long as certain sectors of the economy is protected. The argument that protection will protect jobs is not supported by the empirical literature. While protection, in the short term, may help create more jobs in the protected industry than it otherwise would be generated, it does not mean that protectionist measures can increase the total volume of employment in the economy. In fact, empirical evidence from around the world argues to the contrary. While costs such as job losses are likely from import competition, the solution to this is not trade restriction but other policies to help workers adjust.
9. Cost of Living Since 2006, food prices have increased by 59%, heating and lighting has increased by 60% and transportation has gone up by 50%. Between 2006 and 2012 alone, food prices went up by 54% while non-food prices increased by 32%. This has left most households worse off in very real terms. In particular, households have been affected because while the cost of living rose, incomes/wages have not kept pace with most sectors across the economy. The sharp rise in food prices has disproportionally impacted the poor as poor households spend a large portion of their household budget on food.
The government has always quickly jumped to the conclusion that VAT is zero rated on basic food items. It is true that VAT is zero on tinned fish, flour and sharps, powdered milk, edible oil, rice and tea.
I challenge the Minister of Finance to show to this House that his policy has actually worked in keeping down price increases for these products between 2006 and 2014. Or have retailers taken advantage of the zero rating to still increase prices, and profits, as the Minister of Finance himself admitted at the Budget Forum.
Madam Speaker, more importantly, a typical poor household does not only consume these items. A typical basket for any poor household also includes the electricity bill, water bill, mobile phone recharge, frozen meat, bread, processed food, transportation and entertainment. Further, even the poor and the middle classes now consume more fresh meat products such as chicken, sausages, fish and goat (which have all increased in prices). The poor simply consume less meat and hence protein intakes, or consume far more unhealthy meat cuts, which are high in fat and hence extremely bad for their health.
10. Poverty and Social Sectors The 2002/2003 Household Income and Expenditure Survey (HIES) showed that 35% of the population lived in income poverty. The 2002/2003 HIES also showed that 40% of the population in rural areas were in income poverty. This proportion of people living in poverty in rural areas increased to 43% in the 2008/2009 HIES.
By 2008/2009, the rate of overall poverty recorded a slight decrease to 31%, particularly due a decline in urban poverty. Despite this decrease, it still remains clear that almost a third of our population live below the poverty line. This is a serious economic issue and needs to be encompassed in any agenda towards greater and inclusive economic growth. I understand the most recent HIES is being analysed now. Well, looking at the per capita growth rates of real GDP, I can say that poverty rate would still be over 30%.
Madam Speaker, in the first five years of the Bainimarama Regime, when there was economic stagnation and freezing of nominal incomes, and a decline in employment, real incomes of our people may have declined by as much as 30%, because of the continued increase in cost of living.
Poverty remains high because unemployment rates have been high and the country’s continued low economic growth has been ineffective in reducing poverty, although we expect some improvements these last three years based on the moderate economic growth and high infrastructure spending.
Fiji needs high inclusive economic growth that translates into more employment, higher earnings, and increasing family incomes. Only such changes can make any significant dent on poverty by improving the living standards of the poor and the middle class.
11. Education and Health Madam Speaker, We wholeheartedly support the continuation of the increase spending on health and education. We support free education including for preschool.
We also support the Ministry’s plan to provide flexibility in the use of grants to schools and address student-to-teachers ratio and additional teachers. However, let me once again implore upon the Minister for Education to set up an independent education commission to look at the whole education system. The Minister for Education announced it in his maiden speech but there is no mention of it in the budget speech. We have had so many changes over the last 2-3 decades that educationally, we have gone this way and that, often reversing policy, so that today, we really don’t know where we are. An independent and expert commission should be able to provide recommendations for change which should be sustainable. The last one was set up 2000 but because of the coup the Commission could not complete its full report.
I am also surprised that University of Fiji had its allocation reduced by a million dollars. It is unclear what the basis for this was? The University of Fiji is a great example of a display of community spirit by a committed group of people to provide choice for students wanting to pursue higher education. There are so many allocations which we can point out in this budget that are not a priority and wastage of taxpayer funds. We ask the government to restore the grant to the same level as 2014 and if possible increase it to $4.5 million. Perhaps we can reduce the infrastructure budget by $2m or even $200 million, as I am sure the Honorable Minister for Infrastructure would not mind as he is well aware that they cannot spend it all in 2015, if it is done efficiently and wisely.
Health We support the increased allocation and the plans by the health ministry to recruit more doctors and nurses to provide better services to our people. However, there are several questions that arise from the plans for the health ministry in 2015 for the recruitment of 150 additional doctors next year. What plans has government got to recruit all of them? It is our understanding that only 75 local graduates come out every year. Where will the other 75 come from? Will graduating standards be reduced so as to increase the number of graduates? Will they be recruited from overseas? If so, when is that expected to take effect so that the new year has the full complement of 150 new doctors by January 1? As the Minister himself admitted, the real issue is quality of service delivery and I hope the public service reform will address some of the staffing issues within the Ministry of Health including allied health workers.
The $8 million allocation for free drugs for household is welcomed but consequently also raises a lot of questions on the logistics of implementation especially with regard to the income threshold requirements. Government has not come out with any clear plan. First, we understand that all current pharmaceuticals supplied in the public hospitals are already free and those available in pharmacies, 74 of them are under price control. It appears that the public availability of medicine has failed and the Government must re-look this first.
With respect to the $8 million free medication, how will government determine the $20,000 threshold? How is this to be monitored? Will the free medicine be available at all pharmacies or are only some favoured ones likely to get the nod? We suggest that Government appoint a holistic expert committee to seriously look at how this $8 million dollar free medicine is to be distributed. This $8 million allocation must reach the people for whom it was intended and we will vigilantly monitor from this side of the House to see that it is done.
With respect to Millennium Development Goals 4 and 5 Fiji seems to have made good progress and that is commendable but with respect to MDG 6 and the looming NCD crisis there is room for improvement. Death rates as a result of NCD related diseases such as diabetes, pressure and heart attacks has shown significant increase over the last several years. Finally, our health budget of 2.7% of GDP and 8% of total expenditure is below the international benchmarks. We need to at least raise the expenditure to about 10% of the total expenditure. Of the $47 million increase in the health budget for 2015, about 17 million goes to capital expenditure and only 16 million for operational expenditure. This is inadequate for the Ministry if it is seriously considering improving health services at all levels. The Government should seriously consider additional allocations to operational expenditure specifically targeted to improving services at our public hospitals, reducing waiting time and improve doctor and nurse availability after hours.
12. Economic Sectors – Sugar The Government once again congratulates itself for an increase in sugarcane production by12% in 2014 over the 2013 output. That is understandable. But they are not telling us that the number of active growers has decline to 13,000 from more than 16,000 in 2011. They are not telling us that total cane production has declined by 50% since 2006.
Madam Speaker, The truth is that the sugar industry which is still very important for Fiji seems to be on a permanent decline. Farmers have lost confidence in the industry and unless there is a major injection into the industry to restore that confidence I am afraid that the sugar industry will be dead and buried in the next 5-7 years. An allocation of $9.7 million for the industry, less than the $12 million allocated for the Natadola golf tournament, is not going to remove the binding constraints currently facing the industry.
Madam Speaker, Farmers have been short-changed over the last several years. While they have received the share for the sale of molasses, they have not received their share for the electricity generation. We suggest that FSC immediately rectify this and pay the farmers the arrears of the shares that they have not been paid. This could restore their confidence in the industry. They’re several more possibilities for high value by-products which should be considered by government.
Tourism Tourism is a key sector for our economy and will remain so in the future. But what is it that is holding back the tourism industry? What is stopping us to get a million to tourists to visit our shores? We need simple answers to these questions.
If we do a simple analysis, we find that the infrastructure is enough to get more than a million tourists to Fiji. There are enough rooms alone in Denerau that can accommodate a million tourists. Fiji Airways decision to purchase the three A330’s does not justify the fact that it can be the major carrier of tourists into Fiji. Current Fleet: 3 x A330 = 242 seats per aircraft = 726 seats per day and 3 x 737 aircraft = 150 x 3 = 450 seats per day. The total available seats per day is 1176. At 70 % seat factor we are looking at only 823 seats per day.
Fiji Airways has 300,468 seats that it is available to contribute. If Fiji Airways does trips twice daily to all destinations it will still not come close to carrying 70% of total inbound tourists.
It is also quite evident that Fiji Airways cannot be the sole contributor towards achieving 1 million tourists in the next 3 years. Partnerships with other airlines and new airlines is necessary for Fiji and the Government should consider this.
Madam Speaker, let me also say that I have serious doubts with the financial reports of the Fiji Airways showing significant profits. The financial reports should be provided in full. Additionally, we note that in three years we are in a search for a third CEO and the Airline is now being run by expatriates when many local people are available to do those jobs.
We welcome the allocation of $23.5 million dollars towards Tourism Fiji. However, we are concerned that tourism numbers have only grown by 43,000 visitors between 2009 and 2013. The record visitor arrival was achieved in 2011 of 675,050 visitors still a long way to achieving million tourists per year. There should be a total overhaul of Tourism Fiji because the best way to promote Fiji is to have our local people representing us in many of our marketing office. With the last local CEO Joe Tuamoto, we were doing well. Since 2011 Tourism Fiji has seen 3 CEO’s and now looking for the fourth one. Government wants to promote Fiji products. Fiji is a Fijian product. We must promote Fiji with Fijians. I am told some expatriates representing us in our marketing office cannot even say Bula properly!
Madam Speaker, In wrapping up, I wish to reflect on the poignant remarks delivered by the Honourable Prime Minister during his maiden address where he made reference to His Excellency the President’s reminder of this chamber having borne witness to some of the greatest moments in our history and also some of the worst.
I too, share His Excellency’s observation on the symbolism of the highest court of the land returning to this very chamber. I also share the Honourable Prime Minister’s view of the need to work together to achieve a future that our people deserve – he can count on the Opposition to do exactly that and ensure that any legislation and policies that passes through us will be robustly debated, questioned and to the best of our abilities, reflective of the good interests of the people. It is what we have been called to do.
Madam Speaker, it was reassuring to see the supplications of the esteemed Government Members of Parliament with hands outstretched from the other side of the chamber beseeching us to work together. I totally agree with that sentiment.
However in “moving forward”, as seems to be the intense catch-phrase of the Government, let us never forget how we got here and the legacy of past coups that our people who elected us, continue to be hurt by. The coup culture must be purged, and the Honourable Prime Minister has an opportunity to indeed come full circle, right these wrongs and truly, but not tokenistically, champion what is good for Fiji by convening a Government of National Unity.
Madam Speaker, our people throughout Fiji are yearning for magnanimity, wisdom, statesmanship and moderation that bequeaths a way forward that binds; that unites; that leads; that compromises and that heals
Madam Speaker, People are also looking at being freed from an environment of fear and vindictiveness… and is without vindictiveness. On vindictiveness, Madam Speaker, I have many examples. But one that I would like raise in particular is the government’s continued victimisation of former Prime Minister Laisenia Qarase. He was promised in December 2013 that his Prime Ministerial Pension will be restored but today he is still waiting for it. Why?
This government currently wields absolute power and has created a culture of servility and sycophancy amongst civil servants, the media, the professionals and the private sector.
In fact never in the history of Fiji have we had such shocking levels of servility, sycophancy and fear of those wielding government power. It is very depressing to find people who are fearful of even shaking hands with an Opposition member. I have taken it upon myself to assure many of them to shake hands quickly and move away lest they find themselves suddenly being considered “55 years of age”. This is real. ￼ Madam Speaker, In a multiracial society such as ours and a presence of a strong indigenous community we must build a culture of respect, tolerance and inclusivity. We need inclusive and democratic institutions. There are many institutions that we as a country need to collectively re-look at. We need to honestly re-examine our Constitution using a consensus approach as was being done by the Ghai Commission which this Government had itself appointed, we need to build trust in our rule of law equally to all in our society without bias, we need a vibrant and independent press as an active watchdog on government and opposition. We need respect for property rights all of our people and investors both local and foreign, and above all we need to remove all forms of intimidation and fear. We need a clear pathway and mechanism to do this.
Madam Speaker, A Government of National Unity comprising representation from all our three parties, can provide one such Pathway, which would moreover give great confidence to our people and investors. All it needs is a firm first step – from both sides of the house. Lest this become construed as me personally trying to get into government, let me assure the people of this country that I would be quite happy to continue to serve Fiji as a backbencher holding such a Government of National Unity to account as part of the Opposition, with other backbenchers drawn from all our parties.
Madam Speaker, the winter-take-all concept of governance has and will result in bitter, acrimonious debates and finger pointing.
Madam Speaker, there several good policies in health and education and infrastructure that we support but there are serious shortcomings in the budget and some of the policies based on which the opposition is unable to support this budget.