Time for an Economic Summit: Face facts and bring in new thinking
Fiji Times Opinion Piece - Saturday 16th January 2021
Time for an economic summit
Face facts, bring in new thinking
BY PROFESSOR BIMAN PRASAD
Perhaps, when we look back at how Fiji performed during the Covid-19 crisis, the biggest failure we will remember is how the Government failed to warn us of the truth about the economy.
Not once in all the Government’s TV broadcasts, Budget announcements and innumerable ribbon-cutting speeches last year, were we told the truth: “2020 is bad, but 2021 will be worse - and you must prepare for this.”
Instead, among the vague talk about “Bula bubbles” and “blue lanes” the Government has pretended that economic recovery is just around the corner.
Even in promoting their usual solution to every problem – opening up the taps at FNFP – they gave the impression that the crisis will soon be over, everyone will soon be working again and can build up their FNPF balances again.
And none of this is true.
What is the truth for the Fiji economy? And once we know the truth, what will we do about it?
The International Monetary Fund forecasts a global economic growth recovery of about 5.2% in 2021. The rolling out of vaccines provides hope, but normal international travel will not resume anytime soon. This will keep our tourism industry in the Doldrums for all of 2021.
The industry in 2022 will look significantly different. Hotels and other infrastructure will not just spring back into action. Many will need cash for maintenance and repairs. Their key staff will have moved on to other things.
Many of the smaller services businesses – which provide transport, tours and information to tourists and which support big industry players – may be bankrupt, their assets repossessed and unable to restart.
In December’s Budget response I pointed out that the Government’s so-called “Tourism Response Team” had not met since August. The name of the team tells us its job - to respond. But while industry players wait, Government will not even pick up the phone!
The Government has no money to offer. But it can still offer leadership and co-ordination to battered industry players. It can still listen to their ideas. Most importantly it can help plan for the future with policies the industry needs. Instead – nothing.
Tropical Cyclone Yasa has caused additional pain to our people. It will add to our economic woes.
Ironically, for the Government, this is a welcome distraction. It is a chance for Ministers to look busy and involved and to spend other countries’ aid money. But now the cyclone response is under control, the Government should return to what they are supposed to be doing – leading us out of the Covid crisis.
So far, the Government’s economic strategy has been to roll out some meaningless incentives. Abolishing stamp duty - was that the best that it could do? Reducing taxes on alcohol at a time when we need the revenue – why would we do this to “support tourism” when we have no tourists?
We need to quickly adopt some meaningful policies, plan properly and explain to our fellow citizens what we are doing and why.
Millions of dollars in public spending continues as though nothing has happened. For example, on Suva’s Queen Elizabeth Drive a major road and bridge project continues to burn up money.
It will look nice when it’s finished – but vanity projects in Suva are not where we should be spending money right now. This is a time when people in Nadi cannot even put food on the table.
We need to tighten our financial belts, cut out wasteful expenditure and direct our meagre financial resources to key priority sectors such as health, education, agriculture and supporting incomes of the poor and those who have lost jobs.
The man on whom the Government seems to be relying for economic wisdom is Mr Aiyaz Sayed-Khaiyum. He appears to have graduated from being a mere Finance Minister to the more grandly-titled “Minister for Economy”. If that is so, he should be true to his job description and lead it.
His two budgets since the Covid-19 crisis have shown no leadership and no plan. What he will not tell us now is that years of reckless spending have left the Government with no money when the people really need it.
He told us during his “Covid-19 response budget” that the Government had responded with one billion dollars of economic stimulus.
But that money did not come from the Government. It came from releasing people’s own FNPF savings back to them and from banks suspending interest payments on their loans (beware, the interest is still building up).
FNPF contributions for employers were reduced from 10% of wages to 5%. But who was the biggest beneficiary of this? Fiji’s biggest employer of course – the Government!
So not only are workers pulling out their own savings to survive (with 60,000 now at zero in their accounts). They are getting less to build up for their future retirement.
This will have long-term consequences for the balances they will have at their retirement age.
Hoping and praying
The Government thinks it will spend $3.6 billion in the year ending July 2021. Of that, $1 billion is for debt repayments and $1 billion for civil service salaries. We all know FRCS is struggling to collect the budgeted revenue. We all knew that it would.
So, it is very clear that government is just hoping and praying that something good will come along – more borrowing, more grants and budget support from our donors and international lenders.
But the world, including friendly governments, has less money to lend. Fiji’s debt levels are already too high. Even the Government’s favourite cash cow – FNPF – no longer has the capacity to responsibly lend to the Government.
Amazingly, the Government and its Ministers just pretend nothing is wrong. They wander around opening workshops and giving speeches and lecturing people. Their assistant ministers lurk at weddings and funerals drinking grog while their Government drivers patiently wait (usually with the engine running to keep the air-conditioning going).
When will the Government show some leadership, face the facts and tell us its long-term plan? And if it does not have a plan, when will it ask our citizens for help?
The Government may have no money but at least it should try to create trust, confidence – and leadership.
Trust in government is an important ingredient in building confidence in the economy, our investors and people generally.
And to build trust, the Government must show humility and an openness to new ideas. It must stop pretending that it has all the ideas and everything is under control.
A time to listen
For years we have been calling for the return of economic summits – a place and space where all of us can review Fiji’s economic performance and debate and agree on new economic directions. We need the fresh ideas of business, the professions, civil society, social and economic experts and those who represent the poor.
We need these summits even in normal times. But at a time of crisis we need this mechanism even more.
A Government meeting does not mean an expensive excuse to meet in a fancy hotel. In the old days economic summits were held in the National Gymnasium.
The Fiji First government needs to come out clearly about its financial position. It must tell the people of Fiji its ability to meet its budget commitments in the current financial year.
Then it must listen. It must listen to its political opponents. It must listen to people in tourism, agriculture, the services sector, the welfare organisations, the NGOs.
From this we must prepare – and try to agree on - a long-term economic recovery plan, overseen by a group of people from both inside and outside the Government.
Achieving economic consensus begins to build confidence – not just amongst our beleaguered people but also from donors and lenders.
If they see that we are all agreed on a specific path, with a specific economic plan, they will have more confidence to support us. They will be able to see where Fiji is going.
They will also be able to offer us guidance – and again, we in Fiji – and especially those in Government - must listen.
This is a Government that talks a lot about transparency and accountability. Transparency requires it first to give us the real facts about the state of our economy. Accountability is about listening and responding to those we are supposed to serve, those who participate in our economy – the people.