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IMF/ Government of Samoa IMF/ Government of Samoa
Pacific Island ConferencePacific Island Conference
PURSUIT OF BROAD BASED PURSUIT OF BROAD BASED GROWTH IN FIJIGROWTH IN FIJIGROWTH IN FIJIGROWTH IN FIJI
23 March, 201223 March, 2012
OUTLINEOUTLINEOUTLINEOUTLINE
• Medium Term Macroeconomic Targets
• Economic Performance
• Sectoral Performance
• Driving Investment & Growth
• Policies To Drive Investment & Growth
• Social Protection Initiatives
• Lessons Learnt
• Conclusion
MEDIUM TERM MEDIUM TERM
MACROECONOMIC TARGETSMACROECONOMIC TARGETS
MEDIUM TERM MEDIUM TERM
MACROECONOMIC TARGETSMACROECONOMIC TARGETSMACROECONOMIC TARGETSMACROECONOMIC TARGETSMACROECONOMIC TARGETSMACROECONOMIC TARGETS
MEDIUM TERM TARGETSMEDIUM TERM TARGETS
Macroeconomic
Indicators Targets
Economic GrowthAchieve growth of around 5.0 percent in the medium
term
Inflation Maintain at around 3.0 percent on average
Foreign Reserves Maintain at 4-5 months of import cover
Government Deficit To be below 2.0 percent of GDP
Government Debt Reduce debt as a share of GDP to a sustainable level
Investment Raise investment as a percent of GDP to 25.0 percent
Ministry of Finance 2011& 2012
MEDIUM TERM STRATEGYMEDIUM TERM STRATEGY
2012 2012 -- 20142014
• Need to address fundamental challenges :
o Raising growth and investment;
o Fast-tracking structural reforms;
o Prudent financial management by government;o Prudent financial management by government;
o Ensuring debt sustainability
(including contingent liabilities);
o Facilitating inclusive development; and
o Safeguarding against economic shocks.
ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE ECONOMIC PERFORMANCE
GDP GROWTHGDP GROWTH
8
10
12
14
Actuals Average 5 Years Average 2000s
Average 1970s Average 1980s Average 1990s
Percentage
Average 2000s = 0.8%
Average 1970s = 5.5%Average 1980s = 1.9%
Average 1990s = 3.0%
Volatile & Low Economic PerformanceVolatile & Low Economic Performance
-0.2
2.12.3
-8
-6
-4
-2
0
2
4
6
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009(r) 2012(f)
Average 2000s = 0.8%
Average 5 Years = 0.1%
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
EVOLUTION EVOLUTION OF THE OF THE FIJI ECONOMY FIJI ECONOMY 1970s1970s--1980s Post Colonial Era1980s Post Colonial Era
14.0
0.8 1.3
3.1
30.8
Agri Frsty Fish Min & QryManuf Other indus WRT HotelsTrans Comm Other Serv
Major Economic Sectors
• Sugar – backbone
Ministry of Finance
14.0 3.1
13.7
8.1
13.0 2.88.7
3.7
• Sugar – backbone
• Tourism
• Rice
• Cocoa
• Dairy
• Construction Industry
EVOLUTION EVOLUTION OF THE OF THE FIJI ECONOMY FIJI ECONOMY
1990s1990s
Economic Sectors
• Tourism
• Sugar
• Mining
12.0
1.1
2.7 1.4
15.729.4
Agri Frsty Fish Min & Qry
Manuf Other indus WRT Hotels
Trans Comm Other Serv
Ministry of Finance
• Mining
• Mineral Water
• Fish
• Forestry
New
industries
15.7
8.0
11.64.69.7
3.8
EVOLUTION EVOLUTION OF THE OF THE FIJI ECONOMY FIJI ECONOMY
2000s2000s
Economic Sectors
• Tourism - Rapid Expansion
• Sugar - Reduction in preferential prices
and low production
• Fishing10.4
0.92.6
-0.1
36.1
Agri Frsty Fish Min & QryManuf Other indus WRT HotelsTrans Comm Other Serv
Ministry of Finance
• Fishing
• Forestry
• Mining
• Clothing and Textiles
• Manufacturing (Flour, beer,
• cigarettes, cement, soap)
• Mineral Water
• Audio Visual & ICT
• SME development
New
industries
10.414.2
4.112.4
4.4
8.6
6.5
36.1
3129
3635
25
35
451989 Base (1997) 1995 Base(2002) 2005 Base (2007) 2005 Base (2012)
Percentage
Primary Industry Services
SHARE OF GDPSHARE OF GDP
14
1 1
3
14
8
13
3
9
4
12
1
31
16
8
12
5
10
4
10
1
3
0
14
4
12
4
9
7
9
13
1
15
4
11
6
9
6
-5
5
15
25
Agri Frsty Fish Min & Qry
Manuf Other indus
WRT Hotels Trans Comm Other Serv
Source: Fiji Bureau of Statistics
1.02
0.490.57
0.73
0.570.6
0.8
1.0
1.2 2011 2012
Percentage
+2.1% (2011) +2.3% (2012)
Primary Industry Services
SOURCES OF GROWTH IN 2011 & 2012SOURCES OF GROWTH IN 2011 & 2012
0.05
-0.07 -0.08
0.21
-0.07
0.02
0.23 0.28
0.00
0.490.57
0.18 0.12 0.11 0.12
-0.02
0.140.26
-0.45
0.57
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
Agri Frsty Fish Min & Qry
Manuf Other indus
WRT Hotels Trans Comm Other Serv
Source: Fiji Bureau of Statistics
SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE
703675
500
600
700
800Forecast as @ Nov 2011
Annual
980
1,050
1,093
800
1,000
1,200
Forecasts as @ Nov 2011
Annual
‘000s
TOURISMTOURISM
$M
Arrivals & Earnings are at record levels
Arrivals Earnings
0
100
200
300
400
500
2003 2005 2007 2009 2011(e)
0
200
400
600
800
2002 2004 2006 2008 2010 2012(f)
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
517
350
400
450
500
550
Annual
Forecast as @ Nov 2011
‘000 tonnes
SUGARSUGAR
302
250
300
350Annual
Forecasts as @ Nov 2011
$million
Production & earnings expected to increase
Production Earnings
132
167
189
0
50
100
150
200
250
300
350
1994 2005 2007 2009 2011
Sources: Fiji Sugar Corporation Limited and Macroeconomic Committee
70
139
166
0
50
100
150
200
1996 2005 2007 2009 2011(p)
30
25
30
35
Cum to Sept
Annual
Forecast as @ Nov 2011
‘000 tonnes $M
209
150152
200
250
Annual
Forecasts as @ Nov 2011
FISHFISHMarginal growth expected in production & earnings
Production Earnings
1313
14
0
5
10
15
20
2003 2005 2007 2009 2011(e)
Source: Fiji Bureau of Statistics
%
150
0
50
100
150
2003 2005 2007 2009 2011 (e)
$M
150
120
160
Forecast as @ Nov
Annual
‘000 ounces
GOLDGOLD
Higher production & earnings forecast
Production Earnings
148 142
181
150
200Annual
Forecasts as @ November 2011
Sources: Vatukoula Gold Mines Limited and Macroeconomic Committee
63
50
0
40
80
1997 2004 2006 2008 2010 2012(f)
0
50
100
150
2002 2004 2006 2008 2010 2012(f)
85 86
100
80
100
120
Annual
Forecasts as @ November 2011602
704
600
700
800
Annual
Forecast as at Nov 2011
000 m3$MProduction Exports
TIMBERTIMBERProduction & earnings expected to increase
37
0
20
40
60
80
2002 2004 2006 2008 2010 2012(f)0
100
200
300
400
500
1995 2003 2005 2007 2009(e) 2011(e)
Source: Fiji Bureau of Statistics and Macroeconomic Committee
322
280
350
Annual
Forecasts as @ Nov 2011
90
140
160
180
200
Annual
Forecast as @ Nov 2011
Cum to Jun
GARMENTGARMENT
$M$M
Positive outlook for production & earnings
Production Earnings
9689 92
0
70
140
210
2000 2003 2005 2007 2009 2011(e)
61
0
20
40
60
80
100
120
2002 2004 2006 2008 2010 2012(f)
Source: Fiji Bureau of Statistics
62
87
105110
80
119 122 124 127 129
80
100
120
140
Annual Forecasts as @ November 2011$M
MINERAL WATER EXPORTSMINERAL WATER EXPORTS
1.8%1.8%2.5%1.8%
29
4652
68
0
20
40
60
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(p) 2012(f) 2013(f) 2014(f)
Sources: Fiji Bureau of Statistics and Macroeconomic Policy Committee
5%
213
232
297311
322
256
294 295 290 299 299 299300
400
Annual Forecasts as @ Nov 2011
$M
PERSONAL REMITTANCESPERSONAL REMITTANCES
-1.7
Stable foreign exchange earner
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
188
0
100
200
2002 2004 2006 2008 2010 2012(f) 2014(f)
0
10
20
% of GDP
Services & Income Net
Improved trade deficit & service inflows to lower deficit in 2012Improved trade deficit & service inflows to lower deficit in 2012
CURRENT ACCOUNT BALANCECURRENT ACCOUNT BALANCE
-40
-30
-20
-10
0
2005(r) 2007(r) 2009(r) 2011(f)
Current Account DeficitTrade Deficit
Source: Fiji Bureau of Statistics and Macroeconomic Committee
DRIVING INVESTMENT & DRIVING INVESTMENT &
GROWTHGROWTH
DRIVING INVESTMENT & DRIVING INVESTMENT &
GROWTHGROWTHGROWTHGROWTHGROWTHGROWTH
TOTAL INVESTMENTTOTAL INVESTMENT
• Investment target of 25.0 percent
of GDP
• Investment Gap of $750 million
needed
• Significant reduction in private
investment to 4.0 percent from 15.0
percent in 1980. 20
25
30
35
$750m
Government Target: 25%
percent in 1980.
• Consequently, Government has had
to increase its capital spending
• Increase in Government investment
to an 8.0 percent in 2011 from 5.0
percent in 1980.
• Need to increase private sector
participation in the economy – as
engine of growth. 0
5
10
15
1977 1987 1997 2007(e)
POLICIES TO DRIVE INVESTMENT POLICIES TO DRIVE INVESTMENT
AND GROWTHAND GROWTH
POLICIES TO DRIVE INVESTMENT POLICIES TO DRIVE INVESTMENT
AND GROWTHAND GROWTHAND GROWTHAND GROWTHAND GROWTHAND GROWTH
NEED TO DRIVE INVESTMENT AND BROAD-
BASED GROWTH IN THE MEDIUM TERM BY:
• Fostering Sustainable Economic Growth &
Investments
FISCAL STRATEGY FISCAL STRATEGY 2-Pronged Approach
Investments
• Achieving Fiscal Sustainability
Ministry of Finance
FISCAL POLICIESFISCAL POLICIES
The Government Aspires To Empower Fijians, Modernize
The Nation And Strengthen The Economy By:
• Lowering Corporate And Personal Taxes
• Investing In Fiji’s Infrastructure
• Improving Personal Wellness
• Supporting Fiji’s Businesses
• Investing In Outer Island And Rural Areas
• Maintaining Food, Housing And Education Programmes To
Support The Less Fortunate
Ministry of Finance
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT & BROAD BASED GROWTHBROAD BASED GROWTH
GENERAL INVESTMENT POLICIES
• Tax rate reduction
• Investment allowances
• Export income deduction
• Removal of local equity requirement for Stock • Removal of local equity requirement for Stock
Exchange
TOURISM
• 2009 Hotel Incentive Package
• New Short Life Investment Package
Ministry of Finance
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT & BROAD BASED GROWTHBROAD BASED GROWTH
AUDIO VISUAL INCENTIVES
• Income Tax Deduction
AGRICULTURE, FORESTRY & FISHERIES
Ministry of Finance
INCENTIVES
• Income Tax exemption
• Fiscal Duty reduction
• Duty free concession
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT &
BROAD BASED GROWTHBROAD BASED GROWTH
OTHER INITIATIVES
• Bilateral Quarantine Agreement (BQA)
negotiations and increase engagements with
multilateral trade agencies
Set up National Crop & Livestock Council and the • Set up National Crop & Livestock Council and the
National Research Council
• Disaster Management
• Research
• Fast-track the National Fisheries Policy
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT &
BROAD BASED GROWTHBROAD BASED GROWTH
MANUFACTURING; WHOLESLAE & RETAIL AND
TRANSPORT SECTORS
• Reduction in fiscal duties
OTHER INITIATIVESOTHER INITIATIVES
• Extension of the South Pacific Regional Trade and
Economic Co-operation Agreement (SPARTECA)
Textile Clothing and Footwear (TCF) Scheme to 2014
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT & BROAD BASED GROWTHBROAD BASED GROWTH
MINING
• Formulate a “Mining Incentives Package”
SMALL AND MICRO ENTERPRISES (SME’S)
• Income tax exemption - maximum turnover threshold
of $300,000of $300,000
• Introduction of SME Credit Guarantee Scheme
TAX FREE REGIONS
• Tax Exemption
• Extension of the Tax Free Region (TFR)
Ministry of Finance
MONETARY & OTHER RBF INITIATIVES
• Accommodative monetary policy
• Easing of certain exchange controls
• Import Substitution & Export Finance Facility
POLICIES TO SUPPORT INVESTMENT & POLICIES TO SUPPORT INVESTMENT & BROAD BASED GROWTHBROAD BASED GROWTH
• Import Substitution & Export Finance Facility
• Flood Rehabilitation Facility
• Local Borrowing Requirements
• Fiji “My Second Home” Scheme
• Financial Inclusion & microfinance initiatives
SOCIAL PROTECTION SOCIAL PROTECTION
INITIATIVESINITIATIVES
SOCIAL PROTECTION SOCIAL PROTECTION
INITIATIVESINITIATIVESINITIATIVESINITIATIVESINITIATIVESINITIATIVES
SOCIAL PROTECTION INITIATIVES SOCIAL PROTECTION INITIATIVES INVESTING IN PEOPLEINVESTING IN PEOPLE
EDUCATION
• Fee-Free Education’ for classes 1-8
• Free text books for Government-funded schools
• Upgrading of school infrastructure and equipment• Upgrading of school infrastructure and equipment
• Bus Fare Subsidy Programme
SOCIAL PROTECTION INITIATIVES SOCIAL PROTECTION INITIATIVES INVESTING IN PEOPLEINVESTING IN PEOPLE
POVERTY ALLEVIATION & SOCIAL PROTECTION
• Family Assistance Allowance (FAS)
� Allowance of $60-$100 per month is given to destitute families
� Includes elderly (65 years and over), permanently disabled and
chronically ill persons.
� In 2012, 24,000 recipients are expected to benefit from scheme
• Food Voucher Programme
� For elderly (over 70 years and not receiving any form of
government assistance), pregnant mothers who attend rural
health clinics and families with children who attend schools in
remote rural areas.
� Government commitment of $12.6 million for scheme in 2012.
SOCIAL PROTECTION INITIATIVESSOCIAL PROTECTION INITIATIVESINVESTING IN PEOPLEINVESTING IN PEOPLE
POVERTY ALLEVIATION & SOCIAL PROTECTION
• Sustainable Rural Housing Income Generation Project
Facilitate resettlement of squatter dwellers and engages them in income
generating agricultural activities.
• Concessionary Bus Fare for Senior Citizens and Disabled Persons Senior
citizens and disabled persons granted bus fare concession from January 2011.
• Welfare Graduation Programme
� Engage the poor in income-generating activities through the provision of
start-up capital.
� Citizens assessed on income levels and include recipients of the Family
Assistance Scheme and the Care & Protection Allowance programme.
� Program extended to ex-prisoners, youths and families of fire victims.
(Move away from a direct ‘handout’ approach to one that empowers
individuals to become self-sufficient)
SOCIAL PROTECTION INITIATIVES SOCIAL PROTECTION INITIATIVES INVESTING IN PEOPLEINVESTING IN PEOPLE
POVERTY ALLEVIATION & SOCIAL PROTECTION
• Care and Protection Allowance
Monthly cash grants by Government to assist families and guardians in
support to orphans and abandoned children for provision of essential needs.
• Electricity Subsidy • Electricity Subsidy
With rising energy costs, the Fiji Government continues to subsidise
electricity for residential customers using less than 75 kWh and schools using
up to 200 kWh per month.
• National Housing Policy (NHP) and Housing Assistance
The NHP aims to provide equitable access to affordable and quality housing to
all citizens. In addition, a sum of $10 million has been provided for first home
buyers in the proposed Waila City project.
LESSONS LEARNTLESSONS LEARNTLESSONS LEARNTLESSONS LEARNTLESSONS LEARNTLESSONS LEARNTLESSONS LEARNTLESSONS LEARNT
• Higher private sector investment is needed for a healthier
economy - government intervention cannot be sustained
in the long-run
• Infrastructure development is key
• Appropriate fiscal, monetary and exchange rate policies
LESSONS LEARNTLESSONS LEARNT
• Appropriate fiscal, monetary and exchange rate policies
• Responsive exchange control policies
• Need public & private sector partnerships
• Maintain momentum of structural reforms
• Diversify trade outside traditional trading boundaries
• Support of multilateral and development partners
CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSIONCONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION
CONCLUSIONCONCLUSION
• The government is creating an enabling
environment for investment and broad-based
growth
• Election is scheduled to be held in 2014. Lead up
process to this has started. This should provide process to this has started. This should provide
much needed stability and boost investor
confidence
• Fiscal and monetary policies are accommodative
and appropriate
• With active engagement by all stakeholders, Fiji
will meet its medium-term targets
THANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOU
Reserve Bank of Fiji
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