imf/ government of samoa pacific island conference · average 1970s = 5.5% average 1980s = 1.9%...

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%


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 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


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


Manuf Other indus

WRT Hotels Trans Comm Other Serv


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)


517

350

400

450

500

550

Annual

Forecast as @ Nov 2011

‘000 tonnes

SUGARSUGAR

302

250

300

350Annual


$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


‘000 tonnes $M

209

150152

200

250

Annual


FISHFISHMarginal growth expected in production & earnings

Production Earnings

1313

14

0

5

10

15

20

2003 2005 2007 2009 2011(e)


%

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


90

140

160

180

200

Annual


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)


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


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


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


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


• 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


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


• 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)



• 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

imf/ government of samoa pacific island conference · average 1970s = 5.5% average 1980s = 1.9%...

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