Repor No. 11351-EA

Pacific Island Economies:Toward Efficient and Sustainable Growth(in Nine Volumes) Volume 2: Fiji - Country Economic Memorandum

March 8, 1993

Country Department IIIEast Asia dnd Pacific Region

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FIJICURWNCY EQIVALENTS

AINUAL AVIxGes

1986 F$1.00 = US$0.881987 F$1.00 = US$0.821988 F$1.00 = US$0.701989 F$1.00 = US$0.671990 F$1.00 = US$0.681991 F$1.00 = US$0.68

FISCAL YEARJamnuay 1 - December 31

ACRONYMS AND ABIRWIATONSAPEC - Asia Pacific Economic CooperationCED - Customs and Excise DeatmentDOE - Department of EnvironmentEEC - European Economic ConmunityEIB - European Investment BankFEA - Fiji Electricity AuthorityFDB - Fiji Development BankFINAPECO - Fiji National Petroleum CompanyFiT - Fiji Institute of TechmologyFNPF - Fiji National Provident FundFL - Fiji Posts and Telecommunications Ltd.FSC F Fiji Sugar CorporationFSIC - Fiji Standard Industris1 ClassificationFTB - Fiji Trade and Investnent BoardGATT - General Agreement on Tariffs and TradeGSP - Generalized System of PreferencesIRD - Inland Revemne DepartmeMFA - Multi Fibre AgreenMOFEP - Ministry of Finance and Economic PlaningNGO - Non-Govennent OrgnizationNLTB - Native Land Trust BoardP&T - Posts and Telecommunications DqearntPAF - Port Authority of FijiPAFCO - Pacific Fisheries CorporationPECC - Pacific Economic Cooperation ConferenceRBF - Reseve Bank of FijiTFF - Tax Free Factory/Tax Free Zone

COUNTRY DATA

Land Area: 18,272 sq. km. Sea Area: 1,146,000 sq. km.Population: 744,000 (1991) GNP per capita: US$1,830 (1991)Capital City: Suva Population of Capital: 170,000

CONTENTS

Page No.

Executive Sunmnary ................................... iii

I Economic Developments and Prospects ................... 1

A. Introduction ..................................... 1B. Growth and Its Composition ........................... 1C. Fiscal Performance ................................ 2D. External Accounts ................................. 4E. Prices and Wages ................................. 5F. Monetary Policy .................................. 5G. Medium-Term Prospects ............................. 6H. External Financing Issues ............................ 8

2 Macroeconomic Poly and Public Sector Reform .... ........ 13

A. Macro-Policy To Support Growth ....................... 13B. Public Sector Management ........................... 14C. Public Sector investment Planning ....................... 19

3 Pvate Sector Development and Sectoral Potenal .... ....... 23

A. Promoting Private Sector Development .................... 23B. Sectoral Growth Potential ............................ 30

4 Human Resource Development ......................... 37

A. Labor Force Development ............................ 37B. Issues in Education Service Delivery ..................... 38C. Issues in Health Service Delivery ....................... 40

This report was prepared by a World Bank mission which visited Fiji in August 1992. The mission memberswere Steven Tabor (Chief of Mission), Hjordis Bierman (consultant), Peter Osei, Peter Johnston (consultant),and Ian Morris (consultant). Farrukh Iqbal assisted in the finalization of the report. A draft of the report wasdiscussed with Gu. .nment officials in February 1993.

Volum 2:PFi

5 Growth and the En oment ........................h. 43

A. Itroduction .............................. ,,,, 43B. Resource Management Challenges ....................... 43C. EnviromnenWal Planning and Institutional Development .......... 44

Stadsdeal Appendix ................................... 47

Map

TABLES IIV TExT

1.1 Growth Performance, 1982-92. 21.2 Summary of Central Govermnent Operations, 1981-92 31.3 Balance of Payments, 1981-92 .... 41.4 Exchange Rates and Relative Prices, 1981-92 51.5 Monetary and Price Developments, 1986-9?. 61.6 Macroeconomic Projections, 1992-2001 ....... ............ 81.7 Extenal Financing Requirements and Sources, 1987-2001 10

2.1 Public Sector Employment, 1992 .1S2.2 Parastatal Sector Profit, Budget Subsidy and Enployment 16

3.1 Effective Rates of Protection in Manufacturing, 1991 .24

4.1 Social Indicators, 1980-91 .38

FIGURES IN TExT

1.1 Fi External Assistance. 9

Voluw 2: F i

FIJI

Exective Sumiawy

IhnbdfOcn macroeconomic drag given the importance of sugarto output, employmen:, and export growth in the

i. Fiji consists of about 300 islands country. It will also push to center stage such keycovering more tan 18,000 square kilometers in the strucual issues as how to diversify away fromSouth Pacific. Its population and economic activity sugarcane in agriculture and expand the mai-are concentae on two large islands, Vitu Levu facturng and service base of the economy.and Vamia Levu. Economic activity in Fiji re-volves around sugar, touism, and the manu- iv. Given the above, it is all the morefactring of garments. With a population of important that a development strategy be followedapproximately three quarters of a million and a that emphasizes effciency in the use of public andGNP per capita of US$1,830 for 1991, Fiji com- private resources, that encourages diversification inPares well with other island countries in terms of the production of goods and serwces, and that pro-income and size. The nation is 1,500 km from its vides a supporive macroeconomic and investmentclosest ma3or markets and suffers from a moderate frameworkfor economic growth. Much is at stake.degree of etnic tension. Elections were held in Fiji has already experienced a decade of stagnationMay 1992 and the new Government took office in in the growth of living standards. The policy pathJune 1992. now taken could well spell the difference between

a decade of relative prosperity and another decadeii. Fiji faces a difficult decade. On the of stagnation.dom -tic front, it is emerging from a five yearperiod of intermittent trmnoil which, by leading to v. The elements of a promismg strategya substantial emigration of skilled manpower, has can be derived in part from the experience of thedamaged its human resource base. While the Go- reform program followed in the wake of the crisisvernment has recently forged a consensus around a of confidence provoked by the political turmoil ofnew constitution and held elections, private business 1987. This program focused on restoring stabilityconfidence has not yet been restored. Furthermore, through pragmatic management of fiscal, monetary,although the new Government has indicated its and exchange rate policy. It also aimed at revivingintention to continue along an outward-looking and growth, diversifying the production base, and creat-market-oriented policy path, it faces resistance from ing new sources of employment and foreign ex-groups that perceive a loss of welfare therefrom, change earnings through a reform of the privateresistance that might yet force policy reversals in sector business evironment and a rationalization ofkey areas. public sector activity. Given Fiji's special needs,

its development strategy must also attempt to copeiii. On the external front, the prospects for with the recent erosion of its human resource basesugar remain troubled; Fiji is a high cost producer, in a manner that meets both present and future con-and prefere pricing arrangements in the prin- cerns. Finally, while environmental developmentscipal export markets are likely to be phased out have not yet inposed tight constaints on economicover the decade. Exports could also be affected if acdvity in Fiji, policy makers must be sensitive tolabor problems continue or new problems arise with the potential for this to happen and, therefore,respect to the renewal of land leases for sugarcane attempt to integrate environmental concerns withgrowers. All this will exercise a considerable economic growth concerns in the fitore.

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Accordigly, this summary is organized in five stengthened so that all expenditures are carefullysections consistent with the objective of achieving scrutinized and approved in the budgetary processsustained growth through maintaining macro- prior to commitments being made at the politicaleconomic stability, rationalizing public sector level. The practice of supplementary appropria-activity, improving the climate for private tions should be restricted to emergencies. Toenteprise, developing -human resources, and facilitate fiscal planning and expenditure control,managing the environment. public sector wage increases should be negotiated in

the context of budget preparation, when expenditureAchiving Growh with Stay priorities are determined. Thus, wage settlements

should be forward looking, rather than the nowvi. The successful record of the last decade customary retroactive increases which necessitatesuggests that Fiji 1as been more successful at supplementary budgets.achieving macroeconomic stability than at achievingsustined growth. There has been steady progress ix. The growth objective can be simul-in reducing imbalanc-s in the extemal and fiscal taneously pursued without jeopardizing fiscalaccounts. For example, the current account deficit stability by: (a) increasing the share of publicwas brought down from around 14 percent of GDP inv!estment relative to public consumption; (b)in 1981 to virhtal balance in 1988-89; after some privatizing selected public enterprises to generatedeterioration in 1990 and 1991, it swung into revenues and enlarge the scope for private in -^st-suplus in 1992. Similarly, the budget deficit was ment; and (c) implementing tax reforms in abrought down from a high of around 6.5 percent in manner Omat generates higher revenues and that1982 to virala balance in 1990; it then worsened promotes investment rather than consumpton.considerably in 1991 and 1992. Not surprisingly, Relevant measures are discussed in a later sectioninflation has tended to be moderate; with the on rationalizing public sector activity.exception of the crisis years of 1987-88, it has notstayed far above the 7 percent level in the last ten x. Exchange Rate Management. Ex-years. While there have been signs in recent years change rate policy has, on the whole, been(i.e. 1991-92) of an erosion in fiscal discipline, the consistent w. X maintaining macroeconomicdeficit has not yet gottn out of control. stability. Fiji may benefit from strci. ng

competitiveness as an objective in exchange ratevii. This successful record in reducing management since it needs to diversify its pro-external and fiscal deficits and keeping inflaton at duction and export base Keeping i mind thea moderate level has not been matched by an declining fortunes of such items as sugar and copraequally successful record in maintning high or and the relative competitiveness of more recentstable growth. In the 1980s, growth fluctuated export product and services. The sharp devalua-widely around a low trend level. Indeed, the per tions of 1987, while provoked by the political crisescapita income of Fiji in 1991 was virnualy the same during that year, helped greatly in launching non-as it had been ten years earlier, in 1981. The traditional exports such as textiles and garments involatility of the growth rate reflects the relatively subsequent years. Furthermore, the prospects ofnarrow base of Fiji's economy: dependence on a getting a lasting effect on competitiveness throughfew primary commodities and on tourism has ren- exchange rate adjustment have been improved signi-dered economic fortunes hostage to the vagaries of ficantly by the removal of wage indexation in 1989weather and the terms of trade. The low trend rate and the adoption of a market-oriented approach toof growth, on the other hand, reflects a failure to wage bargaining in 1991.stimulate pri,:ate investment and make publicinvestment more efficient. Given the anemic per- xi. Long Ran Growth. As aready indi-formance of the past and the needs and constraints cated, a concern for maintaining macro-economicof the future, the focus of macroeconomic manage- stability should not obscure the deeper, morement should be widened to accommodate a concern fundamental, problem of achieving growth. Thewith growth as weli as with stability. dominant long-run objective of development policy

in Fii should be to break out of the stagnation thatviii. Fiscal Management. There is some has characterized GDP growth in the last decade.concern at present that budget deficit targets are at Without such a guiding focus, macroeconomic andrisk owing to a relaxation of the normal checks and sector policy is likely to drift and meander inbalances which have governed fiscal processes in response to short-run developments and to have nothe past. This risk should be eliminated by re- cumulative uplifting effect on standards of living.assertig firm control over both expenditure and Macroeconomic stability is necessary but notrevenue processes. Expenditure controls should be sufficient for sustained growth. International

Voea 2: Po iv

experience as well as Fiji's own record over the significant subsidies direcdy from the budget aspast decade shows that growth depends on both the well as indirectv through concessional loans fromquantity and quality of investment. Accordingly, public sector insitutions. Privatizadon would helpbreaking out of the growth doldrums will require a the revenue position of tle Govermment not only bysustained effort to increase public investment and bringing in additional cash but also by stemmingmake it more efficient as well as to improve further the drain implied by such losses and subsidies. Inthe climate for private investment. this regard, it may be worthwhile rethinking

existing policy, which calls for the development ofRatonalWg Public Sector Activity a comprehensive corporatization framework to

precede eventual priv&ization. Internationalxii. Supportive Public Investment. experience as well as Fiji's own recent recordSubstantial growth impetus can come from a well- (e.g., with Fiji Electricity Authority and the Postdesigned public investment program. Such a and Telecommunication Department) suggests thatprogram would boost growth not only through a the corporatization approach rarely produces thedirect effect on aggregate demand but also through intended results. The key weaknesses of cerinan indirect complementary effect on private public enterprises, namely weak management, over-investment. For this to happen, the public staffmg, and pursuit of non-commercial objectives,investment program will first have to be increased can rarely be overcome without a true change inin size; the present level of the program (4.0 ownership. Emphasis should, therefore, now bepercent of GDP) is too low to take Fiji on to a placed on establishing transparent procedures forhigher growth trajectory. Second, the public divestture. In partnership with foreign investment,investment program will have to be reoriented Fiji's private sector can absorb such divestiture: thetowards the provision of more and better infra- fnancial technology and resources exist and so doesstructure. A start can be made in this direction by: investor interest.(a) restoring the Fiji Electricity Authority to a stateof fmancial soundness, (b) rehabilitating the Improving the Environment for Private Enterprisenation's roadways, and (c) addressing humancapital development issues. Donors can help by xv. Private iirestment remained low (ave-orienting their assistance accordingly. Increasing raging 8 percent of GDP) throughout the 1980s.an upgrading infrastructure need not imply an This was due to a number of causes such as: (a) theincrease in total government expenditures; revenues exhaustion of import substitution opportunites infor additional public investment can come from the small domestic market; (b) the existence ofseveral sources including a shift away from current stifling government controls and regulations onexpendimres, selective divestiture, and greater private enterprise; and (c) the pre-empton ofreliance on cost recovery in the delivery of certain lines of business by the public sector. Theinfrastucture and other public services. adjustmnt program begun in the latter half of the

decade relaxed the constraining effects of regu-xiii. Civil Serice Refor`M. Reducing the lations and intervention, but this was offset by theshare of current expenditures essentially involves a turmoil and uncertainties introduced by the coups ofprocess of civil service reform (via departmental 1987. Thus, despite some deregulation, privateconsolidation, selectve retrenchment, and wage investment did not rise. It is possible, of course,restraint) with a view to reducing the size and cost that it would have declined even further in theof the public sector. While government expendi- absence of the reforms. Boosting private sectortures declined substantally over the 1980s, this confidence and investment will require more thandecline was entirely accounted for by a cutback in political stability; it will require a renewedthe investment program; the ratio of public commitment to deregulatory efforts as well as theconsumption to GDP stayed roughly constant over provision of supportive physical infrastructure andmost of this period and, indeed, rose sharply in human resources.1992. In effect, this meant that a larger number ofcostly administrators were implementing a much xvi. Reducing Costs of Doing Business.smaller investment program by the end of the 1980s Deregulatory efforts have figured prominendy inimplying, in a general sense, a decline in public the economic strategy followed since 1987.sector productivity. Actions were then initiated to reduce the cost of

imported inputs and other goods through tariffxiv. Divesdture. Resources can also be reductions and lifting of quantitative restrictions, toreleased through privatization of selected public reduce the cost of labor by delimking wages fromenterprises which are involved in commercial movements in the cost of living, and to reduce theactivities and make systematic losses and/or receive burden of taxes by rolling back high top marginal

v Voume 2: lw

rates and replacing cascading sales and excise taxes resources, and scenic attractions for tourists. Aswith a value added tax. In addition, foreign elaborated below, this provides opportunitief forinvestment and exports were encouraged with entrepreneurial acdvity, opportutdties which can bemixed success through special fiscal and other nurtured by appropriate public policy and invest-incentives including tax holidays and duty- ment.exemption schemes. Further steps can and shouldbe taken in some of these areas to reduce the costs xx. In agricuture, a diversification awayof doing business in Fiji. In this regard, it would from sugar to high-value fruits and vegetables isbe useful to continue reducing marginal tax rates, already ur4erway and will likely accelerate asrationalizing labor legislation and wage-setttn.v European subsidies recede. Agricultual researchprocedures, and facilitating foreign investment. and extension will oc-d to be reoriented to focus on

this new constellation of commodities, and market-xvii. Government has recently taken appro- ing support-particularly in terms of cold storagepriate initiatives to reform the tax system by facilities and expanded air cargo space-will neediniroducing income tax simplification measures and to be provided. Copra, by comparison, is unlikelya value added tax. If these measures are ener- to regain its previous stature as a leading export;getically promoted and properly implemented, they however, domestic consumption remains high and,should have a positive effect on pnvate investment. as such, continued support for replanting effortsConsideration should also be given to introducing appears warranted.more generous depreciation allowances and losscarry-forward provisions. The potential revenue xxi. Output in the fisheries sector couldloss implied by such measures can be offset by double before Fiji would encounter capacityeliminating such costly but unproductive fiscal constraints. This is a rapidly growing sub-sectorincentives as tax holidays; there is little evidence, and, with expansion in canning ck "y, coldfor example, that the generous tax holidays offered storage, and air freight facilities, should continue toby Fiji in the past two decades attraced much grow during the next decade. In forestry, pastincremental private investment. investments in pine plantations are starting to show

positive returns. To ensure that the pine stock isxviii. Other measures also deserve conside- efficiently utilized, a greater degree of sensitivity toration. For example, it would be useful to establish environmental concerns combined with a moreprocedures for the orderly renewal of expiring land commercial focus at the milling and marketingleases (for sugar areas) based on prospective market stage may be required. The combination of the twoconditions. If timely action is not taken, much argues for passage of a code of practices forland, labor, and enterprise in agriculture could be logging and privatization of Tropik Woods Indus-rendered idle; already rural investment has slack- tries Ltd. Part of the proceeds from the sale of theened on account of uncertainty regarding lease- pine forest should be used to support contnuingrenewal conditions. It would also be useful to take reforestation efforts-Fijirs excellent record in thisfirm action to minimize industrial disputes which area should be maintained.have seriously disrupted economic activity at va-rious times in the past and especiaUy in 1991-92. xxii. Manufacturing has been the most rapid-Among the measures that might help boost investor ly growing, albeit highly volatile, sub-sector in theconfidence here are the provision of exemption post 1988 period. While a slowdown in sugar-from unionization for selected export oriented firms related manufacturing can be anticipated, it is veryand the vigorous implementation of labor laws in difficult to identify which areas of export-orientedthe case of illegal strikes (e.g. as happened with manufacturing are likely to be the future sources ofFiji Telecommunications). Fiji can ill afford dis- growth. However, as Fiji cannot compete on laborruptive labor behavior if it is to build a substantial costs or location with many of the East Asianmanufacturing base and attract foreign investment. producers, such manufactring will most likely

occur in niches; this will require rapid response toxix. Sectoral Growth Potenal. There is a changing tastes and preferences.good chance that the above-described strategy willbe successful in generating a higher rate of trend xxiii. Tourism is Fiji's most important indus-growth. Such optimism rests both on Fiji's rela- try as well as the nation's leading earner of foreigntively favorable resource endowment and growth exchange. During the past three years, visitorpotential in a wide range of sectors and on the de- arrivals have been relatively flat, reflectingmonstrated ability of its entrepreneurs to move fast recessionary conditions in major source markets.when the incentives are appropriate. Fiji is rela- To restore dynamism to this most important sub-tively well endowed with fertile land, mineral sector, Fiji will need to improve cost-compe-

Vo.umw 2: ;pW vi

titiveness, expand provision of mid- to upper-level this growth will be exceptionally rapid or that itaommodations, broaden air links to North will be broadly based across sectors. Some sectorsAmerica, Southeast Asia, and Europe, and develop will grow faster than oters; some may decline.a anore interen and accessible range ofsecondary tourism activides. To support this xxvii. Other Concns. Macroeconomic sta-procs, Goverment could enhance economy-wide bility, public sector reform, and measures tocompetitiveness, aggressively pursue an aviation improve the climrae for private sector businessstraegy aimed at attracting new carriers from activity should suffice to launch Fiji onto a higherdistant markets to Fiji, and impose hefty taxes on growth trajectory. As it travels along this tra-the large tracts of coatal land allocated for tourism jectory, however, it will encounter const:-unts inprojects but still undeveloped. the area of workforce quality and enviromaiental

management. These constraints will become in-xxiv. Mining is dominated by production at creasingly tight and costly if adequate attention isthe gold mine in Vatukoula, As this sub-sector has not paid at an early stage to strategies to relaxbeen racked by labor disputes, investors are them. Since measures to tackle human resourcenoticeably wary of undrtking new investments. deficiencies and environmental constraints areIndications are, however, that future potential for typically long in gestation and impact, it is al theeconomically viable minerals production does exist. more important to foresee and attend to such con-Clarifying the legal famework and ensurig cerns early. With regard to human resources, ofharmonious labor relations at the mines wiUl be course, the problem is already at hand given thenecessary to stimulate future activity. substantial erosion of the skldls base that has taken

place in recent years.xxv. This brief review of sectoral potentialprovides grounds for considerable optimism with Developing Human Resourcesregard to Fiji's possibilities. It is important,however, to temper expecations. First, develop- xxviii. 7he HRman Resource Challenge. Hu-ments m the global economy will continue to man resource development has generally been givenexercise a strong, sometimes decisive, effect on high priority in Fiji. This is reflected both in theFiji's economic growth. Second, while a relatively relatively high share (around 28 percent) of thesmall mnmber of investments can provide a power- budget typically devoted to education (around 20ful boost to growth and employment-as happened percent) and health (around 8 percent) expendituresvia the textile industry in 1987/88-it takes but the and in the dramatic improvements in social indica-withdrawa or deferment of a few investments also tors that have occurred over the years. As theseto produce a sharp and swift decline in economic figures do not include private/church inv-stments,activity in a country of Fiji's scale. It is important, actual expenditures in human resources are eventherefore, to maintain a firm and consistent stance higher. Nevertheless, Fiji faces challenges in thewith respect to economic management. While ex- human resource area which will grow in complexityternal difficulties played a part in the stagnation of and urgency over time. The immediate challenge1991-92, some blame must also be placed on some is posed by the substantial emigration that hasinconsistent signals that char rized domestic occurred among skilled groups in recent years. Inpolicy making in these years, signals that have led the medium run, Fiji will also have to confront theto increasing doubts being entertined with regard problem of providing non-agricultural employmentto Government's interest in boosting private for a rapidly growing labor force which cannot beinvestment. absorbed in agriculture for reasons related to the

poor secular prospects of the principal cash crops.xxvi. Industril Policy. Future industrial These challenges are chiefly relevant to the provi-policy should be guided by two aspects of Fiji's sion of education services; however, the main-economic potential, namely, its niche-based nature tenance of good individual and public health statusand its broad range across sectors. These charac- will zIso be important because of the links toteristics make it highly unlikely that a strategy of individual productivity and the tourism industry,"picking winners" will succeed; instead, Govern- respectively.ment should make functional rather than sector-specific interventions with a view to increasing the xxix. The Sklls Gap Problem. Betweenrapidity of private sector supply response. More- 1987 and 1990, around 16,000 skilled persons leftover, expectations should be realistic. The private Fiji. This amounts to a rather high proportion ofsector will in general be quicker and more efficient the estimated total work force of 250,000 persons.at finding areas of comparative advantage and To place the loss and the challenge in perspective,generating growth, but there is no guarantee that the emigration of professional and technical

vii Volume 2: FIV

workes averaged 550 per annum during 1987-90, spending towards curative services. As demand forwhich is more than twice the number of Fijian curative care services increases, Fiji will need tograduates (250 per year) from the main higher use more market-based means of managing theeducation facility in the country, the University of provision of high-cost care. Furthermore, unlessthe South Pacific. The cau of this emigration the empha;is in health service provision is returnedhave been primarily politcal and, with he im- to primary and preventative care, there is the veryprovement in the political atmosphere in recent real danger that progress in the 'building blocks' ofmonths, there is now some hope that emigration the health care system could be reversed. Awil return to normal levels. In the meantime, combination of measures, including support for ahowever, Fiji has to cope witl. the effects of the commercially viable health insurance system,labor flight that has already occurred. Skills gaps improved cost recovery for tertiary care, increasedhave also arisen for other reasons, of course, such output of nurses and para-doctors, and a gradualas the rapid growth of certain manufacturing refocusing of health spending towards preventionindustries and of tourism. More such shortages are and primary care (with emphasis on AIDSin prospect since these non-agricultural activities prevention and family planning) could contribute towill most likely be the principal sources of Fiji's a r.ore effective and sustaible health care system.future economic growth.

Presering the Environmentxxx. Fillbng te Skills Gap. In the shortrun, Goverment and the private sector have xxxii. Fiji's pristine natural environment hasattempted to cope with the skills gap problem long served to underpin economic activity inthrough in-service training and the hiring of agriculture, fisheries, and tourism. Recently,expatriates. The latter solution is expensive and *ever, environmental strains, in the form ofultimately unsatisfactory. A better approach lies in p0l- ited urban drinking water, inadequate solidenhancing the capacity of the domestic education waste and sewage disposal systems, small-scalesystem to produce the necessary skills among erosion in intensively-farmed agricultural regions,Fijiavs; this is the strategy that must be relied upon and unsafe disposal of industrial wastes have calledin the medium run. The implementation of this into question the very viability of private sector ledsolution must involve: better provision of supplies economic growth. For Government, the challengeand reading materials in primary and secondary is to correct the small number of emergingschools, improved teacher training, improved environmental problems (before damage is tooquality of vocational institutes, and upgraded great) and to provide a legal and regulatoryeducation management. These measures will framework that encourages more ecologicaly soundcontribute to increasing the quantity and quality of paterns of investment and urban settlement. In theeducated Fijians. As quality improves, cost- near-teim, steps should be taken to upgrade urbaneffectiveness will become more important. This sewage and sanitation f. :ilities and enforcecan be enhanced through retaining school fees, penalties for industrial dumping (particularly by theincreasing the use of iralti-grade teaching, raising state-owned enterprises). Failure to do so wouldfees at tertiary institudons, and granting greater have an eventual undesirable effect on the health offinancial and operational autonomy to tertiary and the populace but possibly an immediate adversevocational training institutes. While Government effect on tourism. Steps should also be taken toclearly has an important role to play in boosting the use the agricultural extension service to encouragesupply of skills, it can obtain valuable assistance more resource-friendly means of maintaining soilfrom the private sector. Efforts should be made to fertlity and producing high value cash crops. Thisremove obstacles to the development of private could provide valuable breathing room for the cash-schooling/training institutions and to encourage crop sector to enhance its viability and to diversify.efficiently run existing private schools to maintainand expand services; indeed there may be a good xxxiii. The above measures wIll require somecase for encouraging the same through credit improvements in institutional capacity, to manageschemes and other supportive measures. the environment, improvements that will become

even more nritical in the long run. Whilexxxi. Maitaining Good Health Status. In environmental planning is relatively advanced inhealth care, Fiji's past excellent record is in danger Fiji, implementation capacity lags far behind.because of: (i) steady decline in the relative share Greater emphasis on improving implementationof public spending on health care since 1984; capacity, through an updating and consolidation of(ii) diminishing public spending on supplies and environmental laws, enhancing legal enforcementfacility maintenance vis-a-vis the wage bill; capacity, and regularizing the use of environmental(iii) medical skill shortages; and (iv) a bias in impact assessment procedures for large projects and

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urban aettlenm will be needed. Within Fiji, the managemen. Support of these groups, togethertowurism industry and the customaiy rural elite will with the active involvement of reptable non-be inportn allies in the cause of environmena goverment organizadons, should be encouraged.

ix Volume 2: EI

1: Econonuc Developments and Prospects

A. INrRODUCHIoN B. GROWTH AAD in CoMposmoN

1.1 Fiji consists of about 300 islands covering 1.4 Following robust growth in the sixties and18,272 square kilometrs in the South Pacific, of the early seventies, and a slowdown from the mid-which only one half are permanendy inhabited. Its seventies, the economy performed sluggishly andpopulation and economic activity are coancd unevenly over the decade ending in 1991. Thison two large islands, Vitu Levu and Vanua Levu, pattern was especially pronounced in agriculture butwhich together comprise b7 percent of the total has been more typical than not of industry also.la area. While located centally among neigh- Growth was especiaUy poor in the first half of theboring island countries, Fiji is over 1,500 km from 1980s (see Table 1.1), primarily because of: (a) aits closest major markets, Australia and New Zea- deterioration in Fiji's terms of trade and a reducttonland. With a population of approximately three in tourism, both caused by the oil price increase ofquarters of a million and a GNP per capita of 1979-80; (b) the adverse impact on tourism andUS$1,830 for 1991, it ranks as one of the largest sugar of the cyclones in 1983 and 1985; and (c) anand richest Pacific island economies. exhaustion of possibilities for import-substituting

production. While the economy picked up some-1.2 Fiji remains dependent on the sugar and what in the latter half of the 1980s, the record fortourism sectors, with garment manufacturing the decade was one of stagnation, with per capitaemerging as a significant new industry. It incomes at the end of the decade barely above thosecompares weJl with many other developing at the beginning.countries in terms of a range of social indicatorsreladng to life expeancy, health and education. It 1.5 Foiar sets of interventions characterzedis, however, a multircal society, with considerable public policy in the 1I-M-1986 period. First, thepolitical and economic tension. Control of Government attempted comprehensive five-yeargovernment and land rests largely with native plans, far beyond the broad indicative frameworkFijians, while economic activities tend to be employed in the market-oriented economies of Eastdominated by Indian-origin Fijians descended from Asia. Second, barriers to intrnational commerceindeltured labor brought over a century ago to were intensified, supportig inefficient import-work in the sugar industry. Indigenous Fijians now replacement industries and discrminng againstform 49 percent of the population, while Fijians of exports. Third, prices of key products and factorsndian ethnic origin account for 46 percent. were set through administrative arrangements, and

private sector investment activities were intensely1.3 Recent political developments have revolved regulated. Finally, a large and generaly inefficientaround the constitutional implications and economic public enteprise sector was established asconsequences of the military coups of 1987. An Government sought to control the "commandinginterim civilian govemment was in office through heights" of the economy. One consequence of thismost of the last five years. Elections were held in public sector orientation was a sharp decline inMay 1992 and a new government took office in private investment; this fell from 15 percent ofJune 1992. GDP in 1981 to less than 7 percent in 1989.

1 Vd - 1e: FIJL

Table 1.1: GROWr PERFORMANCE, 1982-92- per aumm)

1982-85 1986 1987 1988 1989 1990 1991 1992(ave.)

GDP -0.4 7.7 -6.6 1.0 11.8 4.9 4.1 4.2Agrictlture -2.5 19.1 -6.6 -2.2 11.5 -3.6 -0.4 4.5

Of which: Sugarcane -7.8 46.6 -20.1 -9.5 27.2 -11.4 -4.7 2.3Industry -4.6 1.6 -2.3 -1.0 11.9 6.2 5.7 6.3Of which : Manufacturing -2.8 19.3 -11.3 -0.8 11.6 6.8 4.2 7.5

: Costruction -9.0 -3.4 -27.3 -29.9 17.2 5.4 15.1 2.3Services 2.0 0.3 -0.6 0.6 11.6 8.4 -0.9 3.0

Source: Data provided by Fiji authorties and staff estimates.

1.6 The second half of the 1980s was whUe fiing and fonestry gained importace, andcharacteried by efforts to restore an economic gannent manufacuring expanded rpidly.framework conducive to the growth of privateinvestment and iiative. Economic performance 1.8 Economic activity stagnated in 1991,improved somewbat, but remained uneven. In notwithstanding strong growth in construction, and1985-1988, real GDP grew at an average annual manufacring. The service sectors contracted asrate of about 0.5 percet, as the strong economic tourism arrivals declined (reflecting recession in therecovery in 1986 was reversed in 1987 and 1988, counties of residence and increased competitionas a result of the military coups in May and from other tourist destnations within the region),September 1987. In 1986, the terms of trade and agriculture stagnated. A further decline inimproved sharply when sugar prices increased and sugarcane production (resulting from labor unrestoil prices fell; sugar production and other crops and unfavorable weather) was nearly offset by thebenefitted from favorable weather; tourist arrivals contnued expansion in the fishing and forestrysvtpassed previous levels; gold production doubled; subsectors, while manufacturing reflected aand real GDP increased by nearly 8 percent. conatinuation of the expansion in the non-sugarHowever, in 1987 tourist arrivals dropped and the sectors. Economic activity bounced back in 1992loss of confidence of the private sector was led by a surge in sugarcane exports and tourism.reflected in capital flight and a reduction in Despite the resumption of growth, privateinvestment. The sugar harvest, already affected by investment continued to remain at depressed levels.a severe drought, was delayed by Indian farmers;trade boycotts were imposed by foreign unions; aidprograms were suspended; and many skilled C. FISCAL PhRFoRMANcEworkers left the country. Effects of the 1987politcal events were carried over into 1988. 1.9 A change in fiscal policy orientation

occurred during the 1980s. Table 1.2 prov.es the1.7 Real growth accelerated in 1989 and 1990 as details. Between 1981 and 1986 the deficit wasthe political situation stabilized. Measures to relatively high, averaging 4.2 percent of GDP.restore financial stability and a redirection of the With the events in 1987, significant expenditureeconomy towards export-orientation took effect, restraint was implemented. Nevertheless, as theand some measure of confxdence returned. revenue base weakened, the deficit rose. In 1988Tourism, construction and manufacturing recovered a small budget surplus was realized as thestrongly, but constrction sPil remained low, and stabilizaton measures took effect and the revenuethe expansion in agrinclture was much below that base firmed. The deficit was kept to 0.9 percent ofof overall real GDP, reflecting an industrial dispute GDP during 1989-91 as part of the program toas well as adverse weather conditions for sugar restructre the economy towards market relianceproduction. Within the agricultual and mam- and reduce the role of govermment. In 1992,facturmng sectors, the importance of sugarcane expenditure restraint was eased in the aftermath ofprn on and processing continued to diminish, national elections; current expenditures rose by 5.8

Voen 1: FWif 2

Table 1.2: SUMMARY OF CENTRAL GOVERNM T OEATIONS, 1961-92(in percent of GDP)

1981 1986 1987 1988 1989 1990 1991 1992Estimate

Total Revenue & Gru- 24.9 23.7 23.2 26.1 24.9 25.6 25.6 30.2Total Reveaue 24.2 23.0 22.4 24.7 24.3 25.0 25.1 29.1

Tax Revenue 20.3 18.9 18.1 19.7 20.4 21.5 20.9 23.3Nontax Revenue 3.9 4.1 4.3 5.0 3.8 3.4 4.2 5.8

Grants 0.8 0.7 0.8 1.4 0.6 0.6 0.5 0.7

Expenditures and Net Leding 29.1 28.4 28.2 25.8 26.0 25.8 27.1 34.1Cufrent Expenditures 20.0 22.6 24.1 21.8 21.5 21.6 22.4 28.2Capital Expenditure andNet Lending 9.0 5.8 4.1 4.0 4.5 4.2 4.7 5.9

Overall Balance -4.1 4.7 -5.0 0.3 -1.1 -0.2 -1.5 -3.7Domestic Financing 1.8 4.7 6.0 0.6 1.0 0.2 2.4 3.6

External finance/Capital Expendture (%) 25.9 -0.1 -24.2 -21.9 2.5 0.3 -19.6 40.5

Source: Data provided by Fiji authonties and staff estmates.

percent of GDP, and the fiscal deficit widened to (to 30 percent); temporary increases in specific3.7 percent of GDP. For 1993, the deficit is excises on some goods, and in export duties onbudgeted at 2.5 percent of GDP. gold, silver, sugar, and molasses (from 2 to 3

percent); and enhaned export incentives. VAT1.10 Inthe period 1981-1985,revene andgrants revenues have well exceeded their targets in thewere relatively buoyant, averaging about 25 percent first half year of operation.of GDP. Direct tax rates increased substautially inthe early 1980s to cover public sector wage and 1.13 Government epende in 1981-85 showedsalay settlements and increasing debt service a sharp expansion in the current componnts, as therequirements. Between 1985 and 1987 revenue and wage bill and interest payments on the public debtgrants fell relative to GDP, as individual income rose, with a compensating compression in capitaltax and import duty receipts declined in both years. expenditure and net lending begnning in 1983.In 1988, current receipts were bolstered by a Average annual expenditure was equivalent to 29-temporary doubling of grant inflows (to 1.4 percent 30 percent of GDP, with current expendu rsingof GDP), and both income and trade taxes rose. from 20 to 25 percent of GDP, while capital

expedtue was cut from 9 to about 4 percent of1.11 Revenue performance since then has GDP. In 1986 temporary restraint on currentremaned strong. Total revenue and grants were expenditure was again offset by an increase inboosted by the economic recovery in 1989 and capital expenditure, so that the reduction in overall1990, and by tax reform meaures which broadened expende was only marginal, and the pre-1986the tax base wbile shifting the emphasis of taxation imbalance between current and capital expenditurefrom intrational trade to domestic consumption. reappeared in 1987.

1.12 The reform momentum was continued in 1.14 Following the events of 1987, the emphasis1952, with the implementation as of July 1, of the of adjustment was initially focused on restrainingVAT on goods and services (replacing customs expeniur, including both reductions in realduties, excises, and turnover taxation of hotels and wages and capital expenditure. Unforunately, thismiscellaneous services); a reduction in the number oriention was not sustne, and the pubhc sectorof income tax bands and a lowering of top marginal wage bill rose sharply in 1989 and 1990, and evenres; frter reduction of the maximum fiscal tariff more rapidly in 1992. In general, over the past ten

3 Velau 1: PUL

years, the brunt of expediture restraint has been competitive position and provided the foundationborne by the public investment program and not by for a fundamental change in economic strategy,current expenditures. Capital pendiues (and net from import substitution to export orientation withlending) are curently runng at around 6 percent a greater reliance e'- market forces. As theof GDP (compared to 9 percent in 1981), whereas economy was opened, the share of trade to GDPcurrent expenditures are at 28.2 percent (as increased between 1987 and 1991 from 46 to 57compared to 20 percent in 1981). Rapid growth in percent. Furthermore, there were significant1992 current spending reflects strong growth in the changes in the composition of both exports andwage bill, higher debt service payments, and imports. In exports. the importance of sugargovernment VAT obligations. declined, while thdt of manufacturing, and

particularly garment manufacturing, rose.Furthennore, tourism performed strongly in the

D. EXTERNAL AccouNTs early part of the period.

1.15 After experiencing very large external 1.17 Large or persistent deficits have not been acurrent account deficits (averaging 11 percent of feature of Fiji's external accounts in the latter halfGDP between 1981-83) as well as smaller overall of the 1980s. During most of this period, the cur-losses of international reserves in the early part of rent account was close to balance or in surplus.the 1980s, the current account deficit was reduced The modest deficit in 1987 was caused by the col-to less than 3 percent of GDP in 1984-86 (see lapse of tourism receipts in the wake of the coups.Table 1.3). Both exports (mainly sugar) and Since then, tourism has recovered and contnbutedtourism improved, and public and private invest- handsomely to the systematic surplus on the servicement declined, with consequent reductions in account. Only in 1990 was a large deficit regis-imports and private and official captal inflows. tered in the curret account. This was caused by

the purchase of an airplane and reflected the sensiti-1.16 Even though the current account deficit re- vity of Fiji's relatively small economy to lumpymained low in 1987, dtere was a significant loss of transactions. Official transfers continued to remainreserves as the political events resulted in a net positive, but after 1988 there was a large net out-capital outflow. The large devaluations of the Fiji flow of official capital everv year, reflecting thedollar during the year, however, improved Fiji's Govermment's policy of r'Jucing public sector

Table 1.3: BALANCE OF PAYmEN , 1981-92(US$ million at current prices)

1981 1986 1987 1988 1989 1990 1991 1992

Trade Balance -265 -121 -8 -39 -74 -180 -127 -100Exports, f.o.b. (Domestic) 228 214 269 314 372 410 381 417Imports, f.o.b. (Retained) 492 335 277 353 447 590 508 517

Services (net) 77 118 12 40 95 93 115 153Transfers (net) 17 9 -9 30 14 2 0 -7

Current Account Balance -170 7 -5 31 35 -85 -11 46

Nonmonetary Capital (net) 137 22 43 70 -20 82 32 42

Errors & Omissions -16 19 18 7 -27 41 -12 -40

Overall Balance -49 48 -30 108 -12 37 8 48

Memorandum Items:

Current Account BalanceIGDP (%) -13.8 0.5 -0.4 2.8 2.8 -6.0 -0.8 2.9Gross Reserves 135 171 132 230 211 261 272 317(in months of retaed imports) 3.3 6.1 5.7 7.8 5.7 5.3 5.7 7.8

Source: Bureau of Statistics and staff estimaes.

Vomel 1: Fi 4

Table 1.4: EXCHANGE RAT AM REATIVE PRICES, 1981-92(perIo averages)

1981 1986 1987 1988 1989 1990 1991 1992

Nomitnal Exchange Rate (F$IUS$) 0.85 1.13 1.24 1.43 1.48 1.48 1.48 1.50CPI (1985-100) 79.6 101.8 107.6 120.3 127.6 138.0 146.9 158.7Mm (1985=100) /a 105.3 117.9 129.5 138.9 138.0 145.8 148.7 152.9Relative Price Index (1985=100) 132.3 115.8 120.4 115.5 108.1 105.7 101.2 96.4Real Effective Exchange Rate

(1985=100) lb 97.6 89.9 76.6 64.9 64.9 65.4 67.7 67.9

/a World Banc export price index for manufactures, LDC weights./b A decrease indicates depreciation.

Source: IMF, Fiji authorities and staff estimates.

extrallialites, including prepayment of external settlements were dhiected by governmentdebt. The overall balae of payments was in guidelines. Thus, the nomina depreciationsurplus every year except for 1989, as there were translated into a depreciation in the real effectivelarge private capital inflows. This has facilitated exchange rate also.the build-up of nearly eight months of officialreserve cover. 1.21 By 1989, the new wage guidelines ensured

that the link between wages and the cost of living1.18 Merchadise exports and imports grew was severed. Thus, the surge in oil prices late instrongly from 1987 to 1990, but declined in 1991, the year was not reflected in large wage icreases,reflecting domestic labor unrest and a dampening of when inflation for 1990 rose to about 8 percent.economic activity. Tounsm was also adversely Since then, the steady decline in inflation wasaffected by the slowdown in economic activity accompanied by further liberalizaton of wageabroad. Sugar exports were badly affected by policy. By August 1991, the wage guidelines werelabor problems and unfavorable weather. 1992 a repealed and a market-oriented approach to wagebeter year. Slow growth in imports in 1992 negotiation was adopted. Other changes in laborcombined with strong tourism related receipts legislation in November 1991 were intended toresulted in a $46 million surplus on the current facilitate the operation of these forces. Wage,account. price, and exchange rate movements have resulted

in a small effective exchange rate appreciation from1989 (see Table 1.4).

E. PRICES AVD WAGES

1.19 Fiji's inflation was moderate between 1981 F. MONETARY POLICYand 1991, averaging 6.3 percent as measured by theconsumer price index. The pattern of rise and fall 1.22 Monetary policy has been geared to ensureduring the 1980s was closely related to movements on average overall balance in the external accounts,in the price of oil, a major import. an adequate level of international reserves, and

containment of inflation. External balance requires1.20 The events of 1987 forced a significant credit expansion to move in line with the privatedevaluation to stem capital flight and restore sector's demand for broad money, with the latterconfidence in the currency. As the banking being influenced by inflation, interest rates, andsystem's resources were eroded, the Fiji dollar was real growth. Commercial banks are required todevalued twice, as part of a series of measures maintain statutory resee deposits with the Reservedesigned to halt capital flight, even though credit Bank of Fiji (RBF) and to comply with anexpansion for the year was moderate. The unimpaired liquid asset ratio. Except in 1987,inflationary impact of the devaluation was felt neither of these instruments has been used actively.through 1988, but was tempered by tight fiscal and Interest rates and RBF note issues have been thefinancial policies as well as some price controls. major monetary policy instruments.Furthermore, from mid-1988 onwards, wage

5 VoIuWe 1: Fi

Tabb 1.5: MONETrAY A PRICE DVWLOPME s 1986-92(12-amnth prcentage chang)

1986 1987 1988 1989 1990 1991 1992

Broad Money 16.7 3.6 20.6 10.4 24.5 15.5 14.1Domestic Credit 7.6 14.8 -7.4 32.1 18.0 23.1 12.5

Public 18.1 42.3 -39.4 35.3 -13.8 51.8 26.8Private 4.9 7.1 4.5 31.4 25.1 18.7 9.6

Dpsit Rates /a 6.4 18.4 3.6 6.0 7.0 7.5 9.0Treasury Bils Tenders Lk 1.88 19.21 0.84 4.31 4.94 5.87 3.4ALCnsme rPrce Index 1.8 5.7 11.8 6.1 8.1 6.5 4.9

Source: Data provided by Fiji authorities.

/a On 6-month to 1-year large time deposits (above F$250,000); in percent./b Weighted average yield to maturity (% p.a.); end of period./c Perod averages./d For 91-day hteasr bill issued in December 1992.

1.23 With the crisis in 1987, broad money growth for the significant credit expansion to the publicfell while demand for credit rose sharply (see Table sector. To stimulate private lending activity and1.5). A number of measures were introduced to reduce the liquidity overang, during 1992 the RBFbring money and credit development under control, reduced the mmimum lendig rate from eightinduding the liberalization of interest rates, a percent to six percent per annum, relaxed certaintghtening of RBF's lending auid rediscount policies, exc'.ange controls, reduced the list of export itemspenalties for liquidity shortfalls, and guidelines on ineligible for the RBF export finamce facility andcommercial bank credit expMsion. Nevertheless, introduced a forward exchange rate market.the intnational reserve position deteriorated sharp-ly and the Fiji dollar was devalued twice. With theimposition of exchange controls, and some return of G. MEDRn-TER& PROSPEC1Sconfidence, broad money rose again well in excessof nominal GDP in 1988. However, credit demand 1.25 Detemiana of Medimn-tenm Prowpect.from the private sector was low, and credit to the Medium-term prospects are linked to developmentspublic sector declined during the year. This was in four key areas: the production and export ofreflected in the excess liquidity position of the com- sugar, trade deregulation in major export markets,mercial banks and in a build-up of international re- the resolution of industrial disputes, and theserves. Short term interest rates were abnormally replenishment of middle-level skiUs. The sugarhigh in 1987 and then fell during 1988 and until the sector will be squeezed from two sides. Around thefirst quarter of 1989. This movement was reversed middle of the decade, preferental sugar prices inas the liquidity situation tightened in 1989, with the European markets in particular will likely bereduction in the growth rate of broad money, an discontinued resulting in a decline of around 20aggressive sterilization policy pursued by the RBF, percent of export unit values. On the domesticand an acceleration of credit demands. side, sugar production is affected by ucrtinty

surrounding the renewal of leases for sugarcane1.24 There has been a return to excess liquidity in farmers. Between 1996 and the end of the decade,1992 as private sector demand for credit has been around 40 percent of sugar farm leases will expirelow while deposits have tended to stay high on and will have to be renegotiated. It is not clear yetaccount of lack of other outlets for savings. Excess what principles will guide the renegotiation processliquidity of the commercial banks rose to 13 and what new re, Al values will be established.percent of their deposits in July 1992, compared to The expectation is that the rentals will be highernormal levels of 5-7 percent. A major portion of than has been the norm so far. If so, there will bethese funds was invested in government securities additional pressure to switch away from sugar toand a sharp build-up in RBF notes. This accounts other crops and other activities. Developments in

VobI,. 1: PL 6

the sugar sector will exercse considerable year over the past five years), aud aroundmacreconic drag given its mpotance to oubtp 4.2 pement reafter to the year 2001 (seeemploymen, and exports in Ffl. Table 1.6). This would allow Wigher growth in per

capita incomes of between 2 to 3 percent as com-1.26 Trade liberalzaton in OECD couties, and pared to virual stagnation over the past decade.eseially in Austrlia and New Zealand, will affectFii's epo prospect by redcing the value of 1.31 Industrial activity would accelerate from apreferetial access to dtese markets. On the other growth rate of 1.0 percent per annum during 1987-hand, trade liberalzation wil also offer nw 91 to 4.1 perct in 1992-96, and 4.6 percenopportunities in products and markets hitherto thereafter. The services sector would slowunexploited. On balance, if Fiji is able to relax the marginally in 1992-96, reflecting a slowdown inconstrints that presendy Init its supply of public sector activity, and, reflecting heavyexortables, it should benefit from trade deregn- investment in tourism capacity by the mid-1990s,ation among industrial countries, pick up subsally during 1997-2001. Agricul-

ture would perform poorly over the medium term1.27 The rising incidence of industial disputes reflecting the anticipated decline in Fiji'shas adversely affected Fiji's economic performance concessionaty sugar prices. A 4.5 percent perin recent years, paricularly in sugar and manu- annum-decline in sugar output and exports isfactmred exports. It has partly negated the more projected for 1996 and beyond, based on anhospitable climate for private invesment created by assumption of a modest fall in EEC sugar supportthe srcural reforms undertaken in 1987-91. If a prices. Investment acdvity by the private sector iscontentious industria relations environment projected to be concentrated in the high-growthpersists, it would make the restoration of private sectors of the economy, such as manufacturing anddomestic and foreign iwnv m more difficult. tourism.

1.28 In recent years, unusualy high levels of 1.32 The above scenario would require grossemigration of skilled workers, brought about by investment to rise from around 16 percent of GDPpolitical turmoil, has resulted in severe erosion of at present to between 19 percent and 20 pecent, ofthe sdllsbase. While political stability may restore which around half would be accounted for byemigration to nonnal levels, Fiji stfll has to cope private investment. This is a conservative scenariowith the effects of the emigation that has already since it relies on a modest increase in privateoccurred. The prospects for further industrial and investment, which has averaged 8 percent in recenttourism development, in particular, depend on the years (but was around S percent in 1992). Ifspeed and scale of build-up in the supply of certain strutal reforms succeed in boosdng privateprofessional and tecical sldls-a build-up that investment significantly, higher sustained growthposes a major chalenge to the Fijian educational could be achieved.system and requires accommodation as well withinthe public sector investment program. 1.33 The medium-term outlook for exernal

accounts is also presented in Table 1.6. Three1.29 The actual path taken by the economy will aspects of the projections merit comment. One isdepend not only on the above-noted factors but also the reduction in the current account deficit duringon how policy makers respond. Given the above 1992-96. The second is a widening of the currentchallenges, it is important that a development account deficit during 1997-2001. The third is astraty be followed that emphasizes efficiency in strong overall reserves position until 1996 and athe use of public and private resources, that comfortable position thereafter. The reduction ofencourages diversification in the production of the current account deficit over the next few yearsgoods and services, and that provides a supportive reflects the assumption of a recoveiy in externalmacroeconomic, investment, and regulatory frame- demand for traditional exports, garments, andwork for economic growth. The details of such a tourism as well as positive results from policies thatsaegy are delineated in the remaining chapters of would promote competitiveness. The widening ofthis report. the current account balance thereafter reflects the

prospective decline in sugar production and exports1.30 Projecdons. A positive scenario, incor- for reasons noted earlier. It should be noted thatporating stmctural reforms consistent with such a these forecasts assume only a very modest declinedevelopment strategy and with likely developments in Fiji's world market sugar price starting in thein key export products and markets, would yield mid-1990s. If, as appears increasingly likely, areal GDP growth averaging 3.6 percent a year in GA1T accord in agriculture results in a sharp fall1992-96 (compared with a modest 2.0 percent a in EEC sugar prices, then the current account

7 Vokww 1: FIO

Table 1.6: MAcRioEcoNoMIc RoIEcFIoNs1992-w2q01

1987-91 1992-96 1997-2001

Growh tRa4es (% .a.)Gross Domestic Product 2.0 3.6 4.2

Agriculture -0.4 1.6 0.7Industry 1.0 4.1 4.6Services 4.4 4.1 5.0

Consumption 2.3 2.7 3.3Fixed Investment -3.1 10.2 7.2Exports of GNFS 11.7 5.3 5.2Imports of GNFS 12.6 5.2 5.0

Consumer Prices 7.6 5.6 5.0

Ratios to GDM (%MGross Investment 16.2 16.6 19.4Domaetic Savings 18.1 16.9 18.9

Ote Idicators /a

Current Account/GDP (%) -0.8 0.7 -2.5Debt Service/Exports (%) 11.7 4.9 4.0DOD/GDP (%) 25.9 18.3 16.5Gross Official Reserves 5.7 4.7 3.5(as months of retained imports)

La For last year of the period.

Source: Staff estimates.

balance would come under severe pressure. taning (Figure 1.1). Activities in health andAssuming only a modest fall in prices, however, social infrstructure take 10 percent of total aidthe coninued additions to reserves are expected to expendture and are mainly concentated on hospitalcome from surpluses on net non-factor servces and constuction, housing, and rural infrastructrefrom a constant level e' net direct foreign facilities. Curt proposals im health and educa-investment which, togeher, are assumed to more tion could increase social services' share of total aidthan offset the deficit on merchandise trade. expenditure in the near future. Aid expenditure onReserve deterioration occurs only in 1993 if the road rehabilitation, telecommunications, and theexternal debt of the Fiji Electricity Authority is power distnbution network is helping address gapsprematurely retired as is currently under in Fiji's economic infrastrucxre and is likely toconsideration. The externa debt position remnains dominate external borrowing in the near term.manageable. The debt service ratio is forecast to Under the support of the Roads Project, Fiji hasdecline as exports and GDP grow at a faster clip taken initial steps to allocate increased resources tothan recently observed. help maintain its road assets.

1.35 Direct assistance to the productive sector hasH. EXTERNAL FINANCiNG ISsUES fallen to around 15 percent of total aid, and its

share is expected to drop further with the1.34 Aid ProJfle. External development assis- completion of a major fish cannery project andtance is a less important source of development reduced assistance for agriculture and forestry.finance for Fiji (around 5 percent of GDP in 1992) This change reflects a refocusing of bilateral donorthan for other Pacific Island zountries. The social programs to the social services sector. The declineservices sector currently accounts for about 30 in bilateral aid to the productive sectors is expectedpercent of total external assistance, and of this, a to be counterbalanced to some extent by EEC'slarge proportion is absorbed by overseas student trade promotion program under Lome III and IV,

VoItwe 1: Ru 8

Fgr 1.1: FIn: XTNAL AsmISTA )(1991/92)

Socki Services

EconomicInfrastructLre

Proutv Scto

(a) 1lonk staff estWmotes&(b) In-lu. toti gnd other esptwe wherv

Insuffncient iniormotron Is availabl icr cector c7lloca Ion.

which includes assistance for the establishment of execution, and evaluaton of aid projects. Althougha tax fee mancin zone and support for untapped development loan funds are available, theinvestm and expc t development. Under ElB's Government will need to coinue its selective useprogram, substantial loan resources (US$30 million) of these resources bearing m mmd the financial andhave also been made available witin te Financial management cost associated with loan financing.Procol for the first five years of Lome iV.Proposals have been made to use a substantil 1.38 Oter Aid Flows. In addition to officialportion of this aid for Cyclone Kina-related bridge development assistance, assistance is also providedreconsauction. through a nmber of non-government organizations

(NGOs), volunteer workers, and church groups.1.36 The availability of external assistance is not NGOs, some with support from donors andlikely to act as a constraint in the short-to medium- Government, fill an important gap in communitytem on the level of aid used in Fiji's development development programs not covered by Governmentprogram. Overall, extemal flows are not expected or official external aid programs, with local NGOsto decline in real terms. In the immediate term, particularly active in health, training, and women'sthere coruld well be a net increase in the ulization programs. The linkage beween NGOs andof extemal assistance, as additional resources are government departments is growing and provides andrawn in to meet the rehabilitation needs following opportunity to help ensure program com-Cyclone Kina. Bilateral donors' share of total aid plementarity. Volunteer aid workers are stronglyhas now fallen to a little under 60 percent and is represented in Fiji, with large contingents from theexpected to decline further. The expected United States Peace Corps (over 100) and Japan.downrns of New Zealand's and the United Many of these volunteers assist in teaching with aKingdom's programs will be more than offset by spread into other sectors such as health, agriculture,increases in other bilateral and multilateral donors. fishing, and business. There are also a mmber of

very strong church support groups which cover a1.37 Increasing utilization of multilateral wide spectrum of activities including health,assistance, in particular loan funds, will also development programs for women, and communityincrease demands on Fiji's project management programs. This assistance is additional to thatcapacity. Unlike grant aid, multilateral assistance provided by the churches to the education sector.requires more intensive involvement of the Minis- A relatively small amount of assistance is providedtries and implementing agencies in loan negotia- to NGO development activities through donor pro-tions, and in contracting the supervision and imple- grams; however, estimates are not available of themention of the works and services. Making effec- broader level of community and volunteer support.tive use of what multilateral assistance is likely tobe available for Fiji will require the active involve- 1.39 Aid Effectiveness. Although the availabilityment of key Ministry personnel in the planning, of external assisne does not appear to be a

9 Volue 1: F11

constraint as such on Fii's development program, Department during 1993. Altraively, thethere is scope to improve its development impact Government could more effectively call for jointand to reduce the workload of Fiji officials and aid discussions with donors, and use this approachdonors in administg aid programs. Steps to more often to improve orogram efficiency. Aidfurtier improve aid allocation and delivery include: coordination could improvd and the aid

administrative worldoa. teduced through discussion* a clear definition of goverment sector of investment priorities and strategies at sector

priorities and development strategies; specific country/donor meetings designed to helpframe donors' sector assistance programs.

* a strngtned program and project planningand design capacity; 1.41 It would also be useful for donors to

improve their information exchange and so develop* better communication between Government and a better knowledge of each other's programs. At

donors; present, there is no formal mechanism to achievethis, but there is some ad hoc exchage on specific

* more careful design and implementation of aid proposs and activities. This could best betechnical assistance activities; inco ted into a govenmen-sponsored arrange-

ment with mnimal effort.* incotporation of the total life cycle costs into

investment decision maldeg with particular 1.42 More effective use coud be made ofemphasis on recurrent costs; and available technical assistance. Donors should

ensure an effective match between task reqire-* adequa support for local cost financing. ments, selected personnel, and method of imple-

mentation. Consideration could perhaps be given1.40 There are a number of options open to to increased use of more experienced personnelGovernment to raise these issues with donors. The (sometimes volunteers), who would make frequentrecent re-establishment of the Policy Implemen- short visits rather than provide full time support.taion Committee will help the Government toprovide donors with development assistance oppor- 1.43 The economicandinvestmentimplicationsoftunities (within a macroeconomic framework) that inadequate recurrent cost fincig are well known.are consistent with and conform to public In a number of extera assistance activities, aid isinvestment priorities. These priorities should already being provided to support recurent costemerge from the medium-term public investment expendtu items. Some donors have expressed aprogram to be prepared by the Central Planning willingness to increase this element in their

Table 1.7: EXTERNAL FIANCING REQUIREMENS AND SOURCES, 1987-2001(US$ mfllion per anum at curr: t prices)

1987-91 1992-96 1997-2001

Reauiremen 125 155 197Merchandise Imports 435 654 1,059Mercadise Exports -349 -457 -640Principal Repaymet /a 46 39 27Interest Payments a 25 16 22Other Service Payments (net) -54 -114 -290Change in NFA 22 16 18

Sources 125 1SS 197Private Transfers 25 32 35Official Transfers 24 26 42Public Loan Dibursements ?2 55 71Odter Capital (net) 54 41 49

La Public MLT debt only.

Source: Staff estimates.

volum 1: Fp 10

programs to help enue successfu project 1.45 Approximately half of the external fiancingimpementation. Greater use could be made of this requirements will be met from private sources, insupport. The Govenmest's reluctance in this tie form of foreign direct investment and short-regard is u able, but makes it more cial term trade fmance. 'Tihe other half of the financingthat at protect design and regotation, these costs are r e would be met through official transfersfully ideified and are inorporated into and public loan disbursements. Roughly one-thirdgovernment development and urent expeire of the financing gap could be met through conces-budgets before resoures are committed to sioWal bilateral and multilateral aid programs. Suchimplemetationl. iesources, together with multlateral development

finance, are expected to be available to finance1.44 Finncng Req.ufwnts. A summary of nsmg public sector investmient needs, tberebyFiji's prospective external financing situation is eliminaig the need for Government to borrowprovided in Table 1.7. The gross extemal heavi!y from domestic financial markets.financing requirement is expected to rise to US$155million per annum in the coming five years fromUS$125 million in the preceding five-year period.In the scceeding five years, the extrnal fnncingrequirem could rise even more, to US$197million per year. No major diffculties areenvisaged in meedng these higher fmi ingrequirements if positive economic policies aremaintained.

11 Volm 1: FPf

2: Macroeconomic Policyand Public Sector Refonn

A. MACRO-POmCY To SUPPORT GROW7H redue the revenue base and promote otherwiseinviable investments.

2.1 Fiji has the potential to improve its growthrecord significantly. However the realization of 2.4 Over the medium term, Government shouldthis potential requires an increase in investment, reconsider its expenditure priorities in view of theand fisal and financil policies which provide need to facilitate private investment. To underpinmacroeconomic stability and maintain international private sector expa-sion, increased governmentcompetitveness. Sound macroeconomic policy is investment is necessary, particu'irly in humanneceay, although it may not be sufficient, to resource development and physical infrastructure.restore investor confidence. In the context of low deficits, these priorities

reqpire a large shift (e.g. 5-7 percent of GDP) in2.2 Fhscl Meas. The fiscal polity stance expenditure from current expenditures to capitalshould reflect an emphasis on low deficits, but expenditures and, wihin current expenditures, fromthese should be achieved within a context of rising wages and salaries to operations and maintnance.public investment. Recent declines in the level of In rebuilding public investment, it is recommendedpublic investment have compromised the that resources be optimized through the use of acomplementary role that such investment, in the public sector investment program, consisting of aform of physical and social infrastructure, can play pipeline of properly evaluated investment projects,in raising private investment. in line with national development priorities.

2.3 In the short term, firm control needs to be 2.5 Divestment, corporatizaton, and/or priva-exercised over both expenditure and revenue. On tization of public enterprises and activities is part ofthe expenditure side, this will require that the government's reform program, which shouldexpenditures be approved in the budgetary process lead to more market oriented operations of theseprior to commitments being made at the political or enterprises and a consequent reduction in their needthe technical level. The system of quarterly for government support. (Given the large share ofsupplementary appropriations should be eliminated, economic activity in the hands of the parastatalsand any supplementy appropriations should be (about 25 percent of GDP), this would freeconsidered only for use during emergencies. To government resources for other priority areas,facilitate fiscal planning and expenditure control, while commercializing the operations of thewage increases should be negotiated prior to the activities being divested. However, this has notbudget year, in the context of the budget been the result of the three corporatizationspreparation. Thus, public sector wage setdements undertaken so far. Meaningful divestment of majorshould be forward looking, rather than the now enterprises, with an emphasis on privatization,customary retroactive increases, which often should be the primary approach to reducing publicnecessitate supplementary budgets. On the revenue outlays for quasi-commercial activity.side, the Government should demonstrate itscommitment to the recently implemented VAT, if 2.6 Monetary poicy should provide financialit appears that lack of compliance calls for follow- stability, protectic . of international reserves, andup action, and should reftain from granting any reduction in inflation. In the short run, the excessfurther special exemptions and tax holidays which liquidity in the banking system, the large official

13 Volume 2: P;

eserves, and the slowdown in private activity are, remain competitive. Efficiency of production cantaken together, a source of concern, best be promoted by policies which reduce

distortions and stimulate economI activity trgh2.7 While FIi mainain an essentay liberal the removal of dsicentv and the provision of atrade and payments system, rstrtions on capita supportive rgulatory envronmt. In Fiji's case,movements inslate its financial sector from the wage policy plays a very important part inworld market and contu a barrier to foreign maitnan of competiveness, and the effect ondirect investent. As overseas investments and wage settlements of the rect libaation of theother forms of capital transfers abroad have been labor market is of utmost importance. To thesusded since 1987, and given the lack of deve- eent that wages aally are set competitively, andlopment of the domestic capital markets, neiter the thus are adjustable both upwards and downwards,private sector nor the commercial banks have signi- wages will automatically adjust to maintainficant altrtive investment opiorMunties besides inteional competitiveness and employment in thetme-deposits for domestic financial assets. This face of exagenous shocks such as tems of tradeappears to have led to the recent build-up in private fluctuations. However, at least in the short run,sector deposits in the banking system, and the more nominal wage cuts are unlikely to occur, and hencerecent sharp increase in excess liquidity of tbe com- there may be no atmatic means of aicipating themerciat banks. Despite the RBF's efforts to ease required adjustent to expected deterioration in thecertain capital control, the liquidity overang bas extrna environment. In that case, echange rateled to a downward pressre on interest rates for policy can be used to reduce real wages. TWs maydeposis and short term securities, and has provided also become necessary if money wage growththe opportunity for the public sector to take advan- exceeds productivity growth systematically fortage of the low rates. At the same time, lending institutional or other reasons.rates to the private sector have remained relativelyhigh, providing a cross-subsidy to the public sector. 2.11 In targeting the real exchange rate, careful

atnton should be given to the markets in which2.8 A signicantrelaxatdon of capital restrictions Fiji aims to expand exports. Pr-,emptive inter-under present conditions is likely to result in a vention may, in fact, be required to offset the dis-sharp reduction in private sector deposits, which tortions in extenal balance resulting from prefe-would reduce the liquidity of the banks. At the rendal access into the European market (from thesame time, the commercial banks would wish to sugar quota) and into the western Pacific marketsinvest excess liquid assets abroad at a higher yield. (by SPARTECA), since such support is now viewedThis would result in a loss of inrnional reserves to be transitory in nature.of the RBF and a credit squeeze which would forcea change in interest rate structure, to one closer inline with competing internamional rates. In such a B. PnUC SECTOR MANAGEMENTcase, unless the outstanding amount of public sectordebt was reduced, either international reserves or 2.12 The rationalization of the public sector cancredit to the private sector might be endangered. release resources to be used towards the required

build-up of the public investment program.2.9 A preferable approach to relaxation of the Specificatly, such resources can come from arestrictions would be to intensify RBF's open reform of the civil service aimed at cuttng the siemarket operations to sterlize liquidity, thereby and cost of the public sector as well as from araising deposit rates to an attractive level, while reform of public entprises aimed at reducing theirmoderating the public sector's recourse to financing financial claims on the budget. Vanous reformfrom the system. Relaxation of capital controls possibilities are discussed below.under these conditions would lead to fewerdisruptions to the system. Alternatively, an Scope of Pubc Sedor ACdvSksincrease in the commercial banks' required liquidasset ratio would protect the internationat reserve 2.13 The Government plays a strategic role as aposition as well as the low interest on government provider of a wide range of economic services,secuities, but this would be at the cost of a many of which are provided by the private sector inreduction in credit to the private sector and would other nations. Organized under a "Westminsterrun counter to the objective of increasing market Model", the public sector is divided into 45orientation of the economy. Departments, 26 Boards, 50 non-financial public

enterprises, 9 financial public enterprises, and a2.10 Exchage Rate ManagemeL An export wide range of small companies with significantled growth strategy requires that Fiji's exports public equity. There is, in addition, a local

Vohme 2: F4N 14

government system comprising 2 city councils, 8 Table 2.1: Puc Swcroa EMwv NrT,town councils, 14 provincial councils and 5 rnr 19Q2 lalocal authorities.

2.14 The public sector is the single largest Category Number/Shareformal-wsector employer in Fiji with a total of45,050 employees, or 49 percent of totalemplomt as of June 1992 (Table 2.1). Of this EavPo:totad, the civil service, both established and Established Posts: 22,200unestablished posts, accounts for .75 percent, with of which:the balace in the public enterprises and authorities. General Civil Service 6,500The greatest period of public sector employment Works 600growth was over the decade to 1986, when public Teaching Service 7,300sectr employment grew three times as fast as the Health Service 2,500private sector at 2.1 and 0.7 percent respectively. Military 4,000Civil service employment levels have beenconstrained since 1987 partly to ease budgetary Unestblished Posts: 113300pressures and partly as a result of skill losses Education 500associted with growth in emigration. More Health 1,000generally, attempts tc contain civil service growth Woer 6,600in the 1980s have been based on a careful review of r 6proposals by the Department of Finance and the Tot Civil Service: 34,400Public Services Commission. Measures taken todate include encouraging early retirement at age 55, Public Authorities/Enterorisesselective retrenchment of regularly absent Non-financial 9,350employees, and freezing posts that have been vacant Fimncial 1,300for significant periods of time. Total Public Entrprise 10,65

civl Service Reform Tota P_ubc Sector 45,050

2.15 A high public sector wage bill has tended to Memo Items:crowd out capital spending as well as much needed Sbare in Administration 29.1operational expenditures. During the latter half of Share in Health 7.8the 1980s, current expenditures accounted for 82 Sbrein Public Works 13.3to 86 percent of total government oudays. In 1991, Total as Share of Total Labor Force 48.7cue spending was 25 percent of GDP, of whichF$279 million, or 51 percent of the total, wasallocated to personnel emoluments and pensions. /a Numbers rounde to the nearest 50.With another 25 percent of operaing revenues used 1k Includes temporary, casual, probationary, andfor debt service, less than a quarter of operational contract workers.expenditure was left for non-wage currentrequirements, such as operations and maintenance Source: Bureau of Statisids, Public Servicesof physical infrastructure and social services. commissicn and Mini.y of Finance and

of~~~~~~~~~~~~~~ Economic Planning.2.16 To reduce the crowding out of high prioritypublic outlays, as a medium-term target, priorityshould be placed on improving the budgetary fewer Departments m order to achieve efficiencybalance between current and capital spending, and gains and reduce aminlistrative duplication. Awithin the current budget, between the wage bill significant consolidarton of governmentand other recurrent outlays. This will require a departments, as part of a more general down-sizingreduction in numbers and costs of the public service exercitse, would be appropriate given skll shortagesin order to reduce the wage bill. This, in turn, can plaguing the public sector and a renewed emphasisbe accomplished by a combination of departmental on private sector development. One option wouldconsolidation, staged retrenchment, and wage be to consolidate the various Departments and

consolidation, staged retrenchment, and wage agencies into Ministries responsible for theresbuaint. following five areas: (i) finance and planning; (ii)

2.17 Depqalenta Consolidadon. There is transport; (iii) education, health, youth, sports, andconsiderable scope to consolidate agencies into labor; (iv) trade, industry, commerce and tourism;

(v) and other economic infrastructure.

15 Voiwme 2: Fji

2.18 Facmaed R&chment. Within the civil 2.19 Recastg Pablc Servce. In recasting desevice, it is estimated that nearly 30 percet of tbe size of te civil service, one sttegy is to identstaff occury administrative positions. This implies pardtiular branches or agencies whose services are

a there is one manager for just over two persons no longer reqpired or whose tasks can beproviing direct services to the public. In a small accomplished more efficiendy with a far reducednation, where cownunications ad access are levl of effort. The 1992 MOFMP Report on therelatively good, a very high rado of admistrtsive Budget Framework Exercise contains numerouspeonnel is unneessary. Departmental consoli- proposals for commerciaization and contracting-outdadon may create opportunities for reducing of services provided by various deparments.administrative posts. In addition, retencment Among these, a high priority should be accorded toefforts aimed at eliminating middle management contacting out services for which the private sectorlayers, in both civil service and the public autho- has demonstrated sufficient capacity, such asrities may lead to significant savings. printing services, real estate management, provision

of goverm ent supplies, pharmaceutcal purchase,

Tabe 2.2: PARAATAL SECOR PROFIT, BUDGET SUBSm AND EMPLOYMEWN La

Authority/Company Profit Subsidy Employees(F$ miUllon)

Non--financial EnterpriseFiji Electrical Authority -4.1 0 915Air Pacific 18.9 0 554Air Terminal Services n.a 0 406Civil Aviation Authority 1.6 3.2 42Fiji Pine Commission -1.9 5.5 199Fiji Sugar Corporation 12.0 0 2,574Fiji Intnational Telecommunications 16.2 0 105Fiji Posts and Telecoms 12.0 6.5 2,198IKA Corporation -0.7 0.7 56National Trading Corporation ^3 0 83Pacific Fishing Company 3.0 0 513Ports Authority of Fiji 0.9 0 328Housing Authority 0.9 6.4 40Rewa Rice -0.3 0 52Ulusaivou Corporation n.a 0 26Yalavoua Devt Board -0.5 0.3 59

Total Above: 22.6 8,150Other public enterprises /b: 12.2 1,200Total non-financial enterprises /c: 33.8 9,350

Financial EnterorisesFiji National Provident Fund 31.7 0 145Fiji Development Bank 0.7 8.8 233Home Finance Company 0.9 0 205National Bank of Fiji 0.9 1.0 530Reserve Bank of Fiji 14.2 0 173Total Financial enterprises 9.8 1,286

TOTAL PUBUC ENTERPRISES 43.6 10,636

/a Profit figures are 1990 actual, subsidy figures refer to direct budgetary transfers, official lending, and on-lending for 1991 (indirect subsidies not included), and employment figures are June 1992 estimates.

/b Includes those authorities listed in the Quarterly Employment Survey./c Mission estimate including University of the South Pacific staff for employment purposes only.

Source: Govemment of Fiji, Quarterly Enployment Survey, 1992 Budget Speech and Bank staff estimates.

Volw 2: Ff11 16

laundry service provision, and handiraft center servantS. This has unleashed spiraling growth inmanagemet. SServices that are good candiates for the wage bill and has forced a resort to inflationaryCOpatpiztOn include provision of broadcasting fimancing. Under the present circumsances, Fiservices, water and sewerage, and public housing. could ill afford rapid growth in remuneration levelsThe vast mnuber of government services identified to civil servants. Instead, a more selective policyby the MOFSP as possible candidates for of linig wage awards with productivity measures,divestitae, com iaion, and corporatization starting initially with technical staff, may be a moreimplies that implementation will require a high appropriate means of attracting and retainingdegree of inter-Ministerial cooperation and support. qualified personnel in public service.

2.20 One way of expediting the down-sizing 2.23 Skil Shortages. The events of 1987process is to provide a greater degree of flexibility unleashed a rise in emigration, resulting in ato Department directors in terms of staffing, disproportionate loss of skilled personnel withindivestiture, and contracting out decisions. Government. In certain fields, such as nursing,Increased flexibility in the Departments, together primary teaching, and secondar3 teaching, thewith greater accountability for performance, lies at Government has had to resort to the use of under-the heart of proposals for improving the operations quaified individuals to fill vaca posts. In theseof the civil service set forth in the 1992 Budget areas, increased attention to in-service training ofSpeech. While the Budget Speech called for a existing post-holders and expanded output of skldledthorough review of civil service management teachers and nurses will be needed to fill the skillpractices to precede reform, the deteriorating fiscal gap. At a more technical level, the Governmentoutlook calls for urgent implementation of civil has increasingly relied upon expatriate personnel toservice reform measures. fill Government posts. Despite the high costs

associated witi expatriate employment, there is2.21 Cii Servie Remaeraion. In a low little prospect of near-term localization of many ofgrowth environment, particular care needs to be the more technial posts. It may be possible,taken to maintain a strcture of public service however, to locate domestic consultants as aincentives consistent with productivity gains in the substitute for expatriate personnel. Efforts alongeconomy as a whole. Should public service wage these lines may result in an additional saving ofawards exceed productivity growth, as has occurred resources to the Government.in both 1990 and 1991, the flow-on consequencesto the private sector can rapidly dampen 2.24 Budget Discipline. Careful control over thecompetitiveness and reduce exports. As noted management of public expenditures is essential toabove, a reduction in the overall public sector wage ensure that a degree of fiscal balance is mainained.bil is needed to restore a better balance between The over-spending on recurrent outlays in 1991,current and capital spending. This, in turn, will and the extra-budgetary appropriations and taxnecessitate restraint of public sector wages, with expendiures during the first half of 1992, give risepublic sector wage awards trailing inflation for a to concern regarding the Governmenw'¢ ability tofew years until the combined effects of exert discipline over the budgetary process.'resuctring and wage restrait have resulted in a Improved control over the budgetary process can becivil service wage bil that leaves ample scope for accomplished by: (i) subjecting all revenue andan increased public investment effort. expenditure measures to MOFEP assessment before

presentation to Cabinet; (ii) minimizing the use of2.22 Labor market surveys were conducted in supplementary appropriations for mid-year expendi-1992 to compare remuneration practices in the ture over-runs; and (iii) making active use of thepublic and private sectors. Based on these surveys, Budget Coordinating Committee to screen new re-a significant increase in the salary of senior level venue and expenditure measures.civil servants has been advised in order to improvethe parity between private and publc sector execu- Putbic Enterprise Reformtive positions. Such comparisons of private andpublic sector executive compensation ignore funda- 2.25 There are more than 50 public enterprises inmental differences between the sectors in terms of Fiji, involved in practically all segments of thediffering ski requirements (for senior positions), economy. As a group, the performance of the pub-accountabilty, and degree of job security. In other lic enterprises has been disappointing (Table 2.2).South Pacific states, attempts to achieve Most of the enterprises are badly over-staffed. Ofremuneration-parity at the senior civil servant ranks the 24 largest enterprises, half recorded losses inhave triggered demands for large catch-up wage 1990, a year of strong growth for the economy asawards by the middle and junior ranks of civil a whole. Excluding foreign exchange earnings of

17 Volme 2: FN

the Reserv:- Bank, the total returns from the 24 2.30 The new Government has indicatedtat it islargest public enterprises was a meager 6 percent committed to the reform of the public enterprises.Of net assets in 1990. Budgetary subsidies to the However, the reform process, as well as confidencepublic enterprise sector have averaged 5-6 percent in the new Government's intentions with regard toof totl public expenditures. Indirect subsidies, corporatization and commercialization, wasthrough low-interest credit, capital injections, and weakened in the first months of the new govern-access to Provident Fund resources at concessionary ment as a result of the reversal in restructuring ofterms, would have been larger stUi. the Fiji Posts and Telecommunications Ltd (FPTL).

2.26 In the mid-1980s government support to the 2.31 FPTL. The restructuring of the Post andpublic enterprises rose markedly, reflecting Telecommunications Department (P&T) into aweaknesses in management, staffig, and pricing limited liability company illustrates the difficultiespolicies. By 1988 the Government began a of commercializing a public enterprise in a non-program of selective corporatization of enterprises competitive enviromnent. FPTL has so far shownand government departments in order to commer- little evidence of improvement upon the poorcialize their operations and make them less depen- operating record of P&T:2 (a) capacity has beendent on financial support from the government. expanded from only 58,800 lines in 1989 to 60,300

lines in 1991; (b) FPM profits declined from F$122.27 The corporatzaaion of two public enter- million in 1990 to F$9 million in 1991; (c) wagesprises-IKA Corporation (tuna) and FPC (Fiji Pine) increased by 15 percent in 1991 despite sluggishand one government dearmet (Post and Telecom- overall economic performance; and (d) the qualitymunications, FPTL)-marked the beginning of this of service, as measured by the number of faults perre cring program. A number of other eter- line rose from 1.6 per hundred in 1989 to 1.66 perprinses were under consideration for corporatization hundred in 1991. FPTL does not vigorously pursueand for commercialization of activities in 1991. rural telecommunications nor does it engage in sig-Furthermore. Fiji Electricity Authority and the nificant cross-subsidization of domestic with inter-Civil Aviation Authority were candidates for corpo- national services, the main developmental activitiesratization in 1992, following the restructuring of of Government-owned telecommunications compa-PEA to make it financially viable. nies in other nations. Attempts were made to insfill

a greater degree of commercial orientadon in FPML2.28 Following the initial corporatizations, the in 1989/90. A new Board of Directors, with consi-program was halted, as it became dear that the derable private sector representation, was ap-corporatizations did not have the intended effect. pointed, senior management was replaced, and anIn fact, it appeared that the main effect of the first external management review was conducted. T.hecrporatizations was a change in the legal status of commercialization process suffered a serious set-the entties, while performance reflected continued back in 1992 due to laoor disputes, reinstatement oflack of accountability and the perception that the the previous management team, and the resignationGovernment would stand ready to support the of leading Board members. Given its poor ope-entities when needed. All of the =ntities continued rating performance and limited developmental role,to receive substantial support, including in the there are few advantages to retaining FPTL in theBudget for 1992. public sector. Based on experiences in other

developing economies, privatizing telecommuni-2.29 The reconsideration of the corporatization cations entities has proven to be effective instrategy led to the establishment and subsequent expanding and improving services.stegthening of the Public Enterprise Unit in theMinistry of Finance and its development of a 2.32 A privatization strategy for FPTL shouldcommon framework for achieving meaningful include the following components: (i) termiatngcorporadzations, based on the New Zealand model. the Fiji International TelecommunicationsKey features of the framework were included in the Agreement contract and integrating internationalBudget Speech for 1993. These include a greater with domestic telecommunication operations;emphasis on privatization; passage of a Public alternatively, FPTL could be authorized to provideEnterprise Act; the common objective of international services; (ii) separating telecom-maximizing returns to shareholder funds; ensuring munications and posts services and retaining thethat entities operate as profitable entities; latter in the public sector; (ill) selling themonitoring by a stronger public enterprises unit; Government's controlling interest in FPTL to anand management freedom within the context of international telecommunications operator thrwghagreed business plans. The Budget Speech notes a competitive auctioning process; (iv) permittingthe eventual aim of privatizing public enterprises. separate private operators to engage in wireless

VeIe 2: FN 18

telemnmunications services in competition with estructuring, in advane of privatizaton, hasFPTL; and (v) establishing a strong supervisory tended to produce few impro,ements in opatngbody to regulate tariffs and services. performance. In many instnces, the causes of

under-performance are linked to weak maagement,2.33 FE4. The Fiji Electricity Authority (PEA) political interference, over-staffng and assignmentpresents another example of reform not proceeding of multiple objectives to the firms- factors that areas intendgd. As noted above, the FEA's financial rarely overcome without a change in ownership.position deteriorated significantly in the 1980s as a On grounds of administrative practicality, the cor-result of cost overmus on a large project, failure to poratization program would be more effective ifimplement planned tariff increases, and increased targeted to the small handful of firms that, for rea-debt service requirements following the 1987 sons of scale economy, natural monopoly, or publicdevaluations. As only a few of the measures good provision, may be operaed more efficiently inneeded to restore FEA to a financially sound the public sector. This would include, for example,position were implemented, FEA suffered a further the Fiji Electricity Authority, the Fiji Pine Cor-deterioration in its financial position by 1991. poration, and the Reserve Bank. AR other authori-

ties and corporations could be tread as candidates2.34 The World Bank's Pac#fic Regional Energy for privatization. To establish a privatization pro-Assessment Study (July 1992), recommended a com- gram, the following measures would be required:bination of measures including fresh equityinjection in 1991 of at least F$15 million; con- * those enterprises selected for privatizationversion of PEA's promissory notes into longer term would need to be legally transformed intodebt by floating FEA bonds; an immediate tariff corporate entities, eligible for sale;increase of 6.5 peent, followed by annual 10 per-cent increases in 1992, 1993, and 1994; and go- * ownership of the prastat corporaionsv,ernment fundW of capital expendi. The should be transfenred from the linerecommendations also advised against any further Ministries to MOFEP;short term borrowing by FEA. As action has fallenfar short of recommendations, FEA's position has A the strength of the public enterprise unit indeteriorated further. The Government did not MOFEP should be increased, and resourcesimject any ftesh equity into FEA in 1991 and pro- provided to conact accountancy andvided only F$3.2 million in the budget for 1992. merchant banking firms to assist in theWith regard to tariff increases, there has been no privatization; andincrease (except to cover VAT), and there is no in-crease planned for 1992. The Government has not * transparent rules and procedures forprovided funds to finance PEAs capital expenditure privatization should be announced to ensureso far, and such epnditue has been financed by that fair and open procedures are followed.short term prissory notes. Finally, the restruc-turing of domestic debt has not been finalized yet. 2.36 Unlike many other developing nations, Fiji'sThe FEA is at present in the process of converting financial sector is sufficienty deep to supportits external debt to domestic, theeby avoiding fur- broad-based privatizations; the financial technologyther exchange risk on its indebtedness. As noted alhady exists in the domestic market; and, if soabove, the deterioratng fmancial health of FEA desired, avenues for retaining a portion of publicthreatens the viability of Fiji's electricity supply. equity for ethnic Fijians are well-established.A meaningfil financial restructuring, with an em-phasis on corectng past rigidities in tariff settingpractices, should be pursued urgendy, so that C PuLIC SECTR INVESMENT PLAINGcommercializaton can proceed.

2.37 A higher level of public investment is2.35 Sinilar to the telecommunicatons com- required to offset past deterioration of physicalpanies, many of the parastal corporations are infrtructr and social services, as well as toideally suited for prnatwn. Not only would provide an expanded range of infrastructure andthis stem the drain on public resources, but it would support services to complement private sectorencourage greater efficiency in the operation of the initiatives. To maximize the development impact ofenterprises. Although present policy calls for deve- such investment, however, it will be important tolopment of a comprehensive corporatizadon frame- choose sectors and projects which promise highwork to precede eventual privatization, experience rates of return. This will require improvements inin other developing countries suggests that this is the public investment planning and implementatonunlikely to produce the intended results. High-cost process. Some aspects of this are discussed below.

19 Vowne 2: FIi

2.38 Investnmnt Alocation. Nearly half of all prerequisite to raising public investment levels to apublic investment recorded in Fiji during the past level sufficient to halt the decline in the quality ofdecade has been used to finance subsidies and public infrastructue and social services and to meettransfers to particular producer groups. Such the changing needs of a more export-orientedtransfers range from equity inections into public private sector.sector corporations to price support schemes forlocal dairy and rice producers. There is little 2.41 Only projects of high priority in key sectorsreason to expect that such expenditures have been of the economy should be considered and analyzed.used to fiance ivestment activity; in most In view of the near-term constraints in planninginstances, the transfer of resources would have been capacity, it would not be realistic for theused either to improve the balance sheet of a Government to prepare a detailed multi-year PIPparastatal corporation or to augment incomes of covering all sectors of the economy. It would beparticular groups of producers. In line with more appropriate to focus on a few high ptiorityGovemnment policy of encouraging public sectors, such as agriculture, education, urbanenterprises to operate on a commercial footing, and sanitation, and transport, and concentrate planningof encouraging private firms to develop in a resources in these areas.competitive fashion, such subsidies and transfersshould decline markedly. Those which remains 2.42 Having established clear sectoral prioritiesshould not be classified as public investment. and appropriate financial envelopes, more emphasisInstead, a separate line item in the Budget should on investment options and strategies will bebe used to explicity identify public grants and required. Given the dearth of officials with sectortransfers. development and investment preparation skills in

Government, well focused technical assistance may2.39 Strategic Planning. Prior to 1987, Fiji had be needed in the short-run. At the same time,prepared traditional five-year development plans to formation of an inter-Ministerial investmentguide economic activity. Reflecting the shift in development team, comprised of individuals withemphasis to a more private sector led growth experience in the technical design and economicprocess, the Government abandoned comprehensive evaluation of public investment projects, may bedevelopment planning in favor of strategic planning one means of focusing scarce manpower resourcesactivities. In 1989 and 1991, Economic Summits on major undertakings.were used to bring toget - representatives from thepnrvate sector, trade unions, and Government to 2.43 Project Revew. Public investment projectsdebate and discuss policy directions for the key need to be carefully screened to ensure that suchsectors of the economy. The economic summit investments remain consistent with the dhection ofdocuments, together with policy announcements in public policy, can be accommodated within thethe annual Budget speech, have served as a valuable macroeconomic framework, and can be sustainedmeans of consultation regarding the changing given likely recurrent obligations associated withdirections of public policy. The switch away from operating and maintaining public infrastructure orcentral planning to a more consultative form of support services. Inter-ministerial screening ofstrategic orientation was appropriate and should be major projects through the Developmentcontinued. Committee, with an emphasis on the adequacy of

project preparation, macroeconomic consistency,2.40 Project Preparon. During the shift in and recurrent obligations, is essential to avoidemphasis towards strategic planning, relatively little premature debate and discussion of publicemphasis was given to the preparation of a solid investments at the political levels of Government.public investment program (PIP). The relative lack Given limited economic analysis skills in theof attendon to public investment reflects a number Government, greater use will need to be made ofof factors including: (i) cutbacks in public trained economists, in various branches of theinvestment post 1987 to help restore fiscal balance; public sector, to scrutinize major public investment(ii) an overhang of projects in the PIP reflecting proposals.past policy priorities; (iii) apparent excess capacityin productive infrastructure and social services 2.44 Recurrent Cost Management. Under-relative to market demand; (iv) a shift in spending on operations and maintenance of physicaldevelopment strategy away from a highly infrastructure and social services has reduced theinterventionist approach in the productive sectors; economic life of Government assets, has resulted inand (v) a loss of skilled planning manpower within a backlog of overdue repairs and maintenanceGovernment following the events of 1987. requirements, and has lowered the operatingRebuilding the public investment options is a efficiency of both public assets and services. Over

vokrw 2: Fi 20

the next five years, major investments in road backlog of overdue ehablitation and repair re-repair will be required to correct part of the quirems. For new investments, careful scrutinybacldog of under-maintained assets. There appears is required to ensure that adequate provisions areto be a similar backlog of maintenance requirements made for ongoing recent costs and staffing.in electrical transmission, telecommunications Improvement in the planning and management ofcabling, and urban water supply delivery systems. recurrent oudays will be required, particularly inLooldng ahead, the next generation of public in- areas such as transport, energy, health, andvestment projects may need to focus on clearing the education.

ENDNOTES

Extra-budgetary appropriations include support for regional scholarships for higher education at the Universityof the South Pacific, payment of F$7 million to wind-up the accounts of FINAPECO, and F$20 million forProvincial development activities. New revenue measures, announced outside of the budget process, includea 20-year tax holiday for Fijian investors.

2 FPIL had a total salaried staff of 1,127 in 1991, or a ratio of 25 staff per 1,000 lines. This staff-per-linesratio is nearly 50 percent higher than that found in other small developmng economies. Other indicators of sub-standard operating performance include a call completion ratio of 70 percent and only 60 percent of line faultscleared within two days.

21 Volume 2: Fi

3: Private Sector Developmentand Sectoral Potential

A. PROMOTNG PRvAE SECTOR these areas to reduce the cost of doing bsins inDEVEOPMET Fiji. In this regard, it would be useful to contime

liberalizing the trade regime, reforming the tax3.1 Private investment remained low (averaging system, rationalizing labor legislation and wage-8 percent of GDP) thoughout the 1980s. As out- setting procedules, simplifying and codifying alined in the previous World Bank Report (July liberalized framework for investment, improving1991). this was due -. a number of causes such as: land use ions and facilitating the renewal of(a) the exhaustion of import substitution oppor- expiring land leases for sugacane farmers,tnities in the small domestic market; (b) the increasing the flow of credit, and providingexistence of stifling govermment controls and regu- adequate physical and human infrastructure.Iations on pivate enterpise; and (c) the pre-emption of certain lines of business by the public Trade Poicysector. The adjustment program begun in the latterhalf of the decade relaxed the constaing effects 3.3 Trade policy can help promote pnvate sectorof regulations and intervention, but this was offset development by reducing the costs of importedby the turmoil and uncertainties introduced by such inputs, as well as by increasing the scope forpolitical events as the coups of 1987. Thus, despite business through export orientation. By the mid-some deregulation, private investment did not rise 1980s, it had become clear that a developmentIt is possible, of course, that it would have declined strategy based on import-substitution behind highlyeven uer in the absence of the reforms. Boost- protective barriers could not support sustaineding private sector confidence and investment will growth and diversification of the economy. Accor-require more than political stability; it will repqure diagly, in 1987, Fiji initiated trade liberalization.a renewed commitment to deregulatory efforts as The Govemment has since dismantled the importwell as the provision of supportive physical infra- licensing system, pUtting in place initally highstructure and human resources. tariffs, which have subsequently been reduced to a

maximum of 40 percent. As of mid-1992, only3.2 ReduIng Cos* of Doing Bshess. Dere- petroleum products, selected dairy products, andgulatory efforts have figured prominendy in the milled rice are under license, in contrast to a totaleconomic strategy followed since 1987. Actions of 48 groups of products under license in 1988.were then initiated to reduce the cost of imported The 1993 Budget Speech reduced maximum tariffsinputs and other goods through lowering of tariffs by five percent and announced that no furtherand lifting of quantitative restrictions, to reduce the reductions would take plame for two years. Thiscost of labor by delinking wages from movements serves to lock-in high cost production and weakensin the cost of living, and to reduce the burden of the credibility of Government's overall reformtaxes by rolling back high top marginal rates and efforts.replacing cascading sales and excise taxes with avalue added tax. In addition, attempts were made 3.4 Much more remains to be done. Tariffsto encourage foreign investment and exports remain high on many products, with a great dealthrough special fiscal and other incentives, of variation in rates within similar product groups.including tax holidays and duty-exemption schemes. Even maximum tariffs in the range of 30 to 40Further steps can and should be taken in many of percent can be considered excessive in light of the

23 VoIe 2: kw

high degree of natural trade protecton that tend to be low, while tariffs on domesticallyremoteness and high transpt c9st afford to produced fwl products are high. As a result, fordomestic producers. As the figumes in Table 3.1 many goods, effective rames of protection far exceedsuggest, may manufactsprovide negative value- the nominal rates. Overall, the trade regime stdladded to the ecomy. Due to anomalies in the serves to discorage acdvity in the export sectors.tariff structure, essentals, such as preparedfoodstuffs, face relatively high tarffs while hxiy 3.5 Customms Predvs. The speed of customsgoods, such as jewelry, are taxed at a far lower clearance is of vital importance for firms whoserate. Tanffs on raw materials and capital goods production processes hinge on meedng fixed

Table 3.1: EmscnvE RATES OF PROTECIoN IN MANUwACTURING, 1991

Value ValueDuty on Added Added Effctdve

Nominal Raw With Witout ProtecdonProtec- Matials Protec- Pmecdon Rate

Industry /a Output /b tion /c Id don ! %(P$'000) % (PF$'000)

Butchering & Meat Packing 986 35.0 0.0 698 492 42Dairy Pmducts 15,869 40.0 0.0 6,289 -20 n.v.a.&/Fruit & Fish 16,235 35.0 0.0 5,126 4,340 18Edible & Coconut Oils 26,188 40.0 0.0 5,331 -583 n.v.a.Rice & FlourMiling 33,416 20.0 0.0 8,338 1,764 373Bakey Products 12,876 50.0 30.0 4,893 25 above 600Sugar 104,768 40.0 0.0 27,596 27.676 0/fConfctdoneiy 4,841 40.0 0.0 2,619 1,265 107Miscellaneous Food Producs 4,600 40.0 0.0 876 -946 n.v.a.Animal Feed 6,638 40.0 0.0 1.721 -926 n.v.a.Non-alcoholie Drinks 4,690 40.0 0.0 2,877 1.009 185Texdles & Clothes 16,793 50.0 7.5 6,044 -1,084 n.v.a.Footwear 388 50.0 7.5 125 -50 nv.a.sawmlfliDg 19,204 17.5 0.0 10,783 8,708 24Funiture & Upholstering 10,032 50.0 7.5 4,136 -672 n.v.a.Paper Products 7,658 30.0 0.0 3,456 1,428 142Priming & Publshing 13,577 50.0 7.5 7,508 1,321 468Paint 6,178 40.0 0.0 1,410 -898 n.v.a.Soap, Toileties & Chem. Prod. 13,996 40.0 0.0 4,213 -930 n.v.a.Miscellaneous Chem. Prod. 2,364 40.0 0.0 1,936 1,046 85Retreading 3,385 50.0 0.0 1.423 -263 n.v.a.Plasties 7,292 40.0 0.0 4,117 1,311 214Cement & Conc. Prods. & Basic

Metal Ind. 25,493 50.0 0.0 14,495 1,943 above 600Metal Fumniture& Fixturcs 747 40.0 0.0 318 21 above600Stuctural Metal Products 15,840 40.0 0.0 4,629 -1,497 n.v.a.Fabricated Metal Prods, cx.

Machinery & Equipment 7,083 40.0 0.0 2,553 -127 n.v.a.Agricultuaal March & Equip. 1,189 0.0 10.0 624 657 -5Repairs & Maint. of Ind. Machinery 2,541 0.0 10.0 773 935 -17Boat & Ship Building & Repairing 6,956 50.0 10.0 1,627 -958 n.v.a.Bus Building 791 80.0 10.0 419 -180 n.v.a.

la Indusny groups are based on FSIC the Fiji Standards Industrial Classification. Production and cost data are based on the 1985 Censusof Industries by the Fiji Bureau of Statistics. Duty rates are actual for 1991.

lb Gross output less own capitd construction and misceUlaneous income.tc Fiscal and Customs duties payable on imports, less excise duty payable by domestc producers.Ld Duty rate on tradeable raw materials other than fuel, where a 10 percent duty mte is applied./e Negative value added.if Sutar milling only.L& Assuming zero tariffs on inputs and outputs.

Volme 2: FWi 24

delivery dates. The customs service is among those order to provide more neutral teatme of importsbrancbes of goveanmen suffering 'from skldl and domestcay produced products. Exports andshortages as a result of the recent upsurge in sugarcane producers were provided a zero rting;emigration. This, together with the icreased a drawback system was designed to offset possibleresponsibilites associated with V. - implemen- tax cascading; and registration of small businessestation, may explain the reportedly t and agricultural enterprises was made optional toand inconsistent application of expot and import minimize administrative burden. A total of 17,000clearance procedures. In such a situation, it may VAT licenses were issued, and early indicationsbe worthwhile considering private sub-contracting suggest that tax compliance and understanding areof customs clearance procedures, as Indonesia has relatively good. The administrative requirementsdone with great success, or of switching to a associated with processing VAT returns aresurveillance system based on self-assessment of formidable; failure to process refund requests in aimport duties with periodic spot checks, as Mexico timely manner, or to identify and correct instanceshas done. A high priority should be attached to of non-compliance, can undermine the credibility ofresolving bottlenecks and delays in customs the tax. In its first half year of operation, VATadministration to ensure that administave revenues are running well ahead of target.inefficiencies do not act to offset improvemen in Furthermore, the Government has approved thetrade policy. hiring of 24 additional audit officers to assist the

VAT division of the Inland Revenue Department.Tax Reforms Special technical assistance may, however, be

required to ensure that appropriate operating3.6 Tax policy can promote private investment systems have been established, that the necessaryin several ways. First, by placing the burden of documentation is simplified, that processing timestaxes on consumption rather than investment: this are reasonable, and that review and auditcan be accomplished, for example, by reducing capabilities are adequate.production taxes (excises, property levies, etc.) andmcreasing investment credits. Second, by keeping 3.9 Exporters were zero-rated on grounds ofbusiness taxes low and their structure simple: this competitiveness, while small farmers were exempt-can be done by having few tax classes and a low ed for reasons of administrative practicality.marginal tax rate. Third, by making the process of Provision of a zero-rating to sugarcane producers,granting exemptions transparent and simple; this while perhaps politically expeditious, opens up thecan be done by announcing clear guidelines for possibiLty of other specia interest groupssuch exemptions and avoiding a case-by-ase demanding special tax treatment. Efforts toapproach, which tends to increase uncertainty and broaden the range of zero-rated goods should betransaction costs for potentidal investors. resisted since this would increase distortions,

reduce revenue potendal, and add to the3.7 A wide ranging reform of Fiji's direct and administrative burden of VAT implementation.indirect tax system was initiated in 1992.Previously, the tax system, while generating a 3.10 Income Tax Simplifiaie. The 1992sufficient amount of revenue, suffered from a lack Budget Speech announced a sweeping set of taxof buoyancy, a narrow base, and a high degree of reforms that: (i) reduced the number of tax bandsdepednce on trade-distorting import taxes (37 from ten to three; (ii) eliminated most personalpercent of total revenues). In July 1992, a broad- deductions; (iii) aligned top corporate and personalbased VAT and a simplified, unified income tax tax rates at 35 percent; (iv) eliminated the basicwere implemented. These measures should tax; (v) raised the minimum tax threshold to exemptprogressively shift the burden of taxes away from a larger shar of low income workers from directincome and production towards consumption, taxes; and (vi) raised taxes on dividends of foreignthereby promoting investment and initiative. By corporations from 5 to 15 percent. At the samereducing di atoy tax treatment between time, sugarcane farmers were brought into thedifferent sectors of the economy and between direct tax net, offsetting a large portion of the taxdomestic and international production, the reformed losses associated with lower top marginal rates. Ontax system will provide a more neutral set of balance, the direct tax reforms are expected toincentives to different forms of economic activity. result in a small loss in revemnes, although broaden-

ing the base and simplifying the system (which3.8 The VAT replaced the 10 percent duty on tends to encourage better compliance) may result inimports and some excises on domestic manufactures a better than anticipated revenue effort. By lower-and tourism relatd aUivities. Higher rates of ing top marginal tax rates, and by unifying topdomestic excise remain on alcohol and tobacco in marginal personal and corporate tax rates, the

25 Volue2: 2WP

Govenment bas made its direc tax system compe- mented through wage councils under a ti tetidve with those in the region. The 1992 Budget form. The wage guidelines were highly detailed,Speech also foreshadows the need to develop a and were designed to cover all maes related tocapital gains tax, so as to provide equal tratment worker remuadon and a wide range of workingto all sources of income. Serious considerion conditons. As a result of tight labor marketshould be given to early implementation of a capital controls, employment growth in Fiji was a scant Igains tax, levied inidally on large corporate percet during the 1980s (while population rose bytransactions and urban property. 2.1 percent); the linkage between wage growth and

productivity was weakened, with the result that3.11 Corporate Tax Exempdens. The major unskilled wages approached levels prevailing inremaining deficiency in Fiji's tax system is the middle income economies, such as Korea; a highhighly discretionary nature of exemptions and degree of administratively enforced variability inpreferential rate treatment accorded to different wages across industries for similar occupationalclasses of investors. Those who export 30 percent categories developed; and public sector wages foror more of their total turn-over are eligible for a unskilled labor grew to between 30 and S0 percent13-year corporate tax holiday. Corporate tax above private sector wages.holidays are also provided for investment in capitalgoods, hotel constuction, minerals exploration, 3.13 In 1992, the Government announced aagribusinesses, agricultual land improvement, package of labor market decontrols including antourist vessel costs, and new development abolition of the wage decrees and a tightening ofindustries. As a result of numerous exemptions and labor law legislation. In the first year of implemen-preferential treatm, the corporate tax has a low tation, the process of wage setdements in a deregu-average rate of taxation but a high degree of lated environment proceeded smoothly. The publicvariation in margina effective tax rates. sector wage awards of seven percent in 1991 andlnenadonal experience suggests that tax holidays five percent in 1992, however, appeared to functionencourage investors to finance investments which as an indicator for wage negotiations in the privatehave only a short-term effect and which front-load sector. Given the magnitude of the distortionsthe capital investment. Furthermore, there is little prevailing in the labor market, it may require seve-reason to believe that tax holidays have been ral years for a greater measure of flexibility to beeffective in atractng capital investment. restored. A combination of public sector wageThroughout the 1970s and 1980s, the Government restraint and continued deregulaton of privateoffered generous tax holidays and concessions, but sector wages will help foster a return to a moreprivate investment levels remained depressed. flexible and dynamic labor market.Experience from other counties suggests that theadequacy of physical infrastructure, the availability 3.14 IndusiW Disputes. At loeedence, Fijiof a siflled labor force, and the degree of market inherited an organized labor market. Trade umionsorientation of public policy do far mor to existd in the formal sector of the economy, withencourage private sector investment than do tax most employees affiliated to the Fiji Trade Unionholidays. In Asia, the trend is a movement away Congress (FTUC). In recent years, the frequencyfrom tax holidays for new investors. Tax holidays of industrial disputes has increased and has resultedwere abolished in Indonesia in 1984; they have in disruption of the sugarcane harvest (1991), do-never been a part of Hong Kong's investment mestic telecommunications (1992), and mining acti-promotion regime; Malaysia and Thailand are both vities (1991). While the direct economic lossesin the process of phasing out tax holidays. from labor disputes have not been very high-ave-Moreover, since tax-free treatment cannot be raging about 16,000 to 18,000 work days per yeareconomy-wide, such treatment cannot be extended since 1987, the high frequency of disputes (68 inpermanenty without distordng the incentive 1990) and the volume of publicity accorded to themstucture. For these reasons, the use of tax reduce new investment and employment creation. Inholidays should be eliminated over time. The the garment sector, the establishment of unions andinitl depreciation allowance, indexed for inflation, a small number of industrial disputes have acted asannounced in the 1993 Budget should be sufficient a disincentive to futher foreign direct investment,to lower the cost of capital investment. particularly by business groups from East Asia.

While crganized labor markets have performed ad-Labor Issues mirably in, for example, improving worker safety

conditions, there are indications that a lack of fle-3.12 Wage Polies. Prior to 1991, the Govern- xibility has restrcted employment growth. A num-ment established wage guidelines, in consultation ber of measues may help to improve the operationwith union and employer representatives, imple- of the domestic labor market, including:

Vohe 2: Fyi 26

* provision of time-bound exemption from * provision of authority to FTIB to issueunionization for selected new export oriented foreign investment licenses and work permitsfrms in mfacturing and tourism; for activities outside of the natural resource

area; and* vigorous implementation of labor laws in the

case of illegal industrial disputes (e.g., Fiji * relaxation of local participation requirementsInternational Telecommunications); and in tourism related services and FDB-financed

investments.* strengthening the arbitration functions of the

Ministy of Labor to ensure that alternative Land for Developmentinstitutional arrangements exist for fairresolution of disputes. 3.17 Land use and regulation is a complex matter,

since some 83 percent of the country's land is to be/nveshMent RgAdons retained by ethnic Fijians (as native land) in

perpetuity, with the remainder being allocated to3.15 Compared to many nations, Fiji's investment freehold (8 percent) and Crown Land (9 percent).regime, while deficient in certain respects, is Despite the non-transferable nature of propertyrelatively favorable. The Fiji Trade and Investment rights, institutions and contracting procedures haveBoard (FTIB) promotes investment in Fiji and evolved to encourage effective utilization of Fiji'soffers a set of incentives (for exporters) including land resources. At present, however, thea 13-year corporate tax holiday, low rates of regulatory regime does not encourage efficientdividend taxation, ready access to foreign utilization of customary lands, nor does it provideexchange, and duty free access to raw materials and sufficient incentive for tenants to undertakecapital goods. The FTIB also participates in necessary capital investment or deliver high returnscommittees with other Government Ministries to to native trustees.ensure that requests for foreign investment licenses,and work and stay permits are processed in an 3.18 The current system of administration andexpeditious manner. The initial reaction of both the regulation of native lands is complex and time-Fijian and overseas investment communities to the consuming. Many Acts impinge on land use, andicentives and streamlined procedures offered by their requirements are often in conflict with otherthe FTIB was highly favorable. Averaging about regulations. These include: the Crown Lands Act,F$30 million per annum for 1980-1985, foreign the Native Lands Act, the Forests Act, thedirect investment increased to an annual average of Conversion of Lands Act, the Land Transfers Act,F$65 milion during 1988-1990. A total of 104 the Land Sales Act, regulations pertaining to specialFTIB investment projects were implemented during regions, the Rivers and Streams Act, the Property1988-1990, three-quarters of which were in the Law Act, and the Local Government Act. Rentalgarment sector. From an infant industry, garment rates for native lands, set every five years by theproduction rose over three years to become Fiji's Native Land Tmst Board (NLTB), are very low andlargest source of private employment and second bear little relation to differences in the marginallargest source of gross export earnings. productivity of the land. Consequendy, low lease

rates confer substantial subsidies on tenants, to the3.16 As noted above, foreign investment interest detriment of ethnic Fijians whom the regulationsslowed appreciably after 1990, reflecting, among are intended to assist. The body administeringother factors, concern over legal teatment. While native lands, the NLTB, imposes heavy charges onthe FTIB has issued ample promotional materils land agreements, and its operations are time-describing incentives available, the credibility of the consuming and cumbersome. Finally, tenurepromotional effort is damaged when foreign inves- agreements are flawed in certain respects. Whiletors learn that many of these incentives must be the most common lease period of 30 years isnegotiated and, in the case of the Tax Free Factory generally adequate for all but long gestation cashscheme (see paras. 3.49 - 3.50), are not protected crops, leases which are transferred during theunder the law. To further facilitate foreign period do not receive an extension. As a result,investment, the following measures should be some tenants are operating under much shorterconsidered: lease periods, which results in a disincentive to

undertake capital improvements and a bias towards* a clarification and legal codification of short-term, quick yielding projects.

foreign investment incentives andrequirements; 3.19 Land Lease Renewal. Between 1996 and

the year 2000, nearly 40 percent of the long-term

27 Vo3w 2: Ff

native leases will be due for renewal. As the ensuring adequate staffing and technical expertise inexpiration period approaches, uncertainty regarding the area of development lending, and partly byrenewal conditions has dampened investment in strengthemng the supervision over the FDB byrural-based activities. An early indication from including it within the supervisory umbrella of theGovernment regarding the terms and conditions of Reserve Bank. Reserve Bank supervision is, inland-lease renewal would ease the concerns of the fact, slated to take place once the Developmentexisting tenants. In princi ale, land-leases shoald be Bank takes on a certain level of deposits. Improvedrenewed for an equaly long period. Lease values performance in a competitive environment wouldshould be based on comparable freehold prices, enable the FDB to expand its lending operations inwith a decentralization of authority to local those areas which would generate the highest longgovernment to implement the pricing and renewal term benefits for Fiji.of land leases. Rates should be adjusted flexiblyand more frequently, with the market value (rather 3.24 Other efforts are underway to reform thethan the unimproved capital value) used as the long-end of the financial markets. A commercialstandard of valuation. mortgage market has developed. In addition, the

Reserve Bank has reviewed the operations of the3.20 An improved legislative framework and near -noribund equity market. Divestiture of theinstitutional base can also ease the operations of the stock market by the Fiji Development Bank and anland market. Land legislation should be easing of listing requirements could help promote aconsolidated and clarified so as to reduce regulatory deepening of the domestic equlity market.uncertainty and minimize disputes. A single set ofland and land-use regulations should be prepared. Infrastructure for DevelopmentIn terms of institutions, the procedures and chargesof the NLTB should be examined systematically 3.25 Infrstructure. The availability andwith the objective of shifting the role of the Board adequacy of infrastructure is a key determinant offrom that of a property manager, to an arbitrator of the viability of private sector enterprise. Heavynative land disputes. investment in infrastructure in the 1960s and 1970s

has provided Fiji with a sound base to supportCredit Supply Issues private sector growth, but this base has been

allowed to deteriorate in recent years through the3.21 The Fijian economy exhibits a moderate lack of attention paid to maintenance and repairs.degree of financialization and is well served by a This, combined with rigidities in tariff setting andnetwork of financial institutions' havig total assets non-commercial management systems, has resultedin 1991 of approximately F$2.6 billion, or nearly in a deterioration in the effectiveness of public200 percent of GDP. Activity in the financial infrastructure as a supporting service for privatemarkets is focused on short-term commercial sector development. Two key areas of publictransactions. Since 1987, the financial markets infrastructure are energy supply and transport.have been characterized by high (and excess) liqui-dity, with real lending rate negative untl mid-1990 3.26 Energy.3 Fiji imports all of its petroleum inand deposit rates still highly negative in real terms. the form of finished products (kerosene, motor

spirit, and other distillates). Fiji's consumption of3.22 The Fiji Development Bank (FDB) is the petroleum grew by 2.2 percent per annrm duringprimary source of credit for development, 1985-90, and is projected to grow by as much aschannelling long term funds into priority sectors, 3.7 percent during 1990-2000. In 1991, the Fijimainly agriculture and industry.2 Its lending National Petroleum Company was established to be-operations are guided by interest rate and credit come the sole importer of petroleum products. Re-allocation controls and have been constrained by a cognizing the importance of maintaining a compe-relatively high share of arrears in its loan portfolio, titive petroleum trading environment, this importpoliticization of lending operations, loss of slflled monopoly was abolished in 1992, at a financial costpersonnel during 1987-1989, and weaknesses in to Government of about F$7 million. While themanagement systems. abolition of the petroleum import monopoly has

decided advantages in terms of product quality and3.23 In line with the efforts to reform the security of supply, better and more transparenteconomy, reform of the FDB should include pricing arrangements will be needed to ensure thatabolition of sectoral credit guidelines and subsidized the benefits from trade deregulation are passed onlending. With FDB operating in a competitive to consumers. To achieve this, the Prices andenvironment, priority should be placed on Incomes Board price monitoring system would needimproving its portfolio performance, partly by to be revised, with pricing formulas based on

Voei 2: PFI 28

externally verified price checks and routine order of approximately F$6 million (in 1990examination of company costaof-disibution data. constant terms) wilt be required to meet demand.

Hydro power has the greatest potential for future3.27 Tecthidcy. The Fiji Electricity Authority energy development. There are over 70 sites that(FMA) is responsible for the generation, have hydroelectric potential ranging from 50 Kw totransmission, and distribution of electrical power in several megawatts, of which about ten sites appearFiji, serving about 72,500 consumers on Vid Levu, to have economic promise. Further investmentsVanua Levu, and Ovalau. In 1990, the FEA had may be required to replace and upgrade outmodedsales of 369 OWb, with the bulk (94 percent) from generation and transmission equipment. Unless thethe hydro-based Viti Levu interconnected system. financial condition of FEA improves, it will beThe electrcal supply system is threatened by the difficult for the corporation to pay its debts andpoor financial performance of the FEA, which in finance needed maintenance and expansionturn weakens the firm's capacity to undertae investment. The consequences of this would beneeded repairs, invest in replacements, and finance higher transmission losses and supply shortfalls,expansion. FEA's financial position deteriorated both of which would add to future generation costsmarkedly during the 1980s, largely as a result of and would constitute a significant impediment tocost overruns on the Monasavu project (F$46 investment in manufacturing, services, and othermillion), revenue shortfalls through a failure to electricity-intensive activities.implement planned tariff increases (F$13 milUion),and increased debt service costs following the 1987 3.29 Trampail.4 Fiji is well-endowed withcurrency devaluation (F$104 million). Each of transport infrastructure, much of it developedthese problems should have been addressed through during the 1970s and early 1980s. Due toappropriate tariff setting policies. Some progress inadequate maintenance and improper use,has ben made in restructuring FEA's finances. In considerable deterioration in the quality of theMarch 1991, FEA reached agreement with the Fiji infrsucture has occurred. The Government hasNational Provident Fund (FNPF) for the responded to this situation by initiating a majorconsolidation of FEA's domestic debt into a single road rehabilitation program based on an assessment15 year loan. In an attempt to reduce the foreign of upgrading priorities. More efficient andexchange risk associated with its outstanding loans, effective utilization of the nation's extensivePEA has undertaken to convert its offshore loans to transport base could be made by betterlocal cuntency bonds. While these measures will infrastructure maintenance, deregulation ofprovide a measure of short-term relief, they transport tariffs, improved cost recovery fromeffectively serve to defer, rather than elininate, heavy users, and an expaniion in international airrepayment requirements. In actual fact, the access capacity.financial distress of FEA is primarily a reflection ofrgigies in elecridly tarff setting. 3.30 TransportMaintenance. Under-spending on

maintenance has shortened the economic life of3.28 Anti-inflationazy objectives have tended to roads, ports, and runways, has resulted in higherdominate the tanff setting process for electricity. indirect costs to users in terms of delays and higherIn August 1991, electricity prices were raised by 10 vehicle operating costs, and has necessitated cosdypercent across-the-board to counter the effects of rehabilitation investments. Routine maintenance onthe VAT. Since then tariffs have not been roadways declined from F$7.5 million dollars inadjusted, despite the fact that FEA's production 1986 to P$6.3 million in 1990, a decline of nearlycosts (debt service, labor, taxes, supplies) have 40 percent in real terms. Assessed maintenanceincreased by more than 10 percent. Electricity requirements, averaging F$4,250 per kilometer oftariffs are still well below long-run marginal costs paved road, FP4000 per kilometer of secondaryof supply. Future tariff setting policy should shift road and F$1,000 per kilometer of earth road,towards a narginal cost of supply basis in order to would imply annual maintenance outlays of aboutensure efficient allocation of energy supplies. This F$12 million to maintain all road networks in goodwould necessitate: (i) regional differentiation in operating condition. In most cases, a shift fromtariff setting; (ii) renegotiation of supply agreements actual to assessed maintenance outlays wouldwith the FSC and the EGM; (iii) restructuring of double the economic life of the roadway. Theconsumer tariffs with service charges based on resulting savings in costs of early renovation andactual usage replacing minimum monthly charges; reconstruction would more than offset the higherand (iv) a series of 'corrective' tariff adjustments to maintenance outlays.5 In recognition of theoffset past under-pricing of electricity. With future importance attached to improving roadelectricity demand projected to grow by 3.5 to 4.0 maintenance, the Government budgeted F$14.3percent per annum in the 1990s, investments on the million for these efforts in 1993. Deficiencies in

29 Volume 2: F#V

mauneane planming and management are being aggressive contribudon to tourism development. Ataddressed under the Second Road Rehabilition the same tme, of the 19 domestic air-stips, onlyprojet. Changes In the incentive system for road six have shown an increase in pasger traffic, theusers will also be needed to complement improved others hav o bady deteriorated, many fail to meetmaintenance systems. minimum safety standards, and some requie

emergency repair. The next generation of3.31 UserFeesforRoadways. Using fuel taxes, investments in tourism, manufacting and high-licenses, and impot duties as indicators of cost value agrictural producdon will require improvedrecovered from road users, it has been estmated access to the markets of North America, Europethat passenger vehicles have high rates of cost and Southeast Asia. Better access and morerecovery and that trucks pay far less than their cost competitive pricing conditions can best beto the road system. The mid-load tmcks, with a encouraged by attractng more international carriersrated capacity of 5-8 tons, pay about a quarter of to Fiji. This, in turn, will require a re-examinationtheir estimated costs in road-related taxes, fees, and of Governuent's policy of restricting landing rightsduties. The particularly low level of cost-recovery to charter carriers and the grantng of fifth-freedomfor medium-load trucks is exacerbated if extnsive ('cabotage') rights only on a reciprocal basis. Inoverloading of the vehicles and their consequent negotiations for air access rights, the Civil Aviationdamage to the road pavement is taken into account. Authorty (CAA) should be careful to distinguishThere is a need to implement a revised scale and between the perceived need to secure benefits andstucture of road-related taxation that will reflect guard market share for Air Pacific and the far morethe considerable incremental cost that heavy important goal of supporing the growth of tourism,vehiles impose on the roads, as well as a need to manufacturing, and other economic activities.raise sufficient funds for road maintenance.Upward adjustment of fees and duties on medium- 3.34 Air Freght. For producers of high-valueto-large trucks would be the first step towards manufactures, perishable agricultual products, andcorrecting distortions in road utilization incentives. fresh sea foods, access to air-freight capacity is

essential. Air freight operations in Fiji are handled3.32 Maritme Tqmport. There are three major by Air Pacific, with capacity effectively limited byports and 60 inter-island shipping origins in Fiji. the cargo carrying limits of flights designedOpeating costs in the three main ports, in Suva, primarily for transportg passengers. The highlautoka, and Levuku, are amongst the highest in costs of air cargo reflect limited carrying capacitythe region. Port infrastructure and vessel caracity and the high costs associated with trans-shipmentare generally adequate for the volume of inter- through Australia and Japan. A proactive approachisland and international cargo. High costs, over by Government is needed to ensure that air-freightand above those resulting from low volumes and capacity constraints do not effectively act to pre-limited back hauls, can be attributed to regulatory clude investment in sectors for which such servicesbarriers to competition in specific services. Limis are essential. Consideration should be given toon maritime transport tariffs, for example, licensing outside operators for cargo services, bothdiscourage private operators from plying outer domestically and internationally. Air freight tanffsisland routes. Restrictions on the use of private should be determined on a competitive basis, withstevedores in the main PAF ports introduce delays Government monitoring used to ensure that capacityand raise the costs of loading and unloading bottlenecks do uot arise.vessels. In the interests of lowering transport costsand encouraging a more efficient pattern oftransport infrastucture utilization, a removal of B. SECTORAL GROWTH POTENTLprice controls on inter-island tariffs and an opening-up of PAF ports to private stevedore concerns 3.35 There is a good chance that the above-appear to be warranted. described strategy will be successful in generating

a higher rate of growth. Such optimism rests both3.33 Air Access. The past decade has witnessed on Fiji's relatively favorable resource endowmentconsiderable investment in air transport-related and growth potential in a wide range of sectors andinfrastructure, most of which has been geared to on the demonstrated ability of its entrepreneurs tooffset the increasing over-flying of the South move fast when the incentives are appropriate. FijiPacific by the new generation of wide-bodied jets. is relatively well endowed with fertile land, mineralThe national carrier, Air Pacific, has returned to resources, and scenic attractions for tourists. Asprofitability, has expanded access into the East elaborated below, this provides good opportunitiesAsian market and, by promoting discount fares in for entrepreneurial activity.selected markets, has begun to make a more

Vohue 2: FlJ 30

3.36 Ag4rd*w. In tenms of employment, from copra, sugar, and a handful of importagdculture is the most important sor in the subsdtites to a wide range of mainly perisableeconomy, with more th 80 percent of Al agiultu commodities. To meet the emerginghouseolds engaged either full- or part-time in crop agricultural extsion challenge, support fomproduction, livestock, and fisheries. Sugar various non-govenmeal organizations is beingdomnats the sector, with just under half of total solicited. Business managmt practices appro-output and 40 percent of employment, Cocont, priate for farm households will have to be Includedgitger, rice, poultry, and beef are other important in extension and education progms, as increasing-agricultural commodities. Over the pas wo ly the farm community wfll have to become moredecades, Government has actively promot, a flexible and market-responsive in its investnentvery high cost, import substimion in irrigated nce, decisions. For example, farm management pro-dairy production, and beef and poultry production. grams have been highly successful in the SinatokaMore recently, emphasis has shifted to high value valley area, where farmers have diversified into afruits and vegetables with promising results. range of fruits and vegetables for both the domestic

and international markets. The shift in agricultural3.37 Future prospects for sugarcane production reseach towards gaer emphasis on high-valueand processing do not appear promising due to two fuits and vegetables is being supported throughfactors: (i) a likely reduction in European market training and technical assistance programs. FurteproLection levels for sugarcane, which would result support in this area may be necessary if Fiji is toin prices 30 to 50 percent lower for Fiji's European have the technology needed to support a wide rangeexport; and (ii) the renewal of approximately 40 of cash crop exports. New rural credit networks,percent of long-term land leases between 1996- supported by the International RFd for Agricultural2000, a prospect which has raised unceries Development, represent an attempt to provide in-among sugar-producing tenant farmers. With vestment finance to small scale fanners.protetion levels falling, price prospects for dairyproducts, poultry, and irrigated rice appearequaly 3.40 Quality control, effective operation of adim. In addition, while copra pnces show some system of grades and standards, and modemn mar-signs of modest recovery, Fiji remains a high cost kedng systems are the keys to development of highproducer of these products. Facing a difficult value agro-exports. Foreign investment will beexternal and domestic environment, the key needed to improve market access and to tap needed

anenge for the agriculture sector will be to marketing technology and skills. The Governmentdiversify into a broad range of higher value crops, can continue to play an important role by workingso that Fiji can take advantage of flexibility and in collaboration with growers and marketers tomarket niches to build a number of small, but develop appropriate sets of grades and standards.profitable, sub-sectors. The quality certification process for perishable

commodities in markets such as the US and New3.38 Good export oppormuities exist to expand Zealand is rigorous and time consuming. A wellnon-traditional agricultura exports such as ginger, functioning system of Government-backed gradessquash, and other vegetables, kava, vanilla, and standards will be needed to ensure that Fijipineapple, paw-paw, and mango. Strng demand enjoys access to these quality-conscious murkets.also exists to supply the tourism industry with abroad range of tropical and temperate fiuits and 3.41 The adequacy of market infrastructure is avegetables. Efforts are being made to meet local second key constraint to development of a broaddemad for high-value agricultural projects through base of high value agro-exports. Unlike sugarcanedevelopment of farming systems in the Sinatoka and copra, producers and marketers of perishableValley. Mindful of the weakening market, the FSC commodities require ready access to modern tele-needs to explore diversification opportmities such communications and transportation facilities. Ofas shifdng production more towards ethanol the latter, cold storage and air freight services areproducts and encouraging growers on marginal essentdal. Further development of rural telecom-lands to shift into other crops. In order to resolve munications and transportation services should takethe issue of land-lease expirations, the FSC is into consideration the changing pattem of ruralengaged in active consultation with the Fijian production.Affairs Board, the Growers' Council, and theNative Land Trust Board. 3.42 The Government is engaged in the fnal

stages of a series of large-scale irrigation projects3.39 The system of agricultural research, designed to support imgated rice and sugarcaneextension, and education will likewise require a cultivation. It may be that the fmancial viability ofmajor reorientaion as Fiji's agricultural base shifts these projects can be improved by identifying

31 Voke 2: oft

alternative uses for these lands. Identification of water fisheries, it may be appropriate to providecrop diversification alternatives on irrigated sugar greaer emphasis to rseach and outreach activitiesand rice lands would require furher research for small scale fisheries development.efforts and may require some investment to alterwater management systems. Furereseach and 3.46 Fo0sly. During the early 1960s, Fijiextension efforts should also be targeted to mounted an ambitious program of reforestation withstrngthening traditional agriculture. pine. These plantations are now coming into

production and should support a trebling in output3.43 Despite the fact that copra production and exports from F$25 million in 1990 to nearlyregistered a sharp decline during the 1980s, F$75 million by the year 2000. Other importantcoconuts continue to remain an importan: food and developments include the growing stock ofindustrial crop for a large number of rural mahogany, produced by the Ministry of Forestryhouseholds. While copra prices are expected to (MOF) on previously logged areas.record a modest recovery in the 1990s, it isunlikely that production will be nearly as profitable 3.47 As the emphasis in the sector shifts fromas it was in the late 1970s. Still, as a source of plantation management to logging and processing oflocal nutrition and fibre, coconut production wood products for the domestic market and export,remains very important. As such, a modest level of it will be important to ensure that sustainableresources should continue to be allocated to resource use practices are encouraged and thatrehabiliation and replanting efforts, with commercial practices are followed in processingGovermment participation limited primarily to the and exporting. In support of these objectives, itsipply of good quality planting material. may be timely to consider: (i) preparing a

mandatory set of logging practice requrements; (u)3.44 FPlries. The fisheries sector makes an privatizing the more commercially oriented publicimportant contribution to nutrition and as a source sector wood processors, such as Tropik Woodof income and export earnings. Canned and frozen Industries Limited (TWIK); and (iii) providingfish (primarfly tua) provided F$28 milion in extension advice to the many small mills on qualityexport earnings in 1991, more than doubling since control and export standards. It remains important1985. Reef and freshwater fisheries have recorded for Fiji to maintain its excellent reforestationvery strong growth, with total exports rising from record, both in its management of pine and inunder F$1 million in 1985 to more than F$8 million mahogany plantations. Future reforestationin 1991. Government is directly involved in the activities can be financed, in part, using thefisheries sector through its equity holdings in proceeds from tLe sale of mature plantations. SomePAFCO and the IKA Corporation. Outside of government support, however, may be needed tocanning, however, the private sector dominates, ensure a continuing emphasis on reforestation.both in deep-sea fishing and in the artisanal Although the Fiji Pine Commission has beensegment of the market. corporatized, it is doubtful that replanting activities

would be sufficiently profitable for a fully private3.45 It is estimated that Fiji's total commercial sector organization. The large, positivecatch of tuna, at about 4,000 tons per annum, is environmental externalities associated withabout half of -he total sustainable yield. reforestation would argue for contnued publicOpporunities to expand tuna fishing appear support to replanting programs.promising, and an increase in canning capacity byPAFCO should facilitate increased production. 3.48 Manufadturing. As a whole, the manu-Even more promising are the market for high-value factring sector is estimated to contribute about 12yeliowfm tuna-which is exported in fresh form for percent of GDP, with roughly a third provided bysashimi, and prospects for development of prawn, the sugar industry and another third by productionseaweed, crab, and giant ciam aquaculture and of textiles and light manufactures for export. Themariculture ventures. For each of these activities, balance is accounted for by a small range ofthe main constraint lies not in production, but in domestic consumer goods, fish canning, timber andproduct handling, quality control, and access to copra mills, and other small agro-processingcold storage and air-freight facilities. Private industries. About 22,000 persons are employed ininvestment in cold storage and handling of fresh the sector, with just o,ver half involved in labor-fish would overcome an important hurdle to intensive garment manufacture. Over the latter halfdevelopment of these products. Future public of the 1980s, the share of value-added ininvestment activities are focused on expansion of manufacturing provided by sugar processing hasPAFCO canning iperations. In light of the declined, offset by a rise in output from the non-important contribution made by artisanal and fresh traditional manufactures. In 1991, garment

Volume 2: IV 32

exports, valued at F$89 million (net of re-exports) make this segment of the economy very sensitive toaccouted for a fifth of all merchandise exports. Fiji's competitiveness vis-a-is other countriesOtber non-traditional exports accounted for a competing for the same range of export markets.further 7 percent of total exports in that year. Fiji's small size, English language pvalene, and

relatively pleasant living environment provide it3.49 The introduction of the Tax Free with a certain level of advantage over otherFactory/Tax Free Zone (TFF) scheme in 1989 manufacturing investment locations in the region.provided a major boost to development of export As Fiji cannot be competitve on labor costs ororiented manufacturers. As of the end of 1991, a transportation with many of the East Asian pro-total of 357 firms had been granted TFF du:ers, the main focus of export manufacturing willconcessions; 120 firms were in operation; have to be niche-oriented, with a heavy emphasisemployment had been provided to 11,381 persons; on flexible adaption to changing tastes and pre-and a total of F$167 miUlion had been invested ferences. This implies that Government's roleduring 1988-1991. Contrary to initial expectations, should be one of providing a supportive regulatorynearly half of the TFF factories are Fijian owned; and policy framework-diet intervention would15 percent are Fijian joint-venures and another 20 stand little chance of success.percent are owned by Australian and New Zealandinvestors. 3.53 Tourism. Tourism is a large and well-

established private-sector industry in Fiji. With an3.50 Since 1990, investor interest in the TFF esfimated 260,000 visitors in 1991, tourism contri-scheme has begun to wane. A total of 84 projects buted 13 percent of GDP, brought in nearly a quar-were approved in 1991, but only 6 were ter of foreip exchange earnings, and providedimplemented. During the first half of 1992, only 3 employment (directly and indirectly) to 24,000TFF projects were implemented, compared to more persons, or an esimated 10 percent of the totalthan 50 in the first half of 1989. The factors labor force. As of mid-1992, there were 206 hotelsresponsible for the slowdown in TFF investment in Fiji, with a total bed capacity of 6,369. Majoractivity are symptomatic of the more general source markets for tourism include Australia (33.4constraints facing the manufactring sector as a percent of visitors), New Zealand (12 percent), thewhole, including: (i) a diminution of cost USA (12 percent), and Japan (11 percent).competitiveness due to rising wages andappreciation of the Fijian currency vis-a-vis the 3.54 Although Fiji is a major tourist desdnationAustralian and New Zealand currency; (ii) lack of in the South Pacific, its share of tourist arrivals inaccess to land suitable for industrial development; the Asia-Pacific region is less than 1 percent. Tou-(iii) the erosion of preferential treatment in rist arrivals in this region are projected to increaseAustralia and New Zeald as those nations reduce by 10 percent per annum during the 1990s, nearlytrade barriers; (iv) limited access to and high cost twice as fast as growth in all other regions com-of air cargo space; (v) difficulties in meeting bined. Fiji could double the number of touristproduction schedules due to time-consuming arrivals by the end of the decade-as is proposed bycustoms procedures and periodic labor disputes; and the Ministry of Tourism-without increasing market(vi) political uncertainty. share in the region.

3.51 Government has initiated efforts to overcome 3.55 Since 1989, visitor arrivals to Fiji havethe industrial land constraint by supporting develop- tended to be relatively flat at between 250,000 toment of an industrial zone in the Suva area A 270,000 per year. The slowdown in growth in visi-private concern is developing another such zone tor arrivals is related to recessionary conditions innear Lautoka, which will be able to draw on excess Australia and New Zealand, the liberalization of airport capacity in that area. To enhance competi- travel (and subsequent reduction in domestic traveltiveness, the Government has widened coverage of costs) in Australia, and the relatively high cost (bythe accelerated depreciation allowance in the 1993 regional standards) of middle- to up-market sun-Budget. Government is also investing heavily in and-surf holidays in Fiji. More generally, factorstrade promotion and vocational training to lower that constrain expansion of the tourism industry insearch and manpower costs. Fiji include: (i) high costs associated with inter-

national standard hotel construction; (ii) limited air3.52 In manufacturing, it is very difficult to access to Europe and North America; (ill) diffi-predict which area of activity will attract the next culties in securing land for large scale hotelwave of investment. What is clear, however, is projects; and (iv) a lack of variety in the tourismthat the narrow margins and relatively low fixed- product, due to the paucity of secondary tourismcosts of the export oriented manufacturing firms activities.

33 Vome 2: FIJ

3.56 To regain the momentum in visitor arrivals scale tourism resorts is acaly being developed.and tourism revenue, Fiji will need to improve One means of encouraging investors to do so wouldcostompetitiveness, expad provision of middle t, be to levy a relatively high tax on unimproved landup-market accommodations, broaden air links to that has been zoned for tourism development pur-North American, Southeast Asian, and European poses. Companies would then have an incenive tomarkets, and support development of a broad range develop or forfeit their lease-hold rights to the land.of secondary tourism activities (village tours,cultural activities). The Ministry of Tourism, in 3.58 Minag. The mining sector is dominated bybroad agreemnent with the objectves outlined above, production of gold at the Emperor Gold Mines athas fornulated a policy statement calling for Vatukoula in Viti Levu. The gold mine employsGovernment to undertakce a great number of ini- 1,200 persons and is a major source of income intiatives including, inter alia, improved marketing of Viti Levu. Since 1988, export revenues of goldthe tourism product, broader air access, provision have declined from F$59 million to F$26 million,of support to small enterprise investment in cultural resulting from a fall in both production and prices.and heritage sites, upgrading of training facilities in Part of the reason for the fall in production in 1991the Hotel and Catering School, development of a can be attributed to protracted labor disputes at thetourism coastal policy for environmental preser- mine.vation, promotion of eco-tourism, and continuedprovision of a supportive policy environment for 3.59 A major exploration project in Viti Levu ishotel investors. As to the latter, the proposal by scheduled for completion in 1993. This projectthe Ministry of Tourism to consolidate the various, should provide valuable data on mineral resources.non-automatic incentives offered to new tourism To facilitate further development of mining pro-investors in one legal act is deserving of support. jects, h will be important for Fiji to have in place

a mining law that clearly specifies Government po-3.57 During the past two decades, a number of licy in terms of equity participation, tax teatment,large tounsm hotel complex projects have been and remuneration to local landowners. The existingapproved and land has been provided without any arrangements with the gold mine, having been ne-actual investment taking place. For the tourism gotiated on a one-off basis, do not provide a soundindustry in Fii to grow, it is essential that new basis for future operations. Government inter-investment in international-quality resort infra- vention may also be required to help companesstructure take place. In fact, a great deal of prime secure land rights and wo ensure that harmonioustourism development land has been allocated to relations between land owners, the work force, andmajor hotel concerns but, outside of the Denerau the mining compa'y are maintaind. In addition tocomplex (which is far behind schedule), there is gold and silver, marble and copper resources havelitde actual investment. The Government should been identified as possible candidates fortake action to ensure that land allocated for large- development.

Veoi 2: FIJ 34

ENDNOrES

This is headed by a Reserve Bank and includes 5 commercial banks, I development bank, 1 merciant bank,1 finance company, I unit mtust, I housing authority, 39 land purchase and housing societies, 8 insurancecompanies, I provident fund, and 529 credit unions/societies.

2 Estblished in 1967, the Bank is a wholly government-owne institution, whose sources of funds includeborrowing from other nonbank finacial intermediaries, foreign borrowing, and equity injections from theGovernment. In 1990, FDB assets totalled F$ 153.8 million. Although FDB registers small annual operatingprofits, it has for a number of years been the recipient of the largest amount of budget support among thepublic entides, averaging over F$6 million annually from 1987.

3 Tbis secton is based on World Bank, Fji: Issues and Options in the Ener8y Sector, Report No. 10441-EAP1992.

4 This secton is based on World Bank, Fii: Transport Sector Survey, Report No. 10543-EAP 1993.

Underspending on outer island jetty maintenance (by the Public Works Department) has similar consequencesbut equis far less incmen finmcing to correct. During the second half of the 1980s, annual PWDexpenditure for small jetty financing equalled F$26,000 per year compared to an assessed requirement ofF$40,000 per year.

35 Ve wgw 2: FUi

4: Human Resource Development

A. LABOR FORCE DEVELOPMENT the population growth rate returned to more normallevels, at 1.4 percent per annum.

4.1 At the time of Indepedence, Fiji's socialinstte was highly developed, as was 4.4 Population forecasts vary widely withreflected in relatively high literacy rates (78 percent estimated growth rates ranging from 0.7 to 1.9of the adult population) and high participation rates percent for the decade to the year 2000. A mid-in primary (95 percent) and secondary schools (60 range forecast would imply that the total populationpercent). Population growth and infant mortality would reach 860,000 by the year 2000, an increaserates were moderately high, at 1.9 percent per of nearly 20 percent in the course of a decade.annum and 33 per thousand live births respectively. Much, however, would depend on the magnitude ofThe distribution of education and health care emigration, which, in turn, is closely related to thefacilities, however, had a decided urban bias, degree to which ethnic conflicts are resolved.2

contributing to lower levels of social indicators inthe countryside. 4.5 Labor Force Outlook. The work force is

estimated at about 250,000 persons and is4.2 Following Independence, the Government increasing by 12,000 persons per annum. Sinceresponded to the disparity in access by investing 1987, the formal sector has provided employmentheavily in both rural and urban health care and for about 4,000 new entrants to the work force eacheducation facilities. Public expenditures in year, enough to supply work to only a third of alleducation peaked at 22 percent of total government new job seekers.3 Even so, this represents aoutlays in 1985 before declining to 19 percent in considerable improvement over the employment1992. This excludes the 12 percent of total situation which prevailed in the first half of theeducation spending that is allocated to the 1980s, when growth in formal sector employmentUniversity of the South Pacific (USP). Health came virtually to a halt.expenditures increased steadily, from 6.5 percent ofpublic expenditures in 1981 to 10.4 percent in 4.6 Skill Shortages. Emigration, primarily of1984, and subsequently declined to 8.1 percent in Indian descent, which has been biased towards1992. As a result of heavy public and private skilled individuals, together with development ofsupport to health and education, Fiji's social new industries and tourism facilities, has resulted inindicators witnessed a dramatic improvement in the a shortage of particular categories of skilled labor.decade ending in 1991 (see Table 4.1). With a It is estimated that 42 percent of those inrelatively broad-based and well-developed system of administrative and managerial positions prior tosocial services, the future demand for such services 1987 have emigrated, together with 17 percent ofwill be closely related to demographic and labor clerical workers, 14 percent of sales workers andmarket developments. 13 percent of professional and technical workers.

To place the loss in perspective, the annual4.3 Demographic Outook. Emigration and emigration of professional and technical workersincreasing use of family planning techniques have averaged 550 per year, more than twice the totala considerable influence on Fiji's demographic output of all Fijians (250 persons) per year fromoutlook. The Fijian population is relatively young, USP. Over the period 1987-1990, 61 percent of allwith 35 percent of the total population below 14 accountants, over 30 percent of all typists andyears.' During the period when emigration was computer operators, 20 percent of all doctors, 10the most severe (1986-1990), the Fijian population percent of the skilled tradesman, and 25 percent ofgrew by only 0.7 percent per annum. Thereafter, all tool makers and fitters left Fiji. More

37 VoIam 2: F#i

Table 4.1: SOCIAL INDICATORS, 160-1991 La

Indicator Units 1980/81 1991

Population growth rate perment 1.9 1.4Crude birth rate per 000 28.0 25.0Crude death rate per 000 5.8 5.3Infant mortality rate per 000 32.8 19.7Life expectancy at birth

-Male years 60 61- Female years 63 65

Population per:- Doctor persons - 2,500- Hospital bed persons - 420

Net enrollment ratios-Primary percent 94 97- Secondary percent 60 69- Tertiary percent 3 4

Adult literacy percent 70 87

La Or most recent esdmate.

Source: Government of Fiji, Statistics Office.

genay, about 35 percent of all Fijians attining is especially true for teachers and health carea post-secondary degree are now employed professionals, who are needed to supply socialoverseas, as noted in the World Bank's report on services to the population at large.4 Third, thePost Secondwy Eduaon and the Labor Mare fisal burden of providing education and health care(1993). Given obvious capacity constraints in the is an already high 30 percent of the recurrentdomestic education system, both the Goverment budget, yet unit costs of educadon and health caread the private sector resorted to a mixture of in- are expected to rise rapidly as demands shiftservice training and hiring of expatriates. In 1991, towards a greater emphasis on secondary/vocationalfor example, there were 225 expatriates employed training and curative health care.in the civil service and 664 expatriates employed inthe private sector, for an average of about 2 percentof the domestic work force. The small share of B. ISSUES IN EDUCATION SERVICEexpatriates employed in the Fijian labor force is DELVERYsurprising, coming on the tail of a large-scaleupsurge in out-migration of skilled workers. This, 4.8 The education system in Fiji consists of ahowever, can best be explained by the strong base large network of non-governmental primaryof general skills in the labor force and the rapidity schools, offering education from grades I to 8, andwith which on-the-job training has been able to secondary schools, offering education from formsovercome loss of trained personnel. 3 to 6. In the non-government schools, the

Government provides the teachers, curriculum, and4.7 Barers to Service Delivery. Three factors most of the school supplies. The community, orhinder the efficient provision of social services. non-government group, provides the physicalThe fis is geography. A significant proportion of facilities and 20 percent of the teachers' salaries.the population resides in small villages, scattered In addition, there are 25 multicraft centers and 10across many small islands. Second, many of those special vocational youth training centers as part ofin the work force are under-skilled for the positions the Government-operated segment of the secondarythey hold or operate, without adequate materials school system. At the tertiary level, there is aand facilities to provide good quality services. This range of insdtutions including: (i) 4 teachers

Voume 2: PF 38

colleges; (ii) the Fiji Insdtite of Technology; recurren cost implicans of impoig teacher(di) te Fffi School of Medicine; (iv) the Ffi q ns, expding school accs, andNuring College; and (v) the University of the providing additional vocational eqpment.South Pacific. In addition, a number of overestaining opportnties are provided through donor 4.12 EdWaden FYaadng. High levels of costassistance and-to ethnic Fians-through financing recovery in primay and secoday traing,provided by the Fijian Affairs Board. together with conseable community participation

in school constnirtion, ae notable and laudatoxy4.9 The stated objective of Government is to features of the Fijian educatio system. Indeed, soprovide twelve years of education for every child. importa are these feaues that carefulTo do so, however, would require both an consideration must be given to ensurn that publicexpansion in secondary education facilities and a sector auions in this sector do not displace orreduction in the high drop-out rates for ethnic discourage local community and private iniatives.Fiians. Rather than focus education policy on Education's budgetary requirments, however, areuniversal access to twelve years of training, it may very large and are bound to increase as a greaterbe more appropriate to upgrade the qualit of mber of students receive secondary and post-existing services. To combat the problem of sub- secondary trainig. This underscores the need tostandard achievement and high drop-out rates improve efficiency in the use of public sectoramong rural, ethnic Fijians, the Government may financing by:wish to consider the following initiatives:

* greater use of student loans and partdal* provision of inital primary instruction in scholarships for government-supported post-

local languages to provide a greater sense of secondary training;relevance;

- movement totr;ds market demnnined fees* improved provision of tetbooks and class for publicly owned post-seonda trainiag

materials in the rural areas; and insttes. Such institutes should be allowedto rein a high proportion of these fees so

* provision of intensive trang for prinmary that services offered can be better tuned toand secondary school teachers to enhance the perceived needs of the students;tahng quality.

* increased use of multi-grade teaching,4.10 Vocaional skill shortages are another area of particularly in rural areas;concern. In order to meet the challenges here,further options should be considered, inter alia: e consolidation, where scially feasible, of

highly uneconomic schools with very low* provision of modern equipment and student/teacher ratios;

mnanagement autonomy to the Fiji Institute ofTechnology; o the contiuton of the 20 percent (of the

teachers' cost) fee for schooling both to* improvement of existing voational programs lower costs and to encourage community

in secondary schools in order to transform participation in the supervision of teachers;these into true multicraft centers that providepractical skills for the bulk of the secondary * reduction in the different layers ofschool population-or alternatively, the adnistration and supervision within thecreation of a few vocational boarding Ministry of Education; andschools; and

* a decentulization of procurement and some* inmproved provision of vocational and aspects of curriculum development

agricultural traiDing in rural schools so as to responsibilities to school teachers and schoolequip students with skills that can be applied administrators.in their own communities.

4.13 Looking ahead, a combination of expenditure4.11 Preparation of a strategic plan for the saving and efficiency-enhancing measures willeducation sector is under way in light of the size allow Govemment to continue to maintainand scope of the investments needed to realize the widespread access to primary and secondaryaforementioned initiatives. In formulating such a schools, while improving the quality and relevanceplan, careful consideration should be given to the of the traiing provided.

39 Voame 2: ;

C. IssUEs iN IHELMT SgMRcs DELVEnRY 4.17 Chaning morbidty patens pose new.. I .be* can to te h came system, and addrsing

4.14 The health system in Iji is provied by a tem is likely to requie addiotin fnancia andmix of public and prva sector providers. The human resources. Specificaly, the morbiditypublic healdth system coi8sts of a network of 95 profile is shfting towards a great inciden ofnursing stations, 53 heath atons, 16 sub- 'lifesyle' relatd diseas (e.g. diabets, obesity,divisional hospitals, 3 divisional hospitals, and 3 and heat disease). An upsge in traffic accidentsspecialized hospitals. The base level services are has aLso contributed to changing car requiemet.provided by district murses, who form the first level The F;jian heath care system is designed to addressof coacttough se centers and health sos. these problems through provision of a range ofArea medical officers are responsible for the curative care services. Despite the existce ofsupervision of district nurses and opeate from sub- ample oppormies to modify behavior (and hencedivisional hospitals and area medical offices. reduce costs) through preventative programs,Patiets requing specialist care are referred to relatively little is being done in this area. Shiftingdivisional hospitals. In 1992, the Ministry of the focus from treadng lifestyle-related diseases toHealth bad a total of 2,731 established staff and an preventing such dieases is another high priority foradditional 1,045 casual employees. This included the reform of the health care system.provisions for about 300 doctors, 60 medicalassistants, 1,600 mrses, 600para-medical staff, and 4.18 Specific initatives that could contnrbute toalmost 200 admisative staff. The Government the achievement of the objectives outlined abovework force is augmented by a network of private include:physicians and pharmacist, and by more than1,000 community heth workers and traditional * Striy enforce referral requirementsbirth attendants. through front-Ine care providers to reduce

the use of hospital facilities.4..15 Although the public health system providesfor a phased refemrl system, many patients go 0 Increase fees for curative caredi y to hospitals for front-line care. As a result, servic-cet fees provide less than 3the cost of providing healdth care is skewed towards percent of costs-with fee exemptionshigh unit-cost hospital based services. Budget allo- provided to low income households. Suchcations and stff deployment policies reinforce this fees should be retained at each health facilitywith a relatively high proportion (70 percent) of the and ear-marked for use in maintenance andhealth budget allcated to hospitals and only 30 supplies.percent to other acdvities. In total, it is estimatedthat 87 percent of public expenditrs are allocated * Promote the use of private health insuranceto curative care and only 13 percent to primay and coverage to provide financing for curativepreventive care. Furthermore, two-thirds of aLl care services. The large pool of publicdoctor positions, and more than half of all other sector and parastata employees should behealth cae staff are concenaed in the three required to obtain coverage from privatedivisional hospitals. Correcfting the curative bias in health insurance companies.public expenditur, and thereby ecouging amore effective utilization of health spending, is a * Gradually shift public sector financing fromhigh priority for the health care system. curative to preventive and prinary health

care services, with the aim of providing at4.16 During the past 8 years, real expenditures of least half of all health expenditures to suchthe Ministry of Health have shown a steady decline. programs by the year 2000.Although the budget has declined, the number ofemployees has not. As a result, the wage bill in * Develop a manpower plan to guide thethe Ministry of Health approaches 80 percent of replacement of doctors and nurses losttotal outlays, with continued cutbacks in drugs, through the post-1987 migration.transport allowances for staff in rural areas,equipment, and maintenance. As a result, the * Provide greater management autonomy toquality of the medical services provided has suf- hospitals, introduce private sector repre-fered, and the physical assets of the medical system senmations on their Boards, and allow thehave shown steady signs of deterioration. Correc- hospitals to retain and utilize the fees andting the imbaknce in public sector expendiur, charges they collect.between wage and non-wage outlays, is anotherpriority for improving the health care system. 4.19 The recent establishment of a planning unit

Veome 2: Fl 40

within the Miistry of Health provides Govenmen eligible target group and appars to have plateauedwilh the opportunity to -reassess the strategic after the aggrsve caagns conducted in thedirection and priorities of health care interventions. 1970s and early 1980s. An increase in theIn its first year of operation, the planning unit has coveae of family planning proga wfll bemade good progress in developing a set of thematic needed if Government is to be successful inobjectives for the different parts of the Ministry. achieving it's target population growth rateThe challenge, however, will be to shif the focus (excluding emigration) of 1.9 percent per annum.Of planning efforts from projects and programs to Wider acceptance of family planning techniquessector strategies and policy formulation. Difficult would also convey important benefits in terms ofpolicy decisions will need to be made to redress the the health and well-being of women and children.curaive and large-hospital bias of the existing Better birth spacing and improved infant nutritionmedical system. There is, however, the very real are likely to occur as family planning teciquesdanger that, unless improvements in the public become more commonly adopted. A joint effort byfinancing of primary and preventative care and the Ministry of Health, non-governmentalcost-recovery for curative care occur, the quality of organizations, and community groups is required tomedical services will cotinue to decine, and the improve contraceptive awareness, to improve accessvery strong primary care base that Fiji has to birth control techniques, and to mobilize localestablished may erode. level support for family planning. Acta

budgetary costs of such measures are likely to be4.20 Famely Plaainxg. While Fiji's record in relatvely small since Fiji may have access topublic health services is generally superior to that external grant financing of such programs. Theof other natons at a similar income level, progress gains to Fiji from a slowdown in population growthin providing family planning services lags behind and an improvement in the health of women andthat in many similar countries. Family planning young children will more than outweigh the costs ofcoverage in Fiji is at about 27 percent of the a more active family planning program.

ENDNOTES

Only 4 peent of the population are above 65. Hence the dqeendq ratio is moderate at 0.7.

2 Net departures from Fiji during 1980-86 averaged 5,000 per annum and for the period 1987-90, 11,100 perannum. In 1991 and 1992, emigration slowed to about 6,000 per annum. An estimated 88 percent of thoseemigratig have been Indo-Fijian. Two-thirds of the emigrants were males, implying that future familyreunification could cause a further upsurge in out-migration.

3 New employment is growing at about 1,300 jobs per annum. Retirement and worker attrition account foranother 1,100 jobs and emigration for a further 1,600.

4 For example, less than 1 percent of all primary school teachers have diploma or certificate qualifications,while 70 percent have completed only form 5 or below.

41 Vokne 2: FJi

S: Growth and the Environment

A. iNTRODUCHION tation programs are the primary option. Moregeneraly, huwever, soil conservation techniques

5.1 For more than two decades, development need to be incoraed into routine agricultualplans in Fiji have set forth an ambitious range of extensionprograms. Improvingfarmers' awarenessenvironental policies and strategies, of which and knowledge of conservation techiques is centarelatively lite has been actively implemented due to the development of more sustnable farmingto institutional constaits. To date, pressures on systems.naura resources have had relatively little bearingon Fiji's growth process. Culdvation on abundant 5.4 Water PoUlon and Sewerage. Wateragricultural land, development of isolated beach pollution is becomig a serous concern in certainsites for tourism, and a modest scateing of urban centers. About half of the urban populationiudustridal activity did reladvely litde harm to the is connected to sewers (Suva 35 percent, Nadinatral environment. This situation is changing as 70 percent, Lautoka 90 percent, Sigatokathe nature of economic activity in Fiji evolves. A 20 percen, Nausori 10 pernt, and Labasaswitch to higher value cash crops has resulted in 50 percent). In Suva, most houses have septicerosion and land degradation; increased urban tanks, but the soils do not allow the effluent tosettlement has overloaded waste management properly percolate. In the peri-urban settlement,capacity; and industrialization and intensive relatively few houses have septic tanks; there isfisheries activity are threatening coastal resources. thus abundant seepage of unteatd and pardy

treated wastes into all local streams. Various5.2 Future eomic acvity wil lead to sudies suggest that levels of sewage bacteria andincreasing competition for the use of natural other polutants are in excess of WHO standards,resources. At the margins, new resort areas, particularly near Suva but also around the othercommercial fisberies activity, cash crop agricul- main towns and i the Rewa and Ba rivers. Thankture, industrialization and urban development will to the use of modern water treatment facilities,be competing for an increasigly scarce supply of coastal pollution poses litde risk to urban drinkingarable land, unspoiled vistas, and clean water sup- water supplies. It does, however, result inplies. Managig these trade-offs will require a contamination of the reef fish stock, partcularlyconcerted approach to the development and enforce- shellfish, which are harvested for export and forment of envinental policies designed to enhance growing visitor demand.prospects for sustainable growth and development.

5.5 Thtere are few long-range solutions tourban sewerage disposal problems other than the

B. RESOURCE MANAGEMENT CHALLENGES development of modern sewage collection andtreatment facilides. For the Suva area alone, the

5.3 Soel Ewsion and Land Degdadion. Public Works Department estimates tuat the costs ofDuring the past decade, agricultural settement has a modern sewage system, based on conventionalexpanded onto highly erodible, steep hillsides. technology, are as much as F$60-70 million. ThisSugarcane and ginger production on such lands must be set against the increasing costs of not doinghave contributed to a loss of top soil and anyding, as measured by lost oppormnies forsaeimentation of key waterways.' In the Ba coastal seafood cultivation and possible contami-valley, some 12,000 ha of sugarcane land and nation of beach resort sites. In the near term, the35,000 ha of grassland are badly eroded. In Rewa, Government may wish to consider strictly banning4,000 ha under ginger are reported to be badly the coLection of seafood from polluted coastaldegaded. In the badly eroded areas, refores- waters, routine septic tank pumpig in and near

43 Vdiw 2: FVi

Suva, regula and ependen water quality and are widely ignored, and local governments have nopoLuta monitoring, and enforcing existing authonty to set waste collecton fees or imposepollution laws more rigorously. Over the longer fines for improper solid waste disposal.term, deveopment of moderm sewage systems inthe main urban areas wil be required. As these 5.9 As Fiji's urban areas become increasinglypromise to be costly undertakdngs, a high priority polluted with solid wastes, the nation's potential toshould be attached to developing appropnrae attract tourists becomes increasingly jeopardized.municipal institutions capable of effectively More effective cooperation between the central andmanaging such systems. A system of user charges municipal govemments is needed to improve solidwill also be needed, both to recover costs and to waste disposal standards. Central Governmentencourage public scrutiny of service quality. should take immediate steps to locate and procure

alternative waste dump sites; efforts should then be5.6 Indusia Pollion. With litde effective made to remove the overflow and provide a soilregulation, industrial pollutants have become a and grass cover for the existing dump sites. Togrowing concern. High levels of pollutants discourage lax disposal practices, the municipalassociated with industrial growth include heavy governments should be given the authorty tometals contaminants such as lead, copper, impose fines for solid waste polludon.chromium, and arsenic. Caustic soda and largeamounts of effluent high in 'bh.ogical oxygen 5.10 Protected Areas and Deforestaion.demand' (BOD) are found near the sugar mills; There are about 750,000 ha of indigenous forest,unted fish cannely effluent and tin-plate residue represnting 41 percent of Fiji's total land area ofhave been found in Levuka and Lami; cyanide has 1.83 million ha. Much of Fiji's natural forestbeen found near the mining operations; sulphur provides a home to the nation's unique flora anddioxide and particulate air pollution levels are high fauna.2 Deforestation continues to occur at anear the cement factory; and tributyl tin oxide has moderate pace. Some 90-140,000 hectares ofbeen identified in high quantities near the marine natural forests have been converted to non-forestbay areas of Suva and Lautoka. Overall, it is use since the 1960s. Most of this is due to loggingesdmated that 3,000-6,000 tons of hazardous wastes for commercial sales and fuelwood use. Offsettingare being produced in Fiji annually, very lttle of this, however, has been the successful establishmentwhich is adequately disposed. of pine wood plantations.

5.7 Exisdng legislation governing urban 5.11 Efforts are being made to improve forestpollution is adequate but rarely enforced. More management practices. A National Code onrigorous enforcement of existing industrial pollution Logging Practices has recendy been promulgatedlegilation, together with an upward revision of and is designed to promote voluntary compliancefnes and penalties to reflect more accurately the with less destructive forms of logging. Lookingcleanup costs associated with industrial pollution, is ahead, better protection of natural forests willwaraned. Since Government-owned industries are remain a high priority, to rromote biodiversity andamong the most serious polluters, active to provide resources needed both for traditionalimplementation of pollution control legislation on lifestyles and to attract outside visitors. ImprovedGovemment-owned factories should send a clear protection of natural forests will require improvedsignal to private sector factories engaged in legislation and provision of a suitable number ofunlawful waste disposal practies. staff to enforce forest protection legislation.

5.8 SolWd Waste. There are eleven municipalwaste dumps in Fiji, nearly aU of which are over- C. ENVIRONMENTAL PLANNINGflowing with solid waste. Problems in solid waste AND /NSTITUTIONAL DEVELOPMENTdisposal include odors (especialy in Suva), spillageof cans and plastics into riverways, leaching of 5.12 Ins,odoms. An Interministerialpollutants into coastal areas used for fishing and Environmental Management Committee (EMC),bathing, and degradation of fish breeding sites. established in 1980, advises the Govermnmt on theSamples of shellfish tamen near urban dumps have environmental impact of proposed projects. Anshown high levels of mercury, faecal coliform, Environmental Management Unit (EMU) with twozinc, and lead contamination. Inspection of popuar professional positions was established in 1989 tourban beach and picnic sites suggest that 35 percent serve as the secretariat to the EMC and to developor more of the lnd area is badly Littered with environmental policy. Committees have beenplastic and tin cans. Efforts to locate new dump established in several Ministries to examine thesites have been largely unsuccessful; littering laws environmental aspects of development in different

Vole 2: FIJ 44

sectors. Recognizing the need for better penalty is rarely enforced. A review of Fiji'scoordination of nvironmetal initiatives, a enviromnental laws was completed in early, 1992,Depatmen of the Eavironment (DOE) was and a consolidation and updating of the legislationestablished under the Minister of State in May is expected to be submitted to Parliament in early1992, and proposals have been put forth to provide 1993. Careful consideration will be required tosix professiona posts to the new Departmn. The ensure an effective matcing of modempotential gains from coordinatng various environmeal legislation with Fji's limitedMinisteial environmental protection initiatives capacity for enforcement and monitoring.suggest that a high priority should be attached tostaffing and activating the new DOE. Further 5.14 Pnniung Capacity. Fiji's Nadonaltraining and technical assistance, in key areas such Environment Management Stategy (NEMS) pro-as hazardous waste disposal and urban samtation, vides a comprehensive framework for addressingwill be required to fill gaps in the existing many of the most serious environmental problems.institutional capacity. The NEMS proposes that the Ministry of Finance

and Economic Planning (MOFEP) evaluation proce-5.13 Envihamegnta Law. There are over 25 dures for new projects include discrete attenuon toacts, enfcored by fourteen different Ministies and environmental justification and implications. Thisstatutory bodies, having environmental powers; is waranted, but only for projects above a certainhowever, many are out-daed, ineffective, and size or having likely non-trivial environmentalpoorly eiforced. There are no laws governing the impacts. The newly created DOE could serve toquality of groundwater and very little legislation screen both public investment and large-scalereglating urban comint ats. Under the Public private invesmes to determine which of theseHealth Act, polluters can be fined a maximum of would require an environmental impact assessmentF$20 for illegal pollution, but even this token (E>A)23

ENDNOTES

Recent surveys indicate soil losses of 22-80 tons per hectare per annum (ti/ha) on sugarcane land of 5- to 29-degree slopes. In the root crop areas of the wet zone, soil losses of up to 2,000 tih/a were recorded on slopesof 5-25 degrees.

2 Fiji's flora and fauna are of considerable genetic and scientific interest because of the high percentage ofendemic forms. There are an estimated 750 endemic plants and more than 100 floral species per squarekilometer of natural forest. Nearly 40 percent of birds, 35 percent of reptiles, and 100 percent of theamphibians found in the natural forest are thought to be unique to Fiji.

3 For large private sector investments, an EIA should be required as a matter of course. The Governmentshould not finance private sector EIAs. Besides having little effect on investment incentives, this wouldjeopardize the independec of public review and would weaken private sector interest in environmentallysustainable investment.

45 Vo1e2: .- L

Sftistcal Appendix

Contents

Popidon and Employment

1.1 Estinated Population by Ethnic Origin, Sex and Age, 19881.2 Popuation by Ethnic Group, 1981-911.3 Enigration by Occupational Class, 1987-901.4 Paid Employment by Industry, 1981-92

Nadional Accounts

2.1 Gross Domestc Product by Industria Originat Constant 1977 Factor Cost, 1981-92

2.2 Gross Domestic Product by Type of Expenditureat Currnt Prices, 1981-92

2.3 Investmen and Savings, 1981-922.4 Key Macroeconomic Balances, 1988-92

e3 e of Payments and Thzde

3.1 Balance of Payments, 1981-923.2 Value of Exports by Type of Product, 1981-923.3 Volume of Principal Domestic Exports, 1981-923.4 Value of Imports by SITC Classification, 1981-923.5 Direction of Trade, 1984/913.6 Projected Balance of Payments, 1993-2001

External Assisance and Debt

4.1 External Public Debt, Disbursemetsand Debt Service, 1981-91

4.2 Official Development Assistance, 1984-89

47 Volume1: FE

fhbk Fa

5.1 Summary of Central overnment Pinances. 1981-925.2 Cetal Governet Reveam and Gat, 1981-925.3 Cental Govemnment Expenditures, 1981-925.4 Operating Profit of Major Public Enterpdse, 1985-90

Money and BaUng

6.1 Moetry Survey, 1983-926.2 Iterest Rate Structe, 1984-92

Prodution

7.1 Hotel and Visitor Statsics, 1985-927.2 Production of Selected Agricultural Products, 1985-91

Pries and Wages

8.1 Index of Consumer Prices by Commodity Group, 1983-918.2 Mean Daily Wages of Wage Earners by Industry, 1981-91

Vd%w 1: FM 48

Table 1.1: ESTIMATED POPULATION BY ETHNIC ORIGIN, SEX AND AGE AS OF WECEMM 31 16

FIJI*. Indian Others Total Pereet_ _ _ _ ~~~~~~~~~~~~~~~~~~~~~~of

MaIb Famal. Toal Ibale, FemaleI Total Maie P..l* ToOal Male Fmale Toutl totl

0 - 1 4,837 4,301 0,10 3750 3a54 7,206 473 $0 871 s,ooo 8,244 17,304 2.4

1 - 2 5,221 4,710 9,040 4219 3010 0,1S7 450 420 579 0,800 s,0a7 15,905 2.6

2- a ,416 4,98S 10,404 4360 4243 8,011 476 420 808 10,252 0,651 19,918 2.8

3 - 4 5,o06 4,741 9,704 4421 4247 ,0668 466 430 s02 9,940 9,424 10,364 2.7

4 - 5 5,004 4,s75 9,69 4699 4421 9,120 475 404 st0 10,266 9,700 19,W8 2.8

c - 9 23,145 21,70 44,026 22,834 21,861 44,005 2,231 2,047 4,278 4,0210 45,60 03,s00 13.010 - 14 20,080 10,031 39,117 20,144 190,80 30,504 1,944 1,860 3,004 42,174 40,251 62,425 11.6

15 - 10 17,728 17,172 84,900 17,302 17,164 34,56 1,814 1,66 3,480 38,904 36002 72,M0 10.1

20 - 24 10,467 15,543 3,006 16,814 18,051 33,765 1,0 1,36 3,81 34,907 85,134 70,101 9.7

25 - 29 14,003 14,283 28,070 16,609 16,077 81,7M6 1,449 1,456 2,9004 81,05 81,715 0I,66 8.8

30 - 34 11,702 11,674 23,378 18,410 13,528 26,947 1,210 1,246 2,4S6 26,331 20,440 52,77 7.8

ac - st 9,662 9,641 10,303 10,818 10,065 21,763 1,057 1,023 2,060 21,637 21,69 43,185 0.0

40 - 44 8,110 8,088 10,154 8,00 8,907 17,06 0o 840 1752 18,003 17,689 85,042 6.0

45 - 49 7,032 0,911 13,043 7,062 7,186 14,24s n2 720 1,478 14,846 14,82 20,609 4.150 - 64 5,024 5,76 11,710 6,340 5,82 10,706 841 S52 1,193 11,911 11,700 28.011 3.a

55 - 59 4,60 4,543 0,13 3,01l S,847 7,758 5 440 6sa 9,006 8,880 17,026 2.560 - 64 3,531 3,406 6,937 2,628 2,500 5,222 424 342 76 #',8 6,847 12,026 1.8

e6 - 09 2,691 2,667 6,258 1,874 1,m 2 ,646 200 291 50 4,764 4,730 0,494 1.8

70 - 74 1,683 1,851 8,784 1,167 1,126 2,205 224 204 426 3,274 3,1s0 0,457 0.9

75 n 1,047 2,116 3,863 1,240 1,286 2,520 243 264 607 3,330 8,6 0,906 1.0

not tated 54 56S 1,219 427 440 867 1OC 84 180 1,168 1,080 2,275 0.3

Too l 175,314 109,684 344,90 1n,816 166,77 340,073 17,80 16,769 34,65 34,51 5,160 719,6 100

Sou8re Bureau of StatIetIce.

Table 1.2t PPItLATION BY ElItC ON.UP, 1981-91

1981 1082 1088 1934 1C8C 1986 S9W7 t98" 1989 1930 1991

Ethnic F1jlan ('000) 288 204 801 S0o 816 829 SS9 845 862 860 8osX of total population 44.6 44.? 44. 44.9 45.8 46.0 47.4 47.0 46.5 48.9 40.5AV*. ana ruwtb rat. () 2.1 2.1 2.4 2.8 2.0 4.1 8.0 1.8 2.0 2.8 2.5

Ethnic ndiana ('00) 824 829 886 842 847 849 842 840 J88 840 840X oa total populati, 60.2 60.0 60.0 49.? 40.0 48.8 47.8 47.2 46.0 46.2 45.0Ave. annual growth * -, (M) 2.2 1.5 2.1 1.6 1.5 0.6 -2.0 -0.0 -0.6 0.6 -

0ther *thnie ('000) 84 85 86 So 84 S? U4 85 86 8B 87X of total population 5.8 6.8 5.2 5.2 4.9 5.2 4.9 4.0 4.9 4.9 5.0Ave. annual growth rate M -2.9 2.9 0.0 2.9 -5.0 8.8

Total populotion ('000) 640 658 672 68 097 ns 716 720 726 788 746Growth (M) 1.9 1.9 2.1 2.4 1.8 2.6 - 0.7 0.8 1.4 1.4

Source: Brau of Statistics.

Table 1.3 EMIGRTION BY OCCUPATOML CIASS, 167-90

Occupation Group Indian Oer Toal

Occupation Group 1 1,482 214 1,070Archite, ginesra, & Related Techniciano 308 71 378Life Sclentlits & Related Techaelins 34 a 40Medieal, O.ntl, Veterinary & Rel"e Workers 12 49 241Statisticiens, Mthematicians & System Analyoto 48 a a1Accounftnts 2t 20 29Jurlst 32 8 35Teachers 467 22 470Workers In Rol10lon 22 0 28Authors, Journaliste A Related WriterO 12 10 22Ottor Pro fesonel, Technical & Relatod Workers 84 24 IO8

Occupation Group 2 69 01 O70Legislotive Offtitcil & Govt Administrator 27 7 34managers 562 74 636

Ocpation aroup a 1,488 237 1,726Clerical Supervliors 53 B 68Governmnt Ex cutive Offteals 115 10 125Stenographars, Typists, et 376 74 450Bookers, Cashelrs & Relatod Workers 29S 4S 840Computing Macbins Operators e1 14 66Other Clerical A Related Workers 698 89 687

Occupation Group 4 845 47 302Working Proprietors, Wholso Ale Reta I Trado 27 2 29Technical Salesmen, Comercial Travelloer, etc 18 5 23Insurance A Other Businos Service Salesma 23 3 26Salesmen Shop Asslstants A Related Workers 269 33 292Other Sales Workers 16 4 22

occupation Group 5 198 6 264Cooke, Weiters, A Related Workers 84 28 112Protective Service Workers 81 13 74Othor Service Workers as 26 78

Occupation Group 0 264 34 298Farsers 245 a3 276Other 10 3 22

Occupation Group 7 1,320 154 1,474_talors, Oresamakers, etc 130 6 lS

Machinery Fitters, Machine Assemblers, etc 386 43 429Plumbers, Weider, etc 112 12 124Blocklayers, Carpent rs, et 166 21 179Transport Equipment. Operators 125 12 140Othor 406 81 467

Occupetion croup 8 0,417 1,208 9,e2Housewive 2,824 314 8,138Studeuts 18 yes & over 384 40 430Students lo" than 13 yrs a Infants 4,571 750 5,321Restire 694 01 875other 44 1 1

Total 14,083 2,041 10,124

Source: Data provided by FIJI authorities.

51 Vekaxe 1: FJ

Tabl* 1.4: PAID EIPLOMENT BY DUSRY, 1981-92tas *t VW-Jo)

tbmbr)

1981 1982 1988 1994 188 199 1997 9@ 1989 19 90im Is 19912sEs.

Agriculture 2,609 2,274 2,617 2,238 2,677 2,166 1,900 2,000 2,100 2,812 2,312 2,248

Industry 26,186 28,978 24,898 28,522 24,289 24,218 28,200 23,200 28,900 30,723 80,72 33,806

Mining 1,066 1,145 1,226 1,288 1,214 1,206 1,800 1,400 1,500 1,402 1,402 1,410Manufacturing 14,228 18,622 14,702 14,164 14,067 18,978 18,800 14,000 19,700 21,051 21,051 21,181Eloctrieity, 0. 2,760 2,168 2,281 2,098 2,141 2,070 2,100 2,500 2,500 2,54a 2,48 2,727Construction 7,148 7,148 6,724 6,084 6,860 6,864 6,000 5,800 6,200 5,727 6,727 8,4A0

Service 58,712 62,037 62,676 62,842 54,287 58,476 62,500 52,600 57,200 66,917 55,861 56,426

Trade 14,140 18,878 14,889 14,904 14,906 14,100 11,800 11,600 18,700 14,849 14,849 18,622Transport 7,865 0,982 7,898 7,680 7,811 7,747 7,700 8,000 9,900 9,520 9,620 9,785Financne Real Estate 4,926 5,030 5,067 4,871 4,891 4,864 5,000 5,100 5,400 5,88a 6,888 6,818Comaunity, Social APorsonal Servie s 26,781 28,147 2S,032 25,887 26,730 26,766 28,600 27,800 28,200 25,95 25,849 27,268

Total 81,406 78,289 60,075 78,802 61,082 79,854 77,600 77,700 88,200 88,962 88,386 92,480

Source: Data providod by Fiji authorities.

Table 2.1: CROSS DOMESTIC PRODtCT BY DUSTRIAL ORIGIN ATCONSTANT 1977 FACTOR COST, 19214

(Fs etl on)

1981 1982 1983 1984 1986 196 1" 1998 1989 19t0 1991 1992Es.

Agriculture, Forestry & Fishing 172.0 176.6 143.8 181.0 166.2 198.0 173.8 170.0 189.0 162.9 182.1 190.3Sugarcane 81.2 88.2 47.6 62.7 66.6 65.9 98.6 02.1 79.0 70.0 606.7 2.8Other Crops 22.6 24.5 23.9 26.1 26.6 27.4 26.6 26.0 26.4 27.6 26.1 10.1Livestock 6.6 6.0 7.2 7.2 7.1 7.4 7.6 7.3 7.4 7.6 7.7 6.CFishing 10.2 10.0 12.1 11.1 9.6 9.4 11.6 12.6 18.0 12.6 18.2 18.0Foretry 6.4 4.6 6.4 5.5 6.0 6.7 9.3 11.0 12.6 12.9 13.9 13.0Subsistence 46.6 48.6 47.4 48.4 49.1 60.1 51.0 60.9 61.2 61.6 62.5 53.0

Mining & quarrying 0.4 0.6 0.8 0.7 0.6 1.3 1.3 1.9 1.9 1.6 1.2 1.3

manufacturing 68.9 80.5 7.7 91.0 79.3 94.0 68.9 88.2 92.9 69.2 108.4 109.6Sugar 31.2 82.2 18.3 31.6 22.6 3.3 26.6 24.1 30.0 27.0 26.8 27.9Other 65.4 61.9 57.0 66.7 64.1 56.8 65.3 58.6 59.7 98.6 74.9 79.2S*If Employmnt 2.3 2.4 2.4 2.5 2.6 2.6 2.6 2.6 2.0 2.7 2.7 2.7

Electricity, Gas A Water 6.6 7.0 7.4 8.0 6.4 9.0 6.8 9.0 10.1 10.0 11.0 11.3

Construction 00.6 63.4 50.9 39.6 41.4 40.0 29.1 20.4 23.9 25.2 29.0 29.7

Wholesale a Retail TredeRestaurants A Hotels 126.5 118.0 122.3 122.0 124.6 1U.0 117.1 130.3 160.5 166.4 174.2 163.9Trade 102.4 67.7 100.8 97.8 99.8 109.2 07.0 107.6 132.0 155.0 141.6 164.4Hotels, Restaurants, Cafes 23.1 26.3 21.6 24.4 25.1 26.6 20.1 22.8 27.9 80.4 26.0 29.4

Transport A Communications 70.6 ?7.8 76.0 67.7 90.3 69.6 67.7 94.6 111.1 119.0 119.1 125.4Transport 66.7 05.3 66.4 74.9 77.0 75.7 73.0 79.9 9a.2 104.0 103.9 110.0Communictions 11.9 12.3 12.6 12.8 13.8 14.1 14.7 14.7 14.9 16.0 16.2 15.3

Finance, Insurance, RealEstate a Businoss Service. 67.9 90.8 93.7 95.8 97.8 98.4 96.6 9B.4 99.4 106.2 111.3 115.8

Community, Social aPersonal Service. 120.7 126.0 131.1 137.7 181.6 180.6 136.2 184.5 187.0 140.3 141.6 141.6Less: Imputed Dank Service Charge. 20.0 20.3 21.6 22.3 28.3 23.7 22.0 22.6 24.4 26.6 31.6 U4.0

I. CGOP at Factor Cost 719.9 712.2 983.9 741.4 707.1 701.9 711.5 71.3 602.9 642.6 641.0 67.6

'@ Sources Bureau of Stati.tice and staff estimates.

Table 2.2t GROSS DOMETC PRODUCT BY TrPE OFEXPENMItIME AT O*RENT PRICES, 1981-92

,~~~~~~~~~~~~~~~~~~~~~F ff2t II Iion)

1991 188 19sa 1994 lows 198" 197 1909 loW mo9 19e sn

cO*n*Upe*On ss.0 MA8. 979.9 10a9.0 1090.0 1126.0 UlS.0 1a22.0 M32.0 10n.o 1820.0 208S00

Private 80.0 f".? 148.2 784.1 982.0 s7a.0 980.0 1093.0 1241.0 I8S.0 MS.0 169.0

Government 173.1 20a.s 2a1.8 244.9 262.0 252.0 256.0 229.0 282.0 522.0 810.0 417.0

Gross Investment 382.2 284.6 241.6 241.a 261.1 266.0 286.0 286.0 274.0 404.0 857.0 6.0

F;xod Invstment 2so.s 262.8 23s.2 218.0 2a9.1 21S.0 2ao.0 22a.0 210.0 379.0 ao2.0 3416.0

Privete 1 0.s 11a.2 112.2 130.9 160.0 145.0 144.0 108.0 106.0 us.0 1sa.0 .0

Govormwt n2.8 6.0 a6.a a7.9 41.0 43.0 $4.0 40.0 47.0 ss.0 08.0 a.0

Public Ent rprim 77.2 08.5 90.7 49.2 s8.1 27.0 62.0 76.0 97.0 192.0 101.0 109.0

Chango in Stocks 81.7 21.9 2.4 2.3 12.0 51.0 6.0 18.0 24.0 26.0 65.0 88.0

Foreign Balanco -152.1 -71.2 -62.0 -13.6 -5.0 a2.0 48.0 60.0 49.0 9.0 22.0 148.0

Export (ONfS) 454.4 481.8 498.1 540.2 684.0 600.0 064.0 662.0 1112.0 1838.0 1M.0 1455.0

Import (OGNS) 606.8 SS2.6 560.1 S55.8 589.0 577.0 #18.0 812.0 1063.0 1329.0 1204.0 1812.0

Statisticat Discrepancy 18.0 11.7 -17.1 8.7 -20.0 87.0 -22.0 -20.0 15.0 - - -

GOP at Market Prices 1056.1 1118.4 1142.2 1276.4 1810.1 1461.0 1470.0 1688.0 1861.0 2000.0 2205.0 2612.0

Hotl Indirect Tax.. 102.4 92.9 110.4 128.8 189.0 185.0 186.0 155.0 200.0 280.0 226.0 825.0

CDP at Factor Cost 98.7 1020.5 1081.8 1151.6 1177.1 1826.0 1840.0 1498.0 1661.0 1860.0 1979.0 2287.0

Source: Bureau of statistics end *e.tt estimats.

Table 2.1: IWfESTUSOT AND SAVINGS, 109142

1901 1962 1983 1064 1065 16 197 10oe 1909 t106 1991 92Est.

(In Ml I lIlons of FlJ I Dol lore)

Gross Domestic Investment U2 28C 242 241 251 266 236 236 274 404 3$5 383

Fixed Investment 281 263 239 218 289 216 230 223 260 179 302 a4"

Private 130 113 112 131 160 145 144 108 106 126 138 169

Government 73 61 as 38 41 43 a4 40 47 C8 s6 07

Public Enterprise s 88 91 49 3e 27 52 i5 07 192 101 109

Change in Stocks 82 22 2 23 12 51 6 13 24 26 Ss JB

Gross National Saving 173 198 17 214 237 274 227 261 826 270 840 452

Gross Domestic Savings 176 222 188 238 254 806 278 292 378 329 t85 588

Net Factr Incom -16 -40 -se -40 -44 -42 -39 4 -72 -68 -46 -128

Net Current Trnsfiers 16 16 25 16 28 11 -11 43 21 a 1 -10Official 22 19 27 20 s8 17 13 48 42 37 5? 81Private -8 -3 -2 -4 -12 -6 -23 -S -22 -14 -1? -41

Current Account Deficit 1/ 189 87 64 28 14 -8 8 -4a -52 126 17 -6

Memorandum ItemResourco Gap 188 63 64 3 -8 -39 -48 -56 -104 75 -28 -205

(In Percent of GOP)

Gross Domestic Investment 84.3 25.8 21.1 10.9 19.1 18.2 16.9 14.9 14.7 19.3 10.2 14.7Fixed Investment 28.6 23.6 20.9 17.1 18.2 14.7 15.6 14.0 18.4 18.1 18.7 13.2Private 12.4 10.2 9.8 10.3 12.2 9.9 9.8 6.8 5.7 6.1 6.0 6.6Goverment 6.9 6.5 3.2 8.0 3.1 2.9 2.3 2.6 2.6 2.8 3.1 2.6Public Enterprise 7.3 7.9 7.9 3.9 2.9 1.0 3.5 4.7 5.2 9.2 4.6 4.2

Change In Stocks 7.7 2.0 0.2 1.8 0.9 3.5 0.8 0.8 1.8 1.2 2.5 1.5

Gros National Savings 16.4 17.8 16.5 18.7 18.0 16.7 15.4 17.? 17.6 13.3 15.4 17.8Gross Domostic Savings 16.6 19.9 18.4 10.? 19.3 20.9 18.0 18.4 20.8 16.7 17.4 22.5Net factor Incom -1.C -3.6 -3.1 -8.2 -3.8 -2.9 -2.7 -3.4 -8.9 -2.6 -2.0 -4.6Net Current Trnsf-rs 1.4 1.6 2.2 1.2 2.0 0.7 -0.7 2.7 1.1 0.1 0.0 -0.4

Source: Date provided by FIJI authorities and staff estimates.

1/ Including officall transfers.

Table 2.4: KEY MACIROECONOlWIC BALANCESL4 198-92(% of GDP at corentrmarket prices)

1988 1989 1990 1991 1992

(lurrerl AiQc=MniBalattce -0.2 0.5 -7.8 -2.5 2.9

Exports of ONFS 51.7 59.3 58.1 53.6 58.6Imports of ONFS 48.2 53.8 61.7 52.4 52.1Factor Senrvics (net) -3.4 -3.9 -2.6 -2.0 -1.7Private Transfirs (net) -0.3 -1.2 -1.6 -1.7 -1.9

(>endlal 9,overrunem Baib=lce 0.3 -1.1 -0.2 *1.5 -3.9

Revenues 26.1 24.9 25.6 25.6 30.2Current Expenditure 21.8 21.5 21.6 22.4 28.2Capil Expenditure 4.0 4.5 4.2 4.7 5.9

Of which: nvestment 2.5 2.5 2.8 3.1 2.9

}divate Sho:tor Balance -0.5 1.7 -7.6 -1.0 -1.0

Private Ilvestmenm 7.5 6.9 6.6 6.2 6.2Private Savings 7.0 8.6 -1.0 5.2 5.2

Source: Data provided by Fiji authorities and staff esmates.

Siasc Appexdix: Ph 56

Table 8.1s BALANCE OF PAYMEDS, 1961-12(USS million at eurrent prie.)

1981 1962 1181 1964 1965 1966 1967 1969 1989 1990 1991 1992Est.

E Prtet f.o.b. (Domeetic) 227.8 194.5 170.4 1U6.6 167.1 218.6 206.6 814.1 872.6 410.2 m61.8 417.8Sugr 164.2 184.8 110.1 101.6 97.0 118.1 149.? 184.0 158.9 166.8 149.4 157.8Otber 78.6 60.2 08.8 82.0 70.1 9.7 118.9 190.1 216.6 254.9 282.0 259.9Imports, t.o.b. (Retirned) 492.4 888.1 860.0 348.4 842.2 884.5 276.0 852.7 440.6 569.9 507.9 617.2

Trade IBance -264.0 -168.6 -204.2 -169.9 -176.1 -120.7 -4.0 -36.6 -74.1 -179.6 -126.5 -99.9Services (net) 7.o 78.0 116.5 121.0 189.9 116.2 11.5 89.9 96.5 98.1 114.7 152.6

Private Transfrs (net) -6.8 -8.0 -2.1 -4.1 -10.4 -5.8 -16.6 -3.0 -14.6 -23.2 -24.9 -27.4Current Account -196.4 -118.6 -849. -44.1 -45.5 -7.6 -15.3 -2.2 6.9 -109.9 -86.7 25.8

Offieil Trandfers (net) 25.9 20.6 28.7 16.5 83.0 14.6 10.1 33.6 28.4 25.0 25.8 20.5

Current Account(inel. Off. Tranef.) -170.5 -93.1 -83.1 -25.6 -12.8 7.0 -5.2 31.4 85.3 -84.9 -11.4 45.6

Official Capital (not) 74.2 42.4 40.6 11.8 0.4 -9.4 -25.6 0.? -86.1 -37.1 -32.2 -23.6

Private Capital, MLT (net) 82.0 83.7 81.0 18.5 61.0 81.7 14.4 43.2 40.5 96.5 87.7 58.8

Short Tere Capitol (not) 80.5 1.8 8.6 2.1 -24.0 -0.4 -32.2 14.7 -25.6 23.4 20.2 4.7

Capltal Account 187.3 77.4 60.2 81.6 6.0 21.9 -43.4 69.6 -20.6 61.6 81.6 41.7

Error. & Omleslone -16.9 -13.4 -21.4 1.0 0.2 19.8 18.3 7.8 -20.6 40.7 -12.1 -38.2

Ovra ll Blonce -49.2 -29.1 -8.2 7.2 1.6 46.2 -80.8 108.3 -11.0 8 7.5 8.8 49.8

iemorandum Itom:

Currt Account/dOP (S)(excl. Off Trenef.) -15.9 -9.6 -8.0 -8.7 -4.0 -0.0 -1.3 -0.2 0.6 -7.6 -2.5 1.6Groes R"srve 135.1 126.? 122.0 130.0 146.5 170.7 131.0 229.6 211.0 261.4 271.6 806.7Months of retalned[ impOrts 8.8 4.0 8.9 4.6 6.1 6.1 6.7 7.6 5.7 6.3 6.7 8.0

Source: Bureau of Staetitleu and etaff estimate.

Tablo 8.2: VALUE Of EXPORTS BT TYPE OF PRODUCT, 1081-S2T~~~~~~~~~~~~~~~~~U1 *I I I Ion reatcrernt prics, f .o.b.)

1901 1982 1ion 1904 190S 109 1967 1068 1o9" 1990 191 1992I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Est.Sugar 154.2 184.1 110.1 101.6 97.0 118.1 149.7 184.0 158.9 156.8 149.4 157.8

eromat. - - - - - 0.8 7.1 21.0 669 70.2 90.9 100.0Coconut 01t 7.6 6.6 10.4 17.1 6.6 8.7 2.4 2.4 8.6 8.8 1.6 1.7Gold 18.9 18.7 16.6 18.9 18.9 84.1 40.7 5B.$ 51.4 51.2 81.0 84.0Fish Products .. 10.1 14.6 18.9 11.9 16.1 20.2 88.? 80.2 88.8 34.0 86.4Forestry Product. 1/ .. 8.? 8.9 6.7 8.2 7.0 18.8 10.6 21.0 25.6 21.2 24.7Mole 11.8 5.5 3.1 6.2 6.6 7.0 0.5 0.0 6.6 7.2 9.0 7.60thmr .. 17.7 17.4 19.9 20.9 19.0 26.7 87.7 8.1 65.1 42.0 54.9DOMESTIC EXPORTS 280.2 194.3 170.2 1083.2 167.1 218.6 268.6 814.1 372.5 410.2 801.8 417.8Re-exports 05.0 92.6 B6.0 76.0 69.9 62.2 60.0 58.? 71.6 U4.1 76.0 94.0TOTAL EXPORTS 815.2 287.0 242.2 259.2 287.0 276.0 828.6 872.9 444.1 494.2 457.4 511.8

Source: Date provided by Fij authoritle.

1/ Includes lo", sawn timbrs wener and plywod.

Tabl 8S. VOLUME OF PRICIAL 0oMeSC EXPUTs awsl-.(Toueand taea) a/

19081 102 106 1064 1s"5 19w 1" 1668 1069 1660 101 1629E£.

Sugpe 406 411 "8 879 410 824 480 400 0 8 857 862Coconutoil 14 15 16 Is 11 15 7 4 7 11 4cold (000 Grs.) 076 1426 1287 1o0 166 26 2662 412 4244 4160 2706Cemet .. - 2 4 6 8 8 4 19t s 17

fish (Pipewed,Preserved Canod)(OOO kg) 5AM) 2052 S079 4492 8s 4570 4780 0065 7282 M06 5692.

Ohagpr (000 kg) .. 2068 2829 2486 2065 2606 2334 2421 280 2820 168,Mola e 141 167 93 155 140 126 127 184 140 68 155 143Sakory Producte (000 kg) .. 787 1003 1018 867 001 078 80 1105 111l 949Clgarette (OO kg) .. a 9 a a 6 4 10 79 10 8Paotat (000 litr ) .. 196 229 162 217 208 212 219 145 21? 258Vener Sbea4 (000 .2) .. 2729 8661 4008 4009 8701 8975 628m 4046 14P6 -

Scurce: BOrea of Statistim.

*/ Uniol otherwien tndicated.

I~~~~~~~~~~~Table 3.4: VALUE OF IMPORTS BY srtc CLASSIFICATION, 1981-9I

(USO million at current prices, c.i.t.)

1981 1982 1988 1984 198S 1980 1987 1s88 1989 1080 1991 1002Est.

Food 102.0 75.9 78.8 09.0 609.4 88.0 os.8 n.5 883.9 .6 96.8 100.6Beverane A Tobacco a/ 4.3 3.8 8.8 8.7 8.1 2.8 3.5 4.4 6.6 5.4 5.0Crud. Materials 6.2 4.0 6.1 8.2 2.9 2.6 2.6 8.0 6.2 5.1 6.4 5.7Mineral Fuol 162.8 146.0 112.8 98.9 100.1 72.6 60.9 01.9 74.0 106.1 99.1 106.7Oil, A Fats .. 6.6 6.7 8.7 9.1 6.2 6.4 8.1 6.6 7.6 6.0 7.0Chemicals 43.7 37.6 5 8.4 40.9 83.7 $6.6 82.2 46.2 52.7 65.1 49.1 60.7Manufactured Goods .. 84.7 00.0 84.0 67.4 01.3 83.2 106.4 138.9 164.9 188.2 106.7Machinery 138.8 80.0 01.6 79.9 79.6 102.6 72.6 07.1 149.7 230.7 146.4 178.9Miscellaneous Articles .. 60.0 48.8 47.3 43.4 89.8 32.9 40.1 57.3 72.0 70.5 70.8Miscellaneous Tranactions 21.1 18.4 18.4 14.6 11.4 14.4 14.1 14.8 7.8 8.1 8.8 7.0TOTAL 682.8 510.1 484.9 449.8 440.8 436.0 837.9 460.6 650.1 751.8 651.7 008.6

Source: Data provided by FIjI authoritiee.

*/ Included In afzd.

Tablo 8.5: DIRECTION OF TRADE 1984-91(Fs mEllion et curreat prica)

O.gmn of Imports 1/ Destination ot Eports 2/1984 1988 1986 1987 1988 1989 1990 1991 1984 1985 M 1987 198 19 199D 1991

Austra Ia 168.4 177.8 167.7 188.6 193.8 290.6 808.8 802.2 88.1 38.6 58.4 72.5 116.0 116.7 129.8 104.5Now Zealand 78.6 S8.8 83.0 78.8 124.6 182.6 180.8 176.1 11.0 17.3 20.9 23.5 89.7 67.1 86.2 59.8Japan 78.8 76.5 71.8 56.4 87.2 180.6 122.6 109.8 7.8 8.4 5.4 12.4 28.8 88.9 43.2 38.0EEC 48.6 48.9 80.8 86.9 71.0 55.1 77.1 S0.0 82.2 84.0 110.8 142.9 166.1 166.6 178.6 177.4

Of whIch: UK 24.6 24.5 20.8 20.7 24.1 27.2 33.5 26.8 80.2 83.0 108.7 198.8 162.8 14S.4 187.6 172.1United States 19.7 20.8 28.6 24.4 82.0 48.8 143.6 41.7 28.1 12.8 14.8 20.9 16.0 29.6 61.1 76.2Pacific Islands 2.2 3.8 6.0 2.9 8.1 2.2 2.9 2.8 42.6 44.8 37.9 48.2 59.2 81.9 $3.4 7.6Asia 64.0 60.9 63.7 96.4 106.6 161.2 219.1 228.5 8.1 7.9 10.7 26.9 34.8 9.1 74.5 60.8Other 81.0 29.6 27.5 38.5 SS. 88.8 58.4 45.1 64.9 62.8 58.5 87.1 70.4 168.8 100.1 82.1

Tots l 487.0 508.0 498.6 484.9 658.7 939.2 1118 981.7 280.6 271.4 812.4 884.4 518.1 658.7 781.9 674.9

Source: Data provtded by Fili authorities.

1/ C.I.F. vluose.2/ Includes re-exports.

..

Table 3.6: PRoAmn BALANCE oF PA1mIW, 1993-2001(US miwlon at curren prime)

1993 1994 1995 2001

Epors (fob) 416 456 498 751IMpos (fob) 573 633 705 1,290Trade Ral,e -157 -177 -207 -540Non-fctor Seics (net) 168 197 226 527Facor Srvikes (net) -36 -40 *43 -90ofWhich ilntesk LT 23 18 19 23

Prvate Transde (oet) -29 -30 -31 -33Officl Transfers 22 26 29 48CQrent Account Bauae -33 -25 -27 -87Prtive Capial (net) 25 28 38 53Of wich: Direct hvestment 43 46 49 67

Ofi Capital (net) -30 41 42 44Shorterm Cail (net) 0 0 0 0Capita Ac Bountbalae -5 69 80 97Errts and Omissions 0 0 0 0

an in Resreres (- incrase) 38 -44 -53 -10

Memo Items:

CwrnrmA=countGDP(%) -1.9 -1.3 -1.3 -2.5Debt ServieExorts (%) 13.5 5.7 5.3 4.0Gross ReservesMondts of tained impors 4.3 4.6 4.9 3.5

Swurce: Sff esdmates.

SksM 4 APpaW FV 62

Table 4.1: EXTERNAL PU8LtC DEBT, DISBIMSEM8ITS AM DEBT SERVICE, 1961-91(USS million St current price )

1991 1982 19o 1994 196" 1*66 in67 1966 1969 1990 199

Debt Outstanding A Disbursd 287.4 265.5 2M2.8 279.4 802.2 811.7 8sa.0 838.9 299.2 802.8 267.9Official Creditors 179.1 209.8 229.6 210.2 220.1 241.0 22.5 2st.4 20M.6 276.9 258.8Multi lateral 64.2 106.2 186.5 180.9 144.0 106.4 196.1 199.4 191.8 202.0 202.6Of which: DBRD 42.0 583.6 70.8 9.1 68.4 n.o 60.1 71.9 09.2 67.0 0.1Bi1lateral 94.9 108.5 99.1 79.8 76.1 78.2 68.8 62.1 72.8 70.9 50.6Prlvate Creditor* 68.8 66.7 02.7 09.2 62.1 70.1 5a.1 62.4 85.0 28.4 14.0Suppietrs 9.8 6.4 8.4 19.4 25.0 21.8 14.0 25.4 19.1 11.2 8.6Fianacial Markets 49.1 49.8 54.8 49.8 57.1 40.8 86.6 27.0 10.6 12.1 0.1Disbursements 60.1 50.6 5656 48.7 88.9 16.6 19.8 48.9 15.0 19.0 22.4Official Creditors 72.7 56.0 41.S 20.9 6.1 17.0 19.6 88.1 18.9 16.4 22.4Multiltera l 22.9 27.7 40.0 10.7 3.9 10.7 16.0 83.1 6.6 18.2 21.2Of which: IRD 10.2 18.8 20.2 B.0 0.0 0.2 0.5 7.7 5.0 5.1 7.9Bilaterel 49.6 26.8 1.9 4.8 2.2 0.8 8.0 - 5.4 5.2 1.2Private Creditors 7.4 0.8 18.7 22.6 27.7 1.0 0.8 18.7 1.1 0.0 -Suppl;Ire 0.0 0.1 4.? 9.6 15.4 1.0 0.8 18.7 - -Flnacial Morkote 7.4 0.7 9.0 18.0 12.8 - - - 1.1 0.0Amortization 9.6 11.9 14.6 20.7 81.2 81.8 87.6 87.0 89.9 55.5 -4.1Official Creditors 4.9 9.2 6.6 12.6 14.4 17.6 20.2 28.8 28.1 41.6 47.6Multilateral 1.5 8.4 5.1 0.6 6.7 11.0 12 S 15.? 15.6 88.6 22.0Of which: IORD 1.1 2.5 8.8 4.8 6.5 5.9 6.9 9.2 9.2 9.1 11.8Bl atep l 8.4 6.8 8.4 6.2 6.6 6.6 7.4 1.i 7.8 7.7 26.6Privato Creditors 4.7 2.7 6.0 14.0 16.6 18.6 17.4 14.8 10.7 14.0 6.6Suppliers 2.9 2.4 2.5 7.9 10.7 4.0 0.2 8.0 5.6 6.6 2.7Fienacial Market 1.8 0.8 8.5 0.1 0.1 9.0 11.2 11.8 11.2 5.7 el0Interest Payments 16.6 22.8 28.0 24.8 24.0 25.2 20.0 24.9 24.1 24.0 21.5Official Creditor* 9.8 14.1 16.0 17.9 17.0 19.0 20.8 21.2 19.7 21.4 194.Multilateral 5.0 8.2 6.0 9.9 10.7 11.9 18.1 18.6 12.9 15.0 18.0Of which: ID 8.0 8.6 4.8 6.2 5.0 5.7 0.2 6.2 6.5 8.6 5.8atlateral 4.0 7.9 6.0 6.0 0.9 7.1 7.7 7.7 0.0 0.3 6.4Private Creditors 0.9 6.2 0.8 6.8 7.0 0.2 5.2 8.7 4.4 2.0 2.0Suppliers 0.9 0.7 0.7 1.4 1.7 1.0 1.7 1.0 2.0 1.5 0.0Fianacial Market 0.0 7.5 5.6 6.0 5.8 4.6 8.0 2.7 2.4 1.1 1.6

Source: ORD.

Table 4.2t FIJtI OFFICIAL DEVEUPET ASSISTANCE, 1984-40(US$ at Illon *t current pric")

1984 1985 1986 1987 1988 1889 18 1oss 1886 1987 16 1389

TOTAL RECEIPTS NET TTAL ODA NET

DAC COUNTRIES

Australia 2.0 12.8 11.1 6.9 -9.0 25.6 9.9 10.0 11.8 11.8 19.8 16.7Belgium 0.0 0.0 0.1 0.1 0.1 - - - 0.1 0.1 0.1 -Canada 0.2 0.4 0.8 0.2 0.2 0.1 0.2 0.4 0.8 0.2 0.2 0.1Finland 0.8 - - 0.2 0.8 0.8 0.8 - - 0.2 0.8 0.8France 0.5 - 0.0 1.9 10.2 2.8. 0.6 - 0.6 1.9 10.2 2.2Grmany, Fed. Rep. 0.9 1.0 1.4 1.8 2.1 1.6 0.0 1.0 1.4 1.8 2.1 1.8Japan 1.7 4.7 10.6 7.1 26.9 21.9 8.4 8.2 11.0 10.8 9.1 7.5Netherlands 1.2 0.5 0.4 -0.2 0.4 0.6 1.2 0.5 0.4 0.0 0.4 0.5NMw 2ealnd 8.4 8.4 2.8 8.8 1.8 2.7 8.4 1.4 2.8 3.8 1.8 2.7Norway 0.0 0.0 0.1 0.1 0.1 - 0.0 0.0 0.1 0.1 0.1 -United Kingdom 4.3 -0.7 6.7 -8.8 -2.1 2.7 1.7 1.8 1.6 0.9 0.6 1.8United States 1.0 - - - 2.0 -1.0 2.0 1.0 1.0 1.0 8.0 1.0

TOTAL 16.0 22.1 88.6 17.5 88.0 51.6 23.5 26.8 82.4 82.2 47.4 38.5

MULTILATERAL

ASOB 7.1 0.2 1.8 0.8 20.0 0.2 0.5 0.2 0.4 - 1.5 2.2EEC 7.8 4.2 10.2 8.6 - -0.4 4.3 8.6 0.8 1.4 2.? 1.0IBRD -1.8 -5.6 -5.6 -6.4 -1.0 -8.0 - - - - -

IFC - -0.4 4.0 -0.6 2.0 -0.7 - - - - - -

UW 0.8 0.8 1.2 0.6 1.5 1.1 0.8 0.8 1.2 0.6 1.5 1.1UNTA 0.7 0.8 0.8 0.9 0.6 1.0 0.7 0.8 0.8 0.9 0.6 1.0WFP 0.6 0.1 - 0.0 - 0.5 0.1 - 0.0 - -Other 1.0 1.1 0.9 0.7 0.0 0.7 1.0 1.1 0.9 0.7 0.6 0.7

TOTAL 18.1 0.4 18.8 4.7 28.8 -1.2 7.8 5.0 10.1 8.7 0.9 8.0

ARAB COUNTRIES - - - - - - - - - -

EEC + Member 14.5 6.0 19.4 8.9 10.7 7.4 8.6 8.9 10.8 6.7 18.0 7.9

TOTAL 82.1 22.6 48.5 22.2 568.6 6.2 81.8 81.9 42.5 8.9 54.8 48.1

Source: "oraphlcal Distrlbutlon of Financial Flows to Deloping Countriem, 1984/88 and 19890/89.

Tabl .1S: SUMARY OF CENTRAL CiYVERNMWNt FINANCES, 1981-92

191 1982 1908 1904 1905 1986 1987 1980 1909 1990 1991 100Budget

(In millions of FIJI Dollor.)

Current Receipt. 208.4 266.8 206.8 884.0 840.1 845.9 842.2 414.6 468.8 684.0 66.6 698.6Tax Revenue 214.0 210.5 287.8 273.4 279.8 270.0 2"6.? 812.8 8800. 460.8 401.0 490.0Ineom & Prof Its 118.2 119.9 128.0 146.9 141.0 116.1 120.0 168.5 100.7 19?.? 200.7 215.4CGode Service 28.4 27.2 81.0 86.2 40.9 48.0 44.9 62.8 01.9 77.5 82.0 105.7Int.rnatioasl Trde 72.9 59.2 78.4 04.9 92.4 91.4 09.0 99.6 145.4 160.7 1S2.9 172.4Otter 4.6 4.2 4.0 6.6 4.9 4.7 4.0 8.0 4.4 5.8 7.8 4.5

Nentax Revenue 41.1 44.4 61.0 61.8 56.4 60.5 04.1 70.7 71. 71.9 90.2 86.8Grants 8.8 10.8 10.0 10.1 10.6 9.5 11.4 22.2 12.0 12.7 11.8 15.4

Current Expenditure 211.0 247.3 286.0 $24.0 828.2 330.9 866.4 848.2 400.7 462.4 403.0 515.8Wag.) Salaries 110.1 180.0 166.0 186.0 177.2 186.0 187.5 178.0 202.1 284.0 26S.1 264.0Intereot 19.2 25.6 82.0 87.0 40.6 46.1 58.8 65.6 65.6 07.7 0.1 71.8External 9.5 18.0 12.0 14.0 14.1 18.7 15.9 20.6 10.4 17.0 19.9 16.4Domstic 9.7 12.5 20.0 28.0 26.5 81.6 87.3 46.2 47.2 49.9 45.2 55.4

Subsidlos & Trent arm 40.8 45.0 47.0 65.0 50.0 51.0 60.0 47.6 60.8 71.? Q0.1 8.4Goods A SOeIes 85.9 88.7 41.0 40.0 50.4 48.0 54.6 50.0 78.2 79.0 02.8 96.8

Current Blance (Deticit -) 51.8 10.0 12.8 10.6 19.9 15.0 -18.2 6o.8 63.1 82.4 71.9 08.8

Ceapitl Ex ndlture 95.8 91.4 56.0 62.0 68.8 B4.2 60.7 68.8 0.7 87.8 104.6 107.6No Le- ngftip

Total Expenditure *Not Lending 806.8 880.7 841.0 878.0 a82.5 415.3 416.1 410.0 404.4 509.7 5A.1 622.8

Owerall Balance (Dficit-) -48.4 -78.4 -42.7 -41.2 -86.4 -9.2 -78.9 4.6 -20.8 -4.9 -82.6 -24.2

Flnanc9ig 41.2 80.4 69.2 78.9 -4.5 20.6 4.9 82.6 24.2External (net) 24.7 18.2 5.0 0.0 -0.2 -0.1 -14.7 -14.0 2.1 0.8 -20.6 -5.8Borrowi"9 .. .. 11.0 19.0 14.2 17.1 7.9 11.8 88.5 20.6 22.7 20.8

6.0 18.0 14.4 17.2 22.6 26.8 81.4 20.8 48.2 26.110.7 66.2 80.0 86.2 86.6 69.8 08.6 9.6 1806 4.6 65.1 80.0

Banking S1 -1.4 18.4 18.0 -6.0 2.2 81.6 80.8 -16.0 0.0 ..Provident fund 20.0 29.0 20.0 8.0 80.0 86.7 44.4 48.6 ..Oter t0.1 7.0 -8.0 0.2 -1.6 1.1 18.4 -16.5 .. ..

(In Percent of MOP)

Current Recelpt. 24.9 28.8 26.1 26.8 26.8 23.7 28.2 26.1 24.9 25.6 25.6 22.9Tax Rvenue 20.8 18.9 20.0 21.4 21.2 18.9 I.1 19.7 20.4 21.6 20.9 19.1Inceme & Profits 10.7 10.0 11.8 11.5 10.7 9.8 8.7 9.9 9.1 9.6 9.6 0.2coods a S*ervces 2.2 2.4 2.7 2.0 8.1 8.0 t.0 8.8 8.8 8.7 8.7 4.0International Trde0 6.0 5.8 6.4 6.7 7.0 6.8 6.0 6.8 7.0 0.1 7.4 aOther 0.4 0.4 0.4 0.4 0.4 0.8 0.a 0.2 0.2 0.8 0.8 0.2Neotax Revenue 8.9 4.0 4.5 4.0 4.8 4.1 4.8 5.0 8.8 8.4 4.2 8.8

Graats 0.a 0.9 0.9 0.0 0.0 0.7 0.0 1. 0.6 0.0 0.5 0.0Current E ture 20.0 22.2 26.1 25.4 24.0 22.8 24.1 21.6 21.5 21.0 22.4 19.7Current sanc (Deficit -) 4.9 1.6 1.1 0.8 1.5 1.0 -0.9 4.8 8.4 8.9 8.8 8.2Capital E9ndtr .0 8.2 4.8 8.9 4.0 6.0 4.1 4.0 4.5 4.2 4.7 4.1

Overall Blance (Deficit -) -4.1 -0.0 -8.7 -8.1 -2.0 -4.7 -6.0 0.8 -1.1 -0.2 -1.5 -0.9

Sources Date provided by Fiji authorities and staff estimate.

Table 6.2: CENXTRL GOV0ENM_T REVENUE AND GRANTS, 1981-92(Ft willion at current pric")

191 1982 1988 1984 1985 1998 1987 1983 1989 1990 1991 1mBudget

Total Revenue 266.1 256.0 288.8 824.7 8.0 3U.5 830.8 892.8 401.3 522.2 554.2 603.8

Tax Revenue 214.0 210.5 237.8 278.4 279.8 276.0 260.7 812.8 860.6 450.3 481.0 498.0Taxes on lncom A Prof it 113.2 119.9 128.9 140.9 141.0 186.1 128.8 156.6 108.? 197.7 208.? 215.4

Corporste 81.9 80.7 80.0 34.2 a8.6 84.6 31.2 44.7 47.6 70.4 79.1 75.0Individual 77.2 s8.2 95.7 109.4 104.6 97.2 91.9 108.1 113.4 118.5 121.5 182.4Unelsitlied 4.1 8.0 8.2 8.2 2.8 4.4 6.7 8.7 7.7 0.8 9.1 8.0

Taxes on Property 0.7 0.6 0.8 2.4 0.6 0.8 0.6 0.1 0.2 0.1 - 0.1Esta 4 Gift Duty 0.7 0.0 0.8 2.4 0.6 08 0.6 0.1 0.2 0.1 - 0.2

Taxes on Goods A Service 28.4 27.2 81.0 36.2 40.9 43.8 44.9 52.8 01.9 77.5 82.0 106.7Excel Duties 19.5 23.1 26.8 27.8 81.7 14.2 u8.8 38.9 42.7 52.4 68.4 57.1Turnover Tax 0.0 0.0 1.6 4.6 4.9 6.8 5.9 9.9 14.7 20.8 20.4 28.1Licene Fe 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.6Vehicle Taxes 8.6 8.7 8.8 8.9 8.9 2.8 2.2 8.6 4.1 4.4 4.7 4.5VAT on Governt Servlces -- - - - -- -- - - - 20.5

Taxes on International Trade 72.9 59.2 78.4 84.9 92.4 91.4 98.0 99.6 146.4 109.7 162.9 172.4Import duties 66.8 56.6 78.4 84.9 92.4 91.4 89.0 98.9 188I. 164.7 167.2 100.4Export duties 6.1 2.6 0.0 - -- -- -- 0.7 8.6 15.0 6.7 6.0

Other Taxes 8.8 3.7 8.2 3.1 4.8 8.9 3.6 8.5 4.2 5.2 7.a 4.4Stmp Taxes 3.8 8.1 8.2 8.1 8.7 8.4 8.1 8.1 8.s 4.7 6.? 4.0Other 0.5 0.8 0.0 - 0.0 0.6 0.4 0.4 0.4 0.5 0.0 0.4

Nonax Revenue 41.1 44.4 61.0 61.8 56.4 00.5 04.1 79.7 71.8 71.9 93.2 86.8UN Peacekeeping Fores 12.9 12.8 18.9 18.4 18.9 28.5 17.9 17.6 28.1 24.5Monetary Authority Proft. .. .. I.8 6.9 0.4 6.3 6.8 8.0 10.2 10.0 14.2 10.0Public Enterprise Divid .. .. 0.9 - 1.9 1.9 6.0 6.9 4.9 0.0 7.0 0.1Othor .. .. 29.4 88.1 84.1 38.9 88.1 42.8 88.2 82.4 43.3 44.7

ForeIgn Grnt 8.8 10.8 10.0 10.1 10.6 9.6 21.4 22.2 12.0 12.7 11.8 16.4

Total Revenu A Grant. 268.4 205.8 298.3 384.8 848.1 a46.9 842.2 414.6 4B3.8 684.8 86.6 598.0

Source: Data provided by FIJI authorities and staff estlimtes.

Tablo 5.3: CENITRAL OI.3O IENT EXPENDITURES, 1981-92(Fs *llion at current Priam)

1981 1982 1968 1964 1935 1966 1937 1988 1969 1990 1991 1992Beds"

Current Ex_dtturo 211.9 247.3 296.0 324.0 32a.8 s30.9 355.4 348.2 400.? 452.4 493.6 515.3lbossesa Salaries 116.1 138.0 l16.0 168.0 1.2 196.0 187.5 178.6 202.1 234.0 256.1 2"4.8Selarinr 100.7 119. .. .. 150.6 158.3 181.3 144.6 174.6 201.0 218.4 280.0Wgo 15.5 16.3 .. .. 29.0 27.7 26.1 27.2 27.6 32.3 37.7 84.6

ftployee Contributionto FlPF 5.4 6.9 7.1 S.0 15.9 14.8 23.8 20.2 19.1 24.0 29.9 25.2

Purche, oft ocods A Servics 35.9 so.7 41.0 46.0 66.4 43.6 54.6 69.0 73.2 79.0 92.3 95.3Interest on Public Debt 19.2 25.6 82.0 37.0 40.6 45.1 53.3 M6 465.9 67.7 .1 71.8External 9.6 18.0 12.0 14.0 14.1 13.7 16.9 20.0 19.4 17.9 19.9 10.4Domestic 9.7 12.5 20.0 23.0 2e.5 31.6 37.3 46.2 47.2 40.9 45.2 65.4

Subsidies A OtberCurrnt Transtor 84.9 38.4 39.9 47.0 . 38.2 386.7 27.4 40.? 47.7 58.2 58.2

O0 Dev.lop.sst Expeadits... 95.3 91.8 66.0 52.0 56.3 84.2 60.? 63.8 63.7 67.8 104.6 107.5Acquisitlee of Flze.d Asses 600.2 57.6 .. .. $2.3 37.9 32.? 37.8 53.4 59.2 74.2 64.5Capital Construction .. .. .. .. 29.7 33.1 25.5 25.9 44.1 46.4 53.7 0.9Capitol Purchase .. .. .. .. 2.6 4.6 7.2 11.9 9.8 10.8 20.6 18.6

Capital Greats & Nst LendIng 35.1 83.6 .. .. 24.0 46.3 29.0 29.0 30.8 29.1 30.8 42.9Orats 19.0 21. .. .. 20.7 14.6 17.3 18.2 12.8 19.3 5.9 26.1Wt LeWing 19.1 12.0 7.0 3.0 8.4 31.8 10.9 7.9 19.0 8.3 24.4 19.9

TOTAL 306.6 333.7 32.0 37.0 332.6 41S.0 419.1 410.0 484.4 539.7 569.1 622.8

Soures: Data poided by FIJ I suheritles an staff estietes.

Tsbl. .4 64 OPATD PROT OF lUlORt PCXC eI1WPRIMS, 1985-00 1/(Fl mil lI on)

oovt. status 1 1 986 197 1988 im 1990Shae S/(1)

1. Posts A Tale_ommunications 100 C 6.0 6.5 4.0 9.5 7.3 12.0

2. Ports Authority 100 s 0.9 0.1 -1. 0.4 2.0 0.9

8. FilJ Sugar Corporation 2/ 67 C -6.6 19.2 28.0 15.8 29.7 12.0

4. National Marketing Autority 2/ 100 S -0.6 -0.8 O.8 -0.1 -0.1 -0.8

4. FIj ZntrntionalTelocemination C_ony 21 51 C 6.7 7.0 11.4 11.0 14.9 10.2

6. Fiji Electricity Authority 100 S -1.8 -7.2 -7.0 22.0 2.9 -4.1

7. HNou.inS Athority 100 S -1.6 -2.5 -7.7 -6.5 -4.1 -1.1

S. Motive Land Trust Board 100 S -0.7 -1.2 -1.0 -0.8 -1.4 -1.8

9. National Bank of FIJI 8/ 100 S 0.8 0.8 4.8 0.4 0.8 0.9

10. FIJI Devlopment Bank */ 100 S 0.9 0.4 0.5 0.5 0.6 0.7

11. Fiji Pin. Limited 100 C -0.2 -O.S -18.5 2.4 -0.6 -1.9

12. Fiji National Provident Fund 8/ 100 S 17.4 21.0 28.2 23.7 26.2 81.7

18. FIJI Broadcasting Commssion 10O S -1.4 -1.5 -1.8 -0.9 -1.1 -1.2

14. Civil Aviation Authority 8/ 100 S -0.1 -0.8 0.5 1.1 2.0 1.0

15. FIJI Trad, and Invstment Board 100 5 -0.7 -0.8 -0.9 -0.9 -1.2 -0.8

16. Air Paetftc Limited 2/ 72 C 0.4 1.5 2.4 9.1 17.5 18.9

17. F131 Air Limited 23 C 0.2 0.4 -0.2 0.0 0.1 - 1

Is. Home Finance Coeany 26 C 1.0 1.1 0.8 0.9 1.0 0.9

19. IKA Corporation Limited 4/ 100 C -0.2 0.0 0.4 0.1 0.1 -0.7

20. Public Rental Board 100 S 0.0 0.0 0.0 0.0 -2.9 -2.6

21. Rewa Rice Ltd. 2/ 79 C 0.8 0.7 O.l -0.3 -0.5 -0.3

22. Pacific Fibsing Co. 100 C -1.7 -0.8 1.6 2.0 2.1 8.0

28. Resee Batnk of FIJI 100 S 7.0 7.0 9.0 11.4 14.6 14.2

24. Yalavou Mural Development Board 100 S -0.5 -0.4 -0.3 -0.5 -0.6 -0.5

26. Natlve Land DevelopmntCorporation 100 C -1.8 -1.6 -0.8 0.2 0.0 0.0

26. FIjI Visitors Bureau 100 S -1.0 -1.2 -1.8 0.0 0.0 0.0

TOTAL 22.5 46.0 30.1 101.0 109.3 97.0

Source: Dat provided by FIjI uthorities.

1/ For the financial year ended Deceber of the same calondar yer.2/ For the financial year rnded March of the subequnt calendar ynr.8/ For the financI year ended June of the sme ca lendar year.4/ 1m0 f igure relates to the period Febuary 19 - Doemr *1, 1090.6/ C' rofers to Corporation; "S" refe to Statutory Authority.

SAWS" Apwadt FlE 68

Table 6.1s MONETARY SURVEY, 13-02 I/(Fs mlillon at current prcia)

(and of Period)

1063 1064 196 106 1967 1066 1909 1990 109 1m.t.

Wet Forelgn Assets 106.0 117.3 130.9 139.6 194.6 327.7 331.7 301.9 410.0 496.8

Neot Domestic Aseatn 36.7 372.2 7.6 306.6 413.3 40.8 4AI.s 618.5 753.6 s26.0Domestic Credit 331.5 412.0 436.3 471.4 541.8 501.0 661.9 786.6 961.1 1081.1

Government (net) 32.9 29.3 26.3 47.4 81.t 19.1 63.1 29.2 60.9 82.2Off lc.l Entities 73.3 8.5 59.6 560.4 e6.2 70.4 6s 75.2 07.6 116.6Private Seeor 278.8 324.6 350.4 867.6 393.6 411.5 540.0 676.4 602.9 680.4

Other Ite_ (net) -46.0 -40.4 -ft.7 -74.6 -126.0 -95.7 -184.1 -166.3 -207.5 -252.3

oread Money 443.7 490.0 502.5 566.5 607.0 738.0 809.4 1007.5 1163.6 1327.6Narrow money 141.6 142.3 146.4 178.6 173.2 279.5 275.7 273.7 22.7 337.1

Currency 56.7 61.0 61.6 63.1 64.9 67.7 76 so 90.9 103.1De"nd Deposits 2/ 62.9 91.3 64.6 115.5 109.3 211.8 107.7 167.7 201.8 234.0

=u*a3-meney 802.1 347.7 356.1 407.6 434.7 453.5 563.6 733.7 On0.3 980.5

Source: Date provided by Flji outhorities.

1/ As of last s 1 the month for 1983-f6; lat working day of th. month for 1069 and byond.2/ Includ local bills payablo.

69 Volue 1: F#i

Table 0.21 INTRT RATE SIOUCITE 1094-2(End of Period)(T pe Snam=)

1984 108 1i0 1907 19 t193 1990 1991 102

Miniml Leing Rate 11.0 11.0 0.0 11.0 11.0 3.0 0.0 0.0 6.0Depoit Rate

Coeoial Seak S/ .S a.s , .s S.S 8.5 t.S 8.5 8.6 $.5

Comrcial SeeksInterbank Rat 9.2 13.1 2.0 3.? 1.0 3.0 4.7 5.0 3.0Len t 2/ 13.0 13.1 11.6 13.7 12.3 11.5 12.3 12.4 12.5

81tn. spoeta 6.0 0.0 6.0 6.0 4.0 4.0 3.7 4.1 4.1Smal Tim Deosit. 3/

7 day- h- - 5.5 9.0 4.0 - - 4.31-$ moothe 0.0 6.0 6.0 6.0 4.0 4.0 S.0 4.6 6.034 months 8.5 6.s 6.s 6.0 5.0 5.3 5.S 6.0 7.06.12 soothe 7.8 7.S 7.8 7.8 8.0 5.5 7.0 0.5 6.01-2 yers 8.0 0.0 8.0 0.0 0.0 ?.S 0.S 0.5 10.02-8 yers 9.0 9.0 9.0 9.0 9.0 9.0 9.6 9.0 11.0a years or ir 10.0 10.0 10.0 10.0 10.0 10.0 11.0 11.0 11.0

Lerge Time Depost 4/7 days-1 h - - 3.0 8.0 - 8.5 5.5 .0 0.014 months - 11.3 3.4 11.1 0.? 1.7 4.8 4.5 6.7

6 month 11.0 4.6 10.6 5.5 4.6 6.0 6.1 7.06-12 months 12.1 6.4 10.4 8.6 6.0 7.0 7.6 9.01-2 yre - 12.5 7.1 16.2 8.1 6.9 0.S 9.0 9.0

Public Sector Swrities (yield)Trosury OIlls S/ 7.2 6.7 6.8 11.2 1.S 8.1 4.0 S.7 3.4$-year Bomd 9.7 - 0.1 9.0 6.1 S 7.7 6.2 7.95-year Bonds 6/ 10.4 10.4 9.7 9.8 7.0 7.4 0.6 0.8 9.110-year lands T/ 11.5 11.1 10.4 9.6 9.6 0.8 - 10.0 9.3Proissry Notes (fSC, FFA, P) 9.0 7.8 8.0 12.9 2.5 3.3 6.3 7.0 4.0

$oUse: Data provided by FIJI authorities.

1/ Paid on obstautry resewve depoelt of cermoslal banks.2/ Weighteveag for the yer.

/ Maxim rates on deposits below F320,000.4/ 1axiwm rates on depoit. oever 1250,000.t/ Weighted arae for the year.6/ Weighted avorage for the yer for - yer bonds.7/ Welghted avore for the year for 10-1 yer bonds.

Sted*id App.n& D(L 70

Table 7.1: HOTEL AND VISITOR STATITCS, 129-92(In thousands; unles otherwise indicated)

1068 1066 1967 106" lo0 1000 1001 1992Est.

Hotl Statistic. 1/

Rooms Available (end of perlod) 8.9 8.9 3.6 8.8 8.6 8.9 8.9 4.0Bed Available (end of period) 10.9 10.9 10.4 10.4 10.6 10.6 10.0 10.9Room Occupancy Rat () 56.8 59.0 44. 46.0 8 6.9 60.2 51.9 54.2ed Occupancy Rate () 41.8 42.8 80.0 82.0 48.1 44.8 87.6 89.8

Vetltor Arrivals 2/

Australia 09.6 86.8 65.4 75.8 97.0 108.5 68.6NMw Zelnd 19.6 22.7 16.2 21.5 20.1 29.4 80.6United States 49.6 69.7 47.0 42.1 84.4 86.9 81.6Caneda 10.9 28.7 16.6 16.9 16.5 16.4 16.2Japan 12.6 11.0 5.5 8.4 18.6 21.6 27.8United Kindom 7.7 10.0 6.5 8.6 11.4 16.7 16.6Continen"t Europ 12.7 15.1 14.7 20.6 28.9 27.2 26.8Pacific Islands 11.9 12.8 11.2 14.2 16.1 17.5 16.2Other 6.6 6.7 4.5 5.6 7.8 7.5 6.2

Total 226.2 257.6 109.9 206.2 250.5 270.7 259.8 260.0

om itemAverage length of stay (days) 6.4 7.0 6.8 8.6 9.2 8.8 8.6 8.6

Source: sDao provided by Fiji authorities.

I/ Excludes hotels with fewer than 25 beds and guest house.2/ Excludes cruise ship p sengere.

71 Voeine 1: F1ji

Tabil 7.2: PRODUCTION OF SELECTED AGRICLtTURAL PRQOUCTS, 196591(Tons.; unlts othrwise Indicated)

1986 1066 1067 186 1969 1000 1991

Suareane (000 tonnor) I/ 3,042 4,109 2,060 8,18S 4,06" 4,016 8,880Cope* 21,112 22,610 12,999 10,714 18,866 19,006 15,198Paddy Rie. 27,574 24,600 28,477 82,t2' 81,827 82,14? 29,086Virglnia Tobacco 2/ 877 298 208 144 224 240 252Cocoa 8/ 225 286 46J 288 875 406 465Beef 4/ 8,857 5,644 8,762 8,665 ,188 2,902 2,047Pork 4/ 674 641 6O1 680 566 608 714Goat 6/ 641 680 690 091 679 7 00 60ChIcken 6/ 8,612 8,688 8,690 8,989 5,080 6,491 6,888Eggs 1,90I 1,078 1,649 1,809 2,016 2,078 2,191Fluh 7/ 10,202 9,014 12,824 18,076 18,571 18,894 18,796Ginger 6/ 8,089 6,516 4,666 8,787 4,457 6,600 6,600

Source: Bureau of Statistics.

1/ Figure. relate to *seson, not calendar year.2/ Doe not Include virginia tobacco used for twist tobeaco.8 Sl"e to NMA.4/ For aniesie killed In sloughter houses only.5/ Animls killed In sloughter houes and estimted toubsistence' production.6/ Referm to output of registered chicken abattoire only and Includes

drenmed chickens as well eas *ale of lIve chickens.7/ Estimates of fisb caught Inside FIJI waters excluding "subsistence' fishing

but Includes crustaceans and fish caught under rural fishing scheme.8/ Includes rejecta, planting ginger rhizome. and diusead ones.

Stzdsc Appcedk F#i 72

Table 8.1: V=X OF CONSJUEO PRICES BY COMMWIT , 988(Annual averag percentag cheap)

19s 1984 1985 198S 1987 168 a t m 190 1901

Food 88.9 6.9 6.8 -1.8 6.1 16.4 10.1 6.2 1.6

Drinks and Tobacco 6.4 8.9 8.2 16.0 7.0 9.8 8.2 7.0 2.9

Hbusing 18.6 l3.0 1.2 4.4 1.7 -1.6 1.5 5.3 15.6

Heting and Lighting 4.0 0.7 O.7 -9.2 8.7 10.2 -0.1 10.7 11.8

Durable Houushold Goods 7.6 6.4 - 8.0 9.8 12.0 F.8 6.2 J.2

Clothing and Footwear 6.8 2.8 -0.4 1.5 8.1 16.8 9.2 5.0 8.0

Transport 11.8 O.6 4.0 2.9 0.6 9.8 2.2 10.7 14.4

Servics 8.7 4.5 1.6 1.4 6.4 8.2 1.4 20.0 10.0

Miscillneous 4.8 0.2 2.7 8.6 12.5 82.6 9.1 6.2 8.6

Coabtnod Index 6.7 5.8 4.4 1.6 5.7 11.6 6.1 8.1 6.5

Sourc: Burau of Statistics.

73 Volume 1: FPi

Table 8.2: MEAN DAILY WAGES OF WAGE EAE BY NDUSTRY, 1981-41(FS at c.re et pries)

1981 1982 1988 1984 1988 1988 1987 1968 19t9 1990 1991

Agriculture 8.24 8.10 8.98 8.84 8.82 8.24 8.64 6.88 11.92 9.71 10.19

mining 8.48 9.28 9.60 10.C8 10.48 10.72 11.80 12.40 18.04 12.78 1.40

msnufacturng 10.50 11.20 11.92 12.00 12.16 11.84 12.82 12.6S 11.88 1U.84 14.58

Electricity 10.96 12.96 14.04 14.58 14.98 15.20 16.18 16.92 16.80 18.18 19.06

Construction 10.40 12.00 11.84 11.92 12.24 12.40 18.28 18.84 18.92 14.92 15.87

Commrce 10.24 10.82 11.04 11.20 11.88 11.28 11.68 12.00 12.06 18.12 13.78

Transport 10.68 11.78 12.24 12.6B 18.20 18.20 14.08 14.40 14.68 15.82 18.81

S.rviec 10.40 11.04 12.24 11.78 12.08 12.08 12.72 18.20 18.04 16.84 16.42

All Industries 10.16 10.98 11.68 11.84 12.00 12.00 12.64 12.96 12.84 14.02 14.92

Source: Bureau of Statistics and .taff estimt".

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