Q1. This Ministry
deals with two of the most important sectors
of the economy in Fiji, the Financial Sector
and Telecommunications. Could you explain
in further details what are the functions
and activities of this Ministry in these two
sectors?
A1. The main objective for the Ministry
in the medium term is the implementation of
the Strategic Development Plan (SDP: 2003-2005).
In September of 2002, Government hosted the
National Economic Summit where wide consultations
with the private sector and civil society
took place to ensure ownership of the Plan.
Following the positive reaction from all stakeholders
and participants at the Summit, we expect
to set up a National Economic Development
Council comprising of the private sector,
civil society and Government to monitor the
implementation of the Plan. The priorities
identified in the Plan for the next three
years include:
- Maintaining macroeconomic stability;
- Raising investment for growth and jobs;
- Promoting security and unity for stability;
- Structural reforms to promote competition
and efficiency;
- Alleviating poverty and improving rural
and outer island development;
- Implementing affirmative action and social
justice; and
- Strengthening good governance in all state
institutions, including reform of the Public
sector.
We need to make sure that the plan is implemented
within the time frame and to do so, we need
to ensure that the resources go to the priority
areas identified in the plan. These are
the matters where this Ministry is focusing
upon of course ensuring accountability and
transparency of how funds are used. We will
continue monitoring the plan and the budget
for each year so that the targets are met.
We also look after Telecommunications in
both domestic and international services.
The two companies operating, Telecom Fiji
and FINTEL, have exclusive licenses until
2015. We are trying to protect the framework
in which the exclusivities were given and
also to encourage them to provide good services
at competitive prices to address the need
of the consumers and of course the businesses
in general. An eventual fall of international
and local telecommunication prices will
encourage other industries to come in Fiji.
Q2. What would you consider to be the
most important achievements of your Ministry
since year 2001?
A2. This Ministry plays a crucial role
in the preparation, delivery and implementation
of the National Budget. Having weathered the
events of 2000, the 2001 Budget was challenging
given the economic status of the country at
that time. However, guided by sound economic
advice provided by the Ministry and the Reserve
Bank, we took bold steps towards rebuilding
the economy by adopting an expansionary fiscal
policy. Since then, the economy has been growing
steadily and this has been most rewarding
because it reflects confidence in our policies.
For 2002, I would say the greatest achievement
for the Ministry, aside from the 2003 National
Budget, was the successful hosting of the
National Economic Summit. The last Economic
Summit was held in 1995 so it was a great
achievement for the Ministry to host the Summit
again after seven years. The most important
achievement was to bring stability back and
from there, we mapped our way from a difficult
period to economic growth. Now I can say that
we are on the path of economic growth.
Q3. What do you consider to be the key
steps of this government and this Ministry
in particular to achieve that stability?
A3. Back in the year 2000, The Reserve
Bank of Fiji worked quietly proactively in
having external financial stability. At the
Ministry of Finance, we put in a "mini
budget" for the rest of the year cutting
expenditures. We thought that the economy
was going to fall around 15% but that was
a pessimistic forecast because the economy
fell only by 3%. The combination of the work
of the Reserve Bank and this Ministry stabilized
the situation. With that stability platform
we started having growth in 2001 and 2002.
I am quite happy that tourism led the recovery
as we the sugar industry was declining and
it is an important pillar of our economy.
Our wide consultations with a stakeholders,
the civil society and all the communities
gave us an input on what we should be doing
to get the economy moving. We had these discussions
even before we won the elections. Most of
us, myself included, were not even contemplating
the possibility of coming into politics at
that time, I just finished my period at the
Reserve Bank when we started that counseling
process and I got myself involved in the monitoring
and implementation of the plan by working
side by side with various sectors of the economy.
We can look back and say that we achieved
something.
Q4. In the National Budget 2003, there
are new measures introduced within a strategy
towards securing a sustained growth of 5%
of GDP in Fiji for the next few years. What
would you highlight as the most important
measures that will drive Fiji economy to
this objective?
A4. The new measures introduced in 2003
under Government's fiscal, debt and monetary
policies and structural reform programs are
in line with our strategy towards achieving
a sustained growth of 5 % of GDP. To start,
the objective of Government's fiscal policy
is to maintain stability and provide the necessary
expenditure to support economic growth through
higher investment. For 2003, Government's
revenue policy aims at optimizing revenue
collections, stimulating investment, and broadening
the tax base through the following measures:
- Continuing with the implementation of
the investment package (except for the reduction
in corporate and personal income taxes to
30 % in 2003);
- Maintaining the integrity of the VAT system;
- Protecting key domestic industries;
- Tightening compliance with the tax system;
- Improving collection of tax arrears;
- Ensuring that Government fees, fines and
charges reflect the current cost of producing
these goods and services by indexing the
rates to inflation; and
- Consolidating and retaining the tariff
structure under the 4 main bands.
Revenue policies for 2003 also include
new direct and indirect tax measures. Since
the Government is primarily focused and
aware of the need to expand and protect
the revenue base, it boldly introduces an
increase in the rate of VAT by 2.5% (from
10 % to 12.5%), fully conscious of its impact
and thus offering numerous assistances deliberately
directed towards the poor to help cushion
and offset the overall effect. Other related
policies include the amendments of specific
Income Tax regulations and strategizing
the revenue collection agencies, which concentrate
on alleviating existing loopholes and allow
for efficient revenue collection. On the
expenditure side, the objective is to redistribute
wealth and build productive capacity in
the economy. In doing so, Government will
continue to shift resources from operating
to capital expenditure. For 2003 the priority
areas for spending include: Health; Education;
Infrastructure; Tourism; Poverty Alleviation;
and Affirmative Action for Indigenous Fijians
and Rotumans. Concerning our debt policy,
we are fully aware of the importance of
having effective debt and risk management
measures in place. In fact, this year we
will undertake debt and risk management
policies and strategies to strengthen Government's
debt management capacity. With regard to
Structural reforms, the following areas
will be pursued: Labor market; Goods market;
Public enterprise; Civil service; Trade;
Agriculture and Land; and Financial sector.
The most important thing for us is to ensure
that we get our level of investments. We
have always recognized that investments
need to be increased because, at the moment,
the rate is around 11% of GDP. For us to
achieve the 5% growth we need, we have to
increase the investment level to 25% of
GDP. We need to guarantee that the Government
investment level is up to its peak and then
that the private sector follows. There is
a substantial amount of projects in the
pipeline, which will assure the investment,
and the growth levels desired. In the budget
of 2000 and 2001 we looked at the taxation
and tariff rates so that we could be competitive
with other countries in terms of attracting
investments. The financial system here is
quite liquid, there is a lot of domestic
liquidity available for investment. The
key is confidence, we must show that there
is confidence in our economy.
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Q5. What is
the contribution of the Financial and Telecommunication
sectors to the GDP and what is your strategy
for the future regarding the eventual opening
of the market for more competitors, for more
players in Fiji?
A5. Whilst the contribution of these sectors
to GDP is minimal, there is huge a potential
for growth from new investments in these sectors.
For 2003, the communication sector is expected
to contribute 0.3% to GDP whilst the Finance
sector in total contributes 0.2%. Significant
growths over the years are projected for these
sections with a 7.5 and 3% increase respectively,
by 2003. We are looking at small telecommunication
markets here and the two existing operators
have exclusive licenses. The question is not
whether we should open up the market, what
we need to make sure is that those two companies
will achieve international benchmarks and
will implement best practices in the coming
years in terms of prices and products offered.
We will always respect any exclusive licenses
given the amount of investment that Telecom
Fiji and FINTEL have done. Telecom Fiji is
owned by ATH, FNPF is the major shareholder
of ATH and if we are not careful a lot of
people could be hurt if we did not respect
the exclusivity agreements under which they
operate. Outside these licenses, Fiji is opened
for further competition. We have a very open
policy of entry into the financial sector,
as long as they meet the criteria, and there
is nothing to stop them from coming in. There
are already some Banks established here so
newcomers would have to be looking at different
types of products, which may not be available.
The Government of Fiji is aware that the current
monopolistic structure of the telecommunications
sector is a major hindrance to its growth.
The government is of the view that monopoly
suppliers of telecommunication and ICT services
(particularly public enterprises) will not
fully provide efficient competition internationally
and especially in this area. This is the rational
behind the setting up of the key policy objective
under the SDP of the removal of telecommunications
licenses by 2005 instead of 2015.
Q6. How do you measure the contribution
of foreign development banks, International
Organizations and other Financial Institutions
in the recent and future development of
the Fiji Islands?
A6. Historically, the Republic Of Fiji
Islands had been receiving significant assistance
from the Asian Development Bank (ADB) by way
of loaning funds for the financing of major
capital projects. Current and future projects
include the development of key water supply
and sewerage systems, ports structure, rural
electrification schemes, improvements of civil
aviation and airport areas, and the sponsoring
of alternative livelihoods which involves
financing and training of sugar cane farmers
switching to new agriculture or non-agriculture
venture. We have a very close relationship
with the Asian Development Bank and we are
talking to the World Bank in other areas like
tourism and the developments of hotels is
where we are putting the emphasis at the moment.
With the sort of tourism numbers we are looking
at there will be constraints if we do move
fast. For the South Pacific Games, the Peoples
Republic of China is contributing significantly.
The European Union programmes coming in soon
to assist in our rural education is in the
line of their historic support to the sugar
industry. Australia and New Zealand also finance
various projects. We receive a range of international
aid from various international organizations
and countries such as the EU, NZODA, NZAid,
AusAid, UNDP, UNEP, SPREP, UNDESA, Japan and
China. Outlined in the table below is a summary
of input from these contributors as from last
year to 2005.
Overall Contribution from International
countries and Organizations ($m)
Source: ODA Unit, Ministry of Finance and
National Planning
2002 2003 (P) 2004 (P) 2005 (P)
Operating - 8.874 6.921 6.285
Capital 20.395 55.173 45.980 15.600
Total 20.395 64.047 52.901 21.885
Obviously, a large part of these assistances
are directed to the general capital and
infrastructure development and improvement
within the country in line with the support
from ADB. Furthermore, these assistances
are projected to increase within the medium
term.
Q7. What are your initiatives to increase
Foreign Direct Investment and investment
opportunities in the Financial and Telecommunication
sectors in order to achieve the investment
level of 25% of GDP in the next years?
A7. It is crucial for us to get that investment
level as unemployment is growing and there
is people leaving the school without opportunities
for employment. This could lead to other social
problem in this country so we need to address
this. Currently the domestic telecommunications
industry operates as a monopoly under exclusive
license arrangements. However, under the SDP,
a key policy objective under the information
and communication technology (ICT) services
sector is the liberalization of the industry
through the removal of exclusive licenses
by 2005. Opportunities also exist for new
Internet service providers to enter the industry
and establishment of international call centers.
FDI plays a very important role in signaling
confidence in Fiji's economy. We have everything
that a foreign investor might need to feel
comfortable. The following incentives exist
for investment opportunities not only in the
Financial and Telecommunication sectors but
for investments in other areas as well:
- Tax Rate Reductions: Corporate tax rates
for both residents and non-residents aligned
to 30% in the medium term (non- residents
rate have been decreased from 45 to 34 %
in 2001 and further dropped to 32 % in 2002);
- Investment Allowances: 40% deduction for
investment allowance can be claimed for
qualifying expenditure of at least $50,000
FJD on the acquisition of capital assets
which includes IT-related investments;
- Accelerated Depreciation for buildings
erected before 2005;
- Loss Carry Forward of 8 years;
- Dividend Exemption System;
- Duty rates on construction materials (not
available locally) and capital items reduced
to 3%;
- Specific incentives for the Audio Visual
Industry.
Apart from the Investment Incentives Package
mentioned above, the Government has also
implemented a number of "pro-business"
and "Investor friendly" initiatives
such as:
- The review of Fiji's Foreign Investment
Act to facilitate more FDI into Fiji by
clearly outlining the areas where investment
may take place;
- The review of the Fiji's Investment Approvals
Process to streamline the process and to
minimize 'red tape' faced by both existing
and potential investors alike;
- The relaxation of immigration requirements
pertaining to the employment of expatriates;
- The establishment of a State Owned Investment
Vehicle called the Fiji Investment Corporation
to provide access to equity funding and
capital; and
- The establishment of the Cabinet Sub-Committee
on Investment to expedite investment projects
and proposals through Government.
Q8. If we compare Fiji with other similar
investment destinations, what does Fiji
offer as competitive advantages for foreign
investors?
A8. Fiji offers many excellent investment
opportunities and these are supported by an
array of incentives listed above. With the
low levels of inflation, interest rates and
growing investor confidence, I must stress
that now is the best time to invest. I think
that if we cannot increase investment from
overseas, then we will have to move aggressively
domestically. As I mentioned earlier, there
is a lot of liquidity in the system so if
the domestic investments picks it up to fill
that gap we should be able to reach 25% of
GDP. If we are not able to attract foreign
investment as much as we would like to we
should focus more on domestic investors, on
domestic resources. This will also provide
a signal, if domestic investors trust in Fiji
then the rest of the world will follow. We
learnt this back in year 2000, when we approached
overseas banks for assistance and they told
us they would like to see banks here assisting
us, that happened one year after and since
then our economy has grown progressively over
the years, which signifies the return of confidence
and stability. Major sectors of the economy
are steadily improving with positive outlook
projected over the next few years. As mentioned,
the Government focuses on promoting conditions
for investment by taking up the pro-business
and pro-investor approach. In a nutshell,
Fiji is already home to the South Pacific
Stock Exchange and is preparing itself to
be the financial, economic and political hub
of the South Pacific Region.
Q8. Mr. Kubuabola, could you tell us a bit
more about yourself and what would you like
to be your personal legacy for the future
of the Fiji Islands?
A8. I started as a weather forecaster
a long time ago, I was a meteorologist. I
came into government as a planning officer
and then I made my way through the ranks to
Permanent Secretary for Finance in 1983. Then
I moved to the Reserve Bank of Fiji in 1988
and I stayed there until year 2000. In fact,
I left the bank one week before the coup as
I was appointed to be Ambassador of Fiji in
Washington. But things changed, one's life
can move more than one could imagine. In year
2000, the current Prime Minister was approached
to be the head of the Interim Administration
and he asked me if I would like to join his
team to be responsible for finance, I agreed
and then stayed after the elections. The main
thing I am concerned at the moment is to ensure
that the development plan is achieved, that
is properly complete and hopefully it will
take the country to a better level in terms
of growth and standard of living.
Winne cannot be held responsible for unedited
transcription.
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V.I.P. INTERVIEWS
