Q1. Mr. Narube, regarding
the main mission of the Reserve Bank of Fiji and
the background of the institution, What would you
say have been the most significant contributions
to the development of the Fijian monetary and banking
systems in the last few years?
A1. Before we go to the development of the Fijian
economy, we have to realize that Fiji's banking
and financial system is quite well developed for
a developing country like Fiji. The banking services
we offer are those that we find in any developed
system. We offer internet banking, telephone banking,
instant transmission of funds overseas, among others.
All the world standard services are available here.
So the financial and banking system is well developed.
Something we also need to take into account is that
the entry into our banking system is quite deregulated.
Anyone can apply to come to establish a bank in
Fiji, it is an open country for any company to come
and set up a business. In terms of development,
you have to understand that we just have come out
from turbulent times and our attention was predominantly
on securing financial stability. Now we can give
more emphasis on further development of the banking
and monetary systems. One of the most important
things we are doing is that we are asking for more
disclosure of information, more disclosure of the
financial accounts and more disclosure of the fees
and charges of all the banking and financial institutions.
Secondly, we are helping to develop and upgrade
our existing payment systems, the system of transfer
of funds across banks and financial institutions
and our aim is to establish a real time payment
system. That is still in a development phase. We
have also liberalized exchange controls.
Q2. After that political turmoil, there was
a lack of confidence among the international business
community, what have been the main policies and
incentives implemented by the RBF in order to
ensure confidence and protection to foreign investors
in the Fiji Islands?
A2. After the crisis happened in year 2000,
the priority was to stabilize the situation. We
could not do much else until we stabilized the system.
The key was to move very quickly after the crisis.
We did not wait a week or a month, we moved fast
to implement policies the next working day after
the event. In my opinion, that prompt response generated
a lot of confidence among the business community
and the international observers who where watching
the financial status of the country. During and
after the coup, we were never in any threat of a
financial crisis that would normally be the sequence
of events in such a political crisis. When a political
crisis happens the next thing you see is a financial
crunch and that never happened here. That is the
best message we could send to safeguard financial
stability. Particularly, what I think contributed
to more confidence was that we did not need to rely
on an exchange rate policy, we did not need to devalue
currency - something which was quite expected by
many. People therefore had confidence in our currency,
confidence that our balance of payments was quite
strong, our foreign reserves were quite healthy,
and there was no need for devaluation. These decisions
were taken entirely here in the Bank. There was
no Government in place after the crisis.
Q3. Another of the incentives that foreign
investors can find to invest in Fiji is the possibility
to use the country as an export platform. Could
you explain in further detail the assistance provided
by the RBF to exporters and what are the objectives
behind those measures?
A3. Generally speaking, a stable financial and
economical environment is what attracts investors
and exporters. We are providing a stable environment
and I think that has helped exporters in the last
two years, specifically the measures that we have
taken to facilitate the access to credit and to
funds by exporters. We did that by introducing what
we called the Export Credit Ratio which required
all commercial banks to lend a minimum portion of
their total deposits to exporters. Commercial banks
have their commercial guidelines that guide their
activity but after such crisis they had tightened
their loan books. That was a normal reaction expected
of any commercial bank in that situation but after
two years the commercial banks are now beginning
again to increase their lending. The increase in
lending is mainly to the tourism sector. Something
else we have done to support export activities in
Fiji is to reduce the cost of funds for exporters
through the Export Finance Facility. Without going
into details, that facility basically allows exporters
to access funds from their commercial banks at lower
interest rates. So we have helped them out in three
ways, providing them with a better environment,
promoting access to credit and helping out reduce
their costs.
Q4. There are several investments projects
set by the Government to develop the economy.
What are the banking services that RBF provide
to the Government?
A4. We are, like any other Central Bank, the
banker for the Government. We do not lend to Government
because that has some economic disadvantages even
though some central banks do. We do look after the
issues of Government bonds and we maintain Government
deposits. We also advise the Government on how it
can better utilize its resources and on policies
related to the monetary and financial sector.
Q5. Concerning advice that you give to the
Government, what would you say are the top priorities
to reach the 5 percent growth needed for the development
of the Fijian economy?
A5. That is something that has preoccupied us
in the last six months. First of all, we have encouraged
them to implement reforms in the public sector.
The reforms we are looking at are the size of the
Government and its financial management. These are
the major reforms we are concentrating on. There
are also other reforms we want them to look at,
like the labour reform as it sets incentives for
workers. We are asking the Government to be prudent
in its spending. The Government has announced that
it would reduce its deficit towards 3 percent of
GDP in the next three years and we are encouraging
them to stick seriously to that plan because this
will lead to a more efficient allocation of resources,
especially in a small country like ours, and this
will also help us to protect our foreign exchange.
We also need to raise the level of investment because
that is the engine of growth. We really need more
investments in Fiji to boost economic growth. So
in summary - reducing the size of the Government,
improving the financial management of the public
sector and increasing the level of investments -
if we follow these three priorities we are confident
that we will reach 5 percent average growth in the
next few years.
Q6. How would you define the current relations
between the RBF and other international financial
institutions like the Reserve Bank of Australia
or New Zealand, the Asian Development Bank, the
World Bank or the European Union Bank?
A6. Very cordial and very useful for us. We
are a developing country, an emerging economy, and
as we, at the Reserve Bank of Fiji, are exploring
ways to enhance our capacities, we are learning
from the experiences of other Central Banks and
this helps us a lot. For instance, we have sent
people to the Reserve Bank of Australia and this
is adding knowledge and skills to our workforce.
We have a Governors meeting of Central Banks in
the region, including Australia and New Zealand,
and we use that conference as a platform to exchange
ideas and learn from each other. We are observers
in the South East Asia Central Banks (SEACEN) meetings
- we attend the annual meeting every year. These
Central Banks are from South East Asia: Thailand,
Singapore, Philippines, Malaysia, Indonesia, Sri
Lanka, Nepal, Korea, Taipei, Myanmar and Mongolia.
and it is there that we strengthen our relations
with Central Banks of the region. We have recently
hosted a conference in Nadi, a beautiful site in
the west of this island, Viti Levu, for members
of SEACEN. We talked mainly about technical issues
like the transition mechanism of monetary policy.
We have developed good relations with other financial
institutions and we want to maintain that good relation.
Fiji is a member of the World Bank, Asian Development
Bank and the International Monetary Fund.
Q7. On April 18th 2002, one of the largest
companies in Fiji joined the South Pacific Stock
Exchange (SPSE), the Amalgamated Telecom Holdings
Ltd. How has this affected the Capital market
activities in Fiji?
A7. It has tripled the capitalization of the
SPSE by adding over US$200 million. This new company
being listed now in the SPSE has upgraded the relative
position of the Fijian Stock Exchange from being
the smallest in the world to the second smallest
in the world. It might look a small step, if we
compare it with other stock exchange markets in
the world, but it represents a huge step forward
for the Fijian economy.
Q8. Do you expect any other institution, local
or foreign, to be listed soon?
A8. I cannot give you any names but we are hoping
that two or three more companies will join next
year. We encourage them to do so as our Stock Exchange
has grown significantly in the last ten years. We
intend to continue that growth by introducing new
products into the market, getting more companies
listed and so forth.
Q9. What are the main incentives that a foreign
company can find by joining The South Pacific
Stock Exchange?
A9. First, there are no taxes on dividends and
second, there are no stamp duties on transfers of
the shares. These are the two most important advantages
that are available to listed companies.
Q10. Fiji Islands is heading towards a diversified
investment destination. What would you like to
highlight as the most interesting investment opportunities
within the main sectors of the economy?
A10. There is a lot of optimism with our tourism
industry, a lot of projects are foreign owned and
most of them will start within the next 6 to 12
months. We need more hotel accommodation to meet
the increasing demand of tourists coming to the
Fiji Islands. Besides tourism, our natural resources
represent another good opportunity for foreign investors.
We have a beautiful timber, the mahogany, the largest
mature plantation in the world. The Government is
right now looking for an overseas company to help
in the harvest and in the downstream production
of this timber. There is another great chance that
foreign investors might be well interested in taking,
I am talking about the IT based industry. Around
18 months ago we got connected to the fibre optic
Southern Cross cable, which connects Fiji to Hawaii,
to the west coast of the US, to Australia and to
New Zealand. It connects Fiji to the world and the
capacity of this fibre optic cable is enormous.
This is not the only advantage for the IT sector,
we have low labour cost in Fiji and the high skills
needed for the IT industry. Other areas that show
a vast potential is the Fiji water, a sector that
has grown quite well and has penetrated the difficult
US market, a success story. Fiji water is the best
water in the world.
Q11. The EU, Asian countries and the US are
looking to invest in the region. What are the
main competitive advantages of the Fiji Islands
compared to neighboring countries as an investment
and/or tourism destination?
A11. We have a lovely environment that we can
offer to people who want to do business in Fiji.
We have skilled workers at very competitive wage
rates. We have a set of incentives to attract foreign
investors and we have preferential access to markets
because of our association in international agreements.
We have good economic fundamentals, foreign reserves
are healthy, we have low inflation, and our exchange
rate is stable.
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Q12. The Fiji Islands
Trade and Investment Bureau (FTIB) is evaluating
a lot of investment projects but real investment
is very low due to a lack of financial support.
After political tensions and domestic instability
that led to international isolation, is it really
dangerous to invest in Fiji?
A12. Obviously not. Right now the access to
credit in Fiji is looking quite attractive. Our
interest rates are very low and there is a lot of
liquidity in the banking system that is available
for credit and, at the same time, you have free
repatriation of profits. Fiji has good banking and
financing facilities. Our financial facilities meet
the needs of investors. The increasing growth of
the economy forecasted for the next two years is
also something to take into consideration. For 2002,
the growth is going to be well over 4 percent and
in 2003, we are looking at 6 percent growth. The
political stability has been restored and this obviously
helps to present an attractive package for foreign
investors. The good position of our country certified
by Moody's has also given us confidence that there
is a promising future for the Fijian economy.
Q13. Mr. Narube, you have a long background here
in the RBF, could you tell our readers more about
your experience and personal background?
A13. I started working here, in the Economics
Department of the Reserve Bank, and then I went
to Washington D.C., to the World Bank and to the
International Monetary Fund, for three years. I
came back to the RBF again for a short period and
was later seconded to Government as Permanent Secretary
for Finance. I was appointed Governor in May 2000,
four days before the coup took place so I had a
big challenge to start with.
Q14. The National Budget for year 2003 has been
presented last Friday November 8th, what are the
changes, in relation to last year, that you have
defended in order to improve the financial sector?
Why do you think these measures will improve the
financial climate? What is your general opinion
on how the budget is allocated?
A14. The financial sector plays an important
role in economic development by facilitating financial
intermediation in the economy. In this respect,
the Government is mindful of further development
of this sector. Most of the plans to reform the
financial sector spelt out in the National Budget
for 2002 has either been implemented or firmed up
in the 2003 National Budget. On continuing work,
the Government in conjunction with the Reserve Bank,
will seek appropriate means of providing financial
services to the rural sector and schools - this
is expected to encourage savings at this level.
The Government will also continue to support the
micro-credit schemes (which lend to many rural dwellers).
This is expected to create employment in the formal
sector and generate economic growth.
Regarding financial sector policies, the Reserve
Bank is pleased that Government's Budget announcement
this year is more specific, with detailed plans
outlined to develop the capital market, extend
the Bank's supervisory role to encompass the Fiji
National Provident Fund and deregulate the superannuation
industry. Government is also looking at implementing
the recommendations of the review of the functions
and operations of the Fiji Development Bank.
Government is strengthening the supervision of the
insurance sector and developing an appropriate framework
for the superannuation industry. By rationalizing
existing financial regulations, it is expected that
these institutions will display more transparency
and be driven by clear statutory objectives. In
recognition of the significant position of the FNPF
in the domestic financial system, Government has
announced that, following the development of the
appropriate legal framework, RBF will undertake
the prudential supervision of the FNPF and the superannuation
industry as a whole. The intended deregulation of
the superannuation industry is expected to provide
greater competition, encourage capital market development
and greater innovation. Government also seeks to
decentralize the investment decisions of the FNPF
in order to bring about variation and flexibility
in the deployment of funds.
Government's announcement of setting up an Export
Credit Guarantee Scheme is also a good step forward
as we recognize the importance of the export industry
in driving economic growth. The establishment of
the Scheme comes at an opportune time, particularly
with some exporters facing financing difficulties.
These measures should go a long way to deepen and
create a more efficient financial sector. The policies
outlined for next year by the Government are aimed
at improving financial intermediation and promoting
the stability of the financial system. Successful
implementation of these policies should create more
efficiency, stability and confidence in the financial
system, and thereby provide a suitable platform
for economic growth.
Concerning Government's fiscal policy, I am also
pleased that Government has planned to bring down
its net budget deficit to 4 percent of GDP in
2003, from 7 percent of GDP projected this year.
Consistent with this move, Government's total
debt is expected to fall to 43 percent of GDP
in 2003, compared with 46 percent of GDP in 2002.
This is a welcome move and attests to Government's
commitment to the goals it had set for itself.
Internationally, this should bode well for investors
concerned about Government's fiscal prudence and
the financial climate as a whole.
Regarding structural reforms, Government has begun
the reforms of the sugar industry. We also welcome
Government's explicit commitment to reforms in the
civil service, public finance management and public
enterprises.
In terms of the monetary policy announcement made
in the Budget, the Reserve Bank will continue to
maintain an accommodative policy to support growth
in the economy. Inflation is expected to remain
moderate, with a comfortable foreign reserves position
projected. The Bank is also progressing with its
exchange control liberalization process in 2003
and this should assist in attracting foreign investment
into the country.
In terms of allocation, let me say that the 2003
National Budget is a bold, yet necessary first step
for the successful implementation of the Strategic
Development Plan for 2003-2005.
The sectoral allocations listed in the Budget are
supportive of Government's aim to improve key areas
such as education, health and poverty alleviation
& rural development. Increments received in
these areas are welcomed and should continue to
provide Fiji with a better educated workforce, ensure
that basic health services are accessible to all
and promote an equitable distribution of income.
Government's allocation to the tourism industry
has also increased and this is a very positive sign,
as tourism has the potential to become a billion
dollar industry. The industry is currently the largest
foreign exchange earner for Fiji.
Q15. The Reserve Bank of Fiji will now undertake
the prudential supervision of the Fiji National
Provident Fund and the superannuation industry
as a whole. What does this mean for the future
of the RBF and the FNPF?
A15. The FNPF is becoming a significant player
in Fiji's financial system, and in keeping with
its objectives of maintaining soundness and stability
of the financial system, the Reserve Bank considers
it prudent to move towards the supervision of FNPF.
As announced in the 2003 Budget Address, the
need to include FNPF under RBF supervision is
important when considering that in 2001, 43 percent
of the total assets of the financial system were
held by the FNPF alone. The Reserve Bank's current
supervisory ambit over commercial banks, credit
institutions and the insurance industry account
for around 47 percent of the total assets of the
financial system. The inclusion of FNPF in this
supervisory ambit will allow the Reserve Bank
to supervise a major portion of the financial
system thus enabling it to effectively perform
its role, under the RBF Act, of promoting a sound
financial structure.
Government and the Reserve Bank will look at
deregulating the superannuation industry to bring
in more competition, which would ultimately benefit
members. The growing number of old aged citizens
is an issue which is increasingly becoming universal.
In Fiji, this trend is also evident and brings
with it policy challenges for Government and regulators
such as the Reserve Bank.
Q16. The Reserve Bank of Fiji will further
relax exchange controls from January 1st 2003.
How will this assist investors and contribute
to further expand Fiji's financial system?
A.16. The Reserve Bank of Fiji has been reviewing
its exchange control policy guidelines in light
of economic and financial sector reforms in the
economy.
The major relaxations for 2003 include:
· further increases in the delegated limits
to commercial banks and foreign exchange dealers,
· the removal of limits on certain current
and capital transactions and
· the delegation to the Fiji Islands Trade
and Investment Bureau the authority to process
applications for issues and transfers of shares.
These progressive relaxations provide confidence
to Fiji's financial system and thereby should
encourage growth in foreign investment.
There has been also efforts made to streamline
the foreign investment process. Most recently,
it has been decided that the issue and transfer
of shares would be delegated to the Fiji Islands
Trade and Investment Bureau. This should assist
in the processing time of investment proposals
from offshore.
Q17. Could you tell our readers how do you
read the last figures of the Nominal Effective
Exchange Rate (NEER) index and the Real Effective
Exchange Rate (REER) index? What would you say
are the main reasons for this results?
A17. The Fiji dollar is pegged to a basket of
five currencies of Fiji's major trading partners.
The NEER index measures the overall nominal movement
of the Fiji dollar against the basket of currencies.
A fall in the index reflects a weakening or a depreciation
of the Fiji dollar against the basket. In the year
to September 2002, the Fiji dollar weakened marginally
against the basket of currencies. This overall movement
reflected bilateral movements, which showed that
the Fiji dollar weakened against the New Zealand
and Australian dollars but gained against the Yen,
the US dollar and the Euro.
The REER index is calculated by adjusting the
nominal exchange rates by the movements in the
price levels of Fiji relative to its trading partners
of the five currencies in the basket. A fall in
the index indicates an improvement in our international
competitiveness. In the year to September 2002,
the REER Index fell slightly, reflecting a gain
in Fiji's international competitiveness, largely
due to better domestic inflation outcomes compared
to trading partners.
Winne cannot be held responsible for unedited
transcription.
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MR. SAVENACA
NARUBE
