AUSTEO (AUSTRALIAN EYES ONLY) REPORT: EXCERPT NO. 3

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Australian Delegation Brief Prepared for the July 11, 1997 Forum Economic Ministers' Meeting in Cairns, Australia

FIJI

"Prospects for economic recovery and reform are looking up with signs of compromise on the constitution."

Fiji has the highest per capita income in the Pacific. Well-endowed with natural resources, Fiji's physical and human capital is superior among Pacific islands. But despite its potential, Fiji's economy has been hostage to unresolved differences between indigenous and settler communities (Indian and European). The Fiji economy is expected to grow by 3.2 per cent in 1997 after recording 4.4 per cent growth in 1996.

The coup of 1987 led to a collapse of investor confidence and an exodus of skilled Indian labor. In response, authorities endorsed a new economic strategy, including public sector reform, trade and financial sector liberalization, and transparent investment procedures. But implementation has been weak, mainly because of incompatibility between reform and the promotion of Fijian interests.

The failure of the pro-Fijian policies has been exemplified by the costly collapse of the National Bank, because of large unsecured loans to well-connected Fijians. Trade and investment reforms have stalled because commercial lobbies have regained influence since the return to elected Government in 1992 and because the constitutional issue distracted Government and damaged confidence.

The Fijian leadership is unwilling to yield on Fijian ownership of land. But it is now coming to recognize the high costs of past approaches. Investment has fallen to 12 per cent of GDP, from over 20 per cent in the 1980s; private investment is only 4 per cent of GDP. Poverty and unemployment are rising in both major communities; one quarter of households have incomes below the poverty line. Most of the poor are in rural areas, but the worst poverty is in expanding urban squatter settlements, in which 25 per cent of Suva's population lives. Rural/urban migration is high for Fijians, but with urban unemployment at 20 per cent, their prospects are poor.

Communal issues aside, the economy is in need of fundamental reform. Key exports face major adjustments; for sugar, the looming loss of preferential market access; for garment manufacturing, continuing decline in the value of Australian and New Zealand preferences. Tourism has potential, but needs investment. And the public sector remains bloated, with high wages protected by strong unions.

Prime Minister Rabuka has been promoting communal accommodation and constitutional compromise because he recognizes that Fiji's prosperity depends on a restoration of international confidence which in turn depends on finding a power-sharing formula acceptable to all communities. But the Fijian mainstream continues to fear that any loss of political power will lead to their becoming displaced in their own country. Fijians now outnumber Indians but remain economically backward and doubt they can compete with Indians.

Even if Rabuka can broker a compromise for now, Fijian nationalism has the potential to derail it if it does not satisfy the grass-roots. That, and unresolved issues over land ownership and use, leaves a continuing element of uncertainty over prospects for a recovery.

FORUM ECONOMIC MINISTERS' MEETING POLICY AGENDA

Progress on public sector reform: Fiji has recently passed the Public Enterprise Bill which envisages corporatizing Government-owned firms and raising accountability for their performance.

Trade reform: Although Fiji has made substantial tariff reform in the past there are signs that it may be reversed. Fiji is in the process of accession to the World Trade Organization and is a member of the Melanesian Spearhead Group which has free trade in 35 goods (mainly primary products that only one member produces).

 

BERENADO VUNIBOBO

Fiji Minister for Finance and Economic Affairs since August 1994.

Despite his talent, Vunibobo has been disappointing as finance and economic affairs minister. He knows Fiji needs to be more competitive but has been unable to cut departmental spending or stem Fiji's growing budget deficit. He is struggling to bail out the stricken National Bank, the revenue of which will account for 18 per cent of recurrent spending in 1997.

Vunibobo, aged 64, is now unlikely to realize his ambition to be prime minister. As well as his poor performance, he lacks a wide political base. His home province, Rewa, is too divided and he has been unable to make the alliances necessary for national leadership. And Vunibobo is a Catholic, which limits his appeal to the mainly Methodist Fijians.

In spite of his good understanding of Australia (he was educated in Queensland), Vunibobo can react sharply if he senses he is being patronized. Temperamentally volatile, he is still given to Third World posturing against Western colonialism, of which he sees the Indian presence in Fiji as a legacy. Though he does not contest the need for restructuring, he is fearful of the impact of free trade on island countries and quick to accuse developed countries of hypocrisy. He has supported Fiji's moves for closer ties with Malaysia as a counter to Australia.

BACKGROUND

Vunibob was born in Nukutubu, Rewa province, in September 1932 and attended Marist schools in Fiji. He has a Diploma in Horticulture from the Queensland State Agricultural College, a Bachelor of Agricultural Science from the University of Queensland and a Diploma in Tropical Agriculture form the University of the West Indies in Trinidad.

Before entering politics after the 1987 coup, Vunibobo had been one of Fiji's most able public servants. He started as an agricultural officer in 1962, becoming permanent secretary for agriculture, fisheries and forests in 1971-72. He was secretary for works in 1973-76 before being appointed concurrently Fiji's permanent representative to the United Nations, ambassador to the United States and high commissioner to Canada in 1976-80. Vunibobo was permanent secretary for tourism, transport and civil aviation in 1980-81. From then until 1987, he served as director for the United Nations Development Program --in South Korea and Pakistan.

Vunibob failed to get endorsement as a candidate for prime minister Mara's Alliance Party for the 1987 elections. He accepted appointment later that year as minister for trade and commerce in Fiji's post-coup interim government (1987-92). Vunibobo failed to win a seat in the 1992 elections, eventually entering parliament in 1994. He was briefly minister for home affairs, immigration, employment, youth and sports before gaining the finance and economic affairs portfolio in August 1994.

Unusual for a Fijian, Vunibobo has a range of investments, mostly in Suva property, and owns a small agricultural business. Vunibobo's wife Luisa died in July 1997 after a long illness. He has two sons and three daughters. His interests include reading, debating, walking, gardening, swimming and golf. He is in good shape and follows a healthy diet.

TOMORROW: KIRIBATI

"Kiribati is straining at the leash of fiscal discipline. But its prospects would improve with better, not more, spending."

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