Fiji

UNTIL last May, Fiji was the success story of the Pacific, the only country listed in ADAB’s “Self Sufficiency Model” cate gory for countries with a relatively high standard of living, skilled workforce and infrastructure and a very reasonable level of independence. It had successful tourist and sugar industries and was the only na

tion in the region with a manufacturing base. But the economy of post-coup Fiji is extremely vulnerable.

Investors are sitting back to watch what will happen on the political scene before they commit their money to the country.

And the situation has been exacerbated by the recent devaluation of the dollar.

“If the political situation in Fiji is not resolved shortly,” Westpac’s manager for the Western Pacific, Mr Russell Leitch, said, “the economy of Fiji will suffer further.”

According to Mr Leitch, the economy “dropped to a lower plane” after the first coup than the latest ruction. However, he said if a political solution was not soon found, investor confidence, and with it the economy, would suffer more.

“Fiji is in for a fairly tight period,” Mr Leitch said.

The second coup has pushed Fiji’s for eign exchange reserves down to SFIIO mil lion. According to the Governor of the Reserve Bank, Mr Savenaca Siwatibau, just weeks before the second coup the slide had been arrested and reserves had been stabilised at SFI3O million following a wild drop.

Before the original coup, Mr Siwatibau said, Fiji was “doing very well. Our infla tion rate was quite low last year it was

less than two per cent. Our foreign re serves were the highest they had been in fact it was SFI7O million extremely high compared to previous years and in vestments were beginning to come in. We were looking forward to a balance in our current account. Things were looking ex tremely good.”

To prevent the economy going into a tail spin, the currency was devalued, interest rates were uncapped, and rapidly hit 20 per cent, and public sector salaries were cut by 15 per cent.

In the private sector, some workers took cuts of 50 per cent.

But even the most prompt action could not recover lost investor confidence. The second coup struck a more savage blow as it proved the changes taking place in Fiji were far more than a temporary disruption.

“Fiji has permanently lost some in vestments through the coup and others have been delayed,” the South Pacific Trade Commissioner, Mr Bill McCabe, said.

“It will take time to rebuild investor confidence. Money is nervous.”

It is believed that projects worth hundreds of millions of dollars have been put on hold and observers say that Fiji has now lost some developments to other is land nations.

Investor confidence has also been hit by the Government’s slamming the door

on the flood of foreign exchange leaving the country.

While it was necessary to stem the flow, the penalty for the rigid control of the movement of capital is that it is hard to en tice new investment.

Money is nervous at home as well.

“Business is disastrous,” Mr McCabe said.

“Trade through consumer items in retail is way down about 50 per cent of what it was in early May. In some ways that is not too bad as imports are down and people are growing their own food. But the sales of big items, such as cars and refrig erators, are almost nil. There is simply no consumer confidence to spend what money they have.”

Situated on the trade route to Australia and the US, Fiji is the only independent South Pacific nation to have a significant manufacturing base. Its clothing industry already exports more than $F4m worth of goods to Australia, and it was expected be fore the coup that the industry could have been producing SFlOm worth of export income by the end of next year. Fiji’s sugar industry benefits from access to the lucra tive American market, but that, too, is un der a shadow following the coup as observers question the willingness of In dians to cultivate their holdings during a time of upheaval.

The tourist industry has also suffered with occupancies dropping to just five per cent immediately after the coup. They

quickly rose to 55 per cent, just covering break-even point, but the second coup will have further negative effects on this vital sector of the Fiji economy.