While confirming FNPF's participation in the Fiji Government-guaranteed loan facility of F$455 million (US$207 million) approved by Parliament last week, FNPF CEO Jaoji Koroi said interest payments, deferment and related issues will be discussed with the borrower under the Fund's new lending facility, in which its borrowers can make suitable arragements in light of difficulties faced due to COVID-19.
"FNPF has always had a strategic relationship with Fiji Airways. We're a long term investor and we see Fiji Airways as a strategic asset for Fiji because tourism is quite important and having a strong airline is crucial for our investments in the tourism sector. As you know after the Global Financial Crisis, we had that investment with Fiji Airways through a loan and that has yielded good results over the years. In fact, members have received close to $30m in interest from that lending facility since then. We're going through a very important cycle, and we still need to look to the future. We still need that strategic asset to grow and continue to bring back what we all look forward to, which is a strong tourism sector," Koroi said.
"It's a matter of looking over the next two years or so, we understand the capacity and what needs to be done. I think Fiji Airways has also done internal restructuring of their balance sheet in terms of what to let go and what to keep, so that it can be a finer company that we can improve. So we're looking at participating in that facility and because it's now a government guarantee, we're taking a risk on the lending." Koroi said.
Attorney General and Minister for Economy Aiyaz Sayed-Khaiyum detailed the loan structure in Parliament last week as comprising domestic borrowing (F$191.1m) and offshore borrowings (U.S$117.1m), or a total of F$455million spread over a three year period, effective May 30, 2020.
"Companies like ADB and all these international funding agencies are also looking to be part of that facility, so I think the message is: ok, two years is going to be tough but we need Fiji Airways to come out strongly for the future of the country," Koroi said, when asked about the likelihood that the national airline may not be able to pay anything in the first year since tourism is still crippled.
As revealed by Sayed-Khaiyum last week, $56.3 million is coming from FNPF while the rest will be borne by other local agencies including the Reserve Bank of Fiji and ANZ Bank.
FNPF, whose exposure in the tourism sector is around 16 percent, owns most of Fiji's major hotels and hotel properties in Fiji's tourist belt in Nadi as well as in Suva.
The end of breakfast buffets and garlanding on arrival. The rise of virtual travel experiences. The longing for solitude and simplicity. This is just a sample of the travel predictions being debated across the globe as we look to post-COVID tourism.
But how well is the Pacific positioned to respond to potential changes, and what is the current status of the industry?
“I understand one of the greatest challenges that we have is uncertainty,” Fiji’s new tourism minister, Faiyaz Siddiq Koya told Fiji tourism industry participants in a webinar recently.
China, which has reopened for domestic tourism, has closed buffets, increased distance between tables in restaurants, has all staff wearing personal protective equipment, closed gyms and indoor swimming pools and switched off air conditioning, reports McKinsey’s China-based analysts. Magazines and newspapers are no longer available on flights, and food and beverages are packaged and bottled.
McKinsey predicts young travellers will return to international tourism first, not traditionally the Pacific’s strongest visitor dynamic, although it does provide an opportunity to further develop niche markets, such as adventure tourism.
Associate Professor of Tourism Futures at Wellington School of Business and Government, Dr Ian Yeoman has identified a number trends which could characterise travel in the future, including the desire to connect with family and friends, the search for simplicity, the end of expensive, frivolous or environmentally-destructive expenditure and a move towards community and collectivism.
The Pacific is well placed to capitalise on several of these trends when borders open up, as long as we can differentiate ourselves from other destinations.
The Fiji Parliament will be today asked to urgently grant a government guarantee for a loan to keep Fiji Airways afloat, as the adverse impacts of the COVID19 pandemic begin to bite on the national airline.
Attorney General and Fiji's economy minister Aiyaz Sayed-Khaiyum says the airline needs a loan of up to US$227.5 million, about FJ$455m.
This afternoon parliament will consider the following motion:
"Hon. Attorney General and Minister for Economy Civil Service and Communications to move that Parliament approve
It comes as a total of 758 employees of Fiji's national airline, Fiji Airways, have been terminated effective from today in the wake of the adverse impacts of the COVID19 pandemic which has grounded the airline's fleet.
A new report on the impact of the COVID-19 pandemic on the Pacific’s tourism industry and recovery strategies has recommended immediate wage support, microgrants to industry operators and changes in the tax regimes as key to helping the industry to rebuild.
The Pacific Tourism Organisation (SPTO) commissioned the report, which looks at the impact of the virus on tourism in Cook Islands, Niue, Tonga, Samoa, Solomon Islands, Vanuatu and Fiji.
SPTO Chief Executive Office, Chris Cocker says while one size doesn’t fit all, the report aims to give the industries a framework so they can develop individualised recovery plans.
“I am telling you now that I think most of them either wouldn't have a clue how to develop the recovery plans because this is the first time. We've never experienced anything like this in the world, and in the Pacific, to the magnitude of a crisis like this.”
Cocker says while economic stimulus packages in some nations have responded to the needs of the industry, there are also some actions that can be taken regionally, such as digital marketing.
“Scenario planning could be done sub-regionally, because for example Micronesia has the same source markets which is Asia and also North America. Then you have the Polynesian ones where New Zealand is very strongly focused. Melanesia has Australia as their source market.”
The cruise ship sector has also been decimated by the pandemic, as a number of ships acted as incubators for the virus. The Ruby Princess for example has been linked to almost 700 cases of COVID-19 across Australia, and 21 deaths, after it docked in Sydney in early March after a cruise to New Zealand.
Cocker says the cruise industry has “thrown the ball back in our court.”
“It all depends on the member countries in the Pacific opening their borders and how well they will be able to handle things like hygiene, and also preventive measures and protocols in this case. I think that is another shady area that a lot of our members will still be cautious in approaching.”
As for lobbying to include Pacific Island nations in the so-called Australia-New Zealand Pacific travel bubble, a stepped approach is best.
“I'll be frank… as a regional organisation, in terms of economic recovery [we] definitely would welcome the Australia-New Zealand-Pacific bubble to bring in tourism revenues etc.
“But from our perspective I see it as a complicated situation because we've got 20 Pacific Island countries who are very diverse…It will probably be on a sub-regional basis in this case but I also think from my position our goal is to provide advice and guide them. So our position is we welcome it, but in a cautious and incremental way in this case. The health and safety of our people is top priority and paramount.”
The Fiji National Provident Fund is eyeing good bargains in the assets-for-sale space, as the coronavirus pandemic coughs up distressed companies either looking for cash or offering themselves up for sale.
FNPF CEO Jaoji Koroi said while the pandemic will affect its overall investment returns, considering its exposure to overseas share markets as well as the now crippled tourism sector locally, there are also buyout opportunities that the fund will explore.
"One of the key advantages of the fund is that it is a long term investor. We're here for the long term so, of course the first few years (of recovery) will be a problem but this is also a good opportunity to pick up good assets. A lot of assets will be there at discounted prices so we're preparing our cash flow based on that too, with that (buying discounted assets) in mind," Koroi told Islands Business in a press briefing in Suva today.
As Fiji's only national forced-savings pension fund for workers, the FNPF, via government regulations, has played a central role in coming to members' rescue in events of natural disasters, including the current coronavirus pandemic, which has been declared a natural disaster in Fiji.
With over F$710 million is cash and term deposits in its balance sheet, the Fund said it has enough liquidity to pay out members eligible for its COVID-19 assistance, attend to its normal members services as well as to invest.
"Cash is king during these times so if you have cash, you get the opportunity to look for good assets," Koroi said.
The Fund is expecting the impact from the statutory reduction in employees and employers' contributions - announced by government as a form of relief for workers and businesses in its COVID-19 response budget last month - and the current unemployment scenario in Fiji to begin reflecting in its cash flow from next month.
"Based on what we're receiving for March and February collection, we're still meeting our target, which is about F$50million per month of contributions. We'll be receiving the April contributions in May so that will start to reflect the reduced contribution rates as well as the unemployment now. We're factoring that into our cash flow moving forward," Koroi said.
Also on the casualty list is the Fund's offshore investments, particularly its stakes in the global stock markets, which are currently experiencing historic lows as major economies enter recession territory as a result of the COVID-19 crisis.
"We have an exposure there of around F$70million, all in the Australian market. We've seen a reduction of around 23 percent in the value of that. We're booking that on a daily basis so the impact is really flowing into the income statement, so, on a daily basis, the impact of those losses are in our books. It used to be F$70million, now it's about F$50million," Koroi said.
FNPF has a diversified offshore investment portfolio and owns shares in other unlisted securities such as in the BSP Bank in Papua New Guinea, which Koroi said have performed well and will offset losses in its stock market investment.
The fund is also expecting a big dent in its tourism investments, which represent around 16 per cent of its total investment portfolio.
Koroi said it is using the current stand-still in tourism to refurbish its hotels, among them the Sheraton and Westin hotels in Denarau. Also on the cards is a new contract with an international hotel management chain to manage its Suva-based Grand Pacific Hotel.
The Fund is however expecting positive results from its investment in government securities, particularly its returns from government bonds, which comprises around 40 per cent of its total investment portfolio.
Koroi assured members that their retirement fund is safe as it has in reserve more than what is required of it by law to reserve and to remain solvent.
"We're a long term investor so we're able to ride the lows and highs of every economic cycle," he said.
FNPF so far has over F$7.4 billion in total assets and $6.1billion in members' funds.