Mar 08, 2021 Last Updated 9:51 PM, Mar 7, 2021

Fiji's PS Konrote resigns

The most senior civil servant in Fiji’s Ministry of Economy, Makereta Konrote, has resigned from the post.

Konrote’s resignation comes at a critical time, as Fiji’s Minister of Economy remains in Singapore for medical treatment, and economic activity continues to take a battering from COVID-19 related border closures and Tropical Cyclones Yasa and Ana.

Minister Aiyaz Sayed-Khaiyum has been conducting budget consultation sessions over the Internet from Singapore, with the budget due to be delivered mid-year.

The February economic updated released by the Reserve Bank of Fiji this week stated declines in visitor arrivals (-98.5%), electricity (-13.7%) and mahogany (-98.7%), although there were production increases for cement, gold, pine, woodchips and sawn timber.

The Reserve Bank says Value Added Tax (VAT) collections plummeted by 25.2% and new lending by commercial banks for consumption purposes fell by 39.3%. Commercial banks’ new lending for investment declined by 47.2% in January.

The Bank says labour demand remains week, with job vacancies falling by 82.6% in January.

Government recorded a net deficit of $545.8 million (or 5.5% of GDP) in the first six months of the 2020-21 financial year. At the end of January 2021, government debt stood at 73.2% of GDP. 19% of this was external debt.

A government statement today quoted Konrote, who has been at the Ministry for 18 years and PS for five, as saying: "It has been a great privilege to work on behalf of my country. I want young people, particularly young women, who are considering entering the Civil Service to know that it can be a deeply fulfilling career of service to your fellow Fijians."

"I'm confident that I'm leaving the Ministry in the good hands of dedicated Fijians who are firmly focussed on our recovery from the COVID-19 pandemic."

Shiri Gounder, the Head of Fiscal Policy and former Head of Treasury will act as the Permanent Secretary for Economy from 16 March 2020.

Fiji’s Minister for Economy says there will no civil service pay cuts. Speaking from Singapore during an online budget consultation, Aiyaz Sayed-Khaiyum said the government’s wage bill is $1.1 billion (US$500 million) and the sector employs some 30,000 people.

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Fiji’s Minister for Trade, Commerce and Tourism, Faiyaz Koya says the newly launched Pasifika Heartbeat app is “a great example of how Fijians are exploring opportunities to make information services available to Fijians.”

“The health and medical services has become a leading sector where technology is playing a very important role - with the use of telemedicine and other app services. In fact, the pandemic has sped the digital transformation of healthcare. It has also boosted innovation in how patients can receive and consume health care services,” Koya said.

The Pasifika Heartbeat app is a digital repository of health-related information, including the geo-location of public and private health clinics, pharmacies, and hospitals.

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Investment Fiji has launched its new Fiji Trade Expo Series, with the first expo focused on marketing Fiji’s premium products to New Zealand, Fiji’s third largest export destination for merchandise trade. Other expos in the series will target Australia, USA, India, Europe, China, Japan, Indonesia and UAE. Fiji’s top exports to New Zealand are dalo, medicaments, garments, kava and fresh vegetables. New Zealand is also Fiji’s 3rd largest source of foreign direct investment in terms of both number and value of projects. 

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Research undertaken by the World Bank Group concludes removing non-tariff trade barriers could help countries maximise gains for women-owned businesses in the Pacific Islands, Papua New Guinea and Timor-Leste.  Targeted policies – aimed, for example, at promoting paperless and automated custom systems – could help maximise the benefits of trade for women, who currently face greater challenges than men, the World Bank says.

About 1,500 cross-border trading firms took part in the survey, which showed that women-led firms experience greater obstacles. Fewer women are represented in trade associations and they are consulted less regularly when it comes to matters related to border processes. Women are also dependent on more flexibility in doing business due to more family obligations.

The Acting Permanent Secretary for Local Government, Shaheen Ali says  approximately $30 million has been given as concessional loans to 5,438 micro, small and medium enterprises as part of government’s COVID-19 relief efforts. These loans have been extended mainly in the agriculture, wholesale and retail, food and hospitality, transportation, manufacturing and other service driven sectors.

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A number of Fijian businesses continue to sign under the Fijian Grown logo. One of the latest is farm and floriculture outfit, Golden Cowrie Complex.

Twelve Pacific Island countries are expected to receive vaccines for the coronavirus in the first half of this year through the COVAX initiative, with the region’s largest nation Papua New Guinea expected to receive by far the largest allocation.

PNG—which is still experiencing large-scale community transmission of COVID-19— is forecast to receive 684,000 doses of the AstraZeneca vaccine manufactured at the Serum Institute of India in the first quarter of the year. Solomon Islands will receive 108,000 doses from the same source.

The other Pacific Islands nations listed by COVAX last week will also receive the AstraZeneca vaccine, but from a different manufacturing source.

They are:

  • Fiji 100,800 doses;
  • Kiribati – 48,000;
  • Marshall Islands – 24,000;
  • Micronesia (Federated States of) – 48,000;
  • Nauru – 7,200;
  • New Zealand 249,600;
  • Samoa – 79,200;
  • Tonga – 43,200
  • Tuvalu – 4,800
  • Vanuatu 100,800.

While these forecasts are subject to change, COVAX partners say the release of this information should help governments and public health leaders put into place practical steps to roll out the vaccines in-country.

The Facility aims to see total doses cover at least 3% of the total population of all 145 participant countries in the first half of this year, enough to protect the most vulnerable groups such health care workers.

While  1.2  million doses of the Pfizer-BioNTech vaccine will be available to the COVAX facility in the first three months of this year, no Pacific Islands are listed to receive it as this is the ultra-cold chain vaccine, requiring temperatures of  minus-70 degrees.

More vaccine doses are expected to be available later this year.

After last week's Pacific Islands Forum Special Leaders' retreat, Secretary General Dame Meg Taylor said  Australia and New Zealand have committed to ensuring vaccines will be shared across the region.

"They gave assurances to the leaders that supplies would come. However in terms of an exact date I would be misleading you if I said we had any clear indication of that."

In a speech in Fiji’s parliament today, Attorney General Aiyaz Sayed Khaiyum said vaccine dispersal is so far “shaping up to be a  rich countries’ race. Countries with just 16% of the world’s population have bought out 60% of the world’s vaccine supply.”

“Fiji must secure its place in the world’s economic comeback by securing vaccines as quickly as we can, not months after the rest of the world but alongside it otherwise our people will be more vulnerable than they have ever been, exposed to infection, economically disadvantaged and left behind as the rest of the world races ahead.”

“Patiently waiting our time in the COVAX queue will be economic suicide for the country,” he said, noting that Fiji is working with bilateral partners to secure financial resources to buy vaccines now and will also be looking at making direct purchases from vaccine manufacturers.

“So far Australia  and India have stepped up with direct funding and shifted support,” Khaiyum said.

This story was updated at 5:11pm Fiji time to reflect events in Fiji's parliament today.

Pacific island nations can learn from the early roll-out of coronavirus vaccines in the north Pacific says the World Health Organisation’s  Representative in the South Pacific.

The Pacific’s COVID response is on the agenda of today’s Pacific Islands Forum (PIF) leaders virtual retreat, along with the election of a new PIF Secretary General and action on climate change. A number of PIF members—including Marshall Islands, Federated States of  Micronesia, Palau—are already vaccinating their citizens.

WHO’s Dr Corinne Capuano says while their initial projections were to see the vaccine rollout in the second half of this year in the South Pacific, there is a lot of work being done and it may be earlier, although it’s a complex issue. Forum members are talking to their development partners about vaccine procurement as  COVAX is not expected to meet all vaccine requirements.

WHO Director General Dr Tedros Ghebreyesus recently said the world faces moral failure if it doesn’t ensure vaccine equity. “Rich countries are rolling out vaccines, while the world’s least-developed countries watch and wait,” he said, challenging world and health leaders to ensure that vaccination of health workers and older people is underway in all countries within the first 100 days of 2021.

It’s a message the next Chair of the Pacific Islands Forum, Fiji Prime Minister Voreqe Bainimarama reiterated when he opened the Pacific Island Forum’s reconstructed fale in Suva last week: “With vaccines rolling out across the developed world, we must not allow our region to be cast to the fate of “immunity inequality”. Our people must be kept protected. Our economies must keep pace with what may well be the most important economic recovery in a century. For that to happen, COVID-19 vaccines must become available to our citizens, not months or – God forbid – years after the developed nations, but alongside them. Because we know none of us is safe, until all of us are.”

Suva-based Dr Capuano says there are things to be learnt from vaccination campaigns already underway, including logistics such as cold chain management, and the importance of identifying priority recipients, that is, people most at risk of being exposed to the disease such as health care workers and people working at our borders.

She says dealing with any side effects will also be important; “making sure you have in place systems that are able to deal with any side effects. It is important that you can take care of any side effects after the vaccination and that you have a surveillance system in place so you can monitor what is happening after vaccination.

“The other element is that the vaccine that is currently used in the Pacific requires two doses of injections, so you also want to make sure that you provide full vaccination to people, so you have a registering system that is allowing you to ensure that if people that get the first dose, they get the second as well.”

Dr Capuano cautions that the vaccine is “not a magic bullet” and “non-pharmaceutical interventions”—handwashing, physical distancing and the wearing of masks—remain important, especially in places with community transmission.

She says Fiji and other Pacific nations have been “working very hard” to prepare for vaccine deployment, including messages to overcome the so-called vaccine hesitancy that has been seen in some other countries.

“As the campaign is rolling in other countries in the world, people also see what is going on and that this is the value of being vaccinated. So we see a lot of critical information coming from other parts of the world that can be useful for the Pacific.”

Dr Capuano made the comments at the recent signing of an agreement between the WHO, European Union, United Nations Food Programme and Pacific Community to strengthen the health sector across the Pacific. The European Union has repurposed US$24 million under the EU-Pacific Islands Forum Secretariat Financing Agreement to fund this work in Cook Islands, Kiribati, Fiji, the Republic of Marshall Island, the Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.  

A step up in engagement by the Australian and New Zealand governments, combined with regional and international economic support over the past year, has cushioned the initial blow of Covid-19. 

Moving forward, labour mobility, a fast vaccine rollout and safe travel corridors in the region, combined with the faster release of infrastructure support will be critical to its ongoing recovery.

Closed borders have hit the Pacific island economies hard. The idyllic, Covid-free beaches of the Pacific islands are empty of visitors, and the countries that rely on tourism are experiencing a disproportionate impact of the pandemic on their economies, despite not having a health emergency.

While overseas economic conditions are set to improve this year, the Pacific will require international support to see an uplift in economic conditions. Unlike many of the developed Western countries, the relatively poor Pacific island countries were not able to put a floor under demand and shelter their economies from a more severe recession.

A more severe economic downturn, pressures on payments and elevated currency and country risks are probable in 2021.

Fortunately, the Pacific has long benefitted from support provided by some of its nearest neighbours. Australia and New Zealand have been the region’s key development partners, and more recently, their step up has been encouraging when combined with international donor assistance.

In the last year alone, the World Bank and IFC announced AU$1bn investment into Fiji and the AU$2bn Australian Infrastructure Financing Facility for the Pacific (AIFFP) has become operational.   Recent Australian and New Zealand government assistance to the islands in the wake of Tropical Cyclone Yasa has been welcomed.

In the wake of COVID-19, the Pacific will continue to require international support. The most beneficial types if support are likely to include:

Steps to ensure a:

  • Fast vaccine rollout extended to the Pacific;
  • Safe travel corridors through Australia, New Zealand and the Pacific;
  • Scaled up employment opportunities under the Pacific labour mobility schemes;
  • Release of infrastructure funding quickly and the roll-out of key infrastructure maintenance projects;
  • More budget support lending to contain credit risks; and
  • Agriculture assistance programmes to encourage exports.

Tourism key to a jobs recovery

Prior to the pandemic, the Pacific’s inbound tourism was strong, helped by solid economic conditions, particularly income growth in key source markets including Australia and New Zealand. Growth in overseas arrivals averaged about 5% a year. So much so, that that in the past decade tourism became the main driver of growth for many of the Pacific island economies including Fiji, Vanuatu, Samoa, Cook Islands and Tonga.

Tourism revenue flowed directly into sectors such as accommodation and food services, retail and transport, but then also fed through to other supporting industries yielding secondary benefits to the economy.

Once you add the stimulus from employment and taxes collected, the tourism sector’s total contribution to GDP is several multiples of its direct contribution to GDP and equates to about 40 - to 60% of the region’s output. For the Cook Islands, the contribution to GDP is closer to 80%.

However, since the Covid-induced border shutdown, visitor arrivals have collapsed to virtually zero since April 2020.

Tourism-dependent businesses are experiencing negative cash flows and are struggling to meet commitments. This has resulted in the loss of many thousands of jobs. Fiji lost nearly 70,000 formal sector jobs in 2020 (21% of total employment) which saw the unemployment rate shoot up to 27% from 7% in 2019. Taking into account the informal sector of the economy, which comprise the majority of total employment in the Pacific islands, then the jobs impact is a lot higher.

The solution: A tourism-led jobs recovery.

Many Pacific island countries have not had any community transmission of the virus with some countries having gone several hundred days without a local case. In the absence of international tourism, the economic hardships will get worse.

Recreating the strong growth in inbound tourism seen in the period leading up to the pandemic will be a challenge but it is through the support of its international allies where we might see a turnaround.

GDP and jobs is not the only problem – national debt is mounting

Most Pacific island countries experienced solid growth before the pandemic. But the flipside of this is a rising trade deficit, fuelled by imports of both consumer and capital goods. Over-consumption and narrow growth raises the risk of a return to larger deficits if tourism does not recover.

The need to finance the current account deficit requires a continued inflow of funds, either debt or equity. With the latter requiring favourable economic conditions, debt is the only viable alternative for now.

However, debt has limited wriggle room given the substantial uplift in government borrowings to finance budget deficits in 2020. If the current account deficit comes to a head, then pressures on foreign reserves will emerge and currency risks could rise.

Yes, migrant remittances are holding but that is not enough because consumption does not provide for a jobs recovery.

More budget support can contain credit and country risks

Pacific island governments had to take out large loans and issue debt to offset the decline in revenues brought about by a collapse of the tourism industry. Larger budget deficits have pushed debt higher and has left limited room to borrow more.

Further, Pacific island countries are B-rated credit nations and this prevents them from accessing cheap funds from the international capital markets. The need to fund budget deficits with more expensive domestic debt will heighten credit and country risks. To contain these risks, other countries may consider providing cheaper budget support loans while the Pacific awaits a recovery in tourism and jobs.

Ramping up Pacific labour schemes can help

The Australian Government has restarted its Seasonal Worker Program (SWP) to help fill acute labour shortages in rural and regional Australia. New Zealand has also received seasonal workers.  In the 2018-19 financial year, 12,200 Pacific people worked in Australia under the SWP and remitted an aggregate nearly AUD110m back to Pacific. There are further opportunities here due to the current pool of displaced Pacific workers.

Agriculture technical expertise can reduce imports and help in economic diversification

No doubt after the pandemic we will see a shift away from the Pacific islands being so heavily dependent on tourism as a source of growth. The Pacific has great potential in agriculture with kava exports coming in leaps in bounds in recent years.

Despite this potential, the Pacific remains a net importer of fruits and vegetables when it comes to meeting tourism demand. With abundant land, the Pacific should be looking to reduce these imports and become an exporter of fruit and vegetables. There is also great potential in other areas such as fisheries and niche products like coffee, cocoa and turmeric.

The region would benefit from help with training, technical support and equipment, which could see the Pacific islands, produce high-quality produce at a scale to feed themselves and for the export market.  

Release infrastructure funding quickly and get work started

Inadequate infrastructure remains a key constraint to Pacific prosperity. Without question, the Pacific needs better roads and ports to get produce to market, electricity to drive rural development and industry and more reliable and sophisticated telecommunications. It also needs to safeguard against climate risks by reducing reliance on fossil fuels. The Asia Development Bank estimates that over US$30bn needs to be invested in Pacific infrastructure by 2030.

But the Pacific islands alone lack the resources to meet the ADB’s targets. The narrow-based economies provide limited resources for governments who have to juggle competing priorities, and infrastructure investment is often the casualty. Donor funding is critical.

The AU$2bn Australian Infrastructure Financing Facility for the Pacific (AIFFP) has built a project pipeline of about AU$300m for year ending 30 June 2021. This is exactly what the region needs, more urgently than ever. Fast roll out of this funding, along with the release of fast disbursing funds for infrastructure maintenance works, would mean projects can begin immediately, creating much-needed jobs.

Tessa Price is ANZ's Regional Executive Pacific. Kishti Sen is  ANZ's Pacific Economist

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