Sep 18, 2020 Last Updated 5:56 AM, Sep 18, 2020
August

August (15)

Unscripted and unplanned, Fijians have returned quietly to the land and the sea over the past months as the impacts of job losses brought about by the COVID19 pandemic began to bite.

In the tourism belts of Nadi and nearby Sigatoka, former hotel and resort workers – in their hundreds – are turning to farming and fishing virtually overnight.

Necessity is driving them, and no one knows when, how, or indeed if, this quiet revolution will end.
“With many in the village losing their work, we no longer have a steady income to buy food so we’re planting our own,” says Epeli Ganilau.
He is Turaganikoro, village administrator of Sanasana, the traditional owners of the land which hosts the multi-million dollar InterContinental Fiji Golf Resort & Spa and the Natadola Bay Championship Golf Course.

With almost all the men and women in the village laid off work from the resort and its neighbouring golf course, Sanasana has revived their youth and women clubs to spearhead the return to subsistence farming and fishing.

Other villages in Fiji’s tourism belt on Viti Levu’s west coast and Vanua Levu’s south coast around Savusavu town have done the same; closure of hotels and supporting businesses has driven jobless men, women and youths back to subsistence farming, or fishing.

Figures are daunting, and likely to worsen

A survey of tourism businesses by the International Finance Corporation and Fiji’s Ministry of Commerce, Trade, Tourism and Transport found that if the current situation doesn’t change by this November (a likely scenario given recent increases in COVID diagnoses in the Australian and New Zealand source markets), over 500 of the 3,569 businesses surveyed anticipate bankruptcy. If international travel does not resume within six months, 60.5% of those surveyed will close or move away from the tourism sector.

The study further found that 20% of tourism businesses are currently unable to service their debt, and a further 16% expect to default on their debt within one to four months, and have called for loan repayment moratoria, further tax reductions/holidays, and financial support for recovery and rent deferral.

Meanwhile a study by the International Labour Organisation on the impact of COVID-19 on employment also released at the end of last month found half of the workers surveyed had lost their jobs, and most of those still in employment were on reduced hours. More than half of redundant workers said they could not find jobs and needed financial support, and 46% had ventured into subsistence living and operating a microbusiness. Almost all (99%) said the government should do more to protect their jobs and rights, “instead of depleting their retirement fund.”

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As Fiji’s largest foreign exchange earner pre-COVID-19, the tourism and hospitality sectors went into free fall when international borders closed due to the spread of the pandemic, and the nation entered into lock down mode.

Up to 112,000 workers were out of work almost overnight, most of whom worked in Fiji’s hotels and resorts. Most of them are now surviving by drawing on their life savings at Fiji’s National Provident Fund.

As workers adjust to the new normal, Fantasha Lockington and her team at the Fiji Hotel and Tourism Association have been busy helping members to prepare for the wholesale operational and indeed, cultural changes, the industry requires.

She explains some of these changes in an interview with Islands Business publisher, Samisoni Pareti:

Fantasha Lockington: We’ve worked with the Ministry of Health and the Ministry of Tourism for COVID safe guidelines to be put in place. The Association is using those guidelines as a baseline for what we do in the tourism industry.

Obviously the larger branding properties would defer to their overseas brands or their sister hotels overseas to incorporate the requirements that get rolled out throughout the hotels. But we want to make sure that our medium and small size operators that don’t have those linkages can also do best practice themselves. So, we’ve used the government’s COVID-safe guidelines and we are putting more details into it that identify with the different tourism segments.

The idea is that we ensure that we provide the confidence level that potential visitors would need for them to actually book. Fiji will need to have every single business buy into this COVID-safe guideline. It can’t be just tourism businesses that need to do it. If you’re a bank and your clients are tourism businesses, you must be implementing these things too. If you’re a supplier of some sort, and you’re going to have to drop off some supplies at a hotel you need to do this as well.

That includes downloading the Fiji Care app, and already at the hotels if you check in now, they will be scanning you at the entrance of the door, they will be taking your name, they will be reminding you to download the app. Fiji Airways is making it compulsory to download the app to make sure they can do contact tracing. We’re just putting together the last part of the plan which will determine the training section of what the Ministry of Health would also need in terms of the special medical practices.

If somebody is sick what do you do, what are the processes, how do you isolate them, who do you call, and then what is the process that works from there.  Every possible scenario or question has to be responded to.

I will be working with TLTB (iTaukei Land Trust Board), FITBA (the backpacker’s association), SOFTA, the transfer vessels and companies that take tourists out to the outer islands. They are not all our members out in the islands, so we want to be able to touch base with them and I’m hoping that TLTB can assist us do that, and we’re signing an MOU with them very soon to promote a closer working relationship with locally owned businesses that they work with.

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There was no social distancing evident as tens of thousands of Vanuatu citizens marched through the capital to celebrate the nation’s 40th Independence Anniversary at the end of last month. Vanuatu is one of just eleven countries (at the time of writing) to record no coronavirus cases, so joyful celebrations were unfettered by crowd limits or stringent sanitation protocols.

Vanuatu gained its independence from Britain and France on July 30, 1980. Reflecting on that time, independence figure Pastor Sethy Regenvanu said 40 years ago there were many factors that separated them,  but that the people of Vanuatu had always been independent as “before white people came to Vanuatu” we were…relying on our subsidence agriculture and our way of life, culture and customs.”

The 40th birthday celebrations began with the solemn handing of the Vanuatu flag from the family of first Prime Minister, Father Walter Lini, to successive Prime Ministers or their families, in chronological order, ending with the recently-elected PM Bob Loughman.

Loughman received the baton as the country meets the twin challenges of COVID-19 and Cyclone Harold-induced economic trouble.

Vanuatu is due to ‘graduate’ from Least Developed Country (LDC) status at the end of this year. Loughman is determined to pursue the process (which has been delayed three times already) despite the stresses of COVID and cyclones. LDC status is designed to support countries facing deep obstacles to economic advancement. Graduation means that while they may still receive aid, they should no longer need maximum concessionary treatment from development partners.

An ESCAP paper last year suggested Vanuatu’s successful graduation is a significant achievement which would require a well-informed transition strategy, and “marks the start of what will be a potentially more challenging phase of the nation’s development journey.” The paper says attaining funding assistance will be based on maximising impact and leveraging private sector investment.

Pre-COVID and cyclone, Vanuatu’s economy  was projected to grow by 3.4% but the forecast now is a contraction to 0.6%. In an update just released, the Ministry of Finance says growth is expected to remain positive because of Government’s TC Harold recovery efforts, the Economic Stimulus Package and donor support, plus implementation of  infrastructure projects and the 11th European Development Fund. Medium term projections are also robust, driven by agriculture and industry.

Vanuatu’s strong fiscal position and successive years of budget surpluses means it should be able to fund its US$37 million stimulus measures from its own reserves. While tax revenue for the first half of the year is down 1.8% on the same period in 2019, revenue from the honorary citizenship program was up 32.3% over the first six months of last year, netting Vt 7,094.2 million (US$62,000). This means the 2020 target has already been exceeded.

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The Presbyterian Church Chairman of Vanuatu’s Christian Council, Pastor Alain Nafuki, has thanked COVID-19 for enabling the country to focus hard on identifying the best way towards prosperity for the country for the next 40 years.

Pastor Nafuki says God has allowed the country to face the double impact of category 5 Cyclone Harold in the north of the country and the globally devastating virus which is bound to change the current lifestyles of communities around the world.

“Already I can see that COVID-19 is likely to change the country for the better, as well as for the worse, for the next 40 years”, he says.

Asked to give an example of what worse scenario he is fearful of, he replies, “economic injustice”.

However he believes with over 90% of the country’s 230,000 people identifying as Christian, their faith will become their safety net for the next 40 years.

“I am thankful that despite our tough challenges, the Government is also facing its responsibilities head- on, equipped with its Christian faith, in line with the Nation’s Motto of ‘Long God Yumi Stanap’, or ‘In God we Stand’.

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The impact of COVID-19 is accentuating trends that had already developed over the last decade, says  University of Papua New Guinea lecturer in economics, Maholopa Laveil.

He lists amongst these trends: “falling employment, large fiscal deficits, very mild resource growth and the increasing debt burden.”

Laveil says the exchange rate “is the only policy lever for government right now to use so it can allow a managed depreciation of the kina, but it refuses to do so. And the reforms going forward will be undermined by a looming vote of no confidence in November this year, a misperception of stability held by many government employees, the durability of leading civil servants who are resistant to change, the gradual deterioration as opposed to a sudden deterioration, this does not prompt them to adopt reforms and external financing available that is not conditional on policy reforms.”

In an update published in April 2020 the International Monetary Fund suggested “the kina is overvalued by around 11 to 18%. This overvaluation could be largely eliminated over the next three years without boosting inflation excessively.”

Executive Director of the PNG Business Council, Douveri Henao, said “there is a very lively debate in the market right now with policy makers whether the devaluation of the kina should kick in.

“Those that are pro-devaluation, their main argument is that everything is slowing down so this is the time to actually devalue. Whereas others, especially on the government side, are more reluctant because of the debt financing pegged into a stronger Kina.”

Henao says the Council is working hard to ensure businesses can survive, saying “we simply cannot go back to an April lockdown state of emergency scenario”. He says CEOS and managing directors the Council spoke to at that time, 75% expected revenue to decline, 70% expected a profit decline and 66% indicated they won't be operating any business by the end of the year. Henao says businesses are negotiating a co-regulation model where “social distancing, hygiene protocols, staff rotation protocols are now becoming the compliance mechanism that businesses are undertaking,” allowing them to continue operating.

He indicates that there have been signs of market resilience, with fresh produce moving across the market, “There have also been substitutions on services as well,  more PNG management are rising up to executive positions.   When the March period kicked in,  there were lots of expatriates that left the country,  called from their governments and in particular Australia.   All of those positions are being filled up by PNG middle to senior management.

“[There] has been a massive uptake on technology.  All the consumables have jumped up by 30-40% in purchases because everything's online from school curriculums to business engagement and so forth.”

The ADB projects economic growth will decline to -1.5% this year, likely leading to further cash flow problems for government. Development Policy Centre’s COVID Economic Database notes projected economic growth of -1.5% for 2020, down from 2% pre-COVID. Government revenue is anticipated to fall by 15% and debt will rise to 43.7% of GDP.

“The latest international commodity price data published by the World Bank in April 2020 indicate a general fall in the prices of PNG’s main export commodities. Prices for Liquefied Natural Gas (LNG), copper and nickel declined, while that of gold picked up reflecting investors’ preference for a safe haven investment. Non-mineral commodity prices for cocoa, coffee and palm oil also increased providing some relief to PNG exporters,” Bank of PNG Governor, Loi Bakani wrote for the Pacific Forum blog recently.

“The significant drop in some of the commodity prices has already affected PNG’s export tax revenue and foreign exchange inflows, and will continue to put pressure on the foreign exchange market. The Government’s support to increase local production and ensure its food security requirements are at a satisfactory level is critical to sustain domestic consumption, while reducing the country’s dependency on imports.”

A prominent Australian economist says it is “scary” to see COVID-19 put at risk so many of the gains Pacific island countries have made over the last decade.

Dr Jenny Gordon, the Chief Economist at the Australia Department of Foreign Affairs and Trade, says the Asian financial crisis “taught us in South East Asia that setting up good social protection infrastructure” is important so resources can get to the most needy when there is an emergency.

Gordon anticipates Pacific nations’ economic recovery will rely on the regaining of export markets, local stability and access to finance, and that post COVID economies may have a much greater focus on local production, subsistence agriculture and movement back to rural areas, and a strong investment in human capacity.  She describes a “recovery sequence” that starts with resource prices recovering first, “although it might be some time before we see a considerable rise in energy prices”, potential in agriculture and export of high-value agricultural products, continued return of  the Pacific labour market (including labour schemes in Australia) and then, the return of tourism.

“I suspect the recovery of international tourism is going to be very slow,” Gordon says. “We’ve got to think about the next four years. So in terms of the financing gap there’s not much point in just financing this year’s deficit for governments, we’ve got to actually got to think about how they are going to finance those deficit in [following] years and what the size of those deficits will be.”

Gordon says Australia—the largest development partner for many Pacific island nations— is asking questions about governments’ fiscal situation, what is essential expenditure, borrowing capacity from multilateral banks, other donors and domestic sources, social protection and how to maintain basic services.

“A lot of governments as part of their COVID-19 packages are going to forgive power bills and other types of bills but unfortunately that doesn’t help SOEs [State Owned Enterprises]  or private sector providers who are already struggling to pay the return on the capital that they have invested. So that’s quite challenging, how those SOEs will come out of this.” Gordon says there may be an opportunity to improve infrastructure quality and “put into pace some more robust user-pays systems.”

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“For the Pacific, the impact of climate change will remain as the greatest threat to our Pacific people in the longer term. You can quarantine COVID-19, but climate change cannot be quarantined.”

That’s Exsley Taloiburi, climate change finance adviser at the Pacific Islands Forum Secretariat in Suva.

This month, the annual Forum Economic Ministers Meeting (FEMM) went online, to discuss the regional response to the coronavirus pandemic. The meeting focussed on the social and economic effects of border closures, increased health spending, the collapse of tourism and associated job losses. But Forum Secretary General Dame Meg Taylor was quick to acknowledge the region was dealing with compounding and interconnected challenges: “Today, we are now faced with three crises: a health crisis, an economic crisis and the ongoing climate crisis.”

The final FEMM outcomes statement agreed: “We recognise the three-pronged crisis currently facing the region – the impact of COVID-19, the devastating effects of climate change and natural disasters, and the fragile economic health of the region as a consequence of inherent vulnerabilities.”

Tuvalu’s Minister of Finance Seve Paeniu was chair of FEMM 2020. Speaking to journalists after the meeting, Paeniu stressed that these combined crises affect states like Tuvalu, that do not have any confirmed cases of coronavirus: “Even though we are COVID-19 free, we are already feeling the flow-on impact in terms of the financial drain on our resources, in terms of our health systems, to ensure that our capacity to be able to respond in the event that there is a COVID-19 outbreak in Tuvalu. On top of that, we are very much vulnerable to natural disasters. At the beginning of this year we were hit by Cyclone Tino and then a few weeks later we had the COVID-19 pandemic.”

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