FEATURE: Dire predictions for Fiji's economy

With Fiji's sugar industry facing a severe drought, the future looks grim for the country's economy.

Bruce Hill, Pacific Beat

Last Updated: Mon, 11 Oct 2010 17:25:00 +1100

The leading economist of Fiji's University of the South Pacific says that nearly one third of Fiji citizens will be living in poverty by next year.

Professor Wadan Narsey of USP's School of Economics, which includes population studies and demography, has analysed the Fiji Islands Bureau of Statistics Household Income and Expenditure Survey for 2008-2009, launched at the beginning of October.

He has told Radio Australia's Pacific Beat program the figures send a very stark message about Fiji's rural poor.

The 2008-'09 survey is comprised of two different sets of statistics which masks a growth in rural poverty into a combined total.

"One is for the rural areas where poverty definitely went worse. It went up from 40 per cent to 43 per cent, and in urban areas there appears to be a reduction," he said.

But Professor Narsey says this fall in urban poor will be rendered obsolete as projections of upcoming surveys for 2010 will see another rise.

"The figure for Fiji as a whole [in 2010] will be much, much higher," he said.

"The interesting thing of course is that the household surveys don't tell you anything directly about what took place between 2002 and 2008 but other macroeconomic indicators in Fiji - such as the GDP per capita, the values of building permits approved by the authorities, the number of new car registrations, the amount of electricity consumed in Fiji - what they show is that everything was improving by and large between 2002 and 2006 and after that the slide set in."

Sugar, debt and drought drags on economy

In a panel discussion on Pacific Beat reviewing the survey data the CEO of the Fiji Cane Growers Association, Mohammed Rafiq, says he "100 per cent agrees with Dr Wadan Narsey".

"The rural areas, actually the [sugar] cane growing areas, due to the declining sugar price we are facing a lot of problems. [And] More than a quarter of the population is directly and indirectly dependent on the sugar industry."

Dr John Fraenkel from the Australian National University believes the slight drop in overall poor is due to short term factors.

"The International Monetary Fund thinks that the reconstruction spending in the wake of the cyclone earlier this year would have stimulated growth, and they also think that the large number of tourism arrivals coming into the country would have positively affected growth," he said.

"The Asian Development Bank, however, points out that there's heavy discounting in the industry so while the number of visitors coming into Fiji is high - and Fiji has become a really tourist-dependent economy, particularly with what's happening in the sugar industry - the earnings from tourism may not be at all as high.

"The other important thing to think about is that Fiji has a significant foreign debt, a $F300 million foreign debt, that has to be paid off in a one-off payment in September of 2011."

Acting head of USP's School of Economics, Dr Sunil Kumar, told the panel that environmental factors are also adding to the toll.

"The sugar industry is also facing severe drought. All the fundamentals in the sugar industry are at their lowest so there's really very little hope for the poor in the sugar belt," he said.

"The confidence of the people, the investor community is very low. I think that is where the government needs to come in and put in place the right policies and indeed put out the positive signals about stability, about the nature of governance and so on, so money can flow in [and] we can have investors from outside of Fiji."

Dr Fraenkel says there is a sad history of the political repercussions of a rise in poverty.

"In other Pacific island countries we've seen a number of school students pushed out of schools, hanging around on the streets with no jobs. And states running out of money to pay their civil servants - we haven't yet seen this in Fiji but the economic stories we're getting out are suggesting that it's pretty near."

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