Fiji has about $3 billion worth of foreign investments in the pipeline waiting to be executed, says ANZ Bank top Pacific Islands economist Kishti Sen.

These are mostly investments in the construction sector.

Majority of these foreign investments are awaiting approval, while some have moved to the construction phase.

However, to attract these direct foreign investments (FDI), it is imperative that the coalition Government ensures a conducive business climate for the private sector.

What exactly does this mean? A surprise increase in tax could slow Fiji’s economic recovery from the COVID-induced recession.

Fiji needs to grow its Gross Domestic Product. This can be done by exploiting the country’s natural competitive advantage in sectors such as the Business Process Outsourcing (BPO) and agriculture.

BPO contributes about AUD$66 million (FJD$97.14 million) per annum to the economy, figures published by Investment Fiji indicated.

This figure is expected to triple in the next three years.

The coalition Government is keen in diversifying the economy and providing support to investors, something they have been harping about in the lead up to the 2022 General Election.

In a press conference on Tuesday, Minister for Finance Biman Prasad announced that tax increase was inevitable.

Mr Prasad said the Government needed to find billions of dollars to invest in health, water, road, climate adaptation, energy, and housing.

The People’s Alliance manifesto indicates an increase in tax. But such an economic strategy is not advisable.

“We can’t handle big tax rises. Investors hate surprises,” Mr Sen said.

The Minister for External Trade, Co-operatives and Small Medium Enterprises, Manoa Kamikamica, had earlier told the media that any tax increase must go through a proper review.

And this must include the whole taxation system in Fiji.

The coalition Government has set April 20 – 21 for the National Economic Summit that will bring together representatives of various sectors to dialogue on the economic policy agenda for accelerated economic growth.

Foreign investments, except for those under Tax Free Industry, are obligated to pay corporate tax, value added tax, and import duty.

Current corporate tax for foreign investments is 20 per cent.

Former Prime Minister and Fiji Labour Party leader, Mahendra Chaudhry, also warned against the announcement of inevitable tax increases.

In a press release, Mr Chaudhry said the announcement was “quite disturbing”.

“Any increase in taxes, more so an increase in VAT and Customs Duty, will hit the lower to middle income families hard as it will push up prices,” he said.

ECONOMIC ENVIRONMENT

ANZ Country Head Rabih Yazbek said the message from the Government to engage the business community was a positive start.

For investors, the uncertainty lies at the conclusion of the National Economic Summit.

What will the Government announce in the 2023-2024 National Budget.

“There are many investors who are waiting for elections before deciding or before they pull the trigger on projects. And those same investors are waiting to see what the new business environment is going to be like,” Mr Yazbek said.

“If you are looking to drop $50 million of equity into a project in Fiji, you need to have certainty, you can’t have taxes going up and down. They need to know what they are getting into.”

Mr Sen expressed similar views.

He said the business community looked forward to the Government

ANZ Pacific Islands Economis Kishti Sen (left) and ANZ Country Head Rabih Yazbek. Photo: Nacanieli Tuilevuka

ATTRACTING FOREIGN INVESTMENTS

The Government needs to provide the right infrastructure for investments.

Mr Sen said infrastructure such as wastewater management, roads, and electricity were important engines for increased investment.

He added the Government needed to relook at the approval processes for investments.

It takes about 18 months for an investor to get approval for a project.

“I think if they (Government) focus there, they will grow the economy, grow the revenue pie, and the Government will be in a much better position to reduce deficits all the time,” Mr Sen said.

“With the right infrastructure, you get the direct foreign investment, and then the Government can take a backward step in driving the economy, repair the budget, take a balanced approach, and bring deficits down over time.”

To do that, the private sectors need to be driving the economy.

This is done by giving them the right infrastructure.

In return, these investors will rake in the dollars and employ more people.

DIVERSIFYING ECONOMY

COVID-19 has taught tourism-reliant economies a harsh lesson.

Tourism, gold, garment, agriculture, are key exports. Remittances also play a large part.

Below is an approximate summary of the different sectors contribution to the economy:

• Tourism – In 2022, the industry contributed about $1.7 billion;
• Remittances – Fiji exceeded the $1billion mark in 2022;
• Garment – Value of exports total $100 million;
• Gold – value of gold exports was $134 million in 2020; and
• Agriculture – fresh and frozen export produce were valued at $106 million in 2020.

Mr Sen said there was a growing interest in BPO.

“I can see BPO’s likelihood of the sector taking over traditional sectors such as sugar and manufacturing in terms of foreign currency,” he said.

Mr Yazbek said Fiji was too reliant on tourism, and this needed to change.

“The reason why I harp on about competitive advantage is because we do not need to reinvent the wheel. There are stuff that we are already doing well that we can just do more of.”

TOURISM SECTOR

A Tourism Fiji spokesperson said Fiji’s tourism industry has been recognised as a two-billion-dollar sector.

“In 2022 we had 636,312 tourists visit, which sums to $1.966 billion to the ‘visitor economy’,” the spokesperson said.

The industry aims to reach 85 per cent of the visitor arrivals seen in 2019.

“Considering international tourism projections, the capacity of Fiji’s tourism industry, “ongoing renovations and new inventory, and wider sustainability factors, we anticipate that the visitor economy could expand to approximately $3.37 billion and attract 1 million visitors by the end of 2024.”

Tourism contributes about 40 per cent to the country’s GDP.

It remains the largest employer, providing more than 150,000 employments.

• ON MONDAY: READ ABOUT ONE OF FIJI’S TRADITIONAL INDUSTRIES – SUGAR SECTOR. LEARN ABOUT THE GOVERNMENT PLANS OVER THE NEXT FOUR YEARS. 

Story By: ivamere.nataro@fijisun.com.fj