Fiji and Tonga sign a new air agreement

The Fiji Government and Tonga signed a new Memorandum of Understanding regarding air services between the two countries.

The agreement allows the national carriers of the two countries to operate air services with maximum capacity of 1,000 seats per week with no restrictions on aircraft types and frequency of flights.

The agreement would help assist with tourism and tourist movement between the two countries and also with movement of cargo for imports and exports.

Fiji's carriers are Air Pacific, Pacific Sun and Air Fiji.

Government reduces tax threshold and removes duty on certain items

To help Fiji residents counter the rising cost of food prices (which is also being experienced internationally), Government has put in place some tax measures. These include :

• increasing the income tax threshold for workers to F$15,000.00 from the current F$9,000.00; and
• removed duty on basic food items including white and brown rice, tinned fish and cooking oil.

The Government has said that the moves are temporary measures only.

Read the related article in the Fiji Times which is reproduced below.

"Duty slashed, by Amelia Vunileba, Thursday, May 08, 2008

The interim Government has slashed duty on basic food items to fight rising prices.

In addition, the regime announced from June 1, the income tax threshold will rise from $9000 to $15,000.

This means 20,000 more people will be exempt from paying income tax.

It means the State will lose $20-million in tax revenue.

Duty on basic food items will be slashed to zero per cent in an attempt to arrest the rising cost of food and make it affordable for low income earners.

From June 1, there will be no fiscal duty on white and brown rice, tinned fish, including sardines, tuna and mackerel, other canned fish and cooking oil.

The removal of duty will cost the interim Government a further $1m.

The interim Government has resolved to remove VAT from all locally produced eggs for local consumption. But these policy changes are only a temporary measure.

Acting interim Finance Minister Filipe Bole said the changes were part of the interim Government's efforts to help low income earners in the face of rising food prices.

"This decision is the interim Government's response to the concerns raised by workers' representatives and civil society leaders and those representing the farming communities," he said.

Fiji Islands Revenue and Customs Authority CEO Jitoko Tikolevu said these changes would cost government $21m $20m from raising the tax threshold and $1m from zero fiscal duty.

He said they would have to work harder at collecting taxes. He confirmed that 19,000 to 20,000 people would now be exempted from tax following the rise in tax threshold to $15,000. Mr Tikolevu said 34,000 people would now be exempt from paying tax following the last tax threshold increase from $8840 to $9000 announced at the 2008 Budget in November last year by the interim Finance Minister, Mahendra Chaudhry.

The policy changes have been endorsed by Cabinet based on a submission Mr Bole made on Tuesday. Mr Bole said Mr Chaudhry, who is away overseas, was fully aware of this decision.

"This latest decision ... would mean a direct positive impact on low income earners who have been adversely affected with the rise in food prices," he said.

"Government will remove VAT from locally produced eggs for local consumption in an effort to ensure that people in the lower income bracket and those living at subsistence level have access to protein in their diet at affordable prices."

He said the average annual rate of inflation for the 12 months ending March stood at 5.8 per cent compared to 7.5 per cent for March 2007."

Fiji's strategic location an asset: Ratu Epeli

Read an article taken from the Fiji Times online, http://www.fijitimes.com.fj/, today, 6 May 2008.

It talks about a statement made by our Foreign Affairs Minister that Fiji enjoys a strategic location in the Pacific because of our location.

We need a good discussion of our competitive advantages and how we can put them to good use. We will also need to have a review of our past mistakes and learn from them.

If someone is interested in writing a book about our country's experience (economic and social, in particular) since 1970, can he or she e-mail me on investinfiji@gilbert.com.fj. I would be interested to do a joint detailed analyses on the topic.

In the meantime, read the article from the Fiji Times online, below.


"Fiji's strategic location an asset: Ratu Epeli, Tuesday, May 06, 2008, Update: 11:40AM

Fijis strategic location in the Pacific region is a great asset, says interim Foreign Affairs Minister Ratu Epeli Nailatikau.

He said the proper utilisation of air links to the destinations could also help establish trade links with more developed global economies.

At the same time the increased traffic through our airports in terms of passengers and cargo brings with it another dimension which is an increased movements and corresponding risks, he said.

While speaking at the third meeting of Asia/Pacific Regional Aeronautical Telecommunication Network Implementation Coordination Group (ATNICG 3), Ratu Epeli said Fiji was given the opportunity to host the event due to the ever evolving advancement of its aviation industry."

Adjusting bank regulation for the economic cycle

Read an article taken from Seini Nabou's "What's happening : Pacific Region and the World".


"Bank capital
Joseph and the amazing technicalities
Apr 24th 2008, From The Economist print edition


Adjusting banking regulation for the economic cycle

BANKERS have a bad habit of making economic cycles worse. They are notorious for lending people umbrellas when the sun is shining and asking for them back when rain starts to fall. When the economy is strong and asset prices are rising, banks are only too eager to lend to those wanting to buy assets, helping to push prices higher. In bad times, when prices are falling, banks ask for their loans back, forcing the borrowers to sell assets and driving prices down further.

Right now, banks are desperately plastering over the cracks in their balance sheets created by the credit crunch. This week Royal Bank of Scotland launched a £12 billion ($24 billion) rights issue (see article). Other banks have tapped the bulging wallets of sovereign wealth funds. But there may be a limit to investors' largesse: those who have bailed out banks so far have lost money.

If the well of investors' patience does run dry and banks are forced to shrink their lending, the economic situation may get a lot worse. Already the riskiest borrowers in America and Britain are being shut out of mortgage markets, with predictable consequences for house prices.

Regulators are partly to blame. When the credit boom was roaring in 2005 and 2006, central banks did make pointed comments about the “underpricing of risk”—in plain English, that banks were not charging borrowers enough. But they did nothing about it; indeed, by keeping nominal interest rates low, they encouraged the credit excesses.

International regulations on the capital adequacy of banks do exist, but they tend to be procyclical too, requiring lenders to raise more capital only when the problems have already occurred. And the regulators tend to be one step behind the practitioners. Banks were able to exploit the first lot of so-called Basel rules, because they could hide risky loans off their balance sheets. The new rules, Basel 2, may be more sophisticated in their treatment of risk but they rely heavily on models developed by banks themselves. As the past year's events have demonstrated, those models can be seriously flawed.

Cycling backwards

Could there be a better way to regulate the industry? The regulations could be countercyclical, requiring banks to be like the biblical Joseph and raise more money in the fat years to see them through the lean ones. Defining the cycle may sound prohibitively difficult but Charles Goodhart, a professor at the London School of Economics (and a former monetary policymaker at the Bank of England), suggests a way around it: monitoring whether the pace of loan growth or the rate of increase of asset prices was moving sharply above trend, and requiring banks to find more capital if the alarm sounds. Had such a rule been in place, the subprime-mortgage boom might not have been so explosive.

Of course, the devil would be in the detail. Regulators would need a breakdown of how bank lending was being directed to different geographical areas and asset classes. In good times, greedy bankers would have the incentive to cheat; for example, by making loans to offshore holding companies that would then pass on the money to Florida condo-buyers. Such rules would need to be international, to stop foreign banks from stealing market share from banks in countries that observed the regulations.

The regulators would also need to be careful about being too lax during the downturns. After all, it is at such times that banks are most likely to need capital to keep them afloat. Bank customers might be resentful if they felt regulators had been complicit in letting a bank go under (although deposit insurance should soothe them). But if banks are forced to raise more capital during the booms, their finances should be stronger during the busts.

Despite this, countercyclical regulations would not be popular with the bankers. Over a full cycle, such rules would probably require banks to have more capital than under the existing system (and given the rescue of Bear Stearns, the rules would need to apply to investment as well as commercial banks). Because money tied up in capital earns lower returns, that would mean lower profits.

But it is hard to feel much sympathy for bankers who rake in fortunes during the boom and require taxpayers to help them out in the bust (or make central banks jump through hoops for them, as the Bank of England has done this week—see article). An efficient financial sector is vital for a modern economy but trading securities has arguably achieved too much importance in the Anglo-Saxon world. Winston Churchill once said that he would rather see finance less proud and industry more content. That is not a bad motto for those devising a new set of banking regulations."

Australia seeks greater private sector role in Pacific

This is taken from a Radio Australia story. Again note the advance made by Samoa and PNG. These are two countries that Fiji is losing its competitive advantages to: Samoa, in terms of location and sea links, and PNG, in terms of natural resources. Fiji used to be way ahead of these countries a number of years ago. Some recent international studies have shown that Samoa and PNG have taken the lead from Fiji in relation to some economic indicators. Read the article below.


"The Australian government's push to rejuvenate relations with Pacific island nations has key role for the private sector.

Australia's Parliamentary Secretary for Pacific Island Affairs, Duncan Kerr, told the Australia Papua New Guinea Business Forum in Cairns, the private sector has a vital role to play.

Radio Australia's reporter Jemima Garrett says Mr Kerr told the forum the new Pacific Partnerships for Development are a central part of the Rudd government's push to strengthen and deepen relations with the Pacific and, that if those partnerships are to achieve the millennium development goals, business has an important role to play.

"Business is absolutely essential. We need their input. No country has evolved a successful strategy dealing with poverty without a strong and vibrant private sector."

Mr Kerr said PNG and Samoa are the first Pacific island countries to negotiate their Pacific partnerships.

He hopes to have a completed agreement with PNG or a framework agreement signed before the Pacific forum in August."

Solomon Islands PM says that his country is way head of Fiji now

Please read an article taken from the Solomon Star News on what Solomon Islands Prime Minister said. Article can be found at http://solomonstarnews.com/index.php?option=com_content&task=view&id=1390&change=103&changeown=87&Itemid=45.

The article provides good food for thought for the many of us that love our country - Fiji. There are many ways in which we can work to build this country to something we will all be proud of.

I am posting this article for the sake of generating discussions and thinking to help us build this country. It is not of personal spite or to lay blame on anyone's door. It is to help build a cohesion of ideas and strategies that will help drive this country forward. A land of our dreams and hopes and a place where we are proud to have our roots and links.


"WHAT a contrast.

Compare our prime minister, Dr Derek Sikua, with Fiji’s military dictator Voreqe “Frank” Bainimarama.

You will see how well off we are in Solomon Islands these days in contrast to Fiji.

Fiji was once a regional leader in many things, a nation we often looked to for inspiration. Sadly, no more.

With four coups in just over 20 years Fiji is rapidly forfeiting its right to be a home to regional institutions. It definitely is no longer a regional leader of good.

Take the celebration of World Press Freedom Day in Honiara this week. It provides just one example of how much things have changed. But it’s a significant example.

This Saturday World Press Freedom Day is celebrated in Honiara by Media Association of Solomon Islands (MASI) with Dr Sikua giving the keynote address. He and his office are also supporting MASI’s efforts to mark the day with fundraising for further media development activities.

Why is World Press Freedom Day so important to everyone here? you might ask. Isn’t it just a day about the news media?
If you thought that you would be well off the mark. World Press Freedom Day is really about the rights of you and all Solomon Islanders to freedom of expression and information.

It is about your right to speak out and express your views. It is about robust public debate on matters on public interest. It is about your right to get all the information which enables you to make your own informed decisions.

These are important fundamental human rights essential for any democracy to flourish.

What World Press Freedom Day really celebrates is Article 19 of the Universal Declaration of Human Rights adopted by the United Nations.

This says: “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.”

Compare the attitude of Dr Sikua and his Government to respecting that with how Mr Bainimarama’s unelected military regime ignores this.

The erratic Mr Bainimarama marked World Press Freedom Day in Fiji with another of his rants against the news media.
His goons meantime forcibly expelled from Fiji the publisher of The Fiji Times, Australian Evan Hannah. This just weeks after doing the same to Russell Hunter, the publisher of Fiji’s other main daily newspaper, The Fiji Sun.

Mr Bainimarama’s men showed their contempt for the rule of law by both times ignoring Fiji High Court orders not to expel the newspapermen.

What was the so-called crime of Mr Hunter and Mr Hannah, both vastly experienced and respected journalists who’ve spent many years in the Pacific Islands?

Their newspapers did what they should do. Despite constant military pressure, they tried to keep the people of Fiji informed. They defied the pressure and published information and opinions Mr Bainimarama and his collaborators wanted to suppress.

The Fiji Times and Fiji Sun also tried to allow all Fiji’s people to express their views. Not just those who support the regime. But also the many who oppose it.

So why do the Bainimarama regime fear newspapers and target them? Because newspapers are the most powerful form of news media. They publish the printed word. They provide the permanence and impact that only the print media can.

Dictators like Mr Bainimarama fear newspapers publishing the opinions of the people. They fear independent journalism. Such as The Fiji Times and Fiji Sun telling Fiji’s people of strange tax affairs and offshore bank accounts of Mr Bainimarama’s Finance Minister Mahendra Chaudhry.

Mr Bainimarama’s approach is similar to that of despots like Robert Mugabe in Zimbabwe. Mr Bainimarama’s military goons attack and intimidate and his so-called government expels people like Mr Hunter and Mr Hannah.

True democratic leaders like Dr Sikua respect and embrace the right of all people to freedom of expression and information.
Dr Sikua’s approach is much closer to that of the legendary French philosopher and writer Voltaire. Voltaire famously said: “I disapprove of what you say, but I will defend to the death your right to say it.”

Be thankful everyone that you live in Solomon Islands under enlightened leadership and not in the sad Fiji of today. This week celebrate World Press Freedom Day and all it means to all our Solomon Islands people."

ANZ Interest Rates (Updated 29.4.08)

Schedule of interest rates released by ANZ Fiji are as follows :

• Business Index Rate - 10.25%;
• Residential Property Loan : Standard Variable Rate - 9.75%, 1 Year Fixed Rate - 7.75%;
• Investment Loan : Standard Variable Rate - 9.75%, 1 Year Fixed Rate - 7.75%;
• Personal Loans : Secured - 11.50%, Unsecured - 14.20%;
• Small Loans : Unsecured - 19.00%;
• Retail Term Deposits : 9 months to 1 year - 1.25%, 1 to 2 Years - 1.75%, 2 Years to 3 Years - 1.75%.

Interest rates are on a per annum basis and may be varied by ANZ without prior notice.

Revised Economic Projections for Fiji

The following is a copy of a statement released today, Monday, 21 April 2008, by the Governor of the Reserve Bank of Fiji on revised economic projections for Fiji.


"STATEMENT BY THE CHAIRMAN OF THE MACROECONOMIC POLICY COMMITTEE AND GOVERNOR OF THE RESERVE BANK OF FIJI - REVISED ECONOMIC PROJECTIONS

The Chairman of the Macroeconomic Policy Committee and Governor of the Reserve Bank of Fiji, Mr Savenaca Narube, today announced that “economic growth for 2008 is now projected at
1.7 percent, down from the 2.2 percent announced in October last year”.

The downward revision is mainly due to lower projections for the community, social and personal services sector. Lower forecasts of crop, cane and sugar output, partly due to the
effects of Cyclone Gene, also led to lower revisions for the manufacturing and agriculture,
forestry, fishing & subsistence sectors. These downward revisions could not offset the higher projection in the mining sector as gold output is now included in the new 2008 forecasts after a lapse of mining operations for most of 2007. The new 2008 forecasts also took into account higher projected visitor arrivals which is expected to have a positive impact on the hotels & restaurants and transport industries.

Speaking on last year’s growth, the Governor said that, “Fiji’s economy is estimated to have
contracted by 4.4 percent in 2007, compared to the 3.9 percent decline forecasted in October last year. The downward revision was mainly a result of lower than expected cane and sugar output which was affected by adverse weather conditions and mill interruptions. The performance of the building & construction sector was also weaker than earlier envisaged.

Last year’s contraction was almost broad-based with electricity & water the only sector estimated to have grown. Leading the decline in the economy were the building & construction and community, personal & social services and manufacturing sectors. The absence of mining in 2007 reduced economic growth by around half a percentage point.

The Chairman added that, “while economic recovery is still expected in the next 2 years, it will
be lower than earlier projected. We now expect the economy to grow by 1.1 percent in 2009,
and by 1.6 percent in 2010”.

With regard to trade, Mr Narube explained that, “exports are projected to expand by 7.7 percent this year while imports are expected to grow by 4.6 percent. The growth in exports is
encouraging. However, in absolute dollar terms, the growth in imports is expected to outpace exports. This will lead to a slightly higher trade deficit in 2008. Higher payments for mineral fuels continue to contribute to strong import growth. We therefore need to grow exports at a much higher rate.”

Mr Narube stated that, “official foreign reserves at the end of March were at adequate levels of
$909 million, equivalent to around 4.0 months of imports of goods”. Mr Narube also highlighted that “inflation at the end of the first quarter was 7.5 percent, and while the year-end inflation is currently projected at 5.0 percent, there are upside risks to this assessment.”

Colonial National Bank Interest Rates (Updated 1.4.08)

Schedule of interest rates released by Colonial National Bank are as follows :

• Business Banking Base Rate - 9.70%;
• Residential Property Loan : Variable Rate - 10.00%, 1 Year Fixed Rate - 8.00%;
• Investment Loan : Variable Rate - 10.00%, 1 Year Fixed Rate - 8.00%;
• Retail Term Deposits : 9 months - 2.00%, 1 year - 2.00%, 1.5 Years - 2.00%, 2 Years - 2.00%, 3 Years - 2.00%.

Interest rates are on a per annum basis and may be varied by the bank without prior notice.

Westpac Interest Rates (Updated 1.4.08)

Schedule of interest rates released by Westpac Fiji are as follows :

• Business Lending Rate - 9.99%;
• Residential Property Loan : 1 year Fixed Rate - 7.75%;
• Investment Loan : Variable Rate - 9.75%, , 1 year Fixed Rate - 8.00%;
• Retail Term Deposits : 6 to less than 9 months - 1.25%, 9 months to less than 1 year - 1.75%, 1 year to less than 1.5 Years - 1.75%, 1.5 years to less than 2 Years - 1.75%, 2 years to less than 3 Years - 1.75%.

Interest rates are on a per annum basis and may be varied by the bank without prior notice.

Colonial Fire and Importance of Contingency Plans

There was a fire at Colonial Fiji's IT and backoffice sections early Tuesday morning, 25 February 2008. Customers have said that the bank's ATMs were not working when they tried to make withdrawals.

Colonial had said that the Group had moved all staff to other locations and was working on assessing the damages caused.

Fires and other catastrophes emphasise the need for businesses to have Contingency Plans in place and if they are in place, to ensure that those plans work in the event of a real contingency.

Regulators will need to ensure that financial institutions have Contingency Plans in place.

It was fortunate that the fire was only confined to one part of a financial institution. Imagine the consequences to the financial sector if the fire had covered the entire central business district where most of our banks operate from?

I had mentioned in my earlier post that our business was working on a Contingency Planning Model which is to be used to develop Contingency and Business Continuity/Resumption Plans for clients. If you are interested, pls send an e-mail to investinfiji@gilbert.com.fj or info@gilbert.com.fj.

Expansion of our services

We have been busy over the last two months completing Strategic Plans for the Fiji National Provident Fund and Amalgamated Telecom Holdings Limited.

Fiji National Provident Fund is the largest player in Fiji's financial system and has total asset of over F$3 billion, making up around 38% of total financial system assets.

Amalgamated Telecom Holdings Limited is the holding company for Telecom Fiji Limited and owns a part of Vodafone Fiji Limited. It has management rights over FINTEL.

Over February 2008, we were working on preparing a capacity development plan for a UNAIDS project in the South Pacific. The work included preparing for and facilitating a regional workshop held at Denarau, Fiji. That work has also been completed with the Report submitted to UNAIDS.

Currently, we are developing a Contingency Planning or Business Resumption Planning Model. Similar to our Strategic Planning Model, we will use our Contingency Planning Model to develop Contingency Planning/Business Resumption Plans for clients.

For more information on our services, pls e-mail info@gilbert.com.fj or call telephones (679) 3396427 or (679) 9921427.