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Saturday, November 22, 2008

2009 National Budget Address - Copy of Address by Interim Prime Minister and Minister for Finance

I could not get a copy of the 2009 National Budget Address in pdf form to post on our FijiSale Yahoo Group. I did, however, get a copy sent to me by email from Emily Moli, Senior Reporter, Fiji TV. Many thanks, Emily.

The text of the Address is provided below.

"2009 NATIONAL BUDGET ADDRESS BY THE PRIME MINISTER AND ACTING MINISTER FOR FINANCE & NATIONAL PLANNING, COMMODORE VOREQE BAINIMARAMA

1.0 Introduction

Your Excellencies,

Members of the Diplomatic Corps

Ministers

Distinguished Guests

Ladies and Gentlemen, and

Fellow Citizens of Fiji

A very good morning to you all.

It is my pleasure to welcome you to this presentation of the 2009 Budget.

This is the third Budget of the Interim Government; and one which has been prepared against the backdrop of unprecedented developments in the global financial system, and in the world economy in general.

We live today in a globalised, increasingly more intricate and inter-connected environment. Events that happen in other parts of the world tend to have quite immediate impacts on our lives.

The international economy today is going through a crisis, of a magnitude and depth, not experienced before in the world’s history. The richest nations are hit the hardest by this turbulence; and the indications are that the worst is yet to come. We can be certain that global economic growth, which slowed down significantly this year, will continue to decline in 2009. This also applies to the situation of Fiji’s major trading partners.

For over two decades, Fiji itself has been trapped in a low-investment, low-economic growth spiral, with our economy performing well below its potential.

Since its appointment in January, 2007, the Interim Government has been resolute, to move Fiji forward to sustainable peace, stability and prosperity. Among the key pillars in the draft Peoples Charter for Change, Peace and Progress are our quest for good and just governance; to grow the economy; and to reduce poverty.

During the period 2007 and 2008, we have made considerable progress, particularly in consolidating the public finances and in arresting the rapidly deteriorating fiscal imbalances, brought about through several years of financial indiscipline and mismanagement.

We achieved this through policies and measures that were not populist: curbing consumption; drastically trimming government expenditure; reducing salary in the public sector; reducing the size of government; and imposing import duties on a wide range of luxury items. We had to implement some drastic measures to stabilise the public finances and our foreign reserves. What is noteworthy is that we were able to achieve the stabilisation and consolidation of the fiscal situation within a short period of time.

It is also noteworthy that just when we felt that we have some room to provide the much needed stimulus for growth and development in our economy, we now have to contend with the unprecedented global financial crisis. These latest adverse external developments, which are beyond our control, have further compounded and magnified the challenges that we face, as a nation.

The 2008 Budget was described as a “Budget for Hope”. In the 2008 Budget, the Interim Government had announced a number of important initiatives and reforms: in the areas of infrastructure upgrading and development; private sector development; enhancing productivity and competition; trade reforms; labour reforms; public sector including civil service reforms; financial management reforms; public enterprise reforms. In most, if not all of these areas, we should, by now, be showing robust progress. Unfortunately, this is not the case. We could and should have done much better.

One key theme of the 2009 Budget must necessarily be continuity: to continue, but more vigorously implement the reforms outlined in the 2008 Budget.

Ladies and Gentlemen, Fiji must now deal with a number of problems and challenges, especially given the adverse developments in the global economy. These include the escalation in both fuel and food prices with flow on inflationary pressures, which in turn affect the cost and competitiveness of our products. In addition, the widening trade deficit is placing significant pressures on our balance of payments position.

Moreover, to raise income levels, to improve our living standards, to generate more jobs, and to reduce poverty, it is imperative that Fiji works itself out of the spiral of low investment, low productivity, and low growth.

What are the implications of all this for 2009 fiscal policy and strategy?

The evidence and overall experience to-date indicate that while it is important to outlay adequate resources to support the priority policy initiatives, it is equally, if not more important, to ensure effective and timely implementation. In many instances, it is not the lack of resources per se which has adversely affected or constrained the speedy implementation of the announced initiatives. More often than not, the poor implementation performance has been due to lack of advance planning and preparedness on the part of the Ministries and Departments. Also, generally, there is a lack of urgency to get things done.


2.0 Strategy for the 2009 Budget

The Government has been actively listening and paying attention to the views and concerns of various stakeholders, across the whole of the country. This has happened through the Draft Peoples Charter process, in which nationwide consultations have been undertaken at a level and depth that is unprecedented in Fiji’s history. In addition, the recent Mini Economic Summit and its Working Groups, as well as other representative bodies have provided invaluable feedback on issues that need to be addressed, to move Fiji forward. The 2009 Budget draws upon all this.

A three-prong strategy therefore has been adopted for the 2009 Budget with the dual objective of Raising Economic Growth and Alleviating Poverty

The first prong of the Budget Strategy is to grow the economy by rebuilding and revitalising confidence, particularly of the private sector, for it to invest more, and to generate the jobs and the incomes that our people need. Under this part of the overall strategy, high priority and urgent attention will be given to infrastructure rehabilitation and development; to stimulating and facilitating investment, especially by the private sector; and to enhancing productivity and innovation.

The second prong of the Budget Strategy, in parallel with the first prong, is to ensure that economic growth is pro-poor, and focuses on reducing poverty, improving access to service delivery as well improving the basic living conditions of all our people. Under this part of the strategy, attention will focus on basic infrastructure development in villages and settlements; on education and training; on health and hygiene; on housing, especially tackling the growing squatter problem in the urban and peri-urban areas; and on food production. Particular attention is to be given to the vulnerable and the disadvantaged in the society including the poorest of the poor; the disabled and the elderly; and women.

The third prong of the Budget Strategy, and one which is cross-cutting to the first two, concerns the public sector in terms of both its role and performance orientation. Under this part of the overall strategy, the public sector is to more effectively demonstrate its own commitment to change and modernize: by doing more with less; by raising its productivity and efficiency in service delivery; and by ensuring its own right-sizing through the needed, and long overdue, reform and restructuring. The policy-setting and regulatory roles of the public sector are to be strengthened and rationalized, to ensure that Government policies are transparent, consistent, compatible and sustainable, especially in promoting, facilitating and catalyzing private sector-led growth. Also, in this context, the partnering relationship between the Government, the civil society and the private sector, on issues relating to national social and economic development, are to be enhanced.


3.0 2009 Budget Framework

In the last two budgets, the Government’s strategy to stabilize and consolidate the fiscal position has been highly successful. For the years 2007-2008, the average annual net fiscal deficit is expected to be below 2 percent of GDP while total debt to GDP is expected to be 49 percent. This compares to the period 2000-2006 when the average annual net fiscal deficit was an unsustainable 4.43 percent, and debt was un-affordably high.

Public finances have stabilized over the past two years or so. For 2009, the Government, while continuing to vigilantly maintain an overall prudent stance and adhering strictly to fiscal discipline, is now in a position to increase the deficit to 3 percent. In this context, I should also emphasise that Government has reduced its debt level to 47.9 percent in 2008. The policy space, in the short term, to raise the deficit to support the 2009 Budget Strategy, will be utilised judiciously, to support productive expenditure, especially for infrastructure rehabilitation and development. In this regard, it may be noted that while during 2007-2008 operating expenditure accounted for an average annual 84 percent of total expenditure, in 2009, the share of operating expenditure is being reduced to 80 percent of total expenditure.

A central objective of expenditure policy is to improve the efficiency and effectiveness of Government spending. The Budget is forecast at $1.715 billion in 2009.

As I said before a major strategic thrust of the 2009 Budget is on infrastructure development. Government will actively pursue Public Private Partnership arrangements to finance infrastructure programs and also resort more to outsourcing to the private sector, to expedite implementation. This is a deliberate policy to stimulate investment and sustain growth but also to recognize the capacity constraints within the public sector, such as in the Public Works Department. Moreover, in 2009, we will emphasise the timely implementation of capital projects. In that regard, I will shortly convene a capital projects workshop for senior civil servants in key agencies to ensure a satisfactory state of project readiness so that implementation may commence by January next year.

In addition, increased resources have been made available to achieve our objective of caring for the poor. This means supporting the livelihoods of our people by focusing on areas and regions that have remained depressed and under-developed; and directing adequate resources towards the core priority sectors of health; education; housing; and poverty assistance. The Budget also directs resources for basic infrastructure development at the level of villages and settlements.

In line with the Budget Strategy, emphasis will be placed on supporting expenditure programmes capable of facilitating large-scale production of staple foods, dairy and meat products, and renewable energy sources.

To contain operational spending, each ministry and department have been instructed to spend within their allocated budgets for telecommunications, fuel and oil, stationery, spare parts and maintenance, and supplies and services. As an integral part of these efforts is the decision taken by the Government to, as much as possible, lease vehicles and explore the opportunity of leasing office equipment.


Ladies and Gentlemen


Financing our expenditure is dependent on our revenue performance. In principle, our operating revenue must cover operating expenditure. Prudent cash flow and forecasting management has enabled Government to achieve this objective during the year. We will maintain this discipline in 2009. Let me reiterate our policy that operating revenue drives operating expenditure. This allows for more capital projects to be met through debt financing.

In the 2009 Budget, we are projecting a revenue of $1.522 billion, of which $1.331 billion is from taxes and $191.2 million from non-tax revenue. In formulating our revenue policies we are mindful not to overtax the economy. Therefore, our key revenue policies are targeted at facilitating investment and sustainable economic growth, boosting exports and growth of competitive import substitution industries and protecting local and infant industries.

We also envisage in this Budget to raise non-tax revenue from a review of fees and charges, the divestment of Government shares and sale of Government assets. Revenue received from asset and share sales will be utilized to finance our debt repayments.


4.0 Priorities under the Strategic Thrusts for 2009

Before I discuss specific revenue measures, I will now highlight the priorities under the three-prong strategy of the 2009 Budget.

a) Pro Growth Initiatives and Measures

One of the most important strategic thrusts of the 2009 Budget is to grow the economy. We must increase the economic growth levels to create jobs and generate incomes that are needed and to enable people to get out of the poverty trap, and to prosper. We must also ensure that higher growth is accompanied with a more equitable distribution of its benefits. Without higher levels of growth, we cannot achieve any real progress in ensuring equity, access, and fair distribution of the benefits of development. We have to grow the size of our national economic cake to achieve poverty reduction and also prosperity.

The Government will rely on the private sector to lead the way to achieve higher growth through increased investment. Government, through its policy and regulatory roles, will ensure a more conducive environment for increased investment and confidence, to grow the economy.

In this particular regard the rehabilitation and development of infrastructure is being given very high priority in the 2009 budget. Government has committed significant targeted increases in funding for major road development, water supply and sanitation, and the upgrading of ports.

In addition, Government is fast tracking e-government projects including computerization of the various registries.In addition to budgetary allocations, Government has negotiated a self-funding road development and rehabilitation program, to commence in the first quarter of 2009, with a major foreign entity, to rehabilitate the Queen’s and King’s highways, upgrading approximately 68 kms of road from Wairiki Port to Dreketi; sealing roads around the Savusavu region, and completing the sealing of the Kings highway.

Furthermore through competitive sources of loan funding, work on upgrading and sealing of the roads in the following areas; Saweni-Serea Road; Sigatoka Valley Road; Buca Bay Road and Moto-Balevuto Road, will be undertaken. Efforts are being exerted for this work to commence in the first quarter of 2009.

Improving the supply of water and sewerage services for all in Fiji continues to be a high priority for Government.

As part of this process, consulting expertise has been mobilized to progress the transition from the Water and Sewerage Department to the Water Authority of Fiji.

The Consultant will initially work on Capital Works Review, Network Modeling and improvements to the existing system that will bring about immediate improvements to the current water supply challenges.

Government has allocated sufficient funds to complete the Rotuma Airstrip to facilitate the landing of ATR 42s and the upgrade of Matuku Airstrip. It has also allocated funds to initiate the development of modern port facilities for the Northern Division to support the Tax Free Region initiative.

Apart from infrastructure, particular emphasis will also be given to such strategic sectors as tourism, commercial agriculture, fisheries, forestry, and Information, Communication and Technology (‘ICT’).

The Government’s strategy is to put in place measures that will, in a tangible way, make it more attractive to value-add in Fiji. Value- adding is imperative, particularly if we are to create sustainable industries, earn more foreign exchange, substitute for imports, and generate employment opportunities and upskill our work force.

This Pro-Growth strategy will be combined with a Pro-Poor focus to ensure that those who are lagging behind or are disadvantaged will have greater and better access to opportunities. This also applies to the depressed regions and areas, such as the Northern Division and the Maritime Zones.

It is also imperative that the indigenous people of Fiji are brought into the mainstream of the modern sectors of the economy. This Budget gives particular attention to introducing measures to enable meaningful and tangible participation of the indigenous people in the economy.

Fiji has among the largest of Mahogany resource in the world. Yet the full potential benefit of this resource has for too long been unrealized. There has been much talk and even more uncertainty. In order to provide the trajectory required for this industry, Government is in the process of finalizing the transfer of the ownership of the mahogany plantations to the indigenous landowners through the Fiji Mahogany Trust. The scheme will involve the licensing of approved harvesters who, as criteria of getting a license, must, amongst other things, value-add in Fiji, pay a levy for reforestation, brand Fijian mahogany, provide employment. Applicants for licences will be given favorable consideration if they have indigenous land owner equity participation. Only licensed harvesters can have access to the mahogany. Fiji Hardwood Corporation Limited will be redirected to become a mahogany and forest manager. This initiative falls in line with my Government’s drive to bring indigenous Fijians into the mainstream economy, become equal partners in resource development, and address inequalities of the past. The transfer should be in place by 1 January 2009.

Government has through the Committee for Better Utilization of Land (‘CBUL’) facilitated the renewal of 77 percent of the expired land leases through its outreach program. Landowners through CBUL will receive an additional $8.5 million.Given this new partnership between the landowners, farmer and Government, vast areas will now be revitalized through targeted government spending and community and private sector initiatives and investment.

Fiji has had price controls and monitoring on a wide range of items for over three decades. As we move forward to enhance private sector-led growth of the economy, and to foster competition and level playing field conditions in the market, the merits of having such extensive price control and monitoring needs to be reviewed. The Government shall undertake such a review during 2009. As an immediate measure, Government will lift price controls on rent on commercial properties from 1 January 2009.

The 2009 Budget therefore, introduces a range of measures to grow the economy. These include reduction in corporate tax; establishment of tax free regions; and increased incentives for investment in the tourism, energy, agriculture and ICT sectors. Government shall also lift the moratorium on state agricultural land which are to be leased at commercial rentals for other productive use.

The participation of the commercial banks in Government economic strategy is imperative. In this regard over the past few days, Government and RBF have had consultations with the 5 commercial banks.

We discussed that these banks need to participate and partner Government in initiatives that will be pro-growth, pro-poor and improve and modernize Governmental operations.

The Government and the RBF will closely monitor and consult the banks on interest rates, interest rates spread, fees and charges and other determinants which will create the impetus and environment for a national approach to create better investment and savings opportunities.

It is envisaged that improved and new synergy between commercial banks, Government and the private sector will be realized by 1 January 2009.

To entice Former Fiji Citizens who continue to have strong links with Fiji, they, their spouses and immediate descendents will automatically be entitled to an indefinite permanent residency status, at a cost of $3000.00 per person. Such permanent residency will give them almost all the rights and privileges of a Fiji Citizen including the right to invest and work freely.

Most of the current financial threshold to be met by foreign investors will be reduced to create a more conducive environment for investment and encourage new investors. The new threshold will commence from 1 January 2009.

My Government is committed to a liberalized market within an appropriate legal framework. The Raddison Accord which was achieved because of this Government’s will and determination has led to the liberalization of the telecommunications sector. It has provided competitive pricing, increased and better consumer services and has reduced the cost of doing business in Fiji. With the opening up of the international gateway from 1 July 2009 we will enjoy further reduction in telecommunication costs. Government will continue to pursue such liberalization in other areas of our economy.

As part of facilitating investment Government will assist FNPF to expedite the private sector development of the Grand Pacific Hotel and Momi Bay Hotel projects. I expect the development of these projects to recommence within the first quarter of next year.


b) Pro-Poor Measures and Initiatives

Higher rates of growth must be accompanied by real improvement in the lives of the ordinary people of Fiji. While we need and must have high rates of economic growth to prosper, however, the benefits of such growth must be shared equitably across the nation. The needs of the poor, the vulnerable and disadvantaged must be met. They must be given access to opportunities and assistance, as appropriate. This is to ensure sustainable improvements in their livelihood.

The 2009 Budget seeks to address this by ensuring basic infrastructure for villages and settlements in rural areas; enhancing access to education and training; health and hygiene, and ensuring greater access to housing. Particular attention is to be given to addressing the problem of growing squatter settlements in the urban and peri-urban areas. At a time of increased prices for basic necessities, incentives are being given through the 2009 Budget to increase food production, and encourage self-help in the supply of water and sanitation.

Under the Peoples Charter outreach activities, consultations have been undertaken with people at the local level in the rural areas, in villages and settlements, across the country. A very strong and consistent feedback has been about very basic, “bread-and-butter” developmental issues, relating mainly to the provision of small-scale infrastructure services. Through this consultation process, the Peoples Charter teams identified a total of 854 small-scale projects, all ready for implementation but on which the people have been facing undue delays, in many instances for several years. During the fourth quarter of 2008, the Government has taken action to implement 201 out of the 854 projects at a cost of $1.95 million. All of these 201 projects will be completed within this year. Under the 2009 Budget, an allocation of $12.13 million is earmarked to complete implementation of the balance of 653 projects. Overall, a total of $21.4 million is allocated for rural development including self-help projects such as access roads, housing, electrification, water supply and community development.

Government has in this respect also reduced the amount of contribution required by communities for rural electrification. They will now only need to make a 5 per cent contribution.

Ensuring access to quality education for all is of paramount importance, especially as it is pivotal to liberating people from the vicious trap of poverty.

In our nation today, parents in very low income communities are not able to raise funds to supplement government grants to send their children to school. The level of dropouts from schools has been increasing year by year. According to the 2004-2005 Employment and Unemployment Survey, 10 per cent of children aged 5-14 years were not attending school, due mainly to the financial constraints faced by their parents. Worse still, more than half the total numbers in final year of primary school do not progress to secondary education.

Through the Peoples Charter process, it has been recommended that a Poverty Relief Fund for Education (PRFE) be established, to assist children of the poorest of the poor to gain access to education, at primary, secondary as well as tertiary levels. It is anticipated that the PRFE would be jointly established through the Prime Minister’s office, registered under the Charitable Trusts Act, involving participation and contributions from the Government, the private sector, civil society, charity organizations and external donors.

In the 2009 Budget, $200,000 is allocated, as Government’s initiating seed capital contribution, to get the proposed PRFE underway.


c) Pro- Public Sector Efficiency and Effectiveness

The overall efficiencies and effectiveness of the public service need to be enhanced. I acknowledge that the public service has some highly dedicated staff, and some who contribute above the normal calls of duty. However, generally, inertia is widespread within the public service; and motivation and productivity all need to be lifted. In some key areas, capacity is weak. We must fix these problems, not only through increased staffing but by ensuring availability of the needed competencies and through appropriate remuneration policies. However, the overall size of the public service is large for the size of Fiji as a country. In this context, the reform and right-sizing of the Fiji public service will remain a high priority.

As part of its efforts to provide the right incentives, motivation and improvements to the caliber of civil servants, Government will resume implementation of the Job Evaluation Review and introduce a merit pay system.

Government in its concerted effort to modernize and run its operations has, as a major step, commenced the leasing of vehicles. This will enable Government to reduce its capital outlay, modernize its fleet, bring about transparency and reduce its overall operational costs.

Last August, when launching the Draft Peoples Charter for extensive nationwide public consultations, I had indicated that Fiji’s overall political, social and economic situation is such that the case for change is very compelling. We in Fiji can and must achieve change for a more equitable and prosperous future for all our citizens. And for this, we all must share a collective vision and the will, to achieve the changes that are imperative. This applies in particular to the public service and the government as a whole. To put it simply, we cannot carry on “business-as-usual”. We must modernize the public service by transforming its performance orientation, service delivery effectiveness, and the overall productivity and efficiencies.

Moreover, in our collective efforts to move Fiji forward through the Peoples Charter, it is not only desirable, but, I would say imperative, that a strong partnership approach is now forged between the Government, the civil society and the private sector. This is central to the 2009 Budget strategy.


5.0 REVENUE MEASURES

Ladies and Gentlemen

I now turn to the key 2009 revenue measures.

Our revenue measures are targeted at addressing the challenges I highlighted earlier. These are:

i) addressing our widening trade deficit by supporting export promotion and import substitution; and

ii) introducing targeted incentive packages for resource based industries, value-adding including manufacturing; and ICT development.

The strengthening of revenue collection through improved compliance and facilitating investment and sustainable economic growth are the guiding principles of Government’s revenue policies in 2009. Government is conscious of the need to create and sustain an enabling climate for investment to develop our priority sectors: Infrastructure, Agriculture and Fisheries; Forestry; Tourism and ICT.

The following are some of the major tax incentives that will be available from 1 January, 2009:

(1) Direct tax measures

a) Reduction in Corporate Tax

In 2009, the company tax rate will be reduced to 29 percent and then further reduced to 28 per cent in 2010.

b) Personal Income Tax

From 1 June this year, the income tax threshold was increased from $9,000 to $15, 000. The intention of increased income tax threshold was to alleviate the extra burden on low income earners from the increases in the food and fuel prices this year. This policy will remain unchanged in 2009 and 2010.

c) Establishment of Tax Fee Region(TFR)

The economically depressed Northern and Maritime Island region are in need of special consideration and assistance.

To encourage investment, support development and create employment opportunities in the North and the Maritime islands, Government will declare Vanua Levu, Rotuma, Kadavu, Taveuni, Levuka, Lomaiviti, Kioa, Rabi and Lau as Tax Free Regions(TFR), effective from 1 January, 2009. The TFR incentives will include:

· 13 years tax holiday for new companies; and

· Import duty exemption on raw materials, machinery and equipment for initial setup

In addition, companies that start new projects with at least 25 per cent equity participation involving indigenous Fijians will be granted an additional 5 years tax holiday, that is, a total tax free status of 18 years. Such incentives shall be provided to new companies investing at least $2 million.

d) Tourism Incentive Package

In the 2008 Budget, it was announced that a new incentive package will be introduced to replace the existing short life investment package which expires on 31 December, 2008.

The 2009 Tourism Incentive Package replaces the former that was announced in the 2008 Budget. The Incentives will be in two parts: Standard Allowance and Hotel Incentive Package.

The Standard Allowance provides for 55 percent investment allowance on total capital expenditure as long as there is no shift of revenue offshore.

The second segment of the incentive package will have the following:

. 10 years tax holiday for capital investment not less than $7 million ;and

. Import duty exemption on all capital goods (including capital equipment, plant and machinery) not available in Fiji that is utilized to carry out the investment.

Further, any hotel development in the TFR that entails 25 percent equity by indigenous Fijian land owners, will qualify for an additional 7 years tax holiday on top of the 13 years given under the TFR. For new hotel projects set up in other parts of Fiji, in which indigenous Fijian land owners own at least 25 percent equity will qualify for ten years tax holiday.

It should also be noted that Government has allocated $23.5 million dollars to Tourism Fiji. Government recognizes that Marketing Fiji Tourism is essential. It will continue to provide such funding with certain bench marks to be achieved by Tourism Fiji.

e) Agricultural Incentives

Ten years tax holiday will be granted to new projects by companies undertaking commercial agriculture farming and agro-processing. The incentive will be available from 1 January, 2009 to 31 December, 2014 and to qualify for tax exemption, a minimum of $2 million investment is required and the generation of employment of at least 30 local employees.

f) Bio-fuel Projects

Government is of the view that investment in bio-fuel production needs to be supported given the considerable benefits to the nation in reducing mineral fuel imports. We have an abundance of local resources that can be converted to bio-fuel. To encourage investment in such projects, ten years tax holiday will be granted to companies that will be involved in processing agricultural commodities such as sugar, coconut, cassava etc into bio-fuel. The incentive will be available from 1 January, 2009 to 31 December, 2014. To qualify for the corporate tax exemption, a minimum of $1 million level of investment is required and the generation of employment of at least 20 local employees or more.

In addition, any plant, machinery, equipment and chemicals used for the initial establishment of such new projects will be granted duty free concession.

g) Renewable Energy Incentives

To encourage energy conservation and development of alternative fuel, five years tax holidays will be granted to companies undertaking renewable energy projects and those pursuing investment in power cogeneration. To qualify for tax exemption, a minimum of $250,000.00 level investment is required

To encourage energy use efficiency, energy saver light bulbs will attract zero duty, while duty on non-energy saving light bulbs will be increased.

All importation of renewable energy and energy conservation goods and equipment will be granted duty free concessions. In the same context, fiscal duty and import excise on motor vehicles to be licensed as public service passenger vehicles which operate on Liquefied Petroleum Gas (LPG) or Compressed Natural Gas (CNG) will be reduced from 27 percent to zero percent and 15 percent to zero percent respectively.

h) iCT Incentives

There exists a considerable opportunity for Fiji to benefit from ICT investments. Government has, over the years, introduced a number of incentives to attract ICT business. In 2009, we will:

. Align the incentives available inside and outside the Kalabu Zone;

. The current 10 years tax holiday granted to ICT operators will be increased to 13 years for new operators; and,

. Duty free concession on the importation of computers, specialized plant, equipment and fittings and specialised furniture will be granted for the initial establishment of business.

i) Audio Visual Incentives

In order to enhance Fiji’s competitiveness in attracting foreign film makers, the current film tax rebate of 15 percent will be raised to 35 percent in 2009.

Fiji will be hosting “The Fiji International Film Festival” in 2010 aimed at raising the profile of Fiji. To encourage corporate sponsorship of this event, 200 percent tax deduction will be granted for any corporate contributions made to the Fiji International Film Festival.

j) Education for the Poor

to support access to education for the children of the poorest of the poor families, a Poverty Relief Fund for Education is proposed for which seed funding is included in the 2009 Budget.

It is anticipated that the bulk of funding for this initiative will come from the private sector, individuals, community and voluntary organizations and aid donors. To encourage such funding support, a 200 per cent tax deduction for contributions in excess of $50,000 will be available.

k) Other Incentives

To encourage exports, the following incentives will be extended:

. Export Income deduction will remain at 50 per cent until 2010;

. Employment Taxation Scheme will be extended to 31 December, 2010; and

. 40 percent Investment Allowance will be extended to 31 December, 2010.


(l) “Fiji My Second Home” Programme: This programme is to allow non citizens to reside in Fiji on a multiple entry social visit pass. The goal of this programme is to attract foreign currency funds into Fiji including expenditures locally for retirement living by non-citizens. Those who use this facility will need to satisfy certain criteria including a fixed deposit placement of $200,000.00 for those aged 50 and above; and $300,000.00 for those aged below 50). Interest earned from such deposits will be exempted from tax. This scheme will be operational from 1 January 2009.

(m) Foreign Currency Account Scheme: This scheme is to attract non-residents, including former Fiji Citizens, to send their funds through the banking system to deposit in local bank accounts. For foreign currency accounts, any amount maybe placed in fixed deposit but interest income for deposits above the equivalent of $300,000.00 will be exempt from local tax. This scheme is expected to impact positively on our foreign reserves and will be operational from 1 January 2009.

(2) INDIRECT TAX MEASURES:

a) Tourist Yachts

The duration of stay on tourist’s vessel allowable in Fiji waters will be increased from 9 months to 18 months. The re-entry condition of 9 months will be removed.

b) Super Yachts

To facilitate the “Superyacht” industry in Fiji, Government will formulate a National Yacht Charter Policy. This policy will be ready for implementation by 1 January, 2009.

c) Tariff Changes

The fiscal duty on all items under the 27 percent duty band will now be raised to 32 percent with immediate effect. The increase in the duty rate aims to encourage import substitution of local products, dampen demand and provide stimulus to domestic industries.

The following are additional customs and import excise duties measures that will be made effective immediately:

. Increase fiscal duty of multi-wick kerosene stoves and spare parts from 5 to 32 percent;

. Increase fiscal duty of golf cars and similar vehicles from 15 to 32 percent; and

. Removal of import excise duty of 10 percent on prime movers and specialized earth moving machinery.

d) Petroleum Prices

Government will revert to normal duty rates as follows:

. Motor spirits from 34 cents to 44 cents per litre;

. Diesel from 9 cents to 18 cents per litre; and

. Motor spirits used for blending pre-mixed outboard fuel from 17 cents to 27 cents per litre.

Notwithstanding the reinstatement of the normal petroleum duty rates, given the decrease in the world oil prices the new domestic retail prices to be effective from 1 December 2008 are expected to be lower than the current retail prices.

e) Concessions on Basic Food Items

In June this year, Government reduced fiscal duty to zero percent on a number of basic food items such as rice, edible oil and tin fish. This measure was introduced to cushion the impact of inflationary pressures arising from the hike in global food prices. Government will maintain the zero percent fiscal duty concession on these items in 2009. Moreover, the zero rating of locally produced eggs will remain in 2009.

f) Fishing Industry

To create a level playing field for local and foreign owned fishing vessels, the following concessions will be granted to the fishing industry:

. Reduction in fiscal duty on fuel from 8 cents to 2 cents;

. Reduction in fiscal duty on specialized fishing gear & equipment from 3 per cent to zero per cent;

. Reduction in fiscal duty on specialized fishing vessels from 10 per cent to zero per cent;

. Reduction in fiscal duty on fish baits from 3 per cent to zero per cent; and,

. To encourage value adding a 3 per cent export duty on exports of unprocessed fish will be introduced from 1 January 2009

g) Timber

Introduction of 3 per cent export duty on exports of all unprocessed timber from 1 January 2009.


(3) OTHER

Road User Charge

A road user levy, differentiated by vehicle category and classification, will be introduced effective 1 January 2009 on all vehicles. The revenue generated by this measure will be specifically set aside into an Infrastructure Rehabilitation and Development Fund, and utilized only for the purpose of road maintenance upgrading and development

Ladies and Gentlemen, a complete list of the direct and indirect tax measures are provided for in the 2009 Budget Supplement.

Going forward, Government will ensure consistency, transparency and sustainability of its policies and measures aimed at growing the economy, increasing investor confidence and reducing poverty.

Extraction of Mineral Water

A levy for the extraction of mineral water based on volume will be levied from 1st January, 2009. The levy has been arrived at following consultations with the mineral water extracting companies.

Second Hand Vehicles

Second hand and reconditioned vehicles up to 8 years old can now be imported to allow accessibility to the lower income earners and other users.


7.0 Development Partners

Before I conclude, I wish to acknowledge our appreciation to those development partners who have extended their understanding and assistance to Fiji during these challenging times. I submit to all our development partners, that Fiji seeks your support for our efforts towards national development, to promoting good governance, and for laying a platform for a return to parliamentary democracy. We remain committed to pursuing constructive dialogue and engagement with all our partners in the international community.


8.0 Conclusion

This Budget has been prepared at a time of unprecedented developments in the global financial system and economy. The overall environment is one of growing uncertainties and is becoming increasingly more constraining. What we do know is that Fiji is not sheltered from this external turbulence. Over the coming months, as we enter into our cyclone season and must take all the necessary precautions, in the wake of the global financial and economic crisis, Fiji and its people must be prepared to absorb the shocks. We will need to be prepared to sacrifice; to work harder and smarter; and perhaps above all, to draw upon our inner strengths as a nation and as one people, to work together, to chart our way forward.

In conclusion, I am heartened by the support of the people of our nation as is evidenced from the strong and growing positive response to the draft Peoples Charter. I extend an invitation to every section and individual citizen, and to all our development partners, to join us and make a meaningful contribution to our efforts in nation building. This task of Nation building and National development is not easy and requires much effort, goodwill and resolve, to see it succeed.

The 2009 Budget, being pro-growth and pro-poor, goes a long way to facilitate this. Together with our draft Peoples Charter, this gives me much optimism and hope in our quest for “Building a Better Fiji” for all our people.

I thank you for your attention during this Address and look forward to your continuing support now and, in the year to come. I commend this Budget to our nation, and do so with the support of Cabinet.

May God Bless Fiji.
- ENDS -"

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