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This blog is brought to you by Gilbert & Samuels Company Limited, a financial advisory services and consulting company based in Suva, Fiji.
To contact the authors of this blog, please call telephones (679) 3342719, (679) 3544897 or e-mail info@gilbert.com.fj.


Wednesday, February 25, 2009

The Reserve Bank of Fiji Clarifies Issues on Liquidity

In a Reserve Bank of Fiji press release dated 24 Feb 2009, the RBF has clarified that the low availability of funds for lending in the financial sector, which resulted in an increase in interest rates was not because of RBF’s monetary policy but was a direct result of the outflow of foreign reserves. Last week, ANZ increased its rates by 0.5% while Westpac will increase its rates today by 0.25% and a second increase on the 23/03/09 of another 0.25%.

In response to the tightening liquidity for banks, the RBF has advised banks to continue using the overnight inter-bank market and offering competitive rates for deposits. If these measures fail, banks can borrow from RBF’s overnight lending facility also known as lender of last resort facility. In addition, RBF has an export finance facility whereby banks can borrow at a maximum interest rate of 2% and lend to exporters at concessional rates. The purpose being to promote exports and improve the short-term liquidity needs of banks.

The Governor of RBF, Mr. Savenaca Narube allayed fears of a credit crunch and said “the Reserve Bank will ensure that the financial market will continue to operate smoothly and that the financial system will remain sound.”

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Monday, February 23, 2009

Changes to Foreign Investment Regulation 2008

The Fiji Trades and Investment Board had a Road Show on Monday, 16 February 2009 at the Southern Cross Hotel, Suva. The aim of this Road Show was to announce the current changes to the Foreign Investment Regulations 2008. As of Friday, 16 January 2009, FTIB had de-reserved 4 activities that were previously listed as reserved activities and reduced the minimum investment thresholds for certain restricted activities.
The 4 de-reserved activities are:

  • Bus Business
  • Sightseeing tours, travel agent and tourist guide services
  • An office service business
  • Forestry (plant management & logging)

These 4 de-reserved activities now come under ‘Other Activities’ in the Restricted List of the Fiji Investment Regulation 2009 and will require at least F$250,000.00 in owners contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period of the business.

2009 Restricted List and the Minimum Investment Thresholds

Fishing
· At least 30% equity held by a local and the Foreign investor must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

Forestry (Plant management & logging)
· A foreign investor must undertake value adding and must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

Manufacturing
· Tobacco production
o A foreign investor must use at least 75% locally grown and processed tobacco in all domestic cigarette production and must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

Tourism
· Cultural heritage
o Any activity involving investment in the cultural heritage of the Fiji Islands must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

Service
· Real Estate Management
o A foreign investor engaging in real estate management and real estate agents must have at least F$1 million in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
o A foreign investor engaging in the above real estate management activities needs to be certified under the Real Estate Agents Act
o A foreign investor engaging in real estate activity in renting out of homes/villas/ apartment/bures to tourists must have at least F$250,000.00 in owners contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period.

· Real Estate Development
o A foreign investor engaging in real estate development must have at least F$5 million owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

· Construction
o A foreign investor engaging in the construction industry must have at least F$1 million in owner’s contribution or paid up capital in the form of cash from the operational date to be fully brought into Fiji within the implementation period


· Earthmoving Business
o A foreign investor engaging in earthmoving business must have at least F$1 million in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period


· Island-Island Shipping and Passenger-Service (exclusive of tourism support services)
o A foreign investor engaging in inter island shipping and passenger service must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period.

Other Activities
Other than those activities listed under the Reserved and Restricted List, all other activities requires at least F$250,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date, to be fully brought into Fiji within the implementation period of the business.

The definition of ‘Reserved Activities’ under the 2009 Foreign Investment Regulations refers to those activities that are prescribed for Fiji Citizens only. For the purpose of Section 5 of the Act, the following Activities are prescribed:

  • A milk bar or cafeteria business;
  • A taxi business;
  • A kava business;
  • Retail sale via stalls and markets;
  • A handicraft business;
  • Tailor shops;
  • Repair of personal and household goods;
  • A plumbing business;
  • An electrical business;
  • Plant nursery and care;
  • A day care centre;
  • An internet café and amusement and gaming centres;
  • Home-stay lodging services;
  • A bakery business other than those operated within the vicinity of a hotel/resort and/or operated by foreign owned hotels/resorts;
  • Backpacker operations;
  • A nightclub, other than those operated within the vicinity of a hotel/resort and/or operated by foreign owned hotels/resorts; and
  • A liquor bar, other than those operated within the vicinity of a hotel/resort and/or operated by foreign owned hotels/resorts.

The definition of ‘Restricted Activities’ under the 2009 Foreign Investment Regulations refers to those activities with conditions which must be met by foreign investors who wish to pursue them. These conditions include a minimum owner’s contribution or paid up capital in the form of cash to be brought into Fiji within the implementation period plus specific requirements depending on the activity of the foreign investor.

For Instance:

  1. Fishing Activity – At least 30% equity held by a local and the foreign investor must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
  2. Forestry (Plant management & logging) - A foreign investor must undertake value adding and must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
  3. Manufacturing (Tobacco production) - A foreign investor must use at least 75% locally grown and processed tobacco in all domestic cigarette production and must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
  4. Tourism (Cultural heritage) - Any activity involving investment in the cultural heritage of the Fiji Islands must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
  5. Service
    · Real Estate Management -
    o A foreign investor engaging in real estate management and real estate agents must have at least F$1 million in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period
    o A foreign investor engaging in the above real estate management activities needs to be certified under the Real Estate Agents Act
    o A foreign investor engaging in real estate activity in renting out of homes/villas/ apartment/bures to tourists must have at least F$250,000.00 in owners contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period.

    · Real Estate Development
    o A foreign investor engaging in real estate development must have at least F$5 million owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period

    · Construction
    o A foreign investor engaging in the construction industry must have at least F$1 million in owner’s contribution or paid up capital in the form of cash from the operational date to be fully brought into Fiji within the implementation period


    · Earthmoving Business
    o A foreign investor engaging in earthmoving business must have at least F$1 million in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period


    · Island-Island Shipping and Passenger-Service (exclusive of tourism support services)
    o A foreign investor engaging in inter island shipping and passenger service must have at least F$500,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date to be fully brought into Fiji within the implementation period.
  6. Other Activities - other than those activities listed under the Reserved and Restricted List, all other activities requires at least F$250,000.00 in owner’s contribution or paid up capital for companies in the form of cash from the operational date, to be fully brought into Fiji within the implementation period of the business.

Note : For investment advice and assistance to set up business in Fiji, pls contact our company, Gilbert & Samuels Company Limited, on telephones (679) 3342719 or 3544897 or email info@gilbert.com.fj.

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Saturday, February 21, 2009

Increase in bank lending rates

Two major banks in the country will be increasing their interest rates beginning this week, 20 Feb 2009. The interest rate increase has been blamed on the sustained increase in deposit rates and the high demand for a reducing pool of funds available for lending or system liquidity. Consider this, Fiji’s liquidity has reduced from highs of $300m 18 months ago to an average of less than $50m in recent months.

  • ANZ – 0.5% increase in variable interest effective as of 20 Feb 2009.
  • Westpac – 0.25% increase in variable interest effective on 25 Feb 2009 and a further increase of 0.25% effective on 23 Mar 2009.

Old vs new lending rates (%) for ANZ:

  • Business index rate: 10.25 vs 10.075
  • Home loan: 9.50 vs 10.00
  • Investment loan: 9.50 vs 10.00
  • Personal loan: 11.50 vs 12.00 (secured); 14.20 vs 14.70 (unsecured)
  • Rural banking micro loan: 19.00 vs 19.50
  • Small loan: 19.00 vs 19.50 (unsecured)

Old vs new lending rates (%) for Westpac:

  • Business lending loan: 9.99 vs 10.24 (effective 25 Feb)vs 10.49 (effective 23 Mar)
  • Residential property loan: 9.50 vs 9.75 (effective 25 Feb) vs 10.00 ( effective 23 Mar)
  • Investment loan: 9.50 vs 9.75 (effective 25 Feb) vs 10.00 (effective 23 Mar)

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National Anti-Money Laundering Conference – 18 Feb 2009

The first national anti-money laundering conference of its kind took place at the Holiday Inn on 18 Feb 2009. The one day conference was hosted by Fiji’s financial watchdog, the Financial Intelligence Unit (FIU).


The Governor General of the Reserve Bank of Fiji, Mr. Savenaca Narube, opened the conference by emphasizing the importance of Fiji doing all it can to help the global community combat financial crimes by strengthening its own financial regulations because the world was so closely connected now more than ever.

The conference was also an opportunity for stakeholders to familiarize themselves with FIU and its role. The FIU was an idea borne through the experiences of the RBF and this idea became a reality when in 2006, the FIU was formally established by law. The FIU currently runs under the auspices of the Reserve Bank of Fiji and is under the powers of the Governor. However, the FIU should really be under the powers of the Minister of Justice.

Some of the notable achievements of FIU to date are:

  • Development of Anti-Money Laws (i.e. Proceeds of Criminal Act, Mutual Assistance in Criminal Matters Act and Financial Transactions Reporting Act together with its Regulations)
  • Establishment of Anti-Money Laundering (AML) Committee.
  • Establishment of special investigation units such as the Transnational Crime Unit, Police Money Laundering Crime Unit, and FIRCA’s Fraud & Evasion Unit.
  • Developed an electronic reporting and data management IT system for AML work.
  • Introduced the $10000 border currency reporting, $10,000 cash transaction reporting and reporting of all international electronic funds transfer.

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