Invest in Fiji

Reserve Bank of Fiji issues Risk Management Policy for Insurance Companies

2010-10-26T10:00:00.004+13:00

The Reserve Bank of Fiji has recently issued a Risk Management Policy governing the operations of companies licensed to conduct insurance business in Fiji. The policy puts in place requirements that cover the identification, assessment and management of risks by insurance companies including the development of appropriate risk management frameworks, policies and processes to manage risks.

One of the areas our company, Gilbert & Samuels Company Limited, consults on is the area of risk management. We can help companies identify risks, evaluate those risks and put in place strategies and controls to manage any residual risks that remain within the company.

We can also develop appropriate risk management policies and processes for companies to help them with managing risks within their businesses.

For more information, you can call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

Note : Search for our company, Gilbert & Samuels Company Limited, on Facebook. We post informatoin on the services we offer and the work we are currently doing there.

ANZ Interest Rates (updated 26.10.09)

2010-10-26T09:57:00.002+13:00

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

Business Index Rate - 9.95%;
Residential Property Loan : Standard Variable Rate - 7.75%, 1 Year Fixed Rate - 7.25%;
Investment Loan : Standard Variable Rate - 8.25%, 1 Year Fixed Rate - 7.50%;
Personal Loans : Secured - 11.00%, Unsecured - 15.00%;
Small Loans : Unsecured - 19.50%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.75%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

Westpac Interest Rates (updated 2.8.10)

2010-08-02T08:35:00.002+12:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 7.75%, 1 year Fixed Rate – 7.25%;
Investment Loan : Variable Rate - 8.25%, 1 year Fixed Rate - 7.25%;
Retail Term Deposits : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Companies interested in developing new or reviewing their current strategic plans can contact us on telephones (679) 3342719 or (679) 9921427 or email info@gilbert.com.fj.

We also carry out consultancies on capacity assessments and risk management.

At present we are involved in developing an Organisational Review and Strategic Plan Consultancy.

Colonial National Bank Interest Rates (Updated 22.2.10)

2010-02-22T09:02:00.000+13:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Investment Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Retail Term Deposits: 9 months - 5.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Capacity Assessment Consultancy

2010-02-01T08:35:00.002+13:00

One of our products is Capacity Assessments of organisations. We have previously carried out this type of consultancy for UNICEF and UNAIDS.

Capacity Assessments are done to evaluate whether an organisation has the capacity, skills and expertise to achieve the objectives and functions that it has set out to do.

Donors are usually interested to have an independent assessment done to evaluate whether the NGO or project that it is intending to fund has the capacity to deliver the intentions and objectives for which the funding is to be provided. In that regard, it usually calls upon an independent person to carry out a capacity assessment on that particular organisation.

Another area where capacity assessment can be utilised is to find out whether an organisation has the capacity, skills and expertise to be able to deliver some function that it intends to provide in the future.

At the moment, we are currently doing a capacity assessment consultancy for Dominion Finance Company Limited.

If you are interested in this type of consultancy, pls email us on info@gilbert.com.fj or call telephones (679) 3342719 or (679) 9921427.

Westpac Interest Rates (updated 1.2.10)

2010-02-01T08:32:00.000+13:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 8.50%, 1 year Fixed Rate – 7.75%;
Investment Loan : Variable Rate - 8.50%, 1 year Fixed Rate - 7.75%;
Retail Term Deposits : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Companies interested in developing new or reviewing their current strategic plans can contact us on telephones (679) 3342719 or (679) 9921427 or email info@gilbert.com.fj. We also carry out consultancies on capacity assessments and risk management.

Colonial National Bank Interest Rates (Updated 18.1.10)

2010-01-20T08:42:00.000+13:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Investment Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Retail Term Deposits: 9 months - 5.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Reserve Bank of Fiji issues guidelines for local Boards and on microfinance for banks

2009-12-31T08:24:00.003+13:00

The Reserve Bank of Fiji has issued three new policy guidelines for licensed banks. The guidelines include :

Minimum Guidelines for the Establishment of a Local Advisory Board;
Policy Guideline on Complaints Management; and
Minimum Requirements for Commercial Banks on Internal Micro finance Divisions and Units.

Of note are the guidelines for the establishment of local advisory boards and that for establishment of internal micro finance divisions by banks operating in Fiji.

Currently, whilst a branch of a foreign bank operating in Fiji is headed by a General Manager (or something similar), he/she and the Fiji operations reports directly to a division of the bank that looks after its foreign operations, at the bank's country of incorporation.

Policies on trading and business are currently established by the foreign branch bank's head office with its Fiji operations requested to comply with those. The establishment of local advisory boards should facilitate the more rigorous review of the applicability of some of those policies to Fiji.

An advantage of a local advisory board is that it would, hopefully, also look into more proactive product development that best suits the customer profiles of Fiji banks, rather than the "advanced and complicated" needs of a foreign customer.

With regard to the other policy requiring the establishment of internal micro finance divisions within banks in Fiji, given Fiji's current economic and business environment, focusing on the establishment of micro and small enterprises and providing necessary training to those interested in how to run a business, would be of immense benefit to the country.

In recent years, most people have been displaced off land and from regular paid employment. Instilling a business and entrepreneurial focus on such citizens will help promote a financially independent attitude that will drive them to fend for themselves by running their own businesses. This will reduce the "hand-out mentality" and a heavy reliance on Government and social security and social welfare safety nets.

Looking at, and developing other incentives to promote the development of small and micro enterprises, would be of benefit to Fiji in the areas of :

subsidised training for budding business people and entrepreneurs;
subsidised taxes (perhaps for the first few years of operations until businesses get on their feet);
setting up commercial tax free zones for such small businesses, subsidised procurement prices for essential business overheads; and
setting up centres where business owners can learn from each other's experiences and share their own experiences and challenges as well.

The move by the Reserve Bank of Fiji in establishing these policies are commendable and we hope that the objectives of these various policies are met.

The guidelines take effect from 1 January 2010.

Banks to celebrate as Reserve Bank of Fiji removes interest rate controls

2009-11-27T12:05:00.004+12:00

The Reserve Bank of Fiji has announced that, with effect from 1 January 2010, it will be removing the interest rates controls that it imposed on banks in Fiji in April 2009.

The announcement is expected to cause celebrations amongst banks in Fiji who had been under pressure to reduce their interest spreads and margins since the controls were put into effect.

The change in policy stance rose after the IMF made comments regarding the policy mix used by the central bank to conduct monetary policy and urged the authorities to "utilize more market-based instruments". (Quote is taken from IMF Statement after the conclusion of its Article IV consultations in Fiji, which has been posted earlier on this blog).

In recent years, the Reserve Bank of Fiji had been reinstating direct controls to contain credit (e.g. increases/reductions in Statutory Reserve Deposits and controls on interest spreads/margins), after earlier making a move to use more market based instruments.

An excerpt from today's press release from the Reserve Bank of Fiji is provided below.

"The lending rate and interest rate spread polices will be removed. In April 2009, the Bank announced that the weighted average lending rates of banks and other lending institutions should be brought down to 31 December 2008 levels. All commercial banks have now complied with the lending rate policy of the RBF. In addition, banks are on target to meet the 4 percent interest rate margin policy by December 2009.

In removing the lending rate and interest rate spread policies, Mr. Reddy stated that “all commercial banks are advised to maintain the trend in lending rate and any increase in spread above 4 percent in the future will have to be fully justified and explained to the RBF."

IMF Concludes Article IV consultations in Fiji

2009-11-27T11:01:00.002+12:00

Taken from the International Monetary Fund website on this link.

The statement raises concerns regarding :

constraints on future growth in Fiji and how the "outlook remains highly uncertain due to political developments, the fragile nature of the global recovery, volatility of commodity prices, the risk of natural disasters, and the complex structural reform agenda";
downside risks including how "increased liquidity in the banking system poses risks of inflation, macroeconomic instability, and a loss of competitiveness";
relevance and adequacy of monetary policy instruments used;
the level of government debt and its sourcing mostly from FNPF funds;
sustainability of FNPF to pay pensions at current rates and its use to fund government debt.

"Statement of an IMF Staff Mission at the Conclusion of the Article IV Discussions with Fiji, Press Release No. 09/427November 23, 2009

The following statement was issued today in Suva after the conclusion of an International Monetary Fund (IMF) staff mission to Fiji:

“A team led by Mr. Ray Brooks, Division Chief in the Asia and Pacific Department of the IMF, visited Suva November 10 – 24 to hold Article IV discussions with the government and other stakeholders.1 The team met with Prime Minister Bainimarama, Reserve Bank of Fiji (RBF) Governor Reddy, Acting Finance Minister Sayed-Khaiyum, Finance Secretary Prasad, other senior government officials, and members of the private sector and civil society. Representatives from the Asian Development Bank and the World Bank also participated in the meetings. The team expresses its appreciation to the authorities for the constructive discussions.

“Economic growth in Fiji has been sluggish in recent years due to political developments, delays in structural reforms, and worsening terms of trade. Job growth has been slow and unemployment rose to 8½ percent in 2008.

“The economy is expected to contract by 2½ percent in 2009 as the impact of the global crisis has been exacerbated by floods that damaged crops and tourist infrastructure early in the year. GDP growth of 2 percent is likely in 2010, driven by the rebound in tourism, the devaluation, the global recovery, and rebuilding after the floods. Growth over the medium-term should rise to 2½ percent with fiscal consolidation and progress on structural reforms.

“Fiji, however, faces considerable downside risks given its external vulnerabilities. Increased liquidity in the banking system poses risks of inflation, macroeconomic instability, and a loss of competitiveness. The growth outlook remains highly uncertain due to political developments, the fragile nature of the global recovery, volatility of commodity prices, the risk of natural disasters, and the complex structural reform agenda.

“We commend the authorities for their efforts to limit the overall deficit in 2009 to the budgeted level of 3¼ percent of GDP. This is being achieved by containing expenditure in the face of an unexpected 10 percent fall in revenue. However, central government debt, at over 50 percent of GDP, is high by regional standards. In addition, government has contingent liabilities of around 15 percent of GDP.

“Fiscal consolidation is needed to reduce central government debt to the government’s target of 45 percent of GDP over the medium term. Limiting the 2010 budget deficit to around 2 percent of GDP—excluding costs associated with civil service reforms—would begin to reduce the debt-to-GDP ratio. In the medium term, expenditure can be contained through a well-designed civil service reform and revenue can be strengthened by rationalizing tax incentives. Transparency in fiscal reporting should be improved by widening the coverage of the budget and publishing quarterly reports on the fiscal outcome.

“Monetary policy should be tightened to contain inflation, protect the reserve position, and lock in the competitive gain from the devaluation. Inflation is projected to rise to 7 – 8 percent year-on-year by early 2010 and any further upward pressure on prices could lead to higher wage demands and macroeconomic instability. Given these risks, the recent increase in the statutory reserve deposit ratio is a welcome step. But further measures are needed to absorb excess liquidity and utilize more market-based instruments. We endorse the authorities’ review of the RBF Act to provide the RBF with more independence.

“The Fiji National Provident Fund (FNPF) should be reformed to make it actuarially sound. The generous rate of conversion of benefits to annuities should be reduced and management should be made independent of government and responsible to beneficiaries. The government should reduce its reliance on the FNPF for financing and the FNPF should not be used to finance public enterprises since these actions undermine the fund’s soundness. We support the government’s intention to conduct a comprehensive study to guide its reforms of FNPF.

“The authorities are planning sweeping structural reform that is required to spur growth, create jobs and reduce poverty. Priorities are civil service, public enterprise and land reform, and price liberalization. The social impact of redundancies arising from civil service and public enterprise reform, and the impact of price liberalization, should be mitigated through well-targeted subsidies to vulnerable groups. The government’s decision to corporatize water, procurement and printing services is a very positive step.

“The IMF Executive Board is expected to conclude the Article IV consultation discussions in January 2010.”

Foreign Exchange Dealer Licence Revoked by the Reserve Bank of Fiji

2009-11-24T07:46:00.003+12:00

The Reserve Bank of Fiji has revoked a foreign exchange dealer licence issued to Galaxy International Limited after the company made "serious breaches under the Exchange
Control Act and Financial Transactions Reporting Act, and non-compliance with its conditions of
licence" (refer to Reserve Bank of Fiji Press Release dated 23 November 2009).

Galaxy International Limited was issued with a restricted foreign exchange dealer licence in 2004.

The revocation of licence has the effect of Galaxy International Limited not being permitted to act as an authorised restricted foreign exchange dealer in relation to the following transactions:

Sale, purchase and repatriation of traveller’s cheques and foreign currency notes;
The remittance of proceeds of repatriated Fiji currency notes;
The issue of bank drafts;
The use of telegraphic or electronic transfers for payment and receipt of funds; and
Any other type of transaction that was approved by the Reserve Bank of Fiji for Galaxy
International Limited as an authorised restricted foreign exchange dealer.

The list of other remaining foreign exchange dealers and money changers can be found at the Reserve Bank of Fiji website on this link.

ANZ Interest Rates (updated 24.11.09)

2009-11-24T07:43:00.001+12:00

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

Business Index Rate - 9.85%;
Residential Property Loan : Standard Variable Rate - 8.00%, 1 Year Fixed Rate - 7.75%;
Investment Loan : Standard Variable Rate - 8.50%, 1 Year Fixed Rate - 8.00%;
Personal Loans : Secured - 11.00%, Unsecured - 15.00%;
Small Loans : Unsecured - 19.50%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

Westpac Interest Rates (updated 23.11.09)

2009-11-23T08:30:00.002+12:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 8.50%, 1 year Fixed Rate – 7.75%;
Investment Loan : Variable Rate - 8.50%, 1 year Fixed Rate - 7.75%;
Retail Term Deposits : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Tonga beats Fiji in World Bank's Doing Business Rankings

2009-11-13T08:35:00.003+12:00

Of countries in the Pacific Islands Region, Tonga has beaten Fiji in the latest Doing Business Rankings done by the World Bank.

Tonga's Ease of Doing Business Ranking was 52 compared to Fiji's 54. Samoa follows at 57 with Vanuatu at 59, Kiribati at 79, Papua New Guinea at 102, Solomon Islands at 104.

View the country rankings on this link.

For advice or assistance with investing in Fiji, pls call us on (679) 3342719 or email info@gilbert.com.fj.

Colonial National Bank Interest Rates (Updated 11.11.09)

2009-11-12T07:55:00.003+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Investment Loan : Variable Rate – 8.25%, 1 Year Fixed Rate – 7.25%;
Retail Term Deposits: 9 months - 5.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Reserve Bank increases Statutory Reserve Deposit Requirement

2009-11-09T07:44:00.003+12:00

The Reserve Bank of Fiji has announced that it will increase banks Statutory Reserve Deposits to 7%, from the current 5%.

The increase will reduce the amount of funds that banks available for lending and other purposes.

The move comes as inflation rates rose to 6.3% in September 2009 from 5.1% a month earlier. Year end inflation has been forecasted by the Reserve Bank of Fiji at 9.5%.

Taken together with the Reserve Bank's earlier directive that banks reduce their interest spreads to 4% over 2009, banks will face committed pressure to attempt to maintain their profit margins as they work to meet the Reserve Bank's directive.

Over the last ten years, the Reserve Bank of Fiji has used interest rates as a primary tool to influence interest rates movements. Apparently, this might not have worked as planned so over the last two years, the Reserve Bank has gone back to using more direct means of controlling bank credit through the use of statutory reserve deposit requirements, credit ceilings and specific interest rates directives.

Note : For bank and financial sector compliance advice, pls call our office on (679) 3342719 or email info@gilbert.com.fj. We have assisted a number of financial institutions (in the banking and insurance sectors and the capital markets industries) to put in place policies and procedures to meet any relevant requirements imposed by their financial sector regulators. Our Principal has also sat as a Board Director of a licensed credit institution in Fiji. During his time there (a little over 2 years), he assisted with putting in place appropriate policies and processes and improve the risk and compliance culture within the company. These contributed to the institution making record profits over 2 years consecutive years. Refer to the financial institution's relevant summary financial statements for the 2 years here and here.

ANZ Interest Rates (updated 27.10.09)

2009-10-28T08:09:00.001+12:00

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

Business Index Rate - 9.85%;
Residential Property Loan : Standard Variable Rate - 8.00%, 1 Year Fixed Rate - 7.75%;
Investment Loan : Standard Variable Rate - 8.50%, 1 Year Fixed Rate - 8.00%;
Personal Loans : Secured - 11.00%, Unsecured - 15.00%;
Small Loans : Unsecured - 19.50%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

Interest rates are on a per annum basis and may be varied by ANZ without prior notice. For investment advice and portfolio management, pls call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

Our Strategic Planning Consultancy

2009-10-22T11:58:00.003+12:00

As part of our suit of products, we offer consultancy in the area of strategic planning.

Using a strategic planning model that we have developed, after reviewing other models that are in use, we have developed the current strategic plans for Fiji National Provident Fund, Amalgamated Telecom Holdings, among others.

We have also assisted with developing annual corporate plans for some government agencies/departments. As part of this, we ensure that there is a link between the company's/organisation's strategic plan and its annual strategies and that those responsible for implementing strategies are clearly identified with time frames put in place.

During the current constrained business and economic environment, it might do well for companies to have another review of where they wish to position themselves over the next two to three years and then review/identify new strategies to take them there.

Organisational objectives that might have been relevant in the past two years might need to be reviewed as companies/organisations relook at themselves given the current global/domestic conditions.

If you are a company or organisation that needs assistance in this regard, and need more information on how we can help you, you can call our office on (679) 3342719 or email us on info@gilbert.com.fj.

Our Risk Management Consultancy

2009-10-20T10:22:00.005+12:00

We are completing the development of a risk management framework including risk management policies, procedures and processes for an insurance company in Fiji.

As part of this consultancy, we used a risk management product that was have developed after reviewing other models being used overseas and developing a generic model that can be used for companies/organisations in Fiji and the Pacific Islands region.

The product helps us, together with the client, to develop policies to manage risks within the client company/organisation, including processes to identify, assess and manage risks within that company/organisation.

Most companies/organisations around the world and in the Pacific Islands region do not have a good idea of the risks that their businesses engage in or with.

It has been found that managing risks effectively, leads to improved efficiencies, effectiveness and profitability for a company/organisation.

Our product helps a company identify the risks that it engages in/with, assesses those risks and then identifies strategies to manage those risks. We can also recommend suitable changes to a client's organisation structure to put in place an appropriate hierarchy, reporting lines and systems to manage risks within that organisation/company.

If you need further information on this product or a proposal, pls call our office on (679) 3342719 or email info@gilbert.com.fj.

ANZ Interest Rates (updated 30.9.09)

2009-09-30T08:50:00.001+12:00

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

Business Index Rate - 9.85%;
Residential Property Loan : Standard Variable Rate - 8.60%, 1 Year Fixed Rate - 8.10%;
Investment Loan : Standard Variable Rate - 9.10%, 1 Year Fixed Rate - 8.10%;
Personal Loans : Secured - 11.00%, Unsecured - 15.00%;
Small Loans : Unsecured - 19.50%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

Reserve Bank of Fiji removes credit ceiling

2009-09-04T08:48:00.003+12:00

The Reserve Bank of Fiji earlier this week removed the credit ceiling restrictions placed on banks and credit institutions operating in Fiji.

The removal of the credit ceiling is expected to contribute to growth in bank's and credit institution's lending portfolios with growth by certain financial institutions heavily restricted during the time the ceiling was in place.

Colonial National Bank Interest Rates (Updated 1.9.09)

2009-09-04T08:34:00.001+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.25%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.25%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 5.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice and investment portfolio management services, can use our company, Gilbert & Samuels Company Limited.

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Westpac Interest Rates (updated 1.9.09)

2009-09-04T08:29:00.001+12:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 9.00%, 1 year Fixed Rate – 8.50%;
Investment Loan : Variable Rate - 9.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Also contact us if you require investment portfolio management services.

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Tips for Investment

2009-07-20T09:26:00.003+12:00

There are many tips on investment that one could consider before investing or during the time of investing in a particular investment instrument.

Here are some that I found on one blog, http://www.mygr8blog.com/ :

“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars”, quoted Warren Buffet.
Look at the fundamentals of the company and check its previous track record.
Find out the management of the company whether it is professionally run or not?
What are the plans, prospects and expansions it is undertaking.
Does the company have good will and brand image in the corporate world?
Are there any related and unrelated diversifications, acquisitions or mergers etc?
Closely observe the promoter holding and track record of its dividend, EPS, P/E ratio.
Does the company have any other sister concern companies? Is the company financial sound or not?
Look at both the fundamental analysis and technical analysis and check for its consistency and complementary.
Read various business magazines, journals and newspaper before investing.
From Mutual Fund Fact sheet find out the investment pattern and you can learn the percentage of the investment and the companies the Mutual Funds have invested.
Pick up the scrips that have consistent growth and appreciation as well as giving handsome returns.
Avoid penny stocks.
Don’t overtrade as overtrading kills. Ultimately it is the broker who gets commissions against each transaction.
Don’t speculate but invest.
Never borrow and invest. Cut the cloth as per the coat.
Treat volatility as your friend not as a foe.
Always look at the margin of safety.
Above all, read between the lines.

For investment and portfolio management advice in Fiji, call our office on (679) 3342719 or (679) 3544897 or email info@gilbert.com.fj.

UK banks to disclose remuneration of top earners?

2009-07-17T09:33:00.004+12:00

A recent study of UK banks has recommended that banks need to disclose information on the pay and bonuses of all their top earners, in addition to board members.

The Report also recommended that a bank's Remuneration Committee should extend its responsibility for pay policies to the entire firm rather just the board, particularly for staff members whose remuneration exceeds the median level remuneration of executive directors.

It also stated that the UK financial sector regulatory body, the Financial Services Authority (FSA), should have a bigger role in monitoring the corporate governance of the financial institutions, from hiring new directors to scrutinising pay and risk management policies.

In Fiji, only locally incorporated financial institutions are required to have in place boards. Branches of overseas incorporated financial institutions do not have boards in Fiji, except for management committees that oversee the Fiji operations.

Whilst all financial institutions publish Key Disclosure Statements which provide audited information on their Balance Sheets, Income and Expenditure Statements and selected other prudential ratios, no specific information on executive remuneration is provided.

Should this be required would be a question for the authorities to answer. However, given that fees and charges of financial institutions are a topic of interest in Fiji, when a bank does pay extraordinary levels of remuneration would have an impact of the level of charges which are then passed onto a financial institution's customers.

Financial institutions that require a review of their risk management framework can contact our company on telephone (679) 3342719, (679) 3544897 or email info@gilbert.com.fj. We also offer services in the areas of :

strategic and corporate planning,
capacity assessments,
business continuity planning,
investment advice and portfolio management and on
any financial institutions or financial sector issues.

Read below the article from The Telegraph.

"Banks urged by Walker Report to publish pay of all top earners, by Louise Armitstead

Sir David Walker's recommendations that British banks should publish the pay and bonuses of all their top earners, not just board members, has been welcomed by the Gordon Brown.

His far-reaching review on corporate governance in the British financial sector, which was commissioned by the Prime Minister in February, recommends a public and regulatory scrutiny of pay practices across financial institutions in order to curb the excesses that brought the financial system to close to collapse.

The Prime Minister told MPs on the House of Commons Liaison Committee that he welcomed Sir David's call for tougher non-executive directors to crack down on boardroom excesses.

Mr Brown told MPs he remained "angry" over the inflated pay and reckless speculation indulged in by some bankers and said Sir David made "some very clear recommendations" which he believed would be adopted.

"The general recommendation that the role of chairman and the role of executive directors and non-executive directors in particular in banks is going to change. It's one that we support wholeheartedly, " he said. "You cannot have non-executive directors, as we've seen at some of the financial institutions, who do not understand the risks their company is taking."

"There have been excesses, it is seen by the public as irresponsible and unfair, we have got to take the action," he said, as he defended his response to the banking crisis and insisted Britain had set a model for the rest of the world to follow.

Sir David's report recommends an overhaul of City pay practices as well as a radical shake-up of boardroom practices and conventions.

The report is broken down into 39 Recommendations of which 12 are dedicated to pay.

He argued that the remit of the Remuneration Committee at banks should be extended to take responsibility for pay policies of the whole firm rather just the board, in particular the staff whose pay exceeds the median level of the executive directors.

The pay levels of these staff, of which he said he found a “surprising number”, should be published in bands rather than by name.

All pay should be heavily linked to performance and the payout of bonuses for top earners should be staggered over five years.

In addition, the chairman of the remuneration committee should automatically stand for re-election if more than 25pc of investors vote against his report.

Sir David said: “The recommendations on remuneration are as tough or tougher than anything to be found elsewhere in the world. An important and urgent challenge is to promote adoption of similar approaches internationally.”

His recommendations focus particularly on boosting the responsibility and accountability of board members.

The report argues for the creation of a new role of Chief Risk Officer, answerable only to the board, as well as a new Risk Committee.

With strong references to Royal Bank of Scotland’s ill-fated acquisition of ABN Amro, Sir David argues that the Risk Committee should be particularly responsible for challenging strategic transactions.

Sir David also envisages a far more robust chairman at the head of financial institutions, responsible for challenging the work and plans of the chief executive and the rest of the board.

The chairman will be subject to new levels of scrutiny from regulators and from shareholders including annual re-election.

In an interview with the Daily Telegraph, Sir David said: “One very experienced chairman said to me, “But this will make chairmen a lightning conductor for all that’s perceived to be wrong.”
My answer to that is: absolutely right.”

The report also demands a radical shake-up of non-executive directors. He included recommendations that directors should spend more time doing their jobs – between 30 and 36 days a year – and have more professional and structured support including regular “business awareness sessions.”

In addition, the FSA should be actively involved in both the appointment and ongoing suitability of directors.

The Walker report also recommends an overhaul of the role of institutional shareholders whose role as “absentee landlords’’ is highlighted as a factor in the failure to curtail excesses in the banking system.

Investors should have to engage with companies more actively and, to make sure they do, they should sign up to principles with which they must either “comply or explain” why not. The new shareholder Code should be monitored by the Financial Reporting Council. In addition, voting records should be published for scrutiny.

The FSA will have a far greater role in monitoring the corporate governance of the financial institutions, from hiring new directors to scrutinising pay and risk management policies.

Although Sir David’s remit was originally just to recommend changes in the corporate governance of banks but this it was expanded to financial institutions. He said the principles could almost all be adopted by other companies, with the exception of the ones regarding risk which are specifically financial.

Sir David, a senior adviser to Morgan Stanley, is a respected City and Westminster veteran. Through a career that has spanned nearly half a century he has held roles including a directorship of the Bank of England in 1981 and deputy chairman of Lloyds, the banking group.

Colonial National Bank reduces variable lending rates

2009-07-15T08:10:00.002+12:00

In its latest interest rates published on 14 July 2009, Colonial National Bank has reduced its variable lending rates for residential home loans and investment property loans by 0.25% to 9.25%, from 9.50%.

There has been no changes to the bank's deposit rates.

This follows the Reserve Bank of Fiji's recent directive for banks to reduce their lending rates to the levels they were at end December 2008 and for each bank's interest spreads to be not more than 4% after a certain time period given to them.

Colonial National Bank Interest Rates (Updated 14.7.09)

2009-07-15T08:08:00.002+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.25%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.25%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice and investment portfolio management services, can use our company, Gilbert & Samuels Company Limited.

We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

ANZ to reduce interest rates further

2009-07-14T11:18:00.002+12:00

ANZ will reduce interest rates further on 29 July 2009.

The reduction in interest rates come about as a result of the Reserve Bank of Fiji's policy for banks to reduce their lending rates to the levels they were as at end December 2008 and for interest spreads to be not more than 4%.

ANZ has also announced that the reduction in interest rates comes together with a raising of the risk preferences that the bank have. The bank has said that it will be more comfortable now with lower risk loans and customers that it would otherwise have been.

Moving on from a global crisis: business as usual or an inflection point?

2009-07-14T10:48:00.002+12:00

Read below comments by the Director-General of the World Bank's Independent Evaluation Group, Dr Vinod Thomas on what the global crisis would mean for countries.

Dr Thomas does note that countries that are open were more vulnerable to the effect of the crisis. He also added that for the financial sector, deregulation (which had been the trend before the crisis) coupled with sensible regulatory policies that are targeted at containing excessive risk taking at the "expense of other people's money" would be advisable for countries.

The article follows.

"Speaking at the Institute of Policy Studies in Singapore on June 19, 2009, Dr. Vinod Thomas, Director-General and Senior Vice-President of the World Bank’s Independent Evaluation Group (IEG), described the current global economic turmoil as a triple crisis comprising the global economic downturn; rising poverty; and climate change. Thomas said that this crisis provides a moment to reflect on the past and actions for the future.

“One can think of this crisis as one that can be solved and we can then move on. We can also think of this as an inflection point where some deep uncertainties about how the ways in which countries have developed and been growing over the last 10-15 years are just not going to happen anymore and that it’s not sustainable.”

The end of globalization?

With those countries most connected to the global economy having been worst hit by the crisis, questions have arisen about whether high levels of globalization will spell doom moving forward. “This crisis adds a certain degree of empirical evidence to an observation that the more you are connected, the more a crisis such as this affects you.”

Thomas also notes that trade has been a mechanism for transmitting the recession to so many countries—Singapore included—demonstrating that there really has been no decoupling. “Asia cannot, as people had imagined, go a separate way from the rest of the world economy, even if the crisis was initiated by the OECD countries.”

Trade and openness remain the policy prescriptions, however; as past experience shows that it is these same globalised economies which have stronger recovery of GDP growth. “In a crisis such as this, those with greater trade shares are hit harder. That does not mean that being connected to the rest of the world is a bad idea, because as the recovery takes place and opportunities show up, those that are more connected to the global economy, with greater shares of trade and investment in their GDP, benefit much more.”

Warning against the trend of rising protectionism, Thomas said that “coming out of the crisis, if the recovery means greater restrictions on trade, then the future growth trajectory will definitely look different from the past. The past growth rates—the honeymoon really—lasted as long as it did because of the increasing openness of the global economy.”

Crisis response

In addition to trade, policy responses have also focused on financial reform, fiscal spending, poverty alleviation, and the environment.

Discussing reforms needed in the financial sector, Thomas noted that “if regulation had a bad name in the past, today it is clear that deregulation- much needed in many economies- needs to be coupled with sensible regulatory policies.”

Thomas also warned against abandoning new or highly innovative financial instruments because of the benefits that they provide: “You need to keep in mind that the intermediation, the leveraging, and the access to credit for large numbers of people can be augmented by many of these instruments… The lesson though is that those need to be matched by a regulatory framework that avoids extraordinary risk-taking at the expense of other people’s money.”

As countries worldwide put in place unprecedented fiscal expansion packages, Thomas noted that we should put a premium on quality over quantity. “You will see huge variations two years from now, with the same dollar producing widely different impacts in terms of the growth recovery, and that will differentiate those who come out of this recovery well, compared to those who don’t.”

The crisis of rising poverty- 150 million more people in poverty in 2008, and 50 million more set to fall below the poverty line in 2009- with its risk of social instability and loss of welfare, is closely linked to employment. The recovery in employment is expected to be slower than economic recovery as employers wait to see if the recovery is real; and as efficiency gains may result in a shift in employment patterns.

While the environment may have been an issue placed on the backburner in previous crises, Thomas said that that is no longer an option, and that climate change means that “the kind of growth that we have gotten used to isn’t feasible going forward. The numbers that are coming out on climate change are just absolutely frightening and if even a part of that is true, then investing in a different way would seem to be a high priority…In 20-30 years, with business as usual, we may be living in an ice-free world. If you think about it, that should be enough to spur action, but that does not spur action anywhere close to what you would like.”

This does not mean, however, that countries should be expected to reduce carbon emissions while they are still developing. “No country has developed rapidly without increasing their carbon footprint. So we have to be realistic. That is the only way development has taken place.”

There is, however, huge room for improvement in the carbon efficiency of development, said Thomas. “A sevenfold variation exists in how carbon intensive you need to be for any given income…so, yes, growth goes with a greater carbon footprint, but, no, it’s not automatic or preordained. There’s huge room for adjusting this as you go forward.”

Uncertainty is at an all time high, and Thomas said that there is a sense that the past is not going to be the best predictor of the future this time around; that the incremental changes that we are comfortable with may miss out on the big picture, especially in terms of risks and opportunities. In this context, Thomas emphasized the importance of flexibility in crisis responses.

“Action waits until there is a crisis”

This crisis does provide for an opportunity to make necessary changes. “We could be at an inflection point as opposed to returning to business as normal. This crisis could be turned into an opportunity to take action on three fronts: economic, social, and climate.”

Citing the examples of fiscal reform in Korea, Thailand, China and Brazil, Thomas said that all of these could be linked to a crisis; and that there are many fronts—human capital, greater competitiveness, social inclusion, infrastructure, public sector governance, new forms of green investment—on which this crisis can spur action."

To read more, click on this link.

World Bank Group Significantly Boosts Support to East Asia and Pacific

2009-07-14T10:39:00.003+12:00

The World Bank has announced last week that it has adjusted its regional strategy and massively increased its financial and technical support for the region, to address the impacts of the global financial crisis.

Whether Fiji qualifies for this assistance, we are not sure but Government officials could look into it. There will certainly be conditions to be met by the Fiji Government should they wish to access any assistance.

At this stage as well, no detailed study has been done as to the extent that the global crisis has affected the Fiji economy, aside from the effect of the domestic political crisis on the country itself. This would really be an interesting study to do.

Read the World Bank Press release below.

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"The World Bank Group responded quickly to the impacts of the global financial crisis on the countries of the East Asia and Pacific region in fiscal year 2009 with over US$9 billion in financing for development. This represents a significant increase on the amount of financing of the previous year. The World Bank Group also ramped up its technical assistance to help governments in the region address the social and economic impacts of the crisis.

“Although growth in East Asia and Pacific still compares favorably with that of other regions, the poor and the vulnerable have been deeply affected by the global economic crisis,” said World Bank Group Vice President for the East Asia and Pacific Region, James W. Adams “In this region alone, more than 10 million people who would otherwise have moved out of poverty are expected to remain below the poverty line. We have adjusted our regional strategy and increased resources for the region to help countries weather the economic crisis and ensure priority programs remain on track. This includes investments in infrastructure, education, health, agriculture, and social safety nets.”

Many countries in the region were just beginning to recover from the food and fuel crisis of 2008 when the global financial crisis hit. The World Bank Group responded by increasing its support --in loans, grants, equity investments and guarantees-- to help countries and private-sector firms deal with the devastating effects of the global financial meltdown.

Commitments from the International Bank for Reconstruction and Development (IBRD)—which provides financing, risk management products, and other financial services to middle-income countries— increased in FY09 to $6.9 billion, up from $2.7 billion the previous year. The International Development Association (IDA), which provides interest-free credits and grants to the lowest-income countries, provided $1.2 billion in support in FY09.

As the largest provider of multilateral financing for the private sector in the developing world, the Bank Group’s private sector arm –the International Finance Corporation (IFC)— also increased its support to help boost private sector-led recovery. In FY2009, preliminary results indicate that IFC generated $1.1 billion of new business in 45 projects, seven of these are located in conflict-affected countries and regions, while one in every five projects has a climate change component.

Karin Finkelston, IFC’s Director for East Asia and Pacific, said “To help the region navigate the financial crisis, we focused our efforts on the poorest and most vulnerable countries. We are pleased that we were able to increase our financial commitments to IDA countries to nearly $400 million from around $200 million in 2008.”

The Multilateral Investment Guarantee Agency (MIGA) supported infrastructure development in south-west China, where fast urbanization and industrial growth have led to severe wastewater issues. The agency issued guarantees of $75.3 million to support two water projects, which will promote improved water quality as well as better environmental practices.

“As the leading international institution promoting foreign direct investment (FDI) in emerging and transition economies, MIGA can help investors mitigate risks in these uncertain times and play an important role in helping countries attract FDI,” says MIGA’s Executive Vice President Izumi Kobayashi. “MIGA can act as a stabilizing influence in the market.”

The Bank Group’s support in FY2009 in the East Asia and Pacific region by sector is as follows :

Agriculture and Rural Development, USD520 million;
Education, USD797 million;
Energy and Mining, USD526 million;
Economic Policy, USD2,792 million;
Financial and Private Sector Development, USD160 million;
Public Sector Governance, USD460 million;
Social Development, USD322 million;
Social Protection, USD215 million;
Transport, USD855 million.

How Developing Countries are coping with the Global Crisis : World Bank

2009-07-14T10:27:00.003+12:00

Read below an excerpt from a World Bank and IBRD March 2009 Report on "How Developing Countries are coping with the Global Crisis". Fiji has a double issue to contend with : both the impact of the global crisis and its own domestic crisis.

"The sharp global contraction is affecting both advanced and developing countries. Global industrial production declined by 20 percent in the fourth quarter of 2008, as high income and developing country activity plunged by 23 and 15 percent, respectively. Particularly hard hit have been countries in Eastern Europe and Central Asia and producers of capital goods. Global GDP will decline this year for the first time since World War II, with growth at least 5 percentage points below potential. World trade is on track to register its largest decline in 80 years, with the sharpest losses in East Asia, reflecting a combination of falling volumes, price declines, and currency depreciation.

Financial conditions facing developing countries have deteriorated sharply. The World Bank estimates that developing countries face a financing gap of $270-$700 billion depending on the severity of the economic and financial crisis and the strength and timing of policy responses. Even at the lower end of this range, existing resources of international financial institutions would appear inadequate to meet financing needs this year. Should a more pessimistic outcome occur, unmet financing needs will be enormous.

The financial crisis will have long-term implications for developing countries. Sovereign debt issuance by high-income countries is set to increase dramatically, crowding out many developing country issuers (private and public). Many institutions that have provided financial intermediation for developing country clients have virtually disappeared. Developing countries are likely to face higher spreads, and lower capital flows than over the past 7-8 years, leading to weaker investment and slower growth in the future.

The challenge facing developing countries is how, with fewer resources, to pursue
policies that can protect or expand critical expenditures, including on social safety nets, human development and critical infrastructure. This will be especially difficult for LICs: the slowdown in growth will likely deepen the degree of deprivation of the existing poor, since large numbers of people are clustered just above the poverty line and particularly vulnerable to economic volatility and temporary slowdowns. Many of the most affected LICs are heavily dependent on official concessional flows, which will be under pressure in donor countries facing their own fiscal challenges.

There is a therefore a strong need to expand assistance to LICs to protect critical
expenditures and prevent an erosion of progress in reducing poverty. Attention must be directed to protecting the poor through targeted social spending, including expanded safety nets, and to maintaining and expanding the infrastructure assets that will be critical to restoring growth following the crisis. A concerted effort is also needed to support the private sector, especially SMEs, which are essential to a resumption of growth and job creation in developing countries. Creation of a global Vulnerability Fund, financed with a modest portion of advanced country stimulus packages, could go a long way to providing the resources necessary for these efforts."

You can get more of this report on this link.

Westpac Interest Rates (updated 1.7.09)

2009-07-01T07:55:00.001+12:00

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

Business Lending Rate (effective 22.6.09) - 9.99%;
Residential Property Loan (effective 22.6.09) : Variable Rate – 9.00%, 1 year Fixed Rate – 8.50%;
Investment Loan (effective 22.6.09) : Variable Rate - 9.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Also contact us if you require investment portfolio management services.

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Bank South Pacific interested in buying Colonial National Bank in Fiji

2009-06-26T07:36:00.003+12:00

Bank South Pacific (BSP) has indicated an interest in buying Colonial National Bank's (CNB) operations in Fiji. This occurs although CNB was not actively looking for a buyer.

BSP is a Papua New Guinea owned commercial bank which first made inroads in Fiji by buying Habib Bank's Fiji operations. It is said to be the largest commercial bank in Papua New Guinea.

In recent years, BSP has undertaken an expansion into the Pacific region. It acquired the National Bank of the Solomon Islands in 2007 and also has operations in Niue.

Colonial National Bank is owned by Commonwealth Bank of Australia.

The necessary due diligence process is being undertaken where the business will be analysed and a review made of the accounts, records and processes of CNB by BSP. This process will take about four to six weeks.

Bank acquisitions in Fiji require Reserve Bank of Fiji approval.

Reserve Bank changes Offshore Insurance Placement Policy

2009-06-23T09:44:00.004+12:00

The Reserve Bank of Fiji announced a change in its policy on offshore placement of insurance business effective from 1 July 2009.

The new policy does not require those intending to buy insurance offshore to provide multiple quotes from the domestic market prior to applying to the Reserve Bank for approval.

The review by the Reserve Bank was said to help in simplifying the approval process for buying insurance offshore.

Insurance may be bought offshore in the following circumstances :

where a particular insurance cover is not available locally;
where the insurance premium for an offshore insurance cover is less than 15% of a similar cover obtained in Fiji; and
where it is in the public interest to buy an insurance cover offshore.

My Observations

Over the years, I would assume that the first two of the instances noted above have generally been the primary reasons for purchase of insurance offshore. However, the third ground on which insurance may be bought offshore appears to be of interest at this particular time.

Given that insurance premium is a function of perceived future risk and past claims, it may appear that due to events happening in the domestic sphere, insurance providers may have raised insurance premiums by significant proportions. Added to this is the fallout from the global financial crisis from which most countries are suffering.

Companies in Fiji may use these reasons as justification to buy insurance offshore. Given that these companies serve members of the public, they can argue that they will be able to sell their products are a lower price, if they can reduce their costs by buying cheaper insurance offshore.

However, if that is permitted, then local insurers may stand to lose out on business that they would have traditionally had access to over the years.

In the long run, this may help correct pricing of insurance premiums as local insurers would have to re look at their pricing of products again for the Fiji market. Some might even be priced out of the Fiji market.

There are also some types of industries where it is in the public interest for them to buy insurance offshore. Some of these industries may include the health industry for certain types of covers, institutions that serve a public purpose for which cover cannot be adequately provided by local insurers, wealthy companies and individuals taking proactive risk management measures by buying insurance that better serves their needs offshore, are some that come to mind.

At these times, one would expect a rise in applications to be submitted to the Reserve Bank in this area. Given that, there should be a likely rise in approvals which would have a negative impact on Fiji's foreign reserves.

For information on our various consulting services, pls call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

Westpac to reduce lending rates later this month

2009-06-14T20:53:00.002+12:00

Westpac Banking Corporation Limited will reduce its business index lending rate by 1% and its variable rate on housing loans by 1.5% and its variable rate on investment property loans by 1% on 22 June 2009.

No reduction in deposit rates have been announced by the bank.

The reduction follows a lead taken by ANZ Banking Group Limited to reduce lending rates across the board by 0.5% by 1 June 2009.

These follow a policy directive taken by the Reserve Bank of Fiji in mid April 2009 requiring banks to reduce their weighted average lending rates to the levels they were as at end December 2008 and to cap their interest spreads (i.e. the difference between a bank's weighted average lending rate and it's weighted average cost of funds) to 4% within 3 months from mid April 2009.

Westpac Interest Rates (updated 11.6.09)

2009-06-14T20:50:00.001+12:00

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

Business Lending Rate (effective 22.6.09) - 9.99%;
Residential Property Loan (effective 22.6.09) : Variable Rate – 9.00%, 1 year Fixed Rate – 8.50%;
Investment Loan (effective 22.6.09) : Variable Rate - 9.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

No Change in Westpac Interest Rates

2009-06-02T07:52:00.004+12:00

Westpac Banking Corporation's interest rates (effective 2.6.09) have been posted on this blog.

One can note that there has been no change to the bank's rates from those that were published a month earlier.

Of the three banks, ANZ, Westpac and Colonial National Bank (CNB), CNB has the lowest business banking index rate and lowest housing loan interest rates.

Housing loan interest rates are around the same levels for the other two banks, ANZ and Westpac.

With regard to deposit rates, Westpac and CNB pay similar interest rates for shorter term deposits while ANZ pays slightly lower than them. Deposit rates for the three banks converge at around 4% for terms from 2 years.

We do not have information for the two smaller banks, Bank South Pacific, and Bank of Baroda.

Note : For investment advice and portfolio management, pls call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

Westpac Interest Rates (updated 2.6.09)

2009-06-02T07:49:00.001+12:00

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

Business Lending Rate (effective 20.4.09) - 10.99%;
Residential Property Loan (effective 20.4.09) : Variable Rate – 10.50%, 1 year Fixed Rate – 8.50%;
Investment Loan (effective 20.4.09) : Variable Rate - 10.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

ANZ reduces lending rates and not deposit rates

2009-06-01T07:35:00.003+12:00

The interest rates published by ANZ Banking Group Limited in Fiji effective 1 June 2009 shows that the bank has started to work on complying with the Reserve Bank of Fiji's recent policy for banks to reduce their weighted average lending rates to the levels they were as at end December 2008 and to cap their interest spreads (i.e. the difference between a bank's weighted average lending rate and it's weighted average cost of funds) to 4% within 3 months from mid April 2009.

The rates published by ANZ Banking Group Limited sees its deposit rates kept at the same levels as they were previously.

However, Colonial National Bank has not reduced both its lending nor deposit rates as seen in the rates that the bank published effective 1 June 2009.

Westpac Banking Corporation Limited is yet to publish its interest rates.

After it does, we will review its rates and comment on it.

Note : For investment advice and portfolio management, pls call our office on (679) 3342719 or email info@gilbert.com.fj.

Colonial National Bank Interest Rates (Updated 1.6.09)

2009-06-01T07:27:00.000+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice and investment portfolio management services, can use our company, Gilbert & Samuels Company Limited.

We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

ANZ Interest Rates (updated 1.6.09)

2009-06-01T07:21:00.002+12:00

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

Business Index Rate - 10.75%;
Residential Property Loan : Standard Variable Rate - 10.00%, 1 Year Fixed Rate - 8.50%;
Investment Loan : Standard Variable Rate - 10.00%, 1 Year Fixed Rate - 8.50%;
Personal Loans : Secured - 12.00%, Unsecured - 15.00%;
Small Loans : Unsecured - 19.50%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

For investment advice and portfolio management, pls call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

ANZ Interest Rates (updated 26.5.09)

2009-05-26T07:40:00.002+12:00

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

Business Index Rate - 11.25%;
Residential Property Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Investment Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Personal Loans : Secured - 12.50%, Unsecured - 15.20%;
Small Loans : Unsecured - 20.00%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

Impact of recent policy decisions in Fiji

2009-05-21T07:06:00.005+12:00

Recent policy decisions taken in Fiji have had implications which have taken place in a very short time.

A decision to retire civil servants at 55 years of age has resulted in a severe shortage of school teachers in Fiji schools as Term 2 of the school year began on Tuesday, 19 May 2009. Read here a story by Elenoa Baselala.

Earlier this week, it was reported that of the government personnel sent home upon reaching 55 years of age, about 200 are to be recruited again into the civil service as reported in the Fiji Times on Tuesday, 19 May 2009. This re-engagement of retired civil servants will add onto government costs as they will have to be insured at higher premiums, might have to be paid at a higher salary than what they were receiving when they were retired, and all this after they would have taken their funds from Fiji National Provident Fund. Most workers who continue working after 55 years of age, often choose to leave their funds there until such time they are effectively retired from employment.

After doctors and nurses have been sent home early on reaching 55 years, Government is now looking at recruiting doctors from India. The move will contribute to increased costs to Government as it pays high salaries and benefits package, in addition to relocation costs as it attempts to attract those doctors.

Last week, I had analysed that the Reserve Bank of Fiji's recent policy decisions will presumably see banks and financial institutions working to raise their non-interest income streams which would ultimately mean that banks will be paying more and higher bank charges. This is because the recent policy announcement by the Reserve Bank has only concentrated on containing interest rates and spreads. Banks and financial institutions might therefore not lose out at all as they make their money/profits from non-interest income streams. Read my posts on this blog last week.

The recent devaluation has not had a desired effect on the tourism industry in Fiji. Tourism Fiji, the former Fiji Visitors Bureau has reportedly said that they have not seen an increase in numbers of tourists as had been expected after Fiji devalued its dollar by 20% a month ago. There are, therefore, other factors that come into play. Are they linked to the political environment or are they more linked to the effect of the global crisis on people's purses as they suffer the fallout from global recession and higher costs of living?

Over recent weeks, most merchants in Fiji have some way or another benefited from the devaluation. Some have used the opportunity to raise their prices of goods at ridiculous levels. For instance, a Gillett Mach 3 Turbo 4-blade pack, which I would buy at around F$17.00, had risen to almost $25.00 with the reason given by the cashier, and with a smile, as "it's the devaluation". The Consumer Council of Fiji would really need to do a survey of some of these shops soon.

As Fiji works on attracting more foreign investment, one of the things that will need to be worked on is to ensure at all times that investors interests are adequately protected as they participate in commerce. If there are some issues with laws on a broader scale, research has shown that at an entity level, companies should at least attempt and put in place adequate safeguards to protect their interests of shareholders and owners. This serves as an attraction before an investor would decide to invest in business in a particular country.

Almost all our efforts in recent years and months have been focused on promoting more sports without much emphasis on other areas where our children could be exposed to help build their future. Read an earlier post I did on this on my other blog here.

In the meantime, Government has reduced the age where people are allowed to drink liquor from 21 to 18. In this environment, when things are looked at in totality, what are we promoting? Is it alcoholism at an early age? Read here.

When one analyses some of these policy decisions, it is difficult to see any coherent flow of policy ideology in some of these decisions. Policy makers will stand back and review some of these policies again or those that are still in the works before they introduce them to ensure coherence.

Fuel prices rise and increased costs of doing business in Fiji

2009-05-18T08:50:00.008+12:00

Fuel prices rise again from today, Monday, 18 May 2009.

The increases are a result of increases in the international product price of fuel and also the recent devaluation of the Fiji dollar.

Prices outside Viti Levu will vary depending on cartage and freight charges to individual islands.

The increase in product prices brought about by the recent devaluation of the Fiji dollar will contribute to increased costs of doing business in Fiji which may also see an increased in business failures as costs spiral out of control for businesses.

So far Government has not announced any special concessions or benefits that can be tapped by small or micro business enterprises during these hard times.

It is expected that reduction in interest rates as intended by the Reserve Bank of Fiji's recent monetary policy announcements will benefit this sector.

Last weekend, ANZ has announced a reduction in its variable lending rates by 0.5% effective from 1 June 2009. The regulator hopes that all other banks will follow suit and announce reductions in their lending rates.

Note : For investment advice and portfolio management assistance, pls call our office on telephone (679) 3342719 or email info@gilbert.com.fj.

We also provide consulting services covering strategic and corporate planning, business continuity planning, capacity assessments and on any issue relating to the financial sector.

ANZ reduces variable lending rates

2009-05-16T08:00:00.003+12:00

ANZ Banking Group Limited is the first bank to announce a reduction of 0.5% in all its variable rate loans as from 1 June 2009.

The announcement was made by the bank's Fiji General Manager, Robert Bell.

The bank said the reduction was a result of an increase in banking system liquidity due to improvement in export proceeds collections and the reduction in the statutory reserve deposit requirements of commercial banks.

ANZ has also said that its wholesale term deposit rates are to fall as well.

The bank has urged customers facing financial difficulties to contact their ANZ branch or relationship manager to discuss their positions, as soon as possible.

One should be expecting other banks to follow suit in reducing their interest rates after the announcement by ANZ.

Will customers pay higher bank fees under new RBF policy?

2009-05-14T07:52:00.004+12:00

The Reserve Bank of Fiji had announced around mid April 2009 that it was capping banks and financial institutions weighted average lending rates to the level at which those rates were for each financial institution at end December 2008.

It also announced that it was placing a ceiling on the interest spreads of the same institutions to a limit of 4%. Read our earlier post on the Reserve Bank of Fiji's new policy here.

What does that mean?

While banks and financial institutions struggle with the new requirements, from which customers should greatly benefit from, particularly when interest spreads with some banks might be around 8% or so, this would mean that banks will desperately look at either increasing revenue from other non-traditional sources, such as fees and commissions, or cutting down their overheads, including closing branches and sending some of their staff home.

Banks and financial institutions might now all be looking at ways to increase their non-interest income, through raising of fees, charging of new fees, etc. It is interesting to note that the Reserve Bank's policy announcement in April 2009, did not mention anything on controlling non-interest income, particularly fees income and commissions, of banks and financial institutions.

So, customers? Expect some increase in your bank charges over the next few months.

As for overheads, banks and financial institutions would be all out to reduce their overheads as a direct result of the new banking and financial institutions requirements. This would see the cutting down of some services in some areas, closing of certain non-profitable branches and agencies, and termination of staff.

Again, you would be able to see these over the next few months.

Note : For investment advice and portfolio management services, pls call our office on telephone (679) 3342719 or (679) 3544897.

Interest Rates starting to trend downwards?

2009-05-08T12:49:00.003+12:00

Treasury Bills (TBs) interest rates have started to trend downwards in figures disseminated by the Reserve Bank of Fiji today.

28 day TB rates fell from 5.79% issued on 8 April 2009 to 5.70% on its issuance on 6 May 2009. 91 day TB rates, similarly fell from 7.35% to 7.30% on those dates.

Banking system liquidity (measured by bank demand deposits held at the Reserve Bank of Fiji) rose to F$119.6 million at end 7 May 2009, from F$105.2 million a week earlier.

Given that TB rates have started to decline and given the rise in banking system liquidity which one hopes will be sustained, one can assume that commercial bank deposit rates should start to fall,. That ultimately should contribute to a fall in commercial bank lending rates.

As lending rates fall, the other challenge is to find projects/avenues where the available funds can be directed to be utilised for purposes that can generate production, exports and employment.

Check my other post here for suggestions on what can be done further.

Banking System Liquidity Improved Slightly - What can be done further?

2009-05-08T08:32:00.003+12:00

Banking system liquidity in Fiji has improved slightly to around F$105 million at end April 2009.

This came after the Reserve Bank of Fiji's actions to reduce the deposit requirement that banks are to hold with the Reserve Bank to 5% from 6%. The Bank had also devalued the Fiji dollar exchange rate by 20% three weeks ago.

What can be done further to stimulate the economy?

The Reserve Bank of Fiji's actions have in the past been generally appropriate for Fiji.

Around 2006, to dampen growth in the property loans market and with intentions to promote lending for investment purposes, the Reserve Bank had put in a requirement that lending for housing mortgages be limited, particularly for those customers that already own a home/property.

They also reviewed all bank lending applications to ensure that lending was indeed directed towards investment related purposes.

What can be done now to encourage money to move around the economy and stimulate growth, is for lending by banks and credit providers to be encouraged again. However, as in the past, lending has to be for purposes that generate economic growth e.g. those that will generate production, more exports, and increased employment. Lending for residential property development and buying second home can still be restricted. (This particular market got very inflated a few years ago in Fiji, particularly in the Suva and Nadi areas.)

Should banks now work on developing mortgage securitisation products (having learnt lessons from the US banks' sub prime mortgage lending debacle) and be able to transfer out some of the loans that exist in their books, to free up their capital and liquidity for further lending? I am quite sure there will be interest locally and around the Pacific Islands region for buying mortgaged backed securities from Fiji. The regulator and potential investors, though, have to be up-to-date with the actual risks and how these securities are to be valued - these were both weaknesses in US regulators, banks and investors prior to the financial crisis of 2007/2008.

With more and more people are being displaced from their employment as a result of the global/local crisis, there would also be a need for an alternative livelihoods project (like that which had been done in the agricultural/sugar cane sector in the past) where such people are provided training on new skills to be able to generate income e.g. setting up and running small businesses.

The Small and Micro enterprise sector has been found to be one of those that can contribute well to the development of an economy, anywhere around the world.

In Fiji, people who wish to run businesses have a primary need to understand the basic principles of running a business, how not to mix business with their personal affairs, the rudiments of an accounting and recording system, how to raise capital and prepare the background papers for it, how to prepare budgets and monitor compliance with them, how to prepare business/corporate/strategic plans and to stick with them (including regularly review them to ensure that they are adequate for the changing environment in which they operate), etc.

More and more people are entering the job market with qualifications but there are not many jobs available. Yet, curricula in schools and tertiary institutions do not provide anything on entrepreneurial training like they do in Singapore, for instance.

Can we export some of our qualified personal but provide incentives for them not to entirely migrate to overseas countries where they will provide their services, but to still find it a benefit to remain a Fiji citizen/resident?

The development of a national human resource development plan should be able to identify these things.

These are some of my thoughts that can be developed further.

Note : For investment advice and investment portfolio management services, call our office on (679) 3342719, (679) 3544897 or email info@gilbert.com.fj. We also do consultancies in areas relating to the financial sector in Fiji and can conduct or assist with similar consultancies in the Pacific Islands region. Our other products include :

strategic/corporate planning;
business continuity planning; and
capacity assessments.

US Bank Stress Tests and Implications on Fiji banks and potential investors

2009-05-08T08:02:00.004+12:00

The largest 19 banks in the US have been subject to stress tests by the regulators there over the past few weeks.

The tests have been the outcome of the continuing impact of the financial crisis that has started from the US and has now spread to the other parts of the world.

Over the recent months, a large number of banks in the US have failed from inadequate provisions made for loans that have continued to default from the large mix of hybrid lending products and loan securitisation that had grown rapidly in those banks since the mid 1990s.

Here are some of the comments that have been raised regarding those stress tests. And here are some leaked results.

The impact that these tests have on us here is that there will be an opportunity to invest or buy into those banks that have need for additional capital.

Also our local banks can see as to the financial status and performance of their correspondent banks overseas, particularly if they are dealing directly with some of the 19 largest banks that have been subjected to the stress tests.

Thirdly, those that have no need for additional capital would show everyone that they have had good systems and controls in place prior and now during the financial crisis promoting confidence in them and indirectly in the financial sector, not only in the US but around the world as well. [Since the onset of the global financial crisis, there has been much criticism as to the role played by the financial sector and regulatory authorities.]

Those banks that will need additional capital will require closer scrutiny to see whether the faults are attributed to their own mismanagement or lax decision making or are a direct result of other wider financial sector issues.

Note : If you need investment advice or portfolio management services, do call our office on (679) 3342719 or email info@gilbert.com.fj. We also carry out consultancies on areas relating to the financial sector in Fiji and can also conduct or assist with similar work in the Pacific Islands region.

Colonial National Bank Interest Rates (Updated 5.5.09)

2009-05-05T07:15:00.001+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice and investment portfolio management services, can use our company, Gilbert & Samuels Company Limited.

We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

No Change to Bank Interest Rates

2009-05-01T10:28:00.000+12:00

There have been no changes to interest rates for banks in Fiji, after recent monetary policy decisions taken by the Reserve Bank of Fiji, including reducing the Statutory Reserve Deposit rates of banks from 6% to 5% of their deposit and similar liabilities.

This is evident from the interest rates published by the country's two largest banks, Australia and New Zealand Banking Group Limited and Westpac Banking Corporation in recent days which we have posted on our blog earlier today.

This would mean that interest spreads, the difference between average lending rates and average deposit rates or cost of funds of a bank, would still be high or at least have not changed much.

In recent weeks, the Reserve Bank of Fiji had issued policy directions to banks one of which was to reduce their interest spreads to 4% in three months time.

While retail customers, the ordinary bank customers including Moms and Pops, would have no change to their rates, wholesale customers have the advantage of enjoying higher rates. Wholesale term deposit rates for 1 year terms are still around 8% or 9%, however, there is some downward pressure on them.

For advice on investment or portfolio management, pls call our office on (679) 3342719 or email info@gilbert.com.fj.

ANZ Interest Rates (updated 28.4.08)

2009-05-01T07:41:00.001+12:00

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

Business Index Rate - 11.25%;
Residential Property Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Investment Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Personal Loans : Secured - 12.50%, Unsecured - 15.20%;
Small Loans : Unsecured - 20.00%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

Westpac Interest Rates (updated 1.5.09)

2009-05-01T07:33:00.001+12:00

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

Business Lending Rate (effective 20.4.09) - 10.99%;
Residential Property Loan (effective 20.4.09) : Variable Rate – 10.50%, 1 year Fixed Rate – 8.50%;
Investment Loan (effective 20.4.09) : Variable Rate - 10.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Fiji Ratings Downgraded by Standard and Poors

2009-04-16T10:42:00.002+12:00

Fiji's ratings by Standard & Poors have been downgraded with effect from 15 April 2009. The revised ratings are as follows :

Credit Rating (Foreign Currency), Rating B-/Negative/C;
Rating of the US$150 million foreign debt 6.875% maturing on 13 September 2011, B-.

The foreign credit rating was reduced from 'B/B' rated in February 2009. The Standard & Poors definitions of ratings are provided at the end of this post.

The downgrade would mean that accessing debt financing from abroad would be more expensive for the Fiji Government and Fiji based businesses. Given that banking system liquidity has been quite tight in recent months, there was an option for businesses to access debt from abroad.

Also, aside from having to pay higher interest for the higher perceived risk, Fiji based businesses would also have to contend with paying more in Fiji dollar terms after the 20% devaluation by the Reserve Bank of Fiji yesterday, 15 April 2009.

Import prices might also be expected to rise as foreign based merchants and businesses price in the higher risk of default after consideration of the latest S&P ratings and those by similar agencies.

The higher prices of imports will again be passed onto ordinary consumers and households in the form of higher prices of products and services.

For advice, pls contact our office on 3342719 or email info@gilbert.com.fj.

Standard & Poors definitions :

ISSUE CREDIT RATING DEFINITIONS - A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion evaluates the obligor's capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
Rating of B - An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

ISSUER CREDIT RATING DEFINITIONS - A Standard & Poor's issuer credit rating is a current opinion of an obligor's overall financial capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. In addition, it does not take into account the creditworthiness of the guarantors, insurers, or other forms of credit enhancement on the obligation. The issuer credit rating is not a recommendation to purchase, sell, or hold a financial obligation issued by an obligor, as it does not comment on market price or suitability for a particular investor.
Rating of B - An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.

RATING OUTLOOK DEFINITIONS - A Standard & Poor's rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.
Positive means that a rating may be raised.
Negative means that a rating may be lowered.
Stable means that a rating is not likely to change.
Developing means a rating may be raised or lowered."

Reserve Bank of Fiji places ceiling on interest rates and interest spreads

2009-04-15T19:02:00.006+12:00

The Reserve Bank of Fiji today imposed a ceiling on lending rates of banks and other lending institutions (including the Fiji National Provident Fund). The ceiling imposed on each institution is the weighted average lending rate of that particular institution as at 31 December 2008.

Additionally, the Reserve Bank of Fiji has also taken the major action of putting a ceiling on interest spreads, which (depending on the definition used) I would understand to be the difference between an institution's weighted average lending rate and it's weighted average cost of funds (i.e. the average rate it pays for customers' deposits placed with it).

The high interest spreads of banks and lending institutions in Fiji has been the subject of much contention by consumers of banking services over the years, with the two large foreign owned banks each making over F$30 million per year in recent years. It is understood that the interest spreads/margins of banks in Fiji are much higher than what they are in most developed economies.

The move to contain lending rates and spreads has not usually been undertaken in recent years by other countries, particularly those with central banks that use open market operations to influence interest rates like Fiji. However, it would seem appropriate for Fiji at this time, given our present circumstances.

Another good move taken by the Reserve Bank of Fiji would see an emphasis on building micro finance lending by banks and financial institutions in Fiji. As a result of the global/local crisis, more and more people would be displaced from jobs. Upskilling and training them to run their own small businesses would help them fend for themselves.

PS : The Reserve Bank of Fiji today announced that it has a new Governor, Mr Sada Reddy, who was Deputy Governor up to last week. Read about it in other media.

For advice, pls call our office on (679) 3342719 or email info@gilbert.com.fj.

Fiji Dollar Devalued

2009-04-15T18:45:00.005+12:00

The Reserve Bank of Fiji has devalued the Fiji Dollar by 20%. The devaluation takes immediate effect today, 15 April 2009.

The devaluation has been done to contain Fiji's falling foreign reserves as well as the impact of recent developments on the economy. Additionally, further restrictions on exchange controls have been put in place.

In simple terms, the devaluation would mean that more Fiji dollars are needed to purchase imports and exporters get more Fiji dollars when they export goods and services. This makes imports more expensive while exporters earn more local currency.

Devaluations are meant to discourage imports and to encourage exports, a reason for which is to assist maintain or boost our country's foreign reserves.

Given that things in or from Fiji will be cheaper to overseas buyers, it should help encourage more purchases of our goods and services from foreign buyers, including tourism.

However, for locals, cost of living would be expected to rise in the short/medium term as a direct result of the devaluation as prices of goods, particularly imported ones, rise. One outcome of this may see people putting pressure on employers to raise their salaries. However, raising salaries and wages would be a real challenge for employers given the current state of the economy, its performance, and the high costs of doing business.

PS : Note our post on the impact of the new ceiling on lending rates which were announced today by the Reserve Bank of Fiji.

For investment and business advice, please call our office on (679) 3342719 or email info@gilbert.com.fj.

Invest in Fiji Blog Readership : March 2009 vs February 2009

2009-04-08T16:44:00.004+12:00

We provide you with statistics on our blog readership. Here are the readership statistics for our Promoting Suva blog for the months of February and March 2009. Data for February is given first followed by data for March.

February 2009

total number of visits - 415;
total number of page views - 612;
top 15 countries of origin of readers and no of visits per country - Fiji, 185; Australia, 60; United States, 37; United Kingdom, 21; New Zealand, 17; India, 11; Canada, 9, Ivory Coast, 8; Thailand, 8; Nigeria, 6; Ghana, 4; Spain, 3; Papua New Guinea, 3; Switzerland, 3; Poland, 3;
top 10 referring source - google / organic, 330; (direct) / (none), 35; yahoo / organic, 16; blogger.com / referral, 5; ftib.org.fj / referral, 4; promotingsuva.blogspot.com / referral, 4; rizwandean.blogspot.com / referral, 4; search / organic, 4; ask / organic, 2;
monetynews.pl / referral, 2;
top 20 keywords used in searches - invest in fiji, 10; bruno gillier, 5; business in fiji, 5; investinfiji, 4; email contact directors 2009 @yahoo.com.fj, 3; investment in fiji, 3; "joes farm" & fiji, 2; +679 email 0f business, 2; +679 email contact addresses of companies in fiji, 2; deposit interest rates, fiji, 2; email fiji islands trade and investment bureau, 2; fiji, 2; fijian holdings unit trust, 2; foana nemani, 2; info@gilbert.com.fj, 2; investing in fiji, 2; rate of interest fiji, 2; starting a business in fiji, 2; westpac fiji interest rates, 2; "@ .fj" + tel: +679 + ceo + 2009, 1;

March 2009

total number of visits - 636;
total number of page views - 1,010;
top 15 countries of origin of readers and no of visits per country - Fiji, 342; United States, 76; Australia, 69; New Zealand, 22; India, 17; Canada, 15; United Kingdom, 14; France, 10; Malaysia, 6; South Africa, 5; United Arab Emirates, 5; Philippines, 5; Ivory Coast, 4; Burkina Faso, 4; Germany, 3;
top 10 referring source - google / organic, 514; (direct) / (none), 37; blogger.com / referral, 22; yahoo / organic, 20; rizwandean.blogspot.com / referral, 6; msn / organic, 5; promotingsuva.blogspot.com / referral, 5; search / organic, 4; ask / organic, 3; google.com / referral, 3;
top 20 keywords used in searches - invest in fiji, 13; investinfiji, 6; bruno gillier, 5; gilbert veisamasama, 5; global financial crisis in fiji, 5; invest in fiji blog, 5; business in fiji, 4; fiji islands invest, 4; gillier group, 4; buisnesses for sale in fiji, 3; colonial national bank fiji, 3; global financial crisis-fiji, 3; investment in fiji, 3; anz term deposits, 2; association of banks in fiji, 2; business for sale in fiji, 2; effect of global financial crisis on fiji, 2; effects of global financial crisis in fiji, 2; effects of recession on holiday inn suva, 2; fiji credit crisis, 2;

Observations

Readership of the blog again grew in March 2009 compared to the month earlier;
Readers from Fiji, USA, Australia, New Zealand, India and Canada form our largest readership group. Readers from these countries can best be targeted for marketing from this blog;
Our top referring site continues to be google.com. This indicates our good visibility on google searches.
Keyword searches indicate that readers are searching for a issues relating to investing in Fiji. Interestingly there is an increase in searches on the impact of the global financial crisis on Fiji.

Companies can utilise our wide readership base and high search rankings to market and advertise their products.

For advertising to our wide readership base, check our advertising rates here. If you wish to discuss how we you can advertise your products and services on our blog, e-mail us on info@gilbert.com.fj.

George Soros warns shares will fall further

2009-04-08T14:30:00.004+12:00

Read the following article by Louise Armitstead from http://www.telegraph.co.uk/ on Billionaire financier's expectations on share prices.

"George Soros, the billionaire financier, helped unsettle markets by voicing fears that share prices had further to fall. In an interview, he said: "It's a bear-market rally because we have not yet turned the economy around. This is not a financial crisis like all the other financial crises that we have experienced in our lifetime."

Markets across the world slid as a raft of bad news stalled the powerful rally that has fuelled optimism for over a month. In Britain, fresh concerns over bank stability and oil prices pushed the FTSE 100 index down 63 points, or 1.6pc, at 3930.5. The Dow dipped 2.3pc to 2789.6 on fresh concerns that the bank bail-out would not stabilise US lenders and after a report showed that chief executives' confidence in the economy had fallen in the past few months.

Germany's DAX lost 0.6pc and France's CAC 0.9pc. In Asia, Japan's Nikkei was down 0.3pc, Hong Kong's Hang Seng sunk 0.3pc and Australia's ASX slipped 1.3pc after interest rates were cut to a 49-year low. The trend threatens to undo the recent two-week rally, in which time the FTSE 100 has jumped 13pc, the S&P 24pc and the Nikkei 25pc.

Like Mr Soros, analysts at Morgan Stanley warned the bear market was not over. They said in a note: "We have to decide whether this is towards the end of another bear market rally that we should sell into now that hope has grown, or the start of a much larger advance, maybe even a new bull market. Our decision is to sell into strength now."

Optimism around the world was boosted last week after the leaders of the G20 countries agreed to a six-point plan designed to ensure the global recession does not turn into a depression. But now there are concerns the leaders did not go far enough.

Mr Soros, whose flagship Quantum Endowment Fund generated 8pc returns last year compared to an average decline of nearly 20pc among other hedge funds, told Bloomberg Television: "The recovery will look like an inverted square root sign. You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shaped recovery or anything like that. You settle down, step down.

"[President Barack Obama] has done very well in every area, except in dealing with the recapitalisation of the banks and the restructuring of the mortgage market.""

Our Portfolio Management Services

2009-04-08T10:02:00.003+12:00

The impact of the global financial crisis for Fiji can be seen in the figures released by the Reserve Bank of Fiji with a reduction in inward remittances by 26.7% during 2008. The tourism industry has also indicated how tough their marketing has been to attract tourists to Fiji at this time.

How can the crisis affect companies and individuals in Fiji?

Primarily, the impact of the crisis will be on those companies and individuals who have some assets or liabilities denominated in foreign currency or have products and services that they market to non-Fiji residents.

Companies and individuals who have their assets or liabilities denominated in foreign currency may find that their assets may increase or reduce in value depending on movements of the foreign currencies in which those assets have been denominated, against the Fiji dollar. For liabilities, they may find that they owe more or less than what they had previously owed, due again to movements in exchange rates.

Similarly, if an individual or company offers its products and services to a target market that are non-residents of Fiji and sell those overseas, then what they expect to get for those sales may change due to changes in exchange rates. More importantly, the global crisis may bring about a reduction in consumption demand in most of the economies/markets overseas which may include the economy/market where the individual or company offers its products and services.

Investment Advice and Portfolio Management Services

If you have investments or are considering some, it might be the best time to consult a professional that can assist you.

To protect your investments, we can assist you with portfolio management services at a competitive fee. As part of this service, we can review your current investments and make suggestions on how they can be improved to better weather the crisis. We can also review and recommend for you new investments that will meet your investment objectives. We will also provide you with regular (at least quarterly) updates on how your investments are performing during the time we manage your portfolio for you.

Investments will be held in your own name rather than by us giving you all the rights and control over investments made.

Our principal, Gilbert Veisamasama Jr, is a licensed investment advisor and with his licence he can provide investment advice and portfolio management services to clients.

If you are interested to discuss this further, please contact us on telephones (679) 3342719 or (679) 3544897 or email info@gilbert.com.fj.

RBF Drops Statutory Reserve Deposit (SRD) Rate

2009-04-07T08:08:00.004+12:00

In its continued bid to stabilize the local financial sector and improve liquidity in the country, The Reserve Bank of Fiji has announced the reduction of the Statutory Reserve Deposit (SRD) from 6 percent to 5 percent, effective today. This comes exactly a week (01/04/09) after the RBF implemented its flood rehabilitation facility for businesses affected by the recent floods, and underpins the central bank’s seriousness about generating economic activity in the country.

The SRD is a legally mandated proportion of total deposits and similar liabilities of each licensed bank in the country that needs to be deposited with the RBF. The relaxing of the SRD rates will inject much needed funds into the highly illiquid local financial sector.

RBF Help for Flood Affected Businesses

2009-04-02T07:47:00.003+12:00

Following its announcement of a Flood Rehabilitation Facility in an RBF press release dated 27/2/09, The Reserve Bank of Fiji has today (01/04/09) announced the implementation of the facility proper. The facility is aimed at businesses affected by the recent floods by providing low interest paying loans. The facility is worth FJD 20 million, maximum interest charged is 6 percent per annum and the loan term is a minimum of 6 months with the possibility of extension.

Businesses may apply for funds for the following reasons:

Replacement of flood-damaged inventory;
Loss of sales (including working capital) due to the flood;
Repair or replacement of flood-damaged plant, machinery and equipment;
Restoration of flood-damaged buildings including resorts and hotels;
Replacement of vehicles damaged by the flood.

For interested businesses, further information can be obtained from the Fiji Development Bank, commercial banks in the country or The Reserve Bank of Fiji.

Colonial National Bank Interest Rates (Updated 1.4.09)

2009-04-01T07:37:00.003+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Contact us also if you require investment portfolio management services. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Westpac Interest Rates (updated 1.4.09)

2009-04-01T07:32:00.004+12:00

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

Business Lending Rate (effective 20.4.09) - 10.99%;
Residential Property Loan (effective 20.4.09) : Variable Rate – 10.50%, 1 year Fixed Rate – 8.50%;
Investment Loan (effective 20.4.09) : Variable Rate - 10.50%, 1 year Fixed Rate - 8.50%;
Retail Term Deposits (effective 30.3.09) : 6 to less than 9 months - 2.25%, 9 months to less than 1 year - 3.00%, 1 year to less than 1.5 Years - 3.50%, 1.5 years to less than 2 Years - 3.75%, 2 years to less than 3 Years - 4.00%.

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

Reserve Bank of Fiji reduces overseas travel allowance

2009-03-30T10:45:00.002+12:00

In its latest press release (27/3/09), the Reserve Bank of Fiji has put further restrictions on the amount of money that can be taken out of the country. With immediate effect, overseas travel allowances have been reduced to FJD 5,000 per traveler and a FJD 5,000 limit per month on credit and debit card payments.

These monetary policy measures have been necessary in light of the worsening global economy and its impact on our trading partners and ultimately our foreign reserves.

Furthermore, RBF will be reviewing Fiji’s growth downwards given the current global economic condition.

On a positive note, however, inflation for the month of February was 1.9 percent compared with 6.6 in January. RBF year-end projections still remain at 4.5 percent.

ANZ Interest Rates (updated 27.3.08)

2009-03-27T07:43:00.002+12:00

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

Business Index Rate - 11.25%;
Residential Property Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Investment Loan : Standard Variable Rate - 10.50%, 1 Year Fixed Rate - 9.00%;
Personal Loans : Secured - 12.50%, Unsecured - 15.20%;
Small Loans : Unsecured - 20.00%;
Retail Term Deposits: 9 months to 1 year - 2.25%, 1 to 1.5 Years - 3.50%, 1.5 to 2 Years - 3.75%, 2 Years to 3 Years - 4.00%.

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

Free Investment Seminar

2009-03-26T06:43:00.003+12:00

The South Pacific Stock Exchange (SPSE) is organising a free investment seminar on Friday, 27 March 2009, at the SPSE Boardroom, Level 2, Provident Plaza 1, FNPF Downtown Boulevard, Ellery Street, Suva, Fiji.

Participants will receive a free educational package. Light lunch will be served.

For information or to register you interest, pls call telephone (679) 3304130 or email info@spse.com.fj.

For advice on investment in Fiji or for portfolio management, pls email our company on info@gilbert.com.fj or call telephone (679) 3342719.

Economics Association of Fiji Seminar - 24 Mar 09

2009-03-25T16:43:00.003+12:00

Reasons for the global financial crisis

Dr. Jerry Jordan, president of the Pacific Academy of Advanced Studies in Los Angeles, told participants at a seminar organized by the Economics Association of Fiji on the global financial crisis which was held at the Holiday Inn on Tuesday night, that in his view the housing bubble in the US was due to two major reasons. The first was the monetary policies of the US Government in 2001. This was a time of uncertainty for the US economy especially with the attacks on the World Trade Center and the bursting of the dot-com bubble. To generate economic activity, the US Federal Reserve reduced interest rates and the ultimate effect was that more of lenders money were directed towards the housing industry. The second reason was the politicization of the housing industry, whereby some of the major lenders were pressured by policy makers to have a major part of their mortgage portfolios invested with low income earners.

The situation was made even worse by the following factors:

Americans penchant for consumption spending – in fact many mortgage holders took out second mortgages (mortgage equity withdrawal) not to consolidate debt but to buy cars and go for holidays.
Failure of the corporate governance of many financial institutions. Dr. Jordan highlighted the importance of having a competent board who understood its role well and understood the core business of the entity. Dr. Jordan suggested that directors who were lacking in these areas should either hire consultants to help them understand their responsibilities or step down. In addition, he said that internal audit should be owned by the entity, totally independent of management and robust. Of course, now days entities are outsourcing this crucial function because it is a lot cheaper.
Failure of supervision by oversight agencies/ authorities.
Failure of rating agencies – securities that came into prominence (e.g. collateralized debt obligation) from this housing boom were given very good ratings even when financial conditions demanded that these ratings be reviewed. Investors who bought these securities based on their good ratings were caught off guard when within a short time frame their investments were worth nothing.

Impact of global financial crisis on Fiji

Dr. Jordan said that the impact will not be as dramatic as what is happening in the US, with business closures and high unemployment but it is coming nonetheless via our trading partners New Zealand and Australia.

On how Fiji can grow its economy given the current global financial situation, Dr. Jordan suggested increasing foreign investment. Again, how this can be achieved, especially with developed countries and many international corporations still licking their wounds from this global financial crisis, may prove a very challenging proposition. The Fiji Trade and Investment Board is tasked with this enormous responsibility and as such should be supported. Dr. Jordan hinted at four countries to look out for as things normalize, namely China, India,Mexico and Brazil. Perhaps FTIB may have some of its work done already.

Our blog makes it onto Alexa's top sites from Fiji

2009-03-14T20:02:00.005+12:00

Our blog, http://investinfiji.blogspot.com/, made it to Number 11 on Alexa's top Business and Economy sites from Fiji and the Oceania region. The category we came under was Regional > Oceania > Fiji > Business and Economy.

Our site ranked higher than other sites such as Vinod Patel Company Limited, Howards Law, Naisoso Island, Mark One Apparel, Denarau Real Estate, Webmasters, Pacific Financial Technical Assistance Centre, Europa - Development EU Relations in Fiji, UN Sustainable Development - Fiji, IMF - Fiji and the IMF, Capital Markets Development Authority, Colonial Fiji, Datec (Fiji) Limited, Fijian Holdings Limited, Housing Authority, and many others.

Other sites that ranked higher than ours were as follows, according to their ranking :

Fiji Web Design;
Vodafone Fiji;
Standss (South Pacific) Limited;
Connect Internet Services;
Business Software Solutions;
Reserve Bank of Fiji;
Internet Fiji;
Taunovo Bay;
GMR Mohammed & Sons (Pty) Limited; and
Harbour Propriety Services Limited.

Get more information on this link.

In the sub-category Regional > Oceania > Fiji > Business and Economy > Financial Services, our site was ranked No. 2 behind the Reserve Bank of Fiji. The top 10 rankings for this subcategory were as follows :

Reserve Bank of Fiji;
Invest in Fiji (our site);
Pacific Financial Technical Assistance Centre;
Capital Markets Development Authority;
Colonial Fiji;
Fijian Holdings Limited;
Housing Authority;
South Pacific Stock Exchange;
Sun Insurance Company Limited; and
Tower Insurance Fiji Limited.

Check out more information on this subcategory on this link.

Alexa has lists of Top Sites available by country, language or in a category.

If you wish to take advantage of our high rankings, send an email to info@gilbert.com.fj or call us on (679) 3342719.

Currently, we offer consultancy services in the following areas :

Strategic and Corporate Planning;
Business Continuity Planning;
Capacity Assessments and Institutional Strengthening;
Issues relating to the financial sector; and
Investment Advice.

Our principal also offers portfolio management services for clients. To contact us on any of the above services, pls email info@gilbert.com.fj or call telephone (679) 3342719.

State Owned Enterprises (SOE) Workshop - Reform Opportunities in the Capital Market - 19 Feb 2009

2009-03-04T14:31:00.045+12:00

The capital market can help Government in improving efficiency and performance of state owned entities (SOEs). Some of these opportunities include enforcing financial and corporate discipline, as well as having better access to relatively cheap capital both locally and abroad. The recent successful capital raising cases of Pleass Beverages and Yatu Lau are good examples.

However, before any of this is possible, Government needs to get its house in order by imposing a performance-based framework for SOEs. The dismal performance of SOEs (see below) is not a new thing in Fiji, and this is due largely to a lack of clear goals, political interference, lax financial discipline and the question of competency of those on SOE boards.

The following are areas the government needs to work on, before SOEs could seriously look at accessing the capital markets:

The government of the day needs to seriously assess its policies and reconcile it with its portfolio of SOEs and see which ones are key components in its strategic plan. Any non-strategic SOEs will need to be divested from to save government from wasteful spending.

Policies and regulatory frame-works need to be in place and current to address the issue of investment in/divestment from these SOEs.

And reformation of SOEs will need political will to implement.

Contingent upon government’s strategic goals, SOEs can be commercialized, form partnerships with the private sector, have competitors injected into the industry if it is operating under a monopolistic framework, or have the SOE fully privatized (divestment). The idea behind SOE commercialization, minus government subsidies (usually SOEs operated like a business but were at the same time heavily subsidized by government which gave them an unfair advantage over the private sector. This promoted gross inefficiency and a resultant high percentage of non-performing SOEs) is to promote efficiency, profitability and a performance based culture.

Valuable lessons can be learned from New Zealand’s SOE reform success in 1987. Between 1987 and 1990, Telecom New Zealand reduced staffing levels by 47% while at the same time increasing productivity by 85% and profitability by 300%. New Zealand Post reduced its workforce by 30% while increasing the rate of next-day delivery within the country from 80%-98%. At home, Amalgamated Telecom Holdings Ltd, an ex-SOE (formerly known as Post & Telecom) is proof that restructuring and ultimately privatization does improve performance. In fact ATH commands 49% of market cap and has the second most traded stock on the South Pacific Stock Exchange. It is also the 1st listed company to adopt the Code of Corporate Governance and ATH recorded the highest total return of 60.67% in 2008.

The following are key areas that SOEs will need to prepare themselves before access into the capital markets is possible:

Strengthening of corporate governance
To avoid conflicts of interest, government as the owner of SOE should not allow its representatives to be sitting on the board. Ideally, the board should be made up of independent directors who have commercial skills and experience. Secondly, there should be performance-based contracts for management and lastly eliminating payments to directors on the board who are there by virtue of holding another office (ex officio).

Clarifying mandates
SOEs must operate with a consistent commercial mandate, free from political interference. Both government and the SOE must be clear on their respective roles and their obligations. This should also be supported by a statement of corporate intent (SCI) to support these arms-length relationships and provide performance monitoring and accountability tools.

Implementing robust frameworks for community service obligations (CSO)
CSO (this generally refers to the provision of essential services, like electricity, water, infrastructure development etc) should be delivered on a full cost-recovery basis. This means that CSOs will need to be rigorously identified, costed, contracted, and monitored for delivery. This is probably one of the most “touchy” areas in SOE reformation and will need all the political will the Government can muster to fully implement the necessary changes.

Imposing financial discipline
Commercialized SOEs should operate under the same hard budget constraints as private sector firms. This ensures prudent spending, better accountability & transparency and ultimately better efficiency for the SOEs core operations. This is where the SOEs business plan (statement of corporate intent and corporate plan) come in handy.

Types of SOEs that may be considered for privatization

Once SOEs have been reformed it is important that Government have a clear understanding of which SOEs are strategic components of its long-run policies and which are not. For non-strategic SOEs, these should be put through the final step of reformation, which is to become privatized (divestment).

A look at privatization of SOEs globally reveals that that these SOEs deal largely in:

Basic utilities (e.g. electricity, water, gas etc).
Information Technology & Communication.
Major capital infrastructure (e.g. airports, ports, roads, rail-railroads).

This is also the growing trend locally, which started with the privatization of P&T to ATH. In fact, at a workshop on SOE reformation that was held at the Holiday Inn on the 19th of Feb 2009, the Ministry of Public Enterprises revealed their plan of having 5 SOEs taken to privatization by next year. Even though the Ministry of Public Enterprises did not reveal any specific names, it is instructive to note two SOEs that attended, Post Fiji Ltd and Airports Fiji Ltd.

Year end earnings of selected state owned entitities in Fiji ('99-'04)

State Owned Entities	2004 ($)	2003 ($)	2002 ($)	2001 ($)	2000 ($)	1999 ($)
Fiji Shipbuilding Corporation Ltd	(183,155)	(269,235)	(304,495)	(145,399)	N/A	N/A
Viti Corps Ltd	FS not submitted	FS not submitted	(249,539)	(643,545)	(581,273)	(645,641)
National Trading Corporation Ltd	N/A	N/A	(9,000)	(2,000)	(344,000)	(692,000)
Fiji Hardwood Corporation Ltd (FHCL)	(2,354,370)	(3,668,944)	(1,841,914)	(2,972,423)	(2,938,350)	(3,981,910)
Rewa Rice Ltd	FS not submitted	FS not submitted	(241,550)	121,399	(328,039)	2,412,967

Reserve Bank of Fiji Economic Review Vol. 26, No. 2, month ended February 2009

2009-03-03T13:06:00.004+12:00

In an RBF Economic Review Vol.26, No.2 dated February 2009, the bank says that as a result of the global financial crisis, the International Monetary Fund has been forced to revise its global growth estimate of 2.2% down to 0.5%. Many of Fijis’s trading partner economies are expected to contract this year. Only Australia has been forecasted to record a growth, albeit one of the lowest in recent years.

On the domestic front, growth in the Fiji economy for 2008 was estimated by RBF to be about 1.2%. Listed below are some of the prominent highlights:

Annual decline of 6.9% in money supply (broad money) on account of low demand deposits which had declined by 25.6%.
Domestic credit growth slowed, led by less government borrowing (4.8% in Dec from 6.9% in Nov).
Worsening of trade imbalance (i.e. more imports over exports) by $1.9b in November. In fact, imports increased by 24.2 %.
Annual decline of remittances by 26.7%.
Low cane & sugar output.
Tightening of liquidity with both lending and time deposit rates increasing.

On a positive note however:

Although exports levels were lower than imports, exports nonetheless had increased by 16.7%, mainly through re-exports of mineral fuels, and higher earnings from sugar, gold and fish.
Raising the tax threshold to $15,000 in June of 2008.
Improved performance of tourism, copra, electricity, gold and construction & building activities.
Decline in inflation from 7.4% in Jan to 6.6% in Dec.
Increase in capital spending and investment lending.

Growth in 2009 is estimated to be around 2.4% by RBF. However, this is all contingent upon both global influences and how well the country handles itself coming out from the recent flood crisis, and during the current tight liquidity situation.

The RBF revealed that inflation stood at 6.1% in January but forecasted a drop to 4.5% by the end of the year. This inflation estimate may be largely due to a drop in global oil price which has seen the benefits flow to the local transport, heating and lighting industries. However, because of Fiji’s high dependence on oil and wheat, the price stability of these commodities will have a huge bearing on this year end estimate.

The RBF has also revealed that the Fiji dollar has declined in value (i.e. the Nominal effective exchange rate of Fiji Dollar had an annual drop of 0.3% in January 2009) but hopefully through RBF’s current monetary policy mix, Fiji’s financial situation will continue to be stable. In addition, the RBF says that official foreign reserves are at a provisional level of $672.2m, sufficient to cover 2.7 months of imports.

Colonial National Bank Interest Rates (Updated 2.3.09)

2009-03-03T07:17:00.001+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.50%, 1.5 Years - 3.75%, 2 Years - 4.00%, 3 Years - 4.50%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Westpac Interest Rates (updated 2.3.09)

2009-03-03T07:14:00.002+12:00

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

Business Lending Rate - 10.24%;
Residential Property Loan : Variable Rate – 9.75%, 1 year Fixed Rate – 8.00%;
Investment Loan : Variable Rate - 9.75%, 1 year Fixed Rate - 8.00%;
Retail Term Deposits: 6 to less than 9 months - 1.75%, 9 months to less than 1 year - 2.25%, 1 year to less than 1.5 Years - 2.50%, 1.5 years to less than 2 Years - 2.50%, 2 years to less than 3 Years - 3.50%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

RBF’s Tight Monetary Policy Will Remain Unchanged

2009-03-01T15:57:00.007+12:00

Mr. Savenaca Narube, the Governor and Chairman of RBF announced in a RBF press release dated 27/02/09 that RBF’s tight monetary policy would remain unchanged.

In making this decision RBF took into account the deepening global financial crisis which has negatively affected Fiji’s trading partner economies. The International Monetary Fund has in fact downgraded global growth to 0.5%.

Leading from this, Fiji’s growth prospects for 2009 do not look too good, with tourism, exports and remittances likely to be the worst hit. This will not help the state of our foreign reserves which currently stands at over $700m.

In addition, the RBF board also recognized that the recent flooding has necessitated Government expenditure in humanitarian and rehabilitation support at a time when there is less money available to finance loans, and interest rates already trending upwards. With these considered, RBF had to maintain its current stance.

However all is not doom and gloom. Mr. Narube advises that Government has the capacity to loan from abroad to finance its expenditure and in the process prop up our foreign reserves. The RBF revealed that Government’s external debt is only 7% of GDP and our external debt servicing is as low as 3% of our export earnings.

In addition, the governor said the bank will continue to maintain the right policy mix to ensure monetary and financial stability. The following are facilities that the bank has put in place to ease the burden on the economy.

Halved its minimum lending rate (MLR) from 6% to 3% (i.e. interest charged on loans taken by banks from the Reserve Bank of Fiji)
Introduced an Export Finance Facility (EFF) whereby banks can borrow cheaply from RBF (max. 2%) and must lend cheaply to exporters.
Introduced a Flood Rehabilitation Facility (FRF) which is similar to EFF.

Furthermore, Mr. Narube said RBF could also use the Statutory Reserve Deposits (SRD) policy tool to stabilize liquidity. All banks in Fiji are required by law to keep (deposit) a specified percentage of their funds with the RBF. RBF sets this SRD percentage and by manipulating it can withdraw funds (tighten liquidity) or inject funds (improve liquidity) into the economy.

The Reserve Bank of Fiji Clarifies Issues on Liquidity

2009-02-25T13:35:00.003+12:00

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.”

Changes to Foreign Investment Regulation 2008

2009-02-23T12:49:00.006+12:00

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:

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
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) - 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) - 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.

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.

Increase in bank lending rates

2009-02-21T12:37:00.013+12:00

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)

National Anti-Money Laundering Conference – 18 Feb 2009

2009-02-21T12:28:00.004+12:00

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.

Westpac Interest Rates (updated 1.1.09)

2009-01-05T21:53:00.001+12:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 9.50%, 1 year Fixed Rate – 7.50%;
Investment Loan : Variable Rate - 9.50%, 1 year Fixed Rate - 7.50%;
Retail Term Deposits: 6 to less than 9 months - 1.75%, 9 months to less than 1 year - 2.25%, 1 year to less than 1.5 Years - 2.50%, 1.5 years to less than 2 Years - 2.50%, 2 years to less than 3 Years - 3.50%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Colonial National Bank Interest Rates (Updated 5.1.09)

2009-01-05T21:47:00.002+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 3.00%, 1 year - 3.00%, 1.5 Years - 3.00%, 2 Years - 4.00%, 3 Years - 4.00%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

What's we've been up to? Corporate Planning Consultancies!

2008-12-30T21:29:00.007+12:00

I apologise for not having this blog updated for a while. We have been busy conducting Corporate Planning consultancies for two Government Departments were also in discussion and have secured informal agreements with two local companies, Datec Fiji and Vt-Solutions, to collaborate on consultancies in the area of business continuity planning (BCP).

We have developed our own Strategic Planning and Business Continuity Planning models in-house from our various experiences and value-add by using professionals from outside our business to assist with our consultancies.

In addition to this, I have also been busy with my trustee duties for Unit Trust of Fiji. For our unitholders, we had declared some dividends that were paid out over the last two weeks.

If you require any assistance with Strategic or Corporate Planning and Business Continuity Planning for your businesses, please email us on info@gilbert.com.fj for our proposal and fee quote or call us on (679) 3342719 or (679) 9921427.

New Coins come into circulation in January 2009

2008-12-30T21:21:00.002+12:00

The Reserve Bank of Fiji has issued new coins which will come into circulation on 13 January 2009. The coins are smaller and lighter compared to the current ones in circulation. There are also no longer any 1 cent and 2 cent coins. Both new and old coins will co-circulate until 31 March 2009 when the old coins will no longer circulate. For more information, pls email info@rbf.gov.fj.

ANZ Interest Rates (updated 30.12.08)

2008-12-30T21:19:00.004+12:00

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

Business Index Rate - 10.25%;
Residential Property Loan : Standard Variable Rate - 9.50%, 1 Year Fixed Rate - 7.50%;
Investment Loan : Standard Variable Rate - 9.50%, 1 Year Fixed Rate - 7.50%;
Personal Loans : Secured - 11.50%, Unsecured - 14.20%;
Small Loans : Unsecured - 19.00%;
Retail Term Deposits: 9 months to 1 year - 1.75%, 1 to 1.5 Years - 2.00%, 1.5 to 2 Years - 2.5%, 2 Years to 3 Years - 3.00%.

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

Westpac Interest Rates (updated 1.12.08)

2008-12-01T07:54:00.000+12:00

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

Business Lending Rate - 9.99%;
Residential Property Loan : Variable Rate – 9.50%, 1 year Fixed Rate – 7.50%;
Investment Loan : Variable Rate - 9.50%, 1 year Fixed Rate - 7.50%;
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 - 2.00%, 2 years to less than 3 Years - 3.00%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Colonial National Bank Interest Rates (Updated 1.12.08)

2008-12-01T07:51:00.000+12:00

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

Business Banking Base Rate – 9.20%;
Residential Property Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Investment Loan : Variable Rate – 9.50%, 1 Year Fixed Rate – 7.50%;
Retail Term Deposits: 9 months - 2.25%, 1 year - 2.50%, 1.5 Years - 2.50%, 2 Years - 3.00%, 3 Years - 3.50%.

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

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

2009 Fiji National Budget - Not much on Financial Sector Reforms

2008-11-26T02:02:00.002+12:00

There is not much new initiatives to be undertaken on financial sector reforms in Fiji as announced in the 2009 National Budget that was delivered on Friday, 21 November 2008, by the Interim Prime Minister and Minister for Finance.

Much of the initiatives mentioned are those that the financial sector authorities have been saying that they were working on for a number of years past.

Of interest though is what is being said with regard to the deregulation of the superannuation industry. There is some mention for a detailed study to be done "on advancing the deregulation of this industry".

Will the deregulation of the industry attract new players, given that one of the primary concerns with regard to the industry is that their potential investments are mostly restricted to assets and projects in Fiji? Will the Fiji National Provident Fund still be "encouraged" to invest its the funds in government securities and to fund Government's borrowing needs, even if there are new competitors?

Also of interest is the work to be done on Micro, Small and Medium Enterprise Development. The Budget mentions that the Reserve Bank of Fiji is working with stakeholders on how Micro, Small and Medium Enterprises can be developed further in Fiji and what role the Reserve Bank of Fiji should play.

In summary, much more effort needs to be put in by the authorities to advance thinking and development of our financial sector. There needs to be critical thinking from our regulators and the players in the financial sector on how we can keep our financial sector vibrant and attractive to potential investors.

There will be a huge challenge to balance that and what happens on the political front, however, this does not stop everyone doing some critical thinking.

Is this a time to go into offshore banking? One where we can still provide services to foreign investors and offer rates and features that are not linked to how the domestic economy works. Funds obtained from foreign investors are not invested in Fiji but overseas so they are safe from domestic hiccups.

What services can our financial regulatory authorities provide in the region to regulators of other small island countries? Are we still able to maintain our competitive advantages in this area compared to our upcoming competitors, Samoa and Papua New Guinea.

How can we encourage more locally owned financial institutions to establish themselves in Fiji and then to branch out into the Pacific after having operated successfully over a number of years? This will serve as a way to hedge country risks of financial institutions incorporated in Fiji.

With regard to Micro, Small and Medium Enterprises, is the Reserve Bank considering a new facility to provide a volume of funds and/or concessionary rates for lending to Micro, Small and Medium Enterprises? Is it considering providing scholarships or paying for training on basic business operations and management for the large number of Fiji's population as an incentive to encourage people to set up their own businesses in light of potential downsizing of companies and organisations as a result of the global/local crisis in the business sector?

Again, as I had already mentioned above, more critical thinking needs to be done by the financial sector and regulatory authorities to advance Fiji's financial sector rather than give us the usual "this and that" that we have been hearing for a number of years now.

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning, business continuity planning and capacity assessment consultancies. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

ANZ Interest Rates (updated 25.11.08)

2008-11-25T09:01:00.000+12:00

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

Business Index Rate - 10.25%;
Residential Property Loan : Standard Variable Rate - 9.50%, 1 Year Fixed Rate - 7.50%;
Investment Loan : Standard Variable Rate - 9.50%, 1 Year Fixed Rate - 7.50%;
Personal Loans : Secured - 11.50%, Unsecured - 14.20%;
Small Loans : Unsecured - 19.00%;
Retail Term Deposits: 9 months to 1 year - 1.75%, 1 to 1.5 Years - 2.00%, 1.5 to 2 Years - 2.5%, 2 Years to 3 Years - 3.00%.

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

Dividends from unit trusts to be exempt from income tax

2008-11-24T11:16:00.001+12:00

Dividends earned from individual citizen's investment with unit trusts based in Fiji will now be exempted from income tax to encourage the level of investments in unit trusts. The announcement was made by the Interim Government in its 2009 National Budget delivered last Friday, 21 November 2008. Unit trusts included in this are :

Colonial First State Income Fund;
Colonial First State Income and Growth Fund;
Fijian Holdings Property Trust Fund;
Fijian Holdings Unit Trust;
Unit Trust of Fiji.

Our company, Gilbert & Samuels Company Limited, had worked on a proposal to request Government to remove taxes from dividends earned by individual citizens from their investment with unit trusts, for Colonial First State Investments, a subsidiary of the Colonial Fiji Group. That work was initiated in late 2006 / early 2007. It is encouraging to note that the exemption has now been granted.

Investors in unit trusts in Fiji are mainly those that do not profess to have technical skills to be able to manage their own investments with a majority being Fijian villagers and communities.

The Capital Markets Development Authority has brochures providing basic information about investment in unit trusts and what to look out for. For more information, pls call the Authority on (679) 3304944.

I act as one of the two trustees for Unit Trust of Fiji with the other being Ms Ulamila Fa-Tuituku, a lawyer by profession.

Individuals and groups that need investment advice, or advice with regard to capital markets issues, can use our company, Gilbert & Samuels Company Limited. We also do strategic planning and business continuity planning consultancy. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

ICT-related Development and Activities in Fiji : Seminar

2008-11-24T09:52:00.000+12:00

The School of Computing, Information & Mathematical Sciences (SCIMS), in collaboration with the Fiji Government's Information & Technology & Computing Services (ITC) and the South Pacific Computer Society (SPACS) will hold a seminar to highlight some of the important ICT-related developments and activities currently taking place in Fiji, on Wednesday, 26 November 2008, from 6pm to 7pm at the N111 Lecture Hall, Faculty of Science & Technology, University of the South Pacific, Laucala Bay, Suva, Fiji.

Currently, the Fiji Government is implementing Fiji's biggest ICT projects to date, some of which include :

development of e-applications;
establishment of a Data Disaster Recovery Centre and a Public Call Centre;
establishment of a network infrastructure program;
VoIP and IP projects.

The seminar will provide an overview of the Fiji Government's e-Government program.

For further information, pls contact Ms Anshu Veenam, ITC on email anshu.veenam@itc.gov.fj or call (679) 3235098.

Individuals and groups that need investment advice can use our company, Gilbert & Samuels Company Limited. We also do strategic planning and business continuity planning consultancy. Our contacts are: telephones (679) 3342719, (679) 3544897 or e-mail: info@gilbert.com.fj.

Incentives for Small and Microenterprises in Fiji

2008-11-23T22:07:00.000+12:00

Although not specifically mentioned in the 2009 National Budget by Fiji's Interim Government as its aims to attract the big investors, here are some of the incentives that small and micro-enterprises can benefit from :

income tax threshold reduced to 29% in 2009 and down further to 28% in 2010 (mentioned in 2009 National Budget). This could bring about some tax savings for small and micro enterprises.
personal income tax threshold for employees remains at FJD15,000.00 (mentioned in the 2009 National Budget). This means that companies will not have to pay Pay As You Earn taxes for its employees whose salary/wages fall below FJD15,000.00 per person.

The biggest incentive that remains, and which appears to be to have not been removed in the 2009 National Budget is the following, and I quote from the 2008 National Budget Address :

"Government is mindful of the contribution of our Small and Micro Enterprises (SMEs). In this regard, threshold for tax exemption will be increased. Additionally, the scope of SME activities will be expanded. From 2008, SME with an annual turnover of $300,000 or less will be exempt from income tax. SME activities will also cover production of dalo, cassava and other root crops. It will also include supportive projects to the tourism industry."

So, while the 2009 National Budget appears to be aimed at attracting the large investors to Fiji, small and micro enterprises still do have incentives to set up.

One potential area that Government can emphasise again is the facilities and avenues that are available to encourage Fiji citizens to set up businesses. Educational institutions should also work towards providing entrepreneurship training for students. In some Asian countries, a course in entrepreneurship is compulsory as a degree unit for all students.

2009 Fiji National Budget Incentive : Tax Free Regions

2008-11-23T21:46:00.000+12:00

The Interim Government in Fiji has announced, in its 2009 National Budget, the set up of Tax Free Regions in the Northern Division and some of the outer islands to encourage encourage investment, support development and create employment opportunities in those areas.

The regions include Fiji's second largest island, Vanua Levu, and other islands including Rotuma, Kadavu, Taveuni, Levuka, Lomaiviti, Kioa, Rabi and Lau. These islands will be known as Tax Free Regions with effective from 1 January, 2009.

Incentives provided in these regions 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.

The incentives are to be provided to new companies investing at least F$2 million.

2009 National Budget Incentive for non-Fiji citizens and former Fiji citizens

2008-11-23T15:50:00.000+12:00

The Interim Government in Fiji has announced, in its 2009 National Budget, an incentive to attract non-Fiji citizens and former Fiji citizens working abroad to bring in their funds into the country. The incentive has an objective to attract non-residents and former Fiji Citizens to bring in their funds for placement with Fiji banks.

For tax purposes, any foreign currency account with fixed deposits above the equivalent of F$300,000.00 will have interest earned on the account exempted from local tax. The incentive comes into effect from 1 January 2009.

Individuals and groups that need investment advice can use our company, Gilbert & Samuels Company Limited. We also do strategic planning and business continuity planning consultancy. Our contacts are: telephone (679) 3342719 or e-mail: info@gilbert.com.fj.

2009 National Budget Incentive for non-Fiji Residents and Retirees

2008-11-23T15:41:00.000+12:00

The Interim Government in Fiji has announced an incentive to attract mature non-Fiji citizens to Fiji in its 2009 National Budget. The objective of the incentive is to attract foreign currency into Fiji and to cater for living expenses in Fiji for retirees.

Those that wish to take up this incentive are required to to have a fixed deposit of F$200,000.00, for those aged 50 and above, and F$300,000.00 for those aged below 50. Interest earned from such deposits will be exempted from tax. The incentive comes into effect from 1 January 2009.

Individuals and groups that need investment advice can use our company, Gilbert & Samuels Company Limited. We also do strategic planning and business continuity planning consultancy. Our contacts are: telephone (679) 3342719 or e-mail: info@gilbert.com.fj.

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

2008-11-22T07:52:00.000+12:00

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 -"

Individuals and groups that need investment advice can use our company, Gilbert & Samuels Company Limited. We also do strategic planning and business continuity planning consultancy. Our contacts are: telephone (679) 3342719 or e-mail: info@gilbert.com.fj.

2009 National Budget - Some features

2008-11-21T11:59:00.000+12:00

The 2009 National Budget has just been delivered by the Interim Prime Minister and Minister for Finance at the Raffles Tradewinds Hotel, Suva, Fiji.

Some of the features that I caught being said included :

incentives provided to increase local food production including teh raising of duties on some imported food items;
company tax rate to be reduced to 29% in 2009 and down further to 28% in 2010;
tax free regions to be set up in the outer islands including Rotuma, Lau, Kioa, etc, (to encourage development in those islands) with tax free status between 13 years to 18 years;
10 year tax free holiday for companies setting up commercial agriculture businesses;
10 year tax free holiday for companies setting up to produce bio fuels;
5 year tax free holiday for companies setting up to produce renewable energy;
13 year fax free holiday for ICT companies including tax free duties for purchasing computers etc from overseas;
200% tax deduction for companies contributing/donating to the film industry in Fiji;
road user levy to be introduced for all vehicles and for certain regions in Fiji;
second hand vehicles up to 8 years old can be imported again;
unlimited Permanent Residency status to former Fiji residents at a cost of F$3,000.00 per person;
multiple entry visas to non-residents who are required to hold a Term Deposit with one of the banks in Fiji of over F$300,000.00; and
Foreign currency accounts with balances over F$300,000.00 will not be taxed to encourage remittances to Fiji by Fiji residents and former Fiji residents.

I will post more information once I get a copy of the 2009 National Budget Address from my contacts. A copy will be loaded onto our FijiSale Yahoo Group. To subscribe for membership of the Group, enter your email address on the "Subscribe to Fiji Sale - Lists Properties on Mortgagee Sale in Fiji" above.

Fiji Electricity Authority increases surcharges and reveals incompetence

2008-11-21T09:31:00.000+12:00

Another opinion piece from me!

The Fiji Electricity Authority has again increased consumer surcharges continuing to blame the high international fuel prices and the need to fund some of its alternative fuel projects as a reason for the increase.

In the ensuing discussions by the Authority's Chief Executive Officer, there is no mention of any use of "free" energy e.g. solar or wind and how customers can be encouraged to use these.

After the announcement of the increase in surcharges, a multitude of complaints has flowed in with businesses and business groups complaining of the increase and how it would impact on their bottom lines.

What the Authority needs is a good review of its direction again. Instead of having an objective of trying to milk consumers for all they are worth, perhaps it could put the national objective of reducing reliance on imports (of fuel/oil) and contributing to improving Fiji's foreign reserves first and foremost.

Vodafone Fiji launches 3G network

2008-11-21T09:18:00.000+12:00

Vodafone Fiji has launched its 3G network over the past few days. The 3G network will bring about more speed and data capacity on the company's mobile network. Improvements that users can expect include :

watching TV and movies on your mobile handsets at high speeds;
video calling;
high speed picture messaging;
high speed Internet services.

The company could also consider reducing its rates further and improving speeds on its mobile Internet gadgets.

Review of our Transport Infrastructure and Strategic Plans

2008-11-19T14:42:00.000+12:00

Here is another opinion piece from me with regard to the state of our roads and transport systems.

I would really love to see what our transport and communications experts have in any Strategic Plans that they might have for Fiji in the area of transport and communications.

One look at the import figures shows what a heavy reliance Fiji has on oil imports to meet, both industrial and consumer needs.

Secondly, our roads are becoming very busy and congested, particularly the routes between Suva and Nausori, Nadi and Lautoka, during the morning and afternoon rush hours.

I had posted a piece on suggestions to help improve on our road congestion problem on our other blog, http://promotingsuva.blogspot.com/ some time ago.

One simple and quick solution is to put in place a rail system between these two towns/cities and then restructure the fare and tax rebates to encourage residents to use the rail system rather than their own or other vehicles for travelling between any of the two locations.

The initial outlay cost might be too foreboding, but I am sure the long term benefits will much outweigh the short term costs. Some of these benefits include :

reduced oil import costs;
reduced pollution from vehicle exhaust fumes;
reduced traffic noise (which is made even more worse by vehicle owners who carry the music and sound systems of auditoriums in their vehicles);
less traffic accidents;
reduced road rage;
reduced complaints from residents;
better health for residents, etc.

Power Rationing by the Fiji Electricity Authority

2008-11-18T09:32:00.003+12:00

The Chief Executive Officer, Fiji Electricity Authority, has recently refuted claims that the power authority is rationing electricity in Fiji.

In recent years, the Authority has constantly informed consumers of the reducing water levels at its Monasavu Dam, the need to import and run diesel generated engines to supplement power needs and the increasing cost of world fuel and therefore the need for a fuel surcharge to be paid by each consumer.

Over recent years, those of us living and working outside the Central Business District have to go through at least one or two days without power each month, during most of the day on those days, when the Authority is supposedly doing maintenance and upgrades in our various locations.

From my own memory, in the 1970s and 1980s and even into the 1990s, I cannot recall such shutdowns being done for maintenance and upgrades.

In itself, those shutdowns are to me, a form of power rationing. What else can they be?

One cannot reconcile the fact that in this day and age of progressive development in machines and systems, the Authority still has to introduce days without power to do maintenance and upgrades.

What are the solutions? Competition? Shall we open up the market to other providers?

One simple solution is for the Authority to simply say that it cannot provide the service and to allow consumers to supplement their own needs with other forms of power e.g. solar and wind.
These other forms of power are provided by God for free so why don't we use them?

Consumers with excess power for their own use can sell their surplus back into the national grid that can be made available to others who will need them.

Some countries e.g. one Scandinavian country has a successful scheme whereby individual households sell power surplus to their needs back into the national grid for use by others that might need them. This has made the country one of the only ones in the area being self sufficient in terms of electricity and power.

Individuals and groups that need investment advice can use our company, Gilbert & Samuels Company Limited. Our contacts are: telephone (679) 3342719 or e-mail: info@gilbert.com.fj.

FTIB Roadshow

2008-11-07T08:29:00.000+12:00

The Fiji Islands Trade and Investment Bureau is organising a Roadshow to raise awareness on new regulations regarding reserved and restricted lists that came into effect on 11 July 2008. The Roadshow will be held on Wednesday, 12 November, from 8.30am to 11.30am, at the Southern Cross Hotel, Suva. For more information, pls call Florence Nand on telephone (679) 3315988 or email florence@ftib.org.fj.

For advice on investment in Fiji, pls contact our company, Gilbert & Samuels Company Limited, on telephones (679) 3342719 or (679) 3544897 or email info@gilbert.com.fj.

Global Prospects and Policies - Speech by John Lipsky, First Deputy Managing Director, International Monetary Fund

2008-11-05T10:25:00.000+12:00

Provided below is a copy of the speech by the First Deputy Managing Director, International Monetary Fund on "Global Prospects and Policies"

"I would like to thank Tim Ryan and his SIFMA colleagues for inviting me here today. It is a pleasure and an honor to have the opportunity to address this distinguished audience, and to share the podium with Under Secretary Ryan.

In discussing global prospects and policies this morning, I will focus on two key themes:
First, to state the obvious, these are very turbulent and uncertain times for the global economy. The world economy is entering a major slowdown, driven by the worst financial crisis in 75 years. As we all know, the current challenges are unprecedented in many important ways. As a result, visibility is unusually imperfect with respect to global economic prospects. Many plausible voices today are predicting dramatic - and, in some cases, dire - outcomes. Regardless, developments continue to evolve rapidly, especially with respect to conditions facing emerging economies. For our part, my IMF colleagues and I are paying close attention to the latest results, and doing our best to anticipate future challenges.

Second, these very difficult financial and economic circumstances call for timely, decisive and cooperative action. Given the global and systemic nature of the current crisis, policy responses need to be scaled commensurately. Our double mantra is straightforward: Global problems call for global solutions; systemic challenges require a systemic response. Increasingly, policymakers around the world share these basic tenets. Already, many unprecedented measures have been announced, and they need to be implemented quickly. Nonetheless, there is scope for further action-particularly with respect to guarding emerging economies from adverse external developments.

I will begin with a very brief overview of the global outlook.

The global economy is in a major slowdown, and there is a risk that it could turn into an outright downturn. Global growth is slowing sharply. Already in this year's first half, growth had slowed to 3½ percent (annualized), down from the 5 percent annual pace sustained over the four previous years.
a. Advanced economies are contracting at end-2008. Advanced economy growth slowed to a standstill during this year's first half. Momentum subsequently has been falling, with leading indicators already dropping to levels last seen during 2001-2002. Indeed, the U.S. economy has slowed sharply and recession risks are looming, while activity in the euro area and Japan had weakened earlier.
b. Increasingly, emerging and developing economies are feeling the impact of the global financial crisis, and their growth is decelerating rapidly. The confluence of a decline in external demand, receding commodities prices, and a sharp moderation in capital flows is likely to dampen activity notably in the coming quarters.

In sum, there is ample justification for pessimism: Global prospects remain highly uncertain and risks of a global recession loom large.

Nonetheless, my IMF colleagues and I are optimistic that a decisive, comprehensive and coherent policy response will be able to truncate the downside risks to the global economy. The key is to focus on dealing with the underlying sources of the weakness, while ameliorating the damage that these underlying factors are creating.

As is widely recognized, the underlying loci of global economic weakness stems from asset price deflation - especially in housing and other real estate markets. Not surprisingly, asset price deflation has been hard on financial markets, creating concentric circles of crisis that have propagated globally at a pace that by and large has taken market participants and policymakers by surprise. How well macroeconomic and financial policies jointly respond to containing the disruption will be telling in determining the global economy's near-term outlook.

There are two key risks to the outlook; One is that asset values - especially housing - will substantially undershoot reasonable long-term levels. The second is that financial market dysfunction will produce reinforcing rounds of real economic distress, especially in emerging economies.

In many countries' housing markets, the apparent boom-time overshooting in valuations already has damaged financial markets and the real economy, but an equally-scaled undershooting would compound the damage.

· Housing-related conditions are weak -- and weakening -- in the United States and several other advanced economies. In the United States, housing activity and prices continue to decline, though the inventory overhang is beginning to moderate. At the same time, however, foreclosures continue to rise, amid a weakening labor market. Rather than finding a floor, as we expect will occur in the coming year, there is a risk of deeper and more prolonged housing correction in the United States. In Europe, the housing correction began later and may have some ways to go. Of course, asset values in many emerging market economies increased in recent years at a faster pace even than in advanced economies, creating obvious risks.
· Avoiding damaging undershooting is justification for a strong policy response. Short-circuiting an adverse feedback loop between housing downturns, widespread financial deleveraging, and weakening confidence would help avoid a deeper downturn. This may require policy actions that impact the underlying markets directly.

The systemic reach of the global crisis underscores the need for global action on a comprehensive and coherent basis.

In financial markets, notwithstanding bold policy actions announced thus far, conditions remain exceptionally volatile and uncertain. Modest declines in interbank spreads, along with sharp falls in bank CDS spreads, suggest some tentative improvement in market sentiment. Solvency concerns have eased in light of the commitment to use public funds to recapitalize financial institutions, but money market funds continue to face large redemptions.

· And while liquidity strains have eased somewhat, they remain acute. Spreads remain at elevated levels, while exceptional volatility and uncertainty is keeping liquidity preference and risk aversion at elevated levels.

Moreover, the financial crisis has spread rapidly to emerging economies; in effect, we have moved swiftly from talk about "decoupling" to a situation where these economies are at substantial risk.

· As discussed in our latest Global Financial Stability Report, published earlier this month, emerging markets-as an asset class-are coming under increasing strains [shown in orange and red in the chart].
· In particular, intensified financial deleveraging is having a global reach, including to emerging economies. More intense capital account pressures, in turn, could seriously harm growth in these economies.

Emerging equity markets already have absorbed greater losses than mature markets, reflecting investors' flight to safety in the face of high uncertainty and risk aversion. Anticipating a significant growth slowdown, emerging equity markets have declined around 50 percent year-to-date.

· Moreover, financial flows are moderating. Pressure on banks in advanced economies-including even those receiving public capital injections and therefore subject to taxpayer oversight-could curtail lending in foreign markets; banks and firms in emerging economies that rely on global wholesale funding markets appear to be facing significant distress and rollover risks; hedge funds and other institutional investors under pressure to unwind positions as a result of tighter financing constraints and redemptions are undermining market liquidity and asset prices more broadly.

Under current strained global financial conditions, the risk of sudden interruptions (or reversals) in capital flows has risen appreciably.

· Countries with large external financing needs and highly levered financial systems face more intense strains in both credit and equity markets. This underscores their more limited room for maneuver in dealing with spillovers from financial and economic stress in advanced economies. Especially vulnerable in this regard are countries where households have contracted large foreign currency denominated loans.
· For the IMF, the current epidemic of spreading financial market strains reflects a challenge that we have faced many times before in many different guises. What is novel are the scale, scope and complexity of the current difficulties.

Our earlier experience warns that sudden stops in capital flows potentially can transform a liquidity shock into a solvency crisis. The needed remedial action - including helping to minimize the risk of a sudden stop, and/or standing ready to compensate for one - is a key IMF responsibility.

We all know more or less how we got to this point - even if the recognition was clear mainly in hindsight. Simply put, the globalizing financial system built up too much risk and too much leverage.

· At the IMF, we have drawn two broad lessons from this experience: First, it seems evident that what we have labeled the "perimeter of regulatory oversight and risk management" was drawn too narrowly. Thus, risks remained out of sight that should have been front and center. The second broad lesson is that regulation should incorporate macro-prudential considerations. In other words, regulation and supervision have focused on instruments and institutions, while remaining more or less oblivious to cyclical and other macroeconomic considerations

Incorporating both these considerations -- the perimeter of regulation, and macro-prudential aspects - will not be either quick or easy. Nonetheless, they will be steps in the right direction.

The immediate imperative for policies is to restore confidence in the financial system. IMF experience indicates that successful efforts typically incorporate three basic aspects: Preserving short-term liquidity, removing damaged assets from bank balance sheets, and recapitalizing banks.

· In advanced economies, bold financial measures announced earlier this month will need to be implemented effectively and quickly.
o Bank recapitalization should proceed swiftly; central bank liquidity support should continue to be provided generously; and comprehensive approaches should be pursued to deal with distressed assets in the financial sector.
· More broadly, policies need to decisively contain both financial disruptions and the possible growth implications, which will include reliance on traditional macroeconomic tools. With the global slowdown undermining commodity prices, the scope for monetary policy to support economic activity has increased, particularly in advanced economies that until recently have been dealing with containing inflation risks.
o Fiscal measures are being used more comprehensively to address solvency issues in systemically important financial institutions, to purchase distressed assets, and to recapitalize the system. At the same time, further support to aggregate demand may be needed, given the loss of private sector confidence.

Policy requirements may also require greater multilateral efforts-inclusive of emerging economies.

· The policy measures adopted by advanced economies may impart unintended effects-notably, since financial institutions in emerging economies in general are not covered under the umbrella of the liquidity operations in advanced economies. Also, domestic banks in emerging economies do not necessarily have the same level of protection through deposit guarantees and such measures as public capital injections. Thus, they may feel pressured to put in place their own programs, even where the resources needed to create credible policies of this nature may not be available.
· In emerging economies, policy actions to deal with sudden interruptions (or reversals) of capital flows will be needed. Of course, in many cases the improvement in monetary, fiscal and structural policies in recent years represents a important protection, as has the build-up in international reserves. Nonetheless, these may not offer complete protection.
o Liquidity support needs to include the corporate sector in countries where funding markets are shrinking. Countries with large reserve buffers could provide foreign currency liquidity as needed, if acute dollar shortages of is affecting firms' ability to operate.
o Emerging economies may also need to consider traditional macroeconomic policies to deal with a shortfall in financing and growth.

The Fund, for its part, is moving quickly and playing an active role to help emerging economies battered by the financial crisis and by the sharp slowdown in advanced economies

· The Fund stands ready to disburse more than $200 billion of loanable funds and can draw on additional resources through standing borrowing arrangements with groups of IMF member countries. As you know, we are currently in program negotiations with several members.
· Since halting economic and financial crises requires timely measures, the Fund is actively considering the launch of a new short-term liquidity lending facility to address problems of fundamentally sound countries temporarily exposed to funding pressures.

Looking past the immediate challenges, a concerted effort will be needed to build a more resilient and efficient financial system. In addition to the two broad areas I mentioned already, there is a need to strengthen global early warning systems, in order to mitigate future risks.

In conclusion, these are very uncertain times and the risks to the global economy are large. But taking a comprehensive and collaborative approach globally-across the full range of policy instruments that we have at our disposal, I am confident that the worst can (and will) be avoided and that a more resilient and sounder financial system will eventually emerge. But the hard work lies just before us, and all will need to do our part."