Fijians have been to the polls for the first time since 2006, in a very significant milestone for the small pacific island nation.
"The signs are evident of a strong [Fijian] economy with potential for sustainable growth."
Vishnu Mohan, ANZ CEO Pacific & CEO Fiji
Election day, on September 17, a public holiday in Fiji, went as smoothly as one could imagine.
There was a serene feel to the whole exercise, as people lined up at polling stations on a typically sunny, tropical day, diligently carrying out their democratic duty and then taking to the local parks and beaches with their families.
Earlier this week, Frank Bainimarama was sworn in as the nation's prime minister at a ceremony in Suva.
In my view, and no doubt in the view of many potential international investors waiting in the fringes, the economic challenge for Fiji’s new leadership will be in maintaining the momentum and commitment to drive growth through increased intra-regional and broader international trade and foreign investment moving forward.
I’ve been in my role as ANZ CEO Pacific & CEO Fiji for about two years now and, drawing from my time here, I can attest to the strength of this nation and the calibre of the people.
I have the highest confidence in Fiji’s future. Fiji has now come a long way in a short time. The signs are evident of a strong economy with vast potential for sustainable growth.
The macro-economic outlook in Fiji is bright with four key sources of positive growth momentum through 2014-15:
1. Private lending has climbed sharply (17 per cent year on year in 2013) – and this will support private consumption. Key drivers were income tax cuts and lump sum payments from the pension fund. Car loans are up 200 per cent year on year.
2. Business lending is up (20 per cent year on year) – broad growth which signals the private sector is buying into a positive election result.
3. The government has an aggressive spending goal in 2014 – with capital expenditure up 40 per cent. This will have positive spill overs in terms of employment growth and wage increases.
4. Multi-laterals (the International Monetary Fund, World Bank and Asia Development Bank) and bi-laterals (Australia and New Zealand) are keen to get aid back in the country. This will be in the form of large infrastructure projects and will be aimed at re-establishing stronger links with the country.
Investor confidence in Fiji is strong with the potential to be great in the very near future and beyond.
ANZ’s own confidence in Fiji was clearly demonstrated in the shift of our Pacific Headquarters from Melbourne to Suva in 2013.
Looking back, I can honestly say that this was one of the best strategic decisions we’ve ever made to move this important decision-making resource closer to our customers and staff on the ground and Fiji was the best choice for the move.
Private investment is essential to sustain broad-based economic growth and ensure fiscal sustainability in the medium term. This is in addition to the increased government expenditure on infrastructure investment.
Investment activity is expected to remain strong. ANZ Economics has upgraded its forecast for 2014 real GDP growth to 4.0 per cent on account of the following:
- Higher fiscal stimulus announced in the national budget
- New 2008 GDP base which reflects the evolving structure of the economy
- Stronger credit growth
- A likely investment surge post elections.
Domestic credit in Fiji continued to maintain its robust growth at 17 per cent year on year in June, buoyed by strong growth in net foreign assets and net domestic credit.
Near-term economic activity is expected to be buoyed by infrastructure projects such as the Damodar City project in Suva, upgrade of Nadi International Airport and various large hotel and resort developments, which will have positive spill-overs to the tourism-related sectors.
Tourist arrivals have risen strongly since the start of the year, supported by improving global economic conditions as well as relatively firm currencies in New Zealand and Australia – the two main sources of tourists.
A smooth transition to a democratic government that’s reform-oriented will help bolster the economy. We are anticipating an uptick in activity post the election, leading to higher inflows of foreign investment.
In the last quarter, rating agencies have upgraded the outlook for Fiji from stable to positive.
Maintaining the momentum around Fiji’s public enterprise reform agenda also holds the key to the nation’s long-term economic prosperity, creating opportunities for private investment, increasing efficiencies in service delivery and reducing the cost of doing business.
Fiji has been reforming its State Owned Enterprises (SOEs) for some 20 years now and has more recently achieved excellent traction in this area. An example of this is in the public-private partnership struck between the Fiji Ports Corporation and Sri Lanka's top end blue chip company, Aitken Spence, in 2013.
Aitken Spence took a 51 per cent stake in the state-owned Fiji Ports Terminal Ltd and control of Fiji’s two largest ports – Suva and Lautoka – for a period of 15 years and recorded an increase in its efficiencies by 35 per cent within a short span of two months.
Trade/investment flows into Fiji
Total trade between Fiji and the World climbed to nearly $US3 billion ($A2.96 billion) in 2013. This is up $US1 billion from five years ago and more than double a decade ago.
Fiji has increasingly tapped Asian supply chains for trade. In 2013, 43.6 per cent of trade was with Asia and the Pacific Islands. This ratio has climbed from 25 per cent a decade ago.
Australian trade with Fiji was nearly $US450 million in 2013, however it appears this has been a steady state level as over the past 15 years total trade has averaged $US458 million between the two countries.
Trade flows between the Pacific & Asia
There has been significant growth in total trade flows between the markets ANZ has a presence in Asia and the Pacific.
Total trade flows between the Pacific and Asia have risen from $US1.7 billion in 2000 to almost $US10 billion in 2013.
A strong future
The signs of economic health in Fiji are robust and now the election has removed an enduring geopolitical uncertainty – not just domestically but for international investors and governments.