Fiji's economy in trouble

[posted 14 April 2005,1400]

Independent surveys have shown that Fiji's economy is headed for troubled times with growth rate this year forecast at a low 1.5% compared to optimistic government estimates of 4%.

The Asian Development Bank in its 2005 country survey has warned that the Fiji economy will slow substantially in the next couple of years. The major contraction will take place in the manufacturing sector with the withdrawal of preferential access to the US market from January.

The 2005 ADB report states: "A major growth slowdown is forecast in the Fiji islands as the garment industry loses concessionary access to export markets and the sugar industry confronts structural adjustment."

Already garment factories have curtailed operations limiting operation to four days a week and cutting back on staff. The Australian market is also weakening with competition from China coupled with a decline in the value of preferences as Australian tariff rates drop.

The sugar industry continues unstable with the insolvent Fiji Sugar Corporation in its latest disclosure revealing that it may continue to make losses of around $13 million a year despite a massive $86 million investment that is in the pipeline to upgrade all mills.

Under the industry reform programme spearheaded by an Indian technical mission, the $86 million loan is expected to come from the Government of India. Despite the investment, FSC says its core business of sugar manufacturing will not be profitable once the European Union preferential price for Fiji sugar is phased out from 2006.

The revelation has prompted Opposition Leader Mahendra Chaudhry to question the wisdom of pumping in $86 million if sugar manufacturing will not be viable.

He also expressed concern that cane cultivation will not be a profitable venture for farmers, unless they can be guaranteed a minimum price of $50-$55 a tonne.

Fiji's growth since 2001 has largely been dependent on growth in tourism, the construction industry and the retail and wholesale sector. Exports have declined with the decline in the sugar production, garment, copra and fish.

There is concern at the alarming increase in trade deficit as exports continue to decline.