Response by Labour Leader Mahendra P. Chaudhry on the 2004 Budget 

(posted 27 November 2003, 16:55)

Fiji Labour Party Leader Mahendra Chaudhry spoke in parliament on 26 November 2003 in response to the 2004 Budget presented on 7 November. He spoke on a number of issues including government finances, sugar, land and increase in cost of living. 

The full text of Mr. Chaudhry’s speech is provided below:

"... I notice that the theme for the 2004 Budget is Building Lasting Prosperity Together. I can only conclude from this, Sir, that the Minister of Finance, in a moment of lightheartedness decided to play a joke on the nation by indulging in such rhetoric. He cannot indeed be serious unless of course the Minister is addressing only a target group in the community!

A close scrutiny of the provisions of the Budget, Sir, will show that it does the exact opposite: it lays a firmer foundation for poverty, not prosperity as the Minister claims. This, unfortunately, is fairly consistent with the SDL government's policies, put in place in the past three years which have seen an explosion in the levels of poverty in our nation while bolstering up the wealth and status of the elite in society.

Under this government's policies the suffering of the ordinary people and the poor, have been accentuated. I refer, Sir, to the first move of the post-coup administration to reverse the initiative of the People's Coalition Government to assist the disadvantaged in society by bringing down the cost of living.

We did this by removing duty from 7 staple food items and bringing another 17 essential consumer items under price control in order to make them cheaper.

Having reversed this policy, the SDL government then went ahead and raised VAT to 12.5% in Budget 2003. This time around, it raised Customs duty another 5% on 510 food and everyday consumer items which, indeed, is tantamount to increasing VAT on these goods by another 5%.

If you need any further proof of the insensitivity of this government to the plight of the ordinary people, Sir, than you just have to look around you to witness signs of increasing distress among our people: mushrooming squatter settlements which in turn is evidence of accelerating rates of rural- urban drift as decline sets in in the country-side, ever-increasing queues of the desperate lining up for the State's meagre destitute allowance, increasing joblessness and high crime rates, beggars lining up the streets, vendors sprouting up everywhere selling their ware to get a little cash income to survive.

Mr. Speaker, I shall be speaking on this at some length later. At this stage the point I wish to make is that mere rhetoric is not going to bring prosperity to everyone in our nation. For this you need positive government policies that are designed to achieve equity and social justice; policies that will stimulate economic growth and create jobs.

Mr. Speaker, I do not see Budget 2004 achieving any of this. Indeed, all indicators point to a sharply deteriorating economic climate.

Once again, Sir, I believe the Minister of Finance is simply trying to delude himself when he refers to strong economic growth in the nation. The Minister could not have been further from the truth when he began his budget address by saying "Fiji is in its third year of strong and continuous economic growth".

Again the reality, Sir, is quite the opposite: it would have been more appropriate for the Minister to have lamented - "Fiji is in its third year of continuing economic decline."

Growth figures oft quoted by the minister and the Governor of the Reserve Bank of Fiji in an attempt to paint a rosy picture of the economy can only be described as an exercise in self-deception.

A growing and vibrant economy will post a positive picture - it will show that the key indicators are performing well and things are progressively getting better. Sadly, such is not the case with our economy, or government finances for that matter.

Let me substantiate my observation by using government's own figures to show that, indeed, the economy is deteriorating and in deep trouble. Indicators which point to this fact are:

• A substantial decline in our foreign reserves - down from a record high of $830 million in 1999 to currently stand at $665 in September 2003. This, Sir, is only 2.5 months of imports…

…Certainly an alarming state of affairs when one considers that the minimum requirement for any healthy economy is at least 4 months of imports.

• Rising net Budget deficits - up from only $10 million in 1999 to $213 million in 2002.
  
• Escalating levels of public debt - up from $1.25 billion in 1999 to $1.9 billion in 2002. For 2003 this is projected to rise to $2.02 billion.
  
• High inflation - up from 0.2% in 1999 to a high of 4.7% in 2003.
  
• Steadily depreciating currency - the Fiji dollar has depreciated significantly against the currencies of Australia and New Zealand, our major trading partners.

The substantial erosion of our foreign reserves is indicative, Sir, of high capital outflows and falling export earnings, particularly in the sugar and garment sectors. Huge capital outflows point to a lack of confidence in Fiji's future. Our fast depreciating dollar is another reason why people are pulling their money out and investing in countries with more stable currencies.

The escalating Budget deficit, Mr. Speaker, indicates a lack of financial and fiscal discipline. Government expenditure in 2003 is expected to be $30 million more than originally budgeted, while revenue is expected to be down by $56 million. The effect of this is that government will borrow $86 million more to offset these deficiencies.

Rising levels of public debt (just over $2 billion) have substantially increased the loan repayment component of the budget, leaving little money for the productive sectors.

The SDL government has borrowed $700 million in the past three years and it continues to borrow more. This huge borrowing has put pressure on our dollar and contributed to fanning inflation to unacceptable levels.

These worsening trends and indicators are clear evidence of reckless mismanagement of government finances and the national economy by the SDL government.

Mr. Speaker, government continues to harp about its strategy of export-led growth. Various ministries and the Governor of the Reserve Bank have, in every ribbon-cutting function they have officiated at, talked glowingly about Fiji's increasing export prowess.

Yet, export figures tell us another story. The figures show that our export earnings have been coming down. They stood at $1195 million in 2002 compared to $1201 million in 1999. Of great concern here are declining incomes from two of our major industries, namely, sugar and garment.

Sugar exports fell from a high of $263 million in 1999 to $240 million in 2002- the forecast for this year is around $180 million… this is $83 million less than the sum earned in 1999.

It is a similar story with garments - exports of which have fallen from a high of $333 million in 2000 to $245 million in 2002... or $88 million less.

Mr. Speaker, the garment manufacturing industry is in deep trouble. In the past three years since the terrorist takeover of Parliament in 2000, some 18 manufacturers have closed their operations here. More than 6500 people have lost their jobs as a result of these closures.

Let us now turn to tourism. We are often told that tourism earnings are our biggest source of foreign exchange. In 2002, that is the latest confirmed figures available, tourism is supposed to have earned us some $570 million. Yet, one has to see the benefits of this reflected in our foreign reserves.

No, the net retained earnings from tourism are much less and would not even be one-half the figure being bandied around at every lavish tourism industry meeting.

Yes, tourists may be coming but much of their bill is paid in their own country through credit cards. Most of these monies never get to Fiji. The money transfers we see here are related to payment of operating expenses while profits are retained elsewhere.

So, the sum total of what I have been saying so far is that we have an extremely weak export sector and it seems to be worsening further.

The Finance Minister himself says in his budget supplement that investment levels continue to remain low (P.20).

Government's answer to this has been to increase the level of public investment through increased capital budget allocations. But this strategy has failed as can be evidenced by the fact that it has not stimulated private investment, particularly foreign direct investment.

THE SUGAR INDUSTRY

Mr. Speaker, I now wish to focus on the sugar industry as one of these deeply troubled sectors of the economy.

It is now a well recognised fact that the future of the sugar industry hangs in the balance and unless drastic surgery is performed now to correct the problems, we could be seeing the demise of this nationally important industry in the next five years or so.

It is obvious Mr. Speaker that Fiji is in no position as yet to say good-bye to an industry that has sustained the national economy for a century, if not more. But, and it is a crucial BUT, Sir, if the industry is to survive, then any changes to the existing structure must take into consideration the interests of all stakeholders and not just the Fiji Sugar Corporation. This means consultation with all concerned parties.

At the risk of stating the obvious, let us take a look at the main problem areas in the industry:

1. Non-renewal of leases has resulted in a significant decline of more than a million tonnes in cane production - production is down from an average 4 million tonnes to 2.7 million tonnes for the 2003 season. Any further decline on this and it will become uneconomical for FSC's mills to operate.

Government's refusal to accept our proposal made in the last sitting of this House for urgent relief and the initiation of a crop rehabilitation programme for farmers who have suffered heavy crop losses as a result of the drought, will make the situation next year even worse.

2. Secondly, we have the financial crisis in the Fiji Sugar Corporation. It is technically insolvent. Administrative mismanagement and incompetence combined with loss of skills have exposed FSC to internal scams and fraud and have led to serious milling problems with frequent mill breakdowns and crushing inefficiencies

3. Milling problems have in turn led to unreliable harvesting quotas, inadequate supply of rail trucks and a dramatic increase in cane burning

The magnitude of problems besetting the industry has created deep feelings of uncertainty and have sapped morale among farmers as reflected in the fact that average cane yield per hectare per grower is now down to 167 tonnes compared to 179 just a couple of years ago.

I have no wish to go into details because the nation is well aware of the crisis facing the industry. I have come here year after year, Mr. Speaker warning of the imminent demise of the industry should no action be taken to resolve the land crisis and overhaul the bankrupt leadership of the Fiji Sugar Corporation.

But these warnings have been ignored until now and in its misguided wisdom, the SDL government has decided to impose a "solution" on the industry which is nothing but a rescue package for the financially stricken FSC drawn up by the corporation itself and which rides roughshod over the interests of cane farmers and mill workers.

Farmers will not accept the draft Bill to restructure the industry that is currently being circulated among government ministries for their comment. That Mr. Speaker is the long and short of it.

Farmers have not been consulted on the proposals despite clear conditions imposed by both the European Union and the Asian Development Bank that all stakeholders must be consulted.

Both these institutions have been approached to help finance the restructure and they have made it clear that assistance will only be forthcoming if there is consensus on changes being envisaged for the industry.

The proposed Bill intends to scrap all industry institutions created under the 1984 Sugar Industry Act except for the Fiji Sugar Corporation. It also intends to scrap the existing sugar industry master award and replace it with individual contracts between growers and the proposed new companies which will own and operate the four mills.

Mr Speaker, cane growers in this country have had a long history of struggle against injustices rampant in the system since the days of exploitation under the Australian-owned CSR Company and indeed, going back to the evils inherent in the semi-slavery conditions of the Indenture period.

Justice to the farmers and stability for the industry only came about under the Denning Award on which the current master award is based including the 30/70 proceed sharing formula awarded by Lord Denning in 1970. Mr. Speaker, under this formula, FSC ran a highly profitable organisation for more than two decades.

Naturally, the question that arises then is whether the formula is to blame for the corporation's present financial crisis or whether this has arisen from incompetent management and bad administration? Undoubtedly, the answer is incompetence and mismanagement!

The government, Sir, would be well advised not to tinker with the Master Award. Rather, it should take heed from the events of 1989/1990 when a military-backed regime tried to impose a one-sided contract on the farmers.

I invite government to abandon its present dictatorial, intransigent attitude and enter into discussion with the true representatives of cane growers on the best method to salvage the sugar industry and FSC.

LAND

Any proposal to restore confidence in the industry and return it to profitability must move concurrently with a resolution to the land problem.

In this respect, Mr. Speaker, I welcome the decision by the current management of the Native Lands Trust Board to continue to renew leases under ALTA pending a political resolution of the issue.

It is a pity that such a decision was not taken in 1997 when the first of the leases began to expire. Since then Sir some 4000 or more unfortunate tenant farmers and their families have been rendered homeless and destitute overnight in a catastrophe that has not only jeopardised the future of the sugar industry but has also exacerbated the nation's social ills with a mushrooming of squatter settlements and exploding levels of poverty.

According to the most recent government statistics, 80,000 of our people, a little over 10% of the population live as squatters in undignified hovels lacking water, electricity and other amenities.

As I said earlier Sir much of this human misery could have been avoided if the previous management of NLTB had not decided to play politics with the land issue and refuse to renew leases indiscriminately.

I therefore welcome the fact that prudence and good sense has finally prevailed and that leases are being renewed under ALTA until a new agreement is negotiated.

This is the commitment, the NLTB gave to the Talanoa sub-committee on land.

The Talanoa subcommittee had also come up with recommendations to resolve the current impasse on land and I am surprised Sir that the prime minister is still sitting on those recommendations in view of the pressing seriousness of the land issue.

Even if the NLTB has resolved the current impasse on land by deciding to issue leases under ALTA, the uncertainty still remains and unless a lasting solution is found, people will be very reluctant to take up native land leases not knowing what the future holds.

I urge the Prime Minister to move the matter forward by appointing a joint parliamentary select committee on land to deal with the recommendations of the Talanoa sub-committee and reach a settlement that would be fair and equitable to all interested parties.

As I had said earlier, Sir, a resolution of the land crisis is a pre-requisite to restoring confidence in the sugar industry and returning it to viability.

COST OF LIVING

I wish to direct my attention now to a certain aspect of the Budget that is causing serious disquiet in the community because of the impact it is having on the cost of living and in particular, on the pockets of the poor.

I refer, Sir, to the increase in Customs duty announced by the Hon Minister of Finance on a range of consumer and everyday items from shoe polish and household detergents to white rice, tea, coffee, milk, biscuits, chocolates, canned fish, fruit juices and canned fruits and vegetables, soup packs, toothpaste and so on. Some 510 items have been hit by the Minister's decision to raise duty on them from 10% to 15%.

The move Mr. Speaker is highly insensitive because it will put many of these items out of the reach of some 70%-80% of our people who are in the marginal income bracket.

What kind of government Sir will deny the children of the poor from occasionally enjoying a nice biscuit, a glass of fruit cordial or an occasional chocolate? Only one that is utterly insensitive to the needs of the poor or so desperate that it needs to raise money by penalising the poor.

Quite apart from the meanness involved, Sir, the increase in duty on some 510 items of daily use in every household, is a gross betrayal of the pledge that was made with the people of Fiji at the time VAT was introduced.

Allow me, Mr. Speaker, to jog the memories of those who choose to forget. VAT, Sir, is part of a total package of deregulation or trade liberalisation that was embraced by the post-coup regime after 1987.

When VAT was introduced in 1992 as part of the deregulation package, we were promised that income tax and Customs Duty would be brought down systematically as part of the package deal. The idea was to bring Customs Duty on all goods down to 10% or zero to compensate for the imposition of VAT.

Raising duty now to 15% on a wide range of consumer items is a breach of this pledge. It is also a reversal of the deregulation process. Government Sir cannot have it both ways. It has not brought income tax down and now it is raising duty on a hundreds of everyday consumer items.

Yet, corporate tax and income tax for those in the top salary bracket have come down from 32% to 31% in the 2004 Budget… what further proof do we need that this government is a government for the rich and the elite of society???

In one move it has taken food out of the mouths of poor children, at the same time it has increased the capacity of the rich to spend more on luxury items by giving them more take home pay.

What distorted form of social justice is this?

Mr Speaker, while extending tariff protection to some selected companies if government is failing to enforce any quality control or standards on locally manufactured items. Several of Rewa Dairy's products like cheeses and yoghurts do not compare favourably with the quality of their imported competitors. And any child will tell you that local cream biscuits, at least, do not have the quality and taste of imported ones such as Arnotts and Griffiths.

One other point, Sir, and I find this quite disturbing. A week before Budget day supermarket shelves mysteriously emptied of Rewa Dairy's Life Milk cartons. On inquiry, shoppers were told that the factory had run out of milk supplies.

Amazingly, they were back on the shelves after Budget, and sporting an increased price. Rewa Life is now selling for $1.49 a pack compared to $1.42 pre-Budget. If this is not profiteering, Sir, I would like to know what is?

Sir, there is another aspect of this policy which is causing disquiet. And I refer to the reduction of duty on exercise books from 27% to 15 %.

The move is so irrational and inconsistent with general policy that there appears to be an aspect of favouritism here that government needs to explain.

One can understand the increased duty on biscuits, Sir, because one of the country's leading manufacturers and a chief financier of the SDL government, has just disclosed in a post-Budget announcement a $30 million extention to his biscuit factory in Walu Bay. He is jubilant about manufacturing some famous international brand names like Arnotts in Fiji.

So the moot question is: Who is intended to benefit from the reduction of duty on exercise books?

I guess, we shall know soon enough! Because as the advertisements in the newspapers have so pointedly asked: why, among all locally manufactured items, was exercise books the only item to be singled out for duty reduction?

There is something here that does not meet the eye, Sir. Local manufacturers of exercise books are justifiably suspicious, and concerned. There are four manufacturers who have invested millions of dollars into plant and machinery and provide employment to some 250 people in the industry.

There is the almost certain risk that they will be forced out of business, close shop and make all these people redundant. Unfortunately, the damage doesn't stop here.

I won't be surprised if this experience doesn't scare away other potential investors.

Entrepreneurs who invest millions of dollars into a project want reliable and consistent government polices - not policies that show favouritism and are designed to benefit only a selected group of elite political friends and financiers.

This is one of the chief reasons for low investment levels in the country - the fact that Fiji today is perceived as a country that has no level playing field. The prevalence of favouristism and corruption make it impossible to do business honestly in Fiji.

Mr. Speaker, in my opinion the SDL government has run out of ideas - not that it had many to start off with - on how to get Fiji back on track.

It lacks the vision for a united Fiji which is the only road to peace, progress and prosperity for all. The SDL government has more neo-nationalists in its ranks than those committed to the well-being of the people of Fiji.

It is fast losing support by initiating policies which have only aggravated the suffering of the ordinary people.

By and large, the SDL is seen as a group of people out to make as much for themselves and their cronies as possible while they are in office. They have to date not shown much commitment to the principles of accountability, transparency and equity which are of course the main pillars of good governance.

Mr. Speaker one wonders whether there is any point in giving advice to a government that is too arrogant and too insensitive to listen to the cry of its people.

I just hope that good sense will prevail before it is too late for our little nation, Sir. It is still not too late for the SDL to embrace with all sincerity the constitutional provision for genuine power-sharing so that we can pool the abundance of skills available on our side to create a government that has the policies and the vision to move our nation forward.

Mr. Speaker I wish you, the secretariat staff and Honourable members the very best for the festive season ahead and hope that the New Year will bring a better sense of national priorities rather than the continued adherence to self-interest which appears to govern the decisions of those in power.

I oppose the Bill.

Thank you.

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