Response to 2003 Budget by Hon Dr Ganeshwar Chand, Member for Lautoka City Indian Communal Constituency, 20th November, 2002 (posted 3 December, 2002, 11.45am)

Mr. Speaker, Sir, I rise this morning to provide a response to the 2003 Budget, which was presented by the honourable Minister of Finance in this august House. Mr. Speaker, Sir, I will revolve my presentation on four key issues. These deal with firstly, the nature of policies which the honourable Minister has outlined and I will argue, Sir, that these policies are indeed anti-poor, they are anti-people, they are anti-small and medium businesses, they are anti-growth and they are anti-nation.

Secondly, Sir, I will also argue that this Budget, and indeed the stand of the SDL-Government, is such that it fails to develop or nourish key institutions which are necessary for the development of this nation.

Thirdly, I will argue that this Budget, and the approach of the SDL-Government, institutionalises division in the country and institutionalises discord and disunity in the nation.

Finally, Sir, I will argue that this Budget is in fact un-constitutional.

Mr. Speaker, Sir, I wish to start my presentation with a quotation from page 34 of the latest Reserve Bank of Fiji Quarterly Review, that is the September issue of this year. On page 34, there is a Summary of presentations made by numerous people at a panel discussion organised by the Economics Association of Fiji. The summary of the former Governor of the Reserve Bank, Mr. Savenaca Siwatibau is included, Sir, and he is reported to state as follows, and I quote:

"Mr. Siwatibau concluded by outlining a few pre-conditions needed to encourage private investment and create an enabling environment. These were: good governance, law and order, a skilled labour force, strong and independent institutions, including the judiciary, sound macro-economic policies, political stability and good leadership at all levels."

Mr. Speaker, Sir, all economists would have to agree with the advice of Mr. Siwatibau. I have not heard any economist in Fiji, or anywhere in reputable international organisations, who have suggested that without good governance, without law and order, without a skilled labour force, without independent institutions (for example the judiciary) and without political stability and good leadership, any nation can progress. Mr. Speaker, Sir, it is a great misfortune of this nation that the current SDL-Government pays no heed to that advice. Sir, that is costing the nation significantly; it is costing the current generation and it will cost the future generation significantly.

Mr. Speaker, Sir, this Budget is against peace and prosperity in Fiji. It destroys the remaining foundation for short-term and long-term peace and prosperity throughout the nation.

Mr. Speaker, Sir, over the past year and two months, we have seen that this SDL-Government cannot be trusted to manage the financial, economic and welfare affairs of the nation and there have been ample evidences of that. This lack of trust emanates from numerous behaviour patterns of the SDL-Government. Let me outline just a few of them, Sir.

Firstly, the team which came into power after the August elections last year, is known for scams, for mismanagement, for corruption and for abuse. This fact has been pointed out by none other than the Auditor-General of Fiji. It is not something which we plug out of thin air. The Auditor-General has on numerous occasions raised significant concerns about this.

Mr. Speaker, Sir, another evidence showing why people do not trust the SDL Government to manage the financial affairs of the nation is that within one year, the SDL Government came to this House with three Supplementary Appropriations Bill. That is a record. These were not Bills which could not have been foreseen. The sums of money were very easily amenable to forecast had the SDL Cabinet paid some heed to advice on good governance.

Thirdly, there has been continuous disarticulation between the Budget statements and the actions of the SDL Government. We recall, Sir, only a few months ago, this Government came to this very House, asking to approve the re-allocation of funds from capital expenditure items to consumption items. These were millions of dollars. That is one example.

We also know, Sir, that the implementation rate of capital projects is miserably low. As at the end of October, the implementation rate of capital projects was hovering around 50 per cent to 55 per cent level. There is disarticulation between what they say and what they do. How can the public and the taxpayers trust this Government to manage the financial, economic and welfare of this nation?

In addition, Mr. Speaker, Sir, we have seen the case of the SDL Government misleading the House and I raise only two of these:

(a) the facts surrounding the awareness of the previous Cabinet of the Agricultural Scam. There is now ample evidence, Sir, that the then Interim Prime Minister was aware of this scam; and

(b) we also were misinformed, Sir, about the facts surrounding the ACP security card scam.

Mr. Speaker, Sir, this Budget itself contains numerous misrepresentations and I will point out some of them.

We all know and most policy-makers know, Sir, that a good budget ought to rely on and ought to be based on the economic capacity of the nation. What is the capacity of the nation to grow? That capacity, Sir, is reflected in the growth rate of GDP.

Mr. Speaker, Sir, if we are to propose a Budget which does not reflect the economic capacity of the nation, then that Budget will be busted, there will be numerous financial problems, debt will continue to rise and ultimately, the poor people, both of this generation and in the future generation, will be the ones who will shoulder the burden.

Mr. Speaker, Sir, the honourable Minister for Finance had stated in his Address that this Budget is based on one key foundation and that foundation is a targeted 5.7 per cent growth in the real GDP. Facts however, Sir, do not support that this target could be achieved. Let me go over some of the facts, as revealed by the Government's own Supplement to the 2003 Budget Address, as revealed by the Reserve Bank's Quarterly Review and as revealed by the key economic statistics, the latest issue given by the Bureau of Statistics.

Mr. Speaker, Sir, the cornerstone of the 5.7 per cent growth is the Tourism Industry. On page 10 of the Budget Address, the honourable Minister for Finance says the following and I quote:

"2003 growth forecast is driven mainly by the healthy performance of the Tourism Industry, which will be boosted by the South Pacific Games."

Let us look at the Tourism Industry, to start off, Sir. Indeed, to rely on one particular event, in one particular industry, the foundation for a 5.7 per cent growth in real GDP is nothing but foolish. We know that the Government is claiming that the construction sector will grow by 9.5 per cent and that is likely because of the South Pacific Games construction facilities; the wholesale and retail trade is expected by then to grow by 12 per cent and that is also on account of the South Pacific Games largely and increased tourist numbers, who are not SPG-related. The hotels, cafes and restaurants sectors are forecasted to grow by 11 per cent. These figures are from Table 1.1 in the Budget Supplement, which is available on page 11. Honourable Members may want to go over this.

Let us look at the facts, Sir. The South Pacific Games is a 15-day event, which starts on the 28th of June, 2003 and ends on the 12th of July, 2003. The first arrival will be five days prior to the start of the Games and the last departure would be around six days after the end of the Games.

According to the South Pacific Games Committee, Sir, they expect around 4,500 players and officials and around 5,000 spectators from outside Fiji. A total of around 10,000 visitors for about, at the most, two and a half to three weeks.

The South Pacific Games Committee, Sir, expects the following income generation from that event:

(a) $5 million - accommodation and transport for players and officials;

(b) $2 million - general personal expenses for players and officials;

(c) $3 million - from supporters on accommodation and expenses; with

(d) a total of $10 million - non-residents.

Mr. Speaker, Sir, which economist, in his or her right mind, would say that this $10 million expenditure related to the South Pacific Games by non-residents would contribute to:

(a) 11 per cent growth in the hotels, cafes and restaurants;

(b) 12 per cent growth in wholesale and retail trade; and

(c) 9.5 per cent growth in construction?

Unbelievable, Sir.

Mr. Speaker, Sir, one other fact is that June and July, when the Games are going to be hosted, is the peak tourist season for Fiji. Obviously, there will be crowding in our hotels, so we do not expect that tourist numbers would rise too significantly during that peak period. In any case, Sir, most of the games will be held in Suva, and Suva, as we all know, has very limited hotel capacity. Per day, I do not think there will be more than 900 rooms available, including the small motels around the city. Sir, obviously, basing the 5.7 per cent real growth forecast on one particular event is fraught with danger.

Mr. Speaker, Sir, we also know that Government capital construction for the South Pacific Games facility for next year is around $2 million. The Chinese Government Aid for the facility in Laucala Bay I think cost around $6 million, most of it is complete, about 60 per cent, which will leave around $2.5 million to $3 million additional expenditure next year. On what basis therefore, Sir, is the Government expecting the Construction Industry to grow by 9.5 per cent?

Mr. Speaker, Sir, I am just going by what the Government document is saying, the 5.7 per cent growth is in key contributed by the Tourism Industry, which will be boosted by the South Pacific Games.

Mr. Speaker, Sir, on page 17 of the Budget Supplement, the Government is saying that in the year 2002, visitor arrivals are expected to be 393,000 and it expects 426,000 visitors to be in Fiji next year. That figure, Sir, under normal circumstances, is not achievable, but of course, there could be initiatives which the Government could take to achieve those figures and I am going to talk about those initiatives towards the end of my response.

Mr. Speaker, Sir, we also know that in the Tourism Industry, the nature of visitors coming to Fiji is changing and that is revealed by some statistics. For example, in 1999, each visitor contributed $768 on average to hotel turnover. That figure declined to $658 in 2001 and in 2002, data at hand shows that that figure is $725. This means that the nature of visitors coming to Fiji has changed visitors are not spending too much money in Fiji. The Tourist Industry would, I am sure, be very aware of that. Obviously, being comfortable with the figures on the number of people coming to Fiji, without looking at the spending power of the tourists who come here, is not very wise policy-making.

Mr. Speaker, Sir, let me now turn to the wholesale and retail trade. On page 16 of the Budget Supplement, there is a statement which reads as follows and I quote:

"Consumption remained exceptionally strong in 2000, despite economic slowdown, resulting in the wholesale and retail trade industry recording a growth of 9.5 per cent."

That is from the Budget Supplement, Sir, yet, the facts are different.

The current economic statistics shows that the private consumption expenditure grew only by 2.3 per cent in the year 2000. If you account for inflation, Sir, the growth in consumer expenditure is a measly 1 per cent. So one may ask, where does this exceptional growth in consumption come from? Is it an attempt to mislead this House and the nation, Sir? Facts speak something else, the statements coming in these books are different.

Another fact, Sir: consumer confidence in Fiji is at an all time low since year 2000. That fact is well-known by all retailers. Mr. Speaker, Sir, the SDL booklet, Supplement to the 2003 Budget Address, talks about improving and rising incomes. On page 16, Sir, they say that in year 2001, there was relatively better incomes stemming from improved labour market conditions and high remittances. For year 2002, it says that there is higher disposable incomes. Yet, Mr. Speaker, Sir, we know that the real income of the people in Fiji has been falling, and has fallen drastically since year 2000.

On page 18 of the Supplement to the 2003 Budget Address, Sir, the following is stated "... substantial redundancies, reduced incomes" so on one page they say there is relatively better income and on another page in the same book, they say, "there were substantially reduced incomes" for year 2000 and no improvements in the first quarter of year 2001 and early 2002. We know, Sir, that there is no return to the pre-terrorist days in terms of real incomes and consumer confidence for the people. Consumer confidence is a vital ingredient, Sir, of any growth in the wholesale and retail sector and indeed, in the economy.

Let us look at construction, Sir; The 9.5 per cent growth in construction. The Government has been talking about a capital expenditure of $239.7 million. But, Sir, when you look at that figure, we see that only $153 million of $239.7 million is going to actual capital construction. The bulk of it, Sir, a large part of it, about $83 million, is in the form of transfers. These are grants which would be given out. These grants also include areas where there will be consumption expenditure. They are not capital expenditure. What I am proposing, Sir, is that that figure of $239.7 million is misleading. The actual construction expenditure by the Government is $153 million which includes $5 million for computer hardware and software. This, Sir, is a decrease of $24.6 million or 14 per cent relative to 2001, a fact hidden on page 64 of the Budget Supplement. The actual physical construction and capital purchase in 2003 is 14 per cent lower than the 2001 level. The Government is talking about an expansionary fiscal policy or a fiscal policy where it claims that there will be growth through construction. Facts reveal otherwise, Sir. If one included aid-in-kind, still the figures are lower than the 2001 level. For example, if you look at the aid-in-kind, other than the $8 million Japanese aid and the $24 million European Union aid, the rest of the aid is for institutional development and not for construction.

Mr. Speaker, Sir, the target of 9.5 per cent is unrealistic. Similarly, Sir, in the transport and communication sector, the target of 9.3 per cent is grossly unrealistic. Let me give you an example, Sir. The Government says that that target would be achieved. The main reason for the transport sector to grow is the following: increase in new vehicle registrations and increase in air travel.

Let us look at the facts, Sir. On page 17 of the Reserve Bank of Fiji Quarterly Review, the latest one, there is some data on outstanding loans and advances from commercial banks for purchase of cars and private vehicles. What they show, Sir, is that the average monthly outstanding loan for purchase of private cars has been declining. In year 2000, the average was $20 million, in year 2001, it was $17 million and this year, as of now, it is $16 million. The Government is expecting a boost in the purchase of cars!!! Even its own budget for purchase of Government cars has been halved from $4 million to $2 million, so where does that growth forecast of 10 per cent for transport come from? The Government will have to do some explaining. We need answers, Sir, because we cannot continue to be misled with general statements while the facts, the actual data proved something else.

Mr. Speaker, Sir, the Government has for once rightfully accepted that the nation needs an investment rate of 25 per cent. I agree, Sir. Fiji needs an investment rate of 25 per cent if we are to sustain growth at over 5 per cent in the GDP. The facts, Sir, are revealing. Table A29 of the Reserve Bank of Fiji Quarterly Review, Sir, shows the investment rates for various years. Mr. Speaker, Sir, they show the following; the investment rate was the highest in 1999 for the past seven years. Of course, that was the time when the People's Coalition Government was in power. The private sector investment in 1999 was the highest for the previous 15 years. In 1999, there was highest public sector investments, again, Sir, when the Labour-led Government was in power. Another fact, Sir, this is all coming from this book, is the highest Government investment level in 1999 ever. That is what this table reveals and yet, the overall investment rate was 12.7 per cent for that year.

Mr. Speaker, Sir, since then the investment rate has declined, it stood at 9.9 per cent in 2000 and I have reasons to believe, that it is no more than 10 per cent now. The Government is basing its growth of 5.7 per cent on a 25 per cent investment rate. The target is laudable but the SDL Government cannot achieve it, Sir, there is no way it can achieve this.

There are ample facts, Sir, if they care to read and listen to a wide cross section of the people, not only the multi-millionaires. Let us read what page 18 of the Supplement says and I quote:

"The downward trend in investment levels, particularly private investment, is a major concern as it is an essential ingredient towards achieving sustainable economic growth ..."

The Government is concerned at the downward trend in investment on page 18. All I am saying is that the trend is downwards and there is no new initiative which can convince us that the investment rates will increase. Indeed, Mr. Speaker, Sir, the investors and the employers are very weary of what the SDL Government is doing. Let them read, Sir, page 16 of the Reserve Bank of Fiji Quarterly Review. On page 16, there is a very interesting and a very diplomatically presented table and some paragraphs explaining them.

The Reserve Bank of Fiji had carried out a survey of business confidence in the country. What they did was to survey the employers. What it revealed is the following: 46 per cent of the employers do not expect any increase in employment. That is revealing; 46 per cent of the employers do not expect any increase in employment. Of course, the way it is coming out here is that 54 per cent of the respondents expect permanent employment to increase. Which means 46 per cent do not expect any increase in permanent employment. That, Sir, shows the confidence or the lack of confidence with the investors in the SDL Government. All that they have to do is to listen, read, understand and accept the facts, that is all that I am saying.

Another fact. The honourable Minister had talked about the $1 million allocation to FIC.

Remember FIC, that vehicle for encouraging investment and growth? Mr. Speaker, Sir, last year the allocation was $15 million. They cut it down to $10 million in the Supplementary Appropriation, next year it is $1 million. Whom are they trying to fool, Sir?

They talked about FIC as a vehicle for investment. I am suggesting to this august House that the Government is not serious about using FIC as the vehicle or mechanism for boosting investment.

Mr. Speaker, Sir, I know that my time is running out and I have a lot to cover. Let me go onto manufacturing. I leave the sugar industry to my other colleagues but let us talk about the garment industry. The garment industry, Sir, is a very interesting industry. On page 15 of the Supplement to the 2003 Budget Address, I quote only 10 or so words which state the following:

"Garments production for 2002 is expected to grow moderately, with earnings forecast to decline ...".

Mr. Speaker, Sir, that my philosopher colleagues would say, is dialectics. The industry is expected to grow, but earnings are expected to decline. Dialectics is often true, and I will tell you how it will be realised later on. One fact was published in yesterday's paper: "Kalacraft is closing". That is a fact, Sir, as 300 people will lose jobs. The fact is that reliance on the non-food sugar industry to grow by 9 per cent is unrealistic. Any country needs the manufacturing sector to grow and for the manufacturing sector to be sustained it needs appropriate policies and an appropriate institutional framework. The SDL Government (and indeed it is not only their fault, but it goes back to the SVT Government), its proposed polices would only see temporary investors coming here. When those policies are no longer in place, they take off and we see that happening with the garment industry. Why not build the base on the basis of resources available in the country? Fiji is well endowed with resources. At this stage, Sir, I would like to read from the Reserve Bank of Fiji's Quarterly Review where the current Governor is summarised to have said the following.

"He (Mr. Narube) also mentioned that our nation's growth rate does not give a good feel for whether or not the nation is growing enough relative to its population. He pointed out that Fiji's GDP per capita remains relatively stagnant over the past 25 years, in comparison, other island economies of similar structure such as Mauritius and Trinidad and Tobago continue to grow. In Mauritius' case, quite substantially. These comparisons give us a feel of how below Fiji's potential stands".

Indeed, it does, Sir. Most advisers have been telling this to the Government but they have just not been listening. We have the potential to develop our manufacturing sector, we are just not using them. By relying on industries whose only contribution are wages they pay to the local workers and those too, Sir, pittance wages, one cannot expect the country's manufacturing sector to grow.

Sir, in mining and quarrying, a growth of 13 per cent is expected with 15 per cent growth in the mining sector. There is no evidence of that. The Government is saying Mount Kasi will start in November, re-mining there. I do not see any drills working; we were on that side only last week.

Mr. Speaker, Sir, electricity growth of 5.4 per cent in real terms is expected. But I do not see anything other than increasing demand for electricity but no capital projects going on in that area.

Agriculture, Sir, again, I leave that to my colleagues to talk on but there are three figures I like to refer to. These are: 8 per cent growth for other crops, 8 per cent for livestock and 8 per cent for fishing. All these are plugged out of thin air. The policies and the budgetary allocation do not show that there is anything different from last year and they do not show anything different for this year, yet there is a 8 per cent growth in real terms in these sectors. Mr. Speaker, Sir, the chickens are coming home to roost.

Sir, I am reminded of an advice to me some years back by a former speaker of this House, then Mr. R.D. Patel. He used to tell us that many leaders have fallen because they begin to believe in their own lies. And here the SDL Government has begun to believe in their own lies. I urge the SDL Cabinet to wake up to facts and there are ample facts. I say, Sir, that the Government has still (despite net loss of human resources), a very capable group of advisers, professional economists in the Reserve Bank of Fiji, in the Ministry of Finance and other ministries, but what is lacking is a Cabinet which can channel that ability so that they can begin to advise the Government without any fear of losing their jobs. The Government is still endowed with that human capital. I urge the Cabinet and I urge the Government to utilise that skill because the facts are ample in these books. They show that we are going down.

Mr. Speaker, Sir, there will be 17,000 new workers joining the labour market at the end of this year and what the SDL Government talks about? Only 131 new jobs in foreign investment projects. That is on page 19 of the Supplement to the 2002 Budget Address. They also talk about the Integrated Human Resource Development Programme for Employment Promotion (IHRDPEP) project. That project was a very elaborate project conceived by ILO with stakeholder interest; the trade unions, the employers and the Government. Sir, that project had a lot of potential but because of the lack of ownership now with the SDL Government the amount of money sunk in has not resulted in the projected growth in employment. Mr. Speaker, Sir, over $6 million has already been spent and let me say that if that $6 million was used to let people dig drains and then cover them up, there would have been more jobs and more income created. That is a sad state of affairs arising from a lack of ownership of policy.

The Government had actually based its budget last year on one particular sector, that is the informal sector. The honourable Members here may recall that I had talked at length about the informal sector. This year? Not a word on the informal sector.

Not a word on the informal sector. Mr. Speaker, Sir, what happened? I had warned Government about relying on the informal sector. Now I understand that the Government has taken the warning seriously and I am glad about that. But, Sir, what it shows is the lack of experience of the Cabinet and, in fact, the attempt to experiment with untested, unresearched proposals. This kind of experimentation must be rejected. Indeed, they must be condemned and rejected.

Mr. Speaker, Sir, we have lost a lot of money into experimentations by the SVT Government and I can give a lot of examples. The Shipyard is one of them, privatisation schemes are another, structural reforms and tax reforms (which I will come to later) are all experimentations. They are costing this nation heavily.

Mr. Speaker, Sir, what is needed is ownership of policy. I endorse what the honourable Leader of the Opposition had said. I, myself, have said many times in this House that people need to own policies. People need to accept the policies as if they were their own. That ownership can only come when people are included in inclusive decision-making, not exclusive decision-making as the SDL Government is trying to do.

We are ready to come that side!

I urge the honourable Member for Nasinu Urban Communal (E. Qovu) to convince his Prime Minister and beg him that we come that side.

Mr. Speaker, Sir, I am convinced that without ownership of policy, most of the policy results will be frustrating. I advise the SDL Government and Cabinet to talk to Mr. Rabuka sometime. Go and talk to him. He is the one who is experienced and who experimented. He had many anti-poor people policies. Go and learn from him.

Sir, what do we see? Lack of ownership.

Mr. Speaker, Sir, page 30 of this supplement is very revealing. With your permission I wish to quote from paragraph 2.14:

"The establishment of the Tripartite Forum was put on hold in 2002 to await the development of the new national trade union centre."

Sir, our Government had worked very hard to re-establish the Tripartite Forum. The SDL Government had also promised that they will establish the Tripartite Forum but then they put it on hold because the honourable Minister for Labour and the SDL Government were trying to split the Trade Union Movement and create a new rival. The facts come out, Sir. In that environment, how can one expect the workers and trade unions to own policies of the Government. They will not.

Mr. Speaker, Sir, let me move on to inflation rates. The Government is saying that the inflation rate for next year will be three per cent. At the moment, it stands at 2.5 per cent. Now let us look at the facts. At the moment it is 2.5 per cent, next year it is going to rise by only 0.5 per cent. What have they done? There is a 25 per cent increase in VAT which will have - a direct effect on inflation.

International oil prices are sure to rise. Since America is determined to create havoc in the Middle East, oil prices are going to rise. Government is saying that price control will go from numerous items. Page 31 of the Supplement says that. Government had established what it called a "steering committee" comprising the private sector and Government which agreed to lift price control on 146 items. The honourable Minister for Finance said that they were only going to review price control (PIB). The fact is that they have agreed to lift price control. That is what is stated in this book.

It also states that it will consult all the stakeholders. I tried to get the membership of the Steering Committee but I saw no-one from the trade unions, nor the consumers. Who were these members from the private sector? I can only guess. You all can guess - they are multi-millionaires. The same people who have been profiting from monopoly pricing, low quality goods that are being dumped here and the same people who want price control to be lifted. Who can believe, Sir, that the inflation rate will only be three per cent. Let me tell you who - the Reserve Bank policy makers. The people who are involved in making policies. They have, rightfully, introduced a new term called "trimmed, mean, underlying measure of inflation". I am sure none of you have ever heard of that, except perhaps the honourable Minister of Finance. The SDL Cabinet does not even know about it. In a lay-man's term, it means that you trim the inflation figure.

The Reserve Bank does it for a good purpose. It does it for monetary policy purposes, but the trimmed mean measure of inflation does not reflect the actual inflation in the country because it excludes inflation arising due to seasonal factors and policy changes.

Mr. Speaker, Sir, the March Quarterly Report of the Reserve Bank has three or four pages on the trimmed mean measure. Prices are going to sky-rocket next year. That is for granted. Price controls are going out. VAT is increasing, oil prices are likely to increase and the trimmed mean will not help the people.

Let me go over the fiscal policies, Sir. I have already spoken about the claim of an expansionary fiscal policy but the facts are different. Fiscal policy is not as expansionary as the SDL Government wants us to believe. Mr. Speaker, Sir, $83 million out of the $239 million, is for capital transfer which will be used for consumption. Deficit levels are going to rise and it will have a direct consequence on the debt in the country.

Let us look at the facts, Sir. The Government, this time last year, was saying that the net deficit over GDP would be six per cent. What is the fact now? The figure is seven per cent. The net deficit over GDP has increased. This time today, Sir, it is saying that the net deficit over GDP would be four per cent and I am saying that it is going to be much higher than four per cent unless the SDL stops capital projects. The revenue projections are too over-optimistic and expenditure proposals are understated. Let me give you some examples.

VAT collections: This year it is estimated that $184 million will come from VAT and next year $271 million (a rise of $87 million). Sir, that is grossly over-stated. $271 million represents six per cent GDP. The VAT rate next year will be 12.5 per cent. In 2001, the VAT collection was 4.8 per cent of GDP. So from 4.8 per cent of GDP, they want to raise it to six per cent of GDP - a highly unachievable target. My estimate is that there will be a shortfall of at least $30 million in next year's VAT collection. At least $30 million from the $271million target and that will raise the debt rate from four per cent to five per cent directly. Similarly, Sir, the income tax collection figures are over optimistic. They exclude any impact of the change in the tax threshold, as well as they are based on a growth of 5.7 per cent, which I know will not be achievable.

Mr. Speaker, Sir, customs duty collection is expected to increase by $36 million, of which $25 million will come from the Sugar Export tax increase.

Mr. Speaker, Sir, fiscal policy is not expansionary. I urge those people who have accepted the SDL propaganda to look at the facts. The fiscal policy of the SDL Government is not expansionary. The Capital Expenditure on Purchase of Non-Current Assets has fallen. It will be lower next year then it was in 2001. How can then it say that it has an expansionary fiscal policy.

The overall debt position in year 2001, was $1.68 billion. This year, the debt of the nation is expected to be $1.87 billion and next year, it is going to be $1.91 billion, under the SDL Government.

Mr. Speaker, Sir, that is a very serious matter. Whatever they say, the facts are different and it is time that Ministers think about this, let alone the rhetoric; leave them alone. Look at the facts, keep them aside. Sir, at the moment, most of the Ministers and of course, alot of the backbenchers, are overridden with political considerations, not with the facts. Look at the facts, make decisions from the basis of the facts and you will serve the nation.

Mr. Speaker, Sir, let me go on to monetary policy now. Generally, in Fiji for many years, monetary policy is geared towards inflation and maintaining a good reserve position. Sir, maintaining inflation at reasonable levels is important but, this slim trimmed mean measure - I ask the trade unions to be very wary of it as will be used by the Government and employers to show that the actual inflation is low, therefore your COLA should be lower then what it should be. Sir, the actual inflation would be much higher and the monetary policy will have to target inflation.

Mr. Speaker, Sir, the good thing I see is that, the interest rates in commercial banks in Fiji have been declining from over 11 per cent to 8 per cent now. I will propose to some of the people on the other side to look at the reasons why interest rates are declining. Whether the People's Coalition Government had anything to do with that because we are convinced that had the People's Coalition Government not taken a very firm stand, the interest rates would not have declined. Of course, we were not allowed to complete the project on the bank sector reform. What we see now, however, is while the lending rate has declined, the interest spread has actually increased. The interest spread is the difference between the lending rate of the commercial bank and the rate at which it borrows money from the people, for example, your term deposit rate and your savings deposit rates.

Sir, let me look at some facts. In 1992, the lending rate was 12.46 per cent while the term deposit rate, (the rate at which you put your money for term deposit) was 8.5 per cent. The difference, which is called the interest spread was 3.96 per cent.

In year 2001, Sir, the lending rate was 8.19 per cent while the term deposit rate was 2.43 per cent, a difference of 5.76 per cent. While the commercial bank lending rate decreased, the commercial bank profits have increased because they are paying the depositors lower. The SDL Government must move and move firmly, and not to speak of the fees and charges. Because of shortage of time, I will leave that to my other colleagues and of course, there is a motion on that and the honourable Member for Nasinu Communal (P. Chand) had earlier spoken on this. It is time that Government acts decisively to contain this mammoth rise in fees and charges, and falling interest rates for customers.

But, what do we see, Mr. Speaker, Sir, the Reserve Bank is moving to supervise the Fiji National Provident Fund (FNPF). Instead of supervising the banks so that they are able to deliver what they are supposed to deliver to the people, they are moving to supervise the FNPF. Sir, that is the epitomy of bad governance. Let me tell you why.

Each year Government raises funds through the issue of treasury bills and bonds. Who manages the issue of treasury bills and bonds? It is the Reserve Bank of Fiji. Who is the greatest lender? The Fiji National Provident Fund. Now, the Reserve Bank which manages the issue of treasury bills and bonds is going to supervise FNPF. There is a direct conflict of interest and bad governance.

The FNPF, Mr. Speaker, Sir, must have a competent board. Let the board manages FNPF affairs. I know my fellow colleagues will be talking about FNPF but, Sir, the Reserve Bank has no business monitoring FNPF. It must remain independent, it must contain its activities to manage the affairs of the banks and insurance companies.

Sir, on insurance, next year, there will be a 12.5 per cent VAT which is going to have a significant impact on the insurance premium and the flow-on effect. The Third Party Policy is going to rise, Home Contents Insurance is going to rise and all premiums are also going to rise. Of course, the industry has expressed serious concern on this. An article on the Fiji Times of 13th November, 2002 had carried some of these concerns. I can only point out and stress that it will increase the cost of insurance. That is not to say the insurance industry is without blame. They themselves have said that they have profited significantly from the premiums and of course, if I had more time, I would touch on that. However, my colleagues will also be looking at that.

Mr. Speaker, Sir, liquidity in the banking system is very high and that is an indication of lack of investor confidence in the country. If liquidity has been absorbed by the Reserve Bank of Fiji notes, that is only a temporary measure at absorbing liquidity. Look at the underlying facts, liquidity is high because there is low investor confidence.

Mr. Speaker, Sir, let me go on to trade, exchange rate and reserves. Again, a conflict of statements. On page 20, para 1.71 of the Supplement to the 2003 Budget Address, the following is stated and with your permission, Sir, may I quote:

"For 2003, export earnings are forecast to grow significantly,...."

On paragraph 1.77 at page 21, it says and I quote:

"The trade deficit is expected to deteriorate significantly, reflecting lower export receipts and a significant rise in import payments."

At page 20, export earnings are forecast to grow significantly and page 21 says that trade deficit will worsen significantly because of lower export receipts. Please tell us one thing; do you expect it to rise or do you expect it to fall? Or is it your usual dialectics?

Mr. Speaker, Sir, the trade deficit is higher this year by $50 million, the capital accounts surplus will contract by about $60 million, the reserve level this year, is lower than last year. At the moment it stands at 5.6 months of imports of goods or 3.6 months of imports of goods and services. Let us look at the facts, Sir.

At the moment our foreign reserve is at 5.6 months of imports of goods or 3.6 months of imports of goods and services. Let us look at some of the past figures. In December, 1997, the reserves were 5.7 months of imports of goods. In December, 1996, it was at 6 months. And Sir, we know that in January, 1998, there was a 20 per cent devaluation.

Mr. Speaker, Sir, let us look at reserves in relation to months of imports of goods and services. In December 1996, our reserve was sufficient to have four months of imports of goods and services.

In December, 1997 - 3.8 months of imports of goods and services; now, it is 3.6 months of imports of goods and services. Reserve levels are not comfortable, Mr. Speaker, Sir. Despite the protestations of the Government, they are not comfortable. This, together with the following other facts, Sir,

(i) Fiji dollar has fallen against the New Zealand and the Australian dollars but increased against the American dollar, the yen and the euro;

(ii) exports of garments are not too bright;

(iii) their reliance on tourism - the figure of 426,000 visitors show that the Government has based all these on a pending devaluation. A devaluation is to come, Sir. The facts speak for themselves; reserves are declining, our garment industry is suffering, they are expecting a lot of tourists to come in. The solution for that, Sir, is a devaluation along the way, perhaps January or maybe earlier.

The SDL policies, Sir, are anti growth. They are anti-poor, and anti-people. Let me briefly refer to the Value Added Tax. We cannot expect and trust the SDL Government to help the poor people. Poverty rate has been rising. What we see, Sir, is one additional million dollar to Social Welfare payments - $1 additional million from this year. They are going to collect about $80 million more from the poor but, they will be paying only $1 additional million for welfare relief to the poor. I am not going to go into that. My views are well-known in this House, Sir. There is no economist in this world who says VAT is anything but a regressive tax. The burden will be on the poor disproportionately. Sir, we are now looking at a legal challenge on the Government's decision to increase VAT.

Sir, let me go on to the other issues. The crucial area Sir, is to do with what Mr. Siwatibau had talked about: good governance, law and order, property rights, ownership of policies. And there again, I also commend the honourable Member for Western/Central General Communal (M.M. Beddoes) for talking at length on these. This SDL Government, Sir, listens to none other than the multi-millionaires because they make money at the expense of the poor people.

Mr. Speaker, Sir, the prices of flour, rice and essentials have been rising. Prices of bread, tin fish have also shot up, Sir, and these are the items that the poor people consume.

Mr. Speaker, Sir, I came across a very interesting statement on page 32 of the Reserve Bank Quarterly. This is a summary of what Mr. Hari Punja had talked about at the Reserve Bank panel discussions. He says, and I quote:

"There was even more money to be made after the coup."

I agree, Sir. Of course, that was why they created the coup. That was why they funded the terrorists. They wanted to make more money at the expense of the poor, Sir, so that the price controls can be removed and the policies for the poor people are taken off the shelf, VAT be imposed and the rate increased.

Mr. Speaker, Sir, the people will revolt if this trend continues. The people will throw out the SDL Government as they threw out the SVT Government. Wake up, wake up, it is time you wake up - that is my advice to the SDL Government. What we see is that in the Public Enterprises and in the higher ranks in the Civil Service, is the entrenchment of mediocrity, failed politicians and failed bureaucrats are being sent abroad, what is the message going out to the investors, Sir?

Mr. Speaker, Sir, this SDL Government is nothing, but a scandal Government. SDL stands for scandal.

Mr. Speaker, Sir, to open up business in Fiji, investors know that there is a need for some beaucratic "assistance". Anywhere between 10 per cent to 15 per cent of the cost of establishing businesses and running them goes in bribes.

Mr. Speaker, Sir, that is a telling reflection of where the nation is heading towards, not to speak of, Sir, the extensively deteriorating race relations in the country. Mr. Speaker, Sir, I can only urge the SDL Government that it is time that they take heed of the fact that all people in Fiji are here to stay, irrespective of their ethnicity, race, religion or creed. They ought to include them in policy-making, decision-making, and not exclude them, and indeed, I will go to the extent of saying, Mr. Speaker, Sir, that any person, however his or her high standing in society is, if he or she claims that by excluding people one can make good policy, that person does not deserve to be in this House. In multi-racial nations, the only way to progress is through including people in decision-making.

Mr. Speaker, Sir, I sum up by saying that the Budget for the Year 2003 is anti-poor, anti-people, anti-growth. It fails to nourish and develop institutions necessary for development. It institutionalises division, discord and disunity, and Mr. Speaker, Sir, the Cabinet is illegal and policies proposed by the Cabinet therefore are also illegal.

Mr. Speaker, Sir, I would vote against the Bill.