Until 2004, balance of trade and payments deficits had not prevented a general rise in reserves, but the sharpness of adverse movements since then

have led to a fall in reserves. Concern is increased due the adverse change in import cover due to the combination of subdued exports and increasing imports. 

In October 2005, the Reserve Bank made a timely and appropriate response by raising interest rates to restrain demand and imports. RBF has gradually increased rates by 2.5% up to mid-2006. In its Monetary Policy Statement of May 2006, RBF makes clear that it will “maintain a tightening bias in its monetary policy stance in the foreseeable future” and “will be monitoring very closely the development in the trade balance of the Balance of Payments”. The SPS proposes a parallel tightening of fiscal policy to support demand management and move from consumption and import led growth to sustainable growth led by exports and investment.

Consumption, Savings and Investments

Consumption remained firm into the first half of 2006 with net Value Added Tax (VAT) from domestic collections increasing by almost 10% in April over the 2005 period. Lending for consumption purposes also showed strong growth with consumption activity also supported by rising incomes, reflected in growth in Pay As You Earn tax receipts by 11.8% on an annual basis. The Reserve Bank’s December 2005 Retail Sales Survey indicates 2006 growth in retail sales will slow to 5% compared to 15% in 2005 due to factors including: import excise duties on consumer durables; continuing high oil prices; and the deliberate monetary policy tightening. Monetary policy now seeks to facilitate the change to export and investment led growth.

Savings in the last quarter of 2005 grew by 5% as private and public enterprises and Government saved whilst individuals continued to borrow as loans and advances grew 7.3% over the quarter. Savings have been discouraged by negative real interest rates on savings and time deposits. As illustrated in Figure 7, the tightening of monetary policy has created positive real interest rates for time deposits for the first time since 2001 and this may encourage future savings to support investment led growth.

Investment has risen 11.5% of GDP in 2000 to 16.7% in 2005 and an expected 17% in 2006. Over this period, private sector investment increased from 3.1% to 6.1% but is still less than half the 13.6% of 1985 and the similar level now needed if productive investments are to lead economic growth. The overall target for annual investment is 25% of GDP, of which the private sector will be encouraged to provide about 15%.

Exchange Rate and Reserves

RBF has two objectives of monetary policy: low inflation and an adequate level of foreign reserves. The adverse change in the balance of trade has impacted upon reserves and required the monetary Figure 7: Real Interest Rates measures being taken to

maintain reserves, through demand management. In October 2005, RBF increased the indicator rate by 0.5% to 2.25%. Subsequently the rate was increased in 2006 by 1.0% in February and another 1.0% in June. In May, RBF also raised the commercial bank’s statutory reserve deposit requirement ratio from 5% to 7%.

These initiatives have made a significant impact on the

lending and deposit rates offered by banks. The real rates of interest, net of inflation, which lenders paid had increased significantly, and for new lenders had risen by over 50% in real terms from 3.88% in 2005 to 7.04% by July 2006. Meanwhile, real rates on time deposits switched from minus 0.72% in December 2005 to plus 4.16% in July 2006 and for new time deposits real rates reached 5.73%. These changes are expected to encourage savings and lower growth in consumption and imports.

Inflation

Despite the expansionary fiscal and accommodative monetary policy stances in the last few years, inflation was maintained at acceptable levels. Inflation remained low and stable due to lower imported inflation and subdued domestic prices. Low levels of inflation continued into the first six months of 2006 and by July the rate was 1.8%. Domestic price pressures have been less than anticipated whilst tightening by the central banks of major trading partners has helped keep imported inflation in-check. In this context, inflation in 2006 may be lower than projected but, conservatively, the year-end inflation forecast remains at 3.5%, influenced by expectation of continued high global crude oil prices.

3.1.5 Fiscal Position in 2006

Budget Deficit

For 2002-2005, the net deficit averaged 4.6% of GDP due primarily to: (i) slower than expected reductions in costs of national security, salary and wages increments, (ii) the cost of disaster rehabilitation in 2003, (iii) overspending by major Ministries, and (iv) the cost of General Elections in 2006. Revenue performed to expectations with the exception of the delayed realization of asset sales proceeds in 2002 and 2004.

Figure 8: Actual and Projected Fiscal Balance In 2004 and 2005, Government reduced the net

deficit below 4% of GDP but further reduction requires that expenditure, particularly for operations, is restrained to levels commensurate with the growth in the revenue base. As illustrated in Figure 8, the deficit will not significantly exceed 2% of GDP in any year of the plan period.

The result of continuing

Figure 9: Actual & Projected Debt to GDP Ratio

deficits has been an increase in public debt from 44.7% of GDP in 2001 to 52% of GDP in 2005 (Figure 9). Whilst the present level is not unduly high, it is necessary to limit the level of debt in order to retain confidence in the country and its finances. The increasing level of debt also increases the annual costs of debt service, thereby either increasing the budget deficit further or reducing funds available for expenditure programmes. Government will continue its current fiscal policy stance of reducing deficits over the medium-term so as to better manage debt and encourage greater use of

the country’s savings in the private sector.

Debt Management and Contingent Liabilities

The reduction in the

Figure 10: Estimated Financing and Refinancing ratio of debt to GDP does not mean that Government will no longer borrow. Total debt service is some $300m to $350m per year and nominal value of total debt will continue to rise at sustainable levels as Government borrows to refinance loans repaid and raise new debts to fund public sector

Annual borrowing for refinancing and new debt is estimated to be about $400m to $500m per year (Figure 10). This will be consistent with macroeconomic objectives and, by turning over the debt portfolio, it will provide an opportunity to restructure the debt.

The borrowing of off-budget entities does not form part of government debt though they are contingent liabilities due to Government guarantees. These liabilities have been on a downward trend as a ratio to GDP but in 2005 amounted to 59.4% of GDP. The major part of this is in the form of guarantees of the liabilities of FNPF, whose major asset is loans made to the Government. Thus, the contingent liabilities associated with FNPF relate to debt which Government owes to FNPF - effectively double counting Government’s obligation to repay the debt and the contingent liability to guarantee FNPF if it does not do so. Net of the FNPF liability the Government has contingent liabilities of some 20% of GDP additional to the public debt. There is no commonly used benchmark for the sustainable level of contingent liabilities. Government will encourage statutory authorities and companies that are majority owned by Government to borrow on the strength of their balance sheets and cash flows. Government guarantee will be restricted and used only as a last resort.

Although contingent liabilities are not a current concern in terms of direct impact on Government finance they are an issue as they impede the process of restructuring public enterprises for which debt had been guaranteed. This issue will be addressed in the Plan period as a part of the more fundamental restructuring of the public sector discussed in Chapter 6.

3.2 Sector Performance

3.2.1 Sectoral Challenges and Opportunities

The overall growth in GDP averages very different performance of individual sectors. The performance, status and development challenges of each sector are analysed in the following sections of this chapter.

Sectoral performance falls into two broad groups of those growing well and those with erratic and/or low growth performance. Significantly, the service, manufacturing, and construction sectors are all growing well – with the single exception of the garment sector impacted by liberalisation and removal of quotas. By contrast, all of the natural resource based sectors are under-performing and/or performing erratically – with the single exception of the private sector led mineral water sector.

This suggests that priority must be given to the service and manufacturing sectors in the plan period in pursuit of economic growth, exports, increased private investment and poverty reduction. Here, tourism is the lead sector and has the capacity to drive supporting development in services, construction and manufacturing as well as creating markets for natural resource sectors if they are able to raise their efficiency, product quality and market orientation.

The natural resource sectors have much greater potential than their recent performance suggests – the mineral water success is a good example of this. Given private sector leadership in marketing, production and investment the natural resource sectors can contribute much more to development. This especially important given their potential impact on poverty alleviation, affirmative action and social justice, and rural and outer islands development. Whilst current performance suggests that the natural resource sectors are unlikely to contribute significantly to growth related objectives in the near term it is essential that reforms in their operations and management be undertaken so that they can make effective contributions in the medium and longer term. Substantial reform and restructuring of the management of these sectors is required – led by the sugar sector

– and is provided for in the overall strategic priorities.

3.2.2 Sugar

The changes required of the sugar sector result from global developments, primarily the WTO driven trade liberalisation, ending quotas and preferential pricing, and the consequential EU reforms. These international institutional changes have necessitated an urgent response from a dwindling local sugar industry. Sugar sector production has fallen by 30% since 1995, even before price reductions commence, and the contribution to GDP has dropped from 11.3% in 1995 to 6% in 2005. Cane production has fallen in the same period from around 4 million tons in 1995 to 3 million tons in 2005. Consequently, sugar production levels are now around 304,000 tons compared to 454,000 tons ten years ago. Land tenure insecurity, production and milling inefficiency and political interference have all contributed to this situation.

Against this backdrop, reforms have been initiated to raise farm level and mill efficiency to steer the industry to viability. The current sugar production forecast for 2006 stands at 322,000 tons, from 3.28 million tons of cane. This represents a TCTS³ ratio of 10.2, which is high and inefficient when compared to the TCTS of 8.7 in 1995. A desirable TCTS ratio for the industry would be around 8. Sugar production forecasts for 2007 and 2008 currently stand at 327,000 tons and 366,000 tons respectively. Total sugar exports for 2006 are projected at $229m, an increase from $217.9m in 2005. Projections for 2007 and 2008 currently stand at $209.3m and $287.4m respectively.

Up to 60% of sugar produced has been for the preferential EU market with a quota of 173,000 tons. The EU has announced progressive cuts in preferential prices from 5% in 2006/2007 to up to 39% by 2009/2010. The local sugar industry therefore needs to quickly adapt as it is slowly exposed to the world market. The EU has indicated its support in this transition phase, in the form of a grant funded National Adaptation Strategy, and also through other trade arrangements such as the Economic Partnership Agreements, which are being negotiated.

Development Constraints and Challenges

The future of the industry will depend heavily on the inculcation of commercial values in all aspects of operation, from farming and harvesting, to transportation and milling. With

³ Ratio showing how many tons of cane required to produce a ton of sugar the ceasing of preferential treatment in the EU market, the merits of the industry will be weighed against other sugar producing countries on the highly competitive world market.

Improving farm level productivity is an additional area crucial to establishing the industry’s competitiveness. Put into perspective, the average cost of producing sugar locally is US 14 cents/pound compared to Brazil at US 4 cents/pound. Local cane productivity levels average 42 tons/ha compared to 80 tons/ha in Brazil. Brazil, as the current lowest cost producer, represents the benchmark for best practice. The variation in productivity levels between the two countries is attributed to factors such as the incidence of replanting, crop variety and husbandry, and farming and harvesting techniques. Strategies are being put in place to systematically address these areas in the local industry but its success will depend on the effectiveness of the research and extension services of FSC and support from SCGC.

With Government support, the FSC has secured an $86m loan from the EXIM Bank of India to upgrade the machinery and equipment in its mills. The recapitalisation programme should improve the milling efficiency of FSC, reducing breakdowns, and improving sucrose extraction rates.

To successfully reform, fundamental issues need to be managed. The loss of experienced farmers due to expiry of agricultural leases needs to be addressed with well targeted training and extension services to work with remaining farmers. The support provided by the EU, through its share in the cost of the National Adaptation Strategy (NAS), will play a pivotal role particularly in addressing the production side of the industry. 

The NAS identifies measures totalling $755 million over an 8 year period and proposes the use of EU donor funds to finance $350 million. As grants, these funds cannot be used for commercial activities except when there is a particular social need, as in micro-finance, or when confined to technical assistance for feasibility studies, as with co­generation and studies of commercial agriculture. Additional funds could be available from the European Investment Bank for such activities.

The EU grants will focus on those parts of the NAS which support cane farming rather than commercial milling operations. They will particularly support cane replanting and research and extension for cane farming systems. Rural infrastructure will be strengthened through community development to sustain drainage systems and development of farm access roads as well as “emergency repairs” to the bridges and classified roads which serve the cane access roads. Grants will also be used to address the social impacts of restructuring on the poor through housing construction programmes and micro-finance. In addition to the sugar cane and social components the NAS will also promote diversification, as discussed in 3.2.3.

The NAS recognizes the importance of security of land tenure in farming, particularly in such multi-year activities as drainage maintenance and cane planting. The Government continues to work with the NLTB and other stakeholders on a land tenure system acceptable to all parties.

Programmes complementing the institutional reforms of the industry within the framework of the NAS, such as the ALP, will support economic diversification of rural areas through development of commercial agriculture and enterprises which, because of their commercial nature, cannot be funded under the grant-based EU funded programmes of the NAS.

3.2.3 Agriculture and Livestock

The agricultural sector grew at an average growth rate of 0.13% in the period 1996 to 2005. Despite the 4.6% growth experienced in 2002, agriculture sector production has been unsatisfactory due to the impact of cyclone Ami and stagnating cane production. The sector production performance is projected to improve in the medium term as a result of expected improvement in cane quality, efficiency gains through the restructure programme within the sugar industry and increases in the production of various other crops. Projections are for positive growth of 3% to 4.5% in the medium term.

The agriculture sector, excluding sugar, contributes around 6% to GDP, accounts for around 14% of agriculture exports, for 15% of total food imports and sustained 54% of the total population. The sector constitutes traditional food crops (dalo, cassava, yams, kumala, and yaqona), tropical fruits (pineapple, pawpaw and mango), vegetables, pulses, ginger, tobacco, rice, spices, cocoa, coconut products, beef, dairy, pork, poultry meat and eggs, sheep, and goat and bee products. Major contributors to agriculture exports are fruits (pawpaw) and vegetables, including dalo. A small but growing volume of certified organic products, including coconut and fruit products and nutriceuticals, are exported. However, growth in the sector has been highly variable.

Growth in the importation of agricultural produce by hotels and resorts due to the inability of domestic farmers to provide consistent supply of quality agricultural products is placing significant pressures on Fiji’s balance of payments. Quality fresh produce (fruits, vegetables and root crops) and raw meat attract premium prices in hotels and resorts. The opportunity to increase domestic supply of fresh food to the tourism industry is significant, but requires a significant re-orientation of agriculture sector programmes. Emphasis must be placed on increasing the production, quality and standards of agricultural produce demanded by Fiji’s hotel and resorts.

Anticipating a substantial exit of farmers and farm workers from cane production, programmes and projects under the National Adaptation Strategy will also fund activities to diversify agriculture in the cane belts, including commercial agriculture activities. As grants, EU funds cannot finance the commercial sugar and non-sugar activities of the NAS, which must be funded from other sources such as elements of the Alternative Livelihood Project (ALP, but will provide support for sustainable activities in agriculture, forestry and off-farm activities through development of post harvest and marketing infrastructure, research and extension, farmer training, and feasibility studies.

The ALP is also assisting agricultural diversification and strengthening commercial agricultural development. Initially focussed in the sugar cane areas, Government plans to extend the livelihood activities to non-cane belt areas in 2007 to complement the infrastructure and livelihoods development proposed in the Rural and Outer Islands Project. A re-scoping of the ALP will be undertaken in the context of proposed NAS activities and intended re-organisation of the Ministry of Agriculture. The ALP focuses on improving farm management, promoting investment in the agricultural sector, commercialization and strengthening industry organizations and agri-business networks, and recognition by government of industry priorities.

Bilateral Quarantine Agreements (BQAs) have boosted, and can continue to boost, exports significantly. Export market access for fresh agricultural products cannot be obtained without a BQA. Because of these BQAs, profitable opportunities already exist for the export of high value niche crops. Market access already secured under BQAs for pawpaw, eggplant, chilli, herbs, pineapple, breadfruit, and mango to New Zealand; kava to Vanuatu; watermelon, yams, and vanilla to Tonga; coffee and copra to Papua New Guinea; and pawpaw to Australia. However, quality, quantity and continuity of supply still need to be improved.

To ease marketing problems in rural areas, Government has established the Agricultural Marketing Authority. The Authority buys and sells agro-produce and agro-inputs and has been directed, through its legislation, to focus on non-viable remote areas. Government funding intends to promote participation in economic development by people, mostly indigenous Fijians, in the remote areas. Whilst the Authority has set up collection centres in some remote areas it is also operating in well established commercial areas, including the Sigatoka Valley, Taveuni, and Savusavu. There is concern that Government subsidised trading in these areas is disrupting markets and reducing the long run competitiveness of Fiji’s agriculture. This concern extends to apparent use of subsidies to compete with established Fiji exporters in markets such as New Zealand, Australia, and the United States. Such activities appear to differ from the intended purpose and to be in conflict with the policies for public sector restructuring (Chapter 6). Such issues will be addressed in the proposed reorganisation of MoA.

Grant assistance on farm inputs for farmers earning less than $3,000 per annum, is ongoing. To date, a total of 11,209 applications have been approved, comprising 363 groups and 5,273 individuals. Assistance will also with the breeding of genetically superior livestock, the provision of training on pasture feed management, good animal health provisions and for management and marketing.

The legalising of the Kava Council through Parliament will ensure greater coordination of the industry as well as improve the quality and price of kava. CIDA undertakes rehabilitation work on the coconut industry, previously undertaken by MoA. This will include the clearing of the senile trees and replanting of Hybrid, Fiji Tall and the Rotuman Tall varieties in identified areas of the traditional growing provinces in the Northern and Eastern Divisions.

Development Constraints and Challenges

Significant challenges are to sustain domestic food production to meet food security and market demands; to identify crops which can generate earnings equal to sugar; the maintenance of quality and continuity of supply; the uncertainty over Land Leasing Arrangements which serves to constrain the move to a more commercial focus.

In addition, there is a need to assist farmers to raise productivity levels, partly through greater use of technology and partly through better farm management. Finance for farming also remains a key constraint.

3.2.4 Forestry

The Forestry sector on average contributes 1.3% of GDP and 3.4% of export earnings. During the period under review the sector grew at an average rate of 1.5% annually. Significant growth of 15% was experienced in 2003 due to commercial harvesting of mahogany. This sector has good potential for growth with sustainable mahogany harvesting. However, the sector has performed below capacity since 2000, largely due to fluctuations in the harvesting of indigenous logs, bad weather conditions affecting logging operations and the closure of several Vanua Levu mills. The sector is anticipated to perform strongly in the medium term through increased mahogany and pine harvesting once the Bua Port is completed.

The forest sector has immense potential for growth, particularly with the commencement of the commercial harvesting of mahogany and an additional volume of pine from Vanua Levu.

The sector has experienced erratic growth between 1999 and 2004. For 2005, the sector is projected to decline by 4.2% on the back of lower log production. However, the situation is expected to improve with 5.7% growth in 2006, followed by 4.5% in 2007 and 3.0% in 2008. The forecast is based on the anticipated increase in production of indigenous and pine logs as well as the harvesting of mahogany. Export earnings from timber and other wood-based products averaged $39.3 million over the past 5 years and, in 2005, export earnings were $45.1 million.

Logs are predominantly processed into sawn timber, veneer or plywood. Wood chips however, with the total export volumes averaging 266,000m³ each year, account on average for 55% to total forest product exports. Most wood products are exported to Australia and New Zealand, while wood chips are sold exclusively to the Japanese market. The American market consumes approximately 40% of all veneer products.

Other exported products, such as mouldings and other finished components, account for at least 6% of annual export earnings.

Vanua Levu pine production has the potential to earn $20-$25 million in export earnings. The new integrated port in Wairiki, Bua, to be completed at the end of 2006, will provide the necessary facilities for wood chip exports from Vanua Levu. 

The Fiji Hardwood Corporation Limited (FHCL) has targeted an annual production schedule of 90,000m³ for the next 3 years, with an annual sustainable production of 100,000m³. FHCL has purchased the Waivunu sawmill in Galoa, Serua and remanufacturing assets in Navutu, Lautoka. The company is moving into log processing as it has met difficulties finding and establishing links with reliable log customers to meet the growing demand for mahogany sawn timbers overseas. Currently, FHCL is mainly a mahogany log supplier whilst attempting to process 55% of its wood supply. FHCL has been facing recurring financial difficulties. Government has had to provide guarantees in order to enable the company to source capital from the domestic financial market. Stringent monitoring of the financial performance by Government is necessary to raise the level of returns on government’s equity in FHCL, and to ensure the sustainable financial viability of the company.

Fiji’s land area is approximately 1,827,000ha of which it is estimated that forests covered 52% or 956,860 hectares. This comprised indigenous forests (857,530 hectares), hardwood plantations (52,950 hectares) and softwood plantations (46,380 hectares). Despite the good forest cover, the extent of deforestation (forest and vegetation clearing) and its impact on the surrounding environment remains a serious concern. Pressures towards further deforestation include population growth and the demand for new settlement areas, and greater agricultural production for food security. The impacts have become more pronounced, with a high incidence of soil erosion, siltation and subsequent flooding of low-lying areas.

To curb this situation, sustainable forest management practices are being promoted by Government. Improving resource utilization through enforcement guidelines under the Code of Logging Practices and the Environment Management Act are being pursued. The completion of the National Forest Inventory in 2007 will provide a sound basis for making informed decisions on the status of the forest resource in Fiji.

Government believes that active landowner participation is necessary for the forestry sector to become a significant player in the economic development of Fiji. Efforts are now under way to improve landowner participation through the establishment of the Fiji Pine and Mahogany Trust, the payment of stumpage fees and land rentals, training of resource-owners, as well as the establishment of community-based forestry projects with resource-owners. In addition, the Fiji Development Bank has established a loan facility, which assists indigenous Fijians and Rotumans to pursue business ventures within the sector.

Development Constraints and Challenges

With declining trends in the traditional exports, the forest sector has been identified as an area with potential to cushion the trade imbalance facing the economy. However, in order to realize this potential, a number of challenges and constraints confronting the sector need to be addressed.

The need for proper infrastructure to facilitate the development of any industry cannot be overemphasized. For the forestry sector, this infrastructure relates mainly to proper access roads and port facility for export.

In the pursuit of increased exports and emphasis on downstream processing, technology development and adaptation and human resource development are two critical areas that need addressing. The participation of resource owners in the industry needs to be carefully crafted with the necessary training and capacity building provided to them.

The costs incurred in the development of products will be in vain if there is no market for them. Market access therefore is critical and given global environmental concerns, recognized certifications are necessary to secure access.

Like any resource, the forest resources of Fiji are finite and can be exhausted. It is in the interest of current and future generations that sustainable forest management practices are adhered to.

3.2.5 Marine Resources

Behind agriculture, the fisheries sector is the largest natural resource sector with its contribution to GDP at about 3%. The overall performance of the sector the past decade can be described as erratic. However, since 2004, the performance has improved reaching pre-2000 levels on the back of strong growth in 2004 and 2005 of 24.1% and 7.4% respectively. This strong performance was attributed to increased catch of tuna for the Japanese sashimi market. 

The tuna industry dominates the sector in terms of output and export. The performance in the sector is therefore closely linked to the progress in offshore fisheries. Modest growth is forecast for 2006 at 3.2%, with the positive outlook expected to continue in 2007 with a growth of 3.5%. A decline is currently projected for 2008 at 6.5%. Export earnings peaked in 2001 at $91.2m but then fell before returning to the peak level in 2006, at a projected $91.8m.

The management of the offshore fisheries has been an area of concern, not only nationally, but regionally and globally also, particularly in the wake of an invasion of state subsidised Asian fleets. Resource management is of utmost urgency and mechanisms such as the Tuna Management and Development Plan need to be followed and enforced at the national level. Positive steps have been taken with the reduction in annual offshore licences from a cap of 110 to 60 in 2006. The number of Fiji licensed tuna long line vessels grew from 43 in 1999 and 55 in 2000, to 101 active vessels in 2001, where it remained during 2002 and 2003. A fleet of 87 vessels was operating in 2004 and 72 in 2005. 

The legislations governing the sector also need reviewing in light of new developments. The present Fisheries Act dates back from 1942, and despite amendments and additional regulations, is outdated. Similarly, the Marine Spaces Act is over 25 years old. Since their introduction, the Law of the Sea has advanced in a number of ways, including the UN Fish Stocks Agreement, and as of June 2004, the Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Fisheries, to which Fiji is signatory. The Social Justice Act (SJA) 2001, the Environmental Management Act (EMA) 2005, and proposed Customary Fisheries Bill (CFB), also have major implications on the management and development of the fisheries sector. There is also a need to include provisions for other areas such as aquaculture, management of artisanal fisheries, and post harvest handling.

The aquaculture sub-sector has not progressed as rapidly as might have been expected despite the large amount of resources that have been invested in research, subsidizing ponds and other infrastructure, establishing hatcheries and pilot farms. The poor performance has been attributed to declining prices, disease, problems in producing post larvae, and difficulties in maintaining yields due to high cost of feed.

Development Constraints and Challenges

Apart from the legislative reforms, the institutional approach to fisheries management in Fiji needs to be reviewed. A multi-pronged approach to fisheries management should be adopted that takes account of economic, environmental, and social performance. Fisheries and resource management agencies around the world now pursue this approach. This model is also based on the need for Government to move away from production orientation towards a resource management, conservation and service orientation.

Because of the heavy dominance of the tuna industry, sector growth will largely be dictated by tuna prices in the US and Japan, as this will affect the value of the tuna catch. However, locally, Government can promote growth through introducing management plans that support a healthy fish stock, thus sustaining catch rates. 

In addition to supporting the fish stock, the level of effort by the industry is being constrained by increases in the cost of doing business, primarily costs of fuel and supplies. The industry has also found difficulty in accessing capital, particularly with the current system of annual licence renewals that create investment uncertainty. 

In supporting the offshore industry, improvements to infrastructure to alleviate current overcrowding of vessels in the ports, would generate economic activity. There is potential in attracting regional traffic to Fiji for servicing and re-supplying provided suitable port facilities are available

3.2.6 Mineral and Groundwater Resources

Fiji has a good prospects with regard to epithermal gold (associated with volcanic centres), porphyry copper-gold (Namosi), and smaller base-metal deposits (Udu, Wainivesi). Whilst mining and exploration in Fiji is dominated by gold production from one producing mine, significant other sector revenues come from industrial minerals such as sand and gravel, quarried stone and coral sand. The groundwater sector consists of development of water supplies for urban and rural areas as well as the production of ‘mineral’ or bottled water. 

The mining and quarrying sector on average accounts for 1.4% of GDP. A sluggish performance in 2005 saw the sector decline by 30.7%, and its contribution to GDP falling to 1%. The decline in 2005 was due to several problems encountered at the mines, including a major underground flooding, high worker absenteeism, and low grade ore extracted at the mines. Gold production in the last five years has averaged 121,707 ounces. Production in 2005 stood at 89,831 ounces and is forecasted to decline to 74,110 ounces in 2006. 

Operations of Emperor Gold Mine (EGM) in Vatukoula have fallen into testing times with rising operation costs and low output. A major reorganization exercise is being undertaken in 2006, involving the rationalization the current workforce of 1800, retraining, and implementing an expansion plan to improve throughput. The mine was shut down temporarily early in the year, and is expected to be back operating at full capacity at the end of 2006. Production for 2006 will therefore likely be the lowest in the mines history. The objective of the reorganization is to bring the mine back into profitability thus ensuring its long-term viability. The conservative outlook for 2007 and 2008 sees an improved performance with production rising to 85,968 ounces in 2007 and 87,945 ounces in 2008. The rising price of gold on the world market also augers well for the industry in the medium term.

The Tuvatu Gold prospect is being re-looked at with renewed interest and Government is hopeful that within the next five years a mining lease could be issued over the area. A new mining lease is being processed for Asia Pacific Resources Limited for the Wainivesi (Tailevu) tenement. The rise in gold price has seen the prospect double in value. Government is also hopeful that the Mount Kasi Mine, currently undergoing resource evaluation studies after being put on care and maintenance, will resume operation towards the end of 2008. 

A new Mineral (Exploration and Exploitation) Bill is scheduled to be tabled in Parliament later in 2006. This will bring in new standards to the industry (both mining and exploration) and update measures on health and safety, resource management and sustainable development.

There are currently four mineral water bottling companies operating. Natural Waters of Viti (Fiji brand bottled in Yaqara) pioneered the product in 1997 and has since successfully penetrated the US market. Recent additions to the industry include Dayals (Island Chill brand bottled at Vuqele, Vatukoula), Diamond Aqua (Diamond Aqua brand bottled at Nadi) and Aqua Pacific (Aqua Pacific brand bottled at Nadi). 

Export receipts from Natural Waters of Viti Limited bottled water plant at Yaqara have been experiencing exponential growth since its inception. With additional bottled-water operations opening, it became necessary for a minimum standard of product quality to be set in order to uphold the integrity of Fiji’s bottled water exports. A strict standard regime for mineral water was imposed in 2005. While there is currently no legislation governing water resources in Fiji, new Mining legislation that will be introduced to Parliament in 2006 will legislate for the access to, use and management of groundwater resources, before separate legislation is formulated.

Development Constraints and Challenges

There has been a lot of focus on mining with little attention paid to the potential economic activity generated through explorations. In order to tap into this segment, the current fiscal regime needs to be reviewed to be sufficiently attractive for small exploration companies. Exploration is a high risk capital business and investors enter with the aim of reaping high rewards. Some key issues to consider when framing a tax package for minerals include the high capital (and debt) intensiveness of mining ventures, the cyclical nature of metal markets, and the long and costly period of pre-operational expenditures on exploration and feasibility studies.

Security of land tenure is a critical issue for mineral sector investors. It must also be recognized that without special compensatory policies, landowner grievances can become a significant impediment to long-term mine operations. An important consideration is that most mines, prospects and quarries are in rural areas and on native land , so spread development to otherwise isolated, poorly developed areas.

Reforms being undertaken within the EGM need to be monitored closely to ensure that human resources issues are properly managed. The mine represents the heart of economic activity in the township of Vatukoula and Tavua. Occupational health and safety and environmental management are key features of a revised legislation that will govern the sector.

3.2.7 Land Resource Development and Management

The Native Land Trust Board (NLTB) administers the leasing arrangements of all native land in Fiji, for the benefit of the Fijian landowners. Native land covers approximately 90% of total land area in Fiji. The NLTB currently administers over 31,000 leases, which cover approximately 24% of total native land. Of the total number of leases, 46% are agricultural, 42.7% residential, 4.8% commercial, 1.3% industrial and 5.2% are for other purposes such as educational, public utilities, recreational and religious use. 

With competing demands for limited land resources for housing, industrial and commercial developments, Government adopted a National Rural Land Use Policy in 2005 with the belief that any development must be approached holistically taking into account not only social and economic factors, but environmental also. Education and awareness raising are recognized as the main engines to drive this initiative.

As a basic factor input, access to land is a major prerequisite for any development. The current system of land tenure in Fiji has been seen to be very rigid. The Agricultural Landlord and Tenant Act 1966 (ALTA) governs the negotiation and grant of agricultural leases on native land. About 50% of all leases are ALTA leases. Since leases began expiring in 1997, it has been increasingly difficult to renew leases under the ALTA framework. Neither the landlords nor the tenants are happy with the terms and conditions imposed under ALTA. The landlords are unhappy about the low rental levels, which do not appear to reflect the value of the land, and the tenants want stronger provisions providing compensation for improvements in the event that the lease is not renewed. Unfortunately, the issue is now heavily politicized and a sensible and pragmatic solution cannot be guaranteed. The ALTA legislation is constitutionally ‘entrenched’ (originally to safeguard the interests of indigenous Fijians) and can only be amended if a two-thirds majority concurs. 

These rigidities in the market for leases have resulted in the development of an illegal “black market” in which landlords and tenants reach agreements outside the law. This “black market” is evident in the growing incidence of vakavanua arrangements. These are informal agreements – with nothing in writing -between mataqali and families or individuals who wish to occupy and use some land. They can run for many years – sometimes decades. The main problem with vakavanua arrangements is that they leave the tenants outside the formal property rights system and thus unable to take advantage of the benefits a legal leasehold title would give them.

The proposed NLTA leases give much greater flexibility in lease conditions which would allow landlords and tenants to reach agreement within the legal framework. Considerably long security of land use is available and potentially higher rentals must be seen in the context of the illegal up-front payments for “goodwill” which must now be paid for the lower rental levels prescribed under ALTA. Government wishes to resolve the land lease issue by establishing a legal framework which allows landlords and tenants to agree on a sound, secure legal basis rather than through and ALTA-based “black market”.

Development Constraints and Challenges

Although 60% of the total land area is suited to some kind of agriculture activity, only about 29% is suitable for arable farming. The current area of land in use has increased considerably over the past 30 years, due to marginal and sloping lands being brought into production. This has resulted in land degradation associated with agricultural intensification, inappropriate farming practices, deforestation and other land uses contributing to environmental problems such as the loss of soil biodiversity. 

The current land tenure system is also very restrictive. The Agricultural Landlords and Tenant Act (ALTA) limits a lease to a maximum of 30 years and maximum lease payments equivalent to a return of 6% per year of the unimproved capital value of the property. This situation provides little incentive for landowners to renew leases for productive use. Many reports have identified the resolution of the land tenure conflict as a prerequisite to any meaningful development in the agriculture sector, and the economy as a whole.

The high incidence of vakavanua arrangements is a response to the surreal situation facing indigenous Fijians wishing to work their own land under a formal legal title. The irony is that though customary owners may lease their land to investors and entrepreneurs, who can in turn use the lease as collateral, there appears to be no easy way for the customary owners to use the land as collateral directly. They can, of course, lease the land to themselves via the NLTB but this seems a tortuous way of making their own ownership ‘legal’. The inability therefore to mobilize native land as a means to accessing credit is restrictive.

3.2.8 Tourism

Visitor arrivals fell from 410,000 in 1999 to 294,000 in 2000 but the tourism industry has recovered strongly with visitor arrivals of 550,000 for 2005. Visitor arrivals are expected to grow strongly in the medium term. 

Over the review period, there were spates of investment in the tourism industry. 2005 saw an increase in room inventory by Sofitel Fiji Resort & Spa and the Navutu Stars Hotel. The Naviti Resort on the Coral Coast also completed its $15 million renovation. Collectively, these resorts and hotels would add about 1500 new rooms to inventory. Construction work at other resorts including the Marriot Fiji Resort & Spa, the Intercontinental Fiji Resort and the Hilton Fiji Beach Resort and Spa will provide further growth impetus for the industry. Air Pacific Limited recently announced its intention to increase inbound flights from Christchurch, Auckland, Brisbane, Los Angeles and also commence regular flights from Kiribati. 

These developments, in part will address constraints associated with the shortage of up­market accommodation in peak periods and airline capacity. Other constraints for the sector include problems related to land tenure, recessions in some major source markets, the pollution and degradation of our natural environment and the lack of development and training to improve workers’ skills, particularly resource-owners interested in effectively participating in the sector.

Secondary tourism activities are still poorly developed, especially when compared to major competing destinations such as Bali and the Australian Gold Coast. Tourists with higher spending capacity tend to spend fewer days in Fiji and this could be due largely to a lack of sufficient entertainment facilities or other secondary activities. Spells of adverse weather also limit the activities available to tourists.

The tourism sector is the country’s largest source of economic growth, investment and foreign exchange earnings. It is mainly private sector driven and is globally competitive. Growth is becoming more broad-based with expanding eco-tourism and village-based activities. Construction of new hotels and the entry of new air carriers support a strongly positive outlook.

Visitor arrivals fell to a low of 249,000 in 2000, but concerted industry efforts saw arrivals recover quickly. Visitor arrivals were over 500,000 by 2005. Tourism earnings are by far the largest foreign exchange earner and reflect the number of visitor arrivals as well as their length of stay. Earnings fell by 26% in 2000, but recovered by 20% the following year. The strong upward trend saw earnings reach $675 million in 2004 and $681 million in 2005. Projections for 2006 indicate growth to $819 million and $997 million in 2008.

Investment activity in the hotel and resort sector is at a high level, with consequential strong growth in the construction sector. In 2003, 18 major tourist projects were approved for development at a total value of $1,336 million. In 2004, $304 million was spent for the first phase of these projects, while the forecast expenditure for 2005 is $565 million.

Eco-tourism is a strategy both for rural development and for greater indigenous participation in the sector. To date, more than 80 registered projects are in operation, of which 31 are licensed operations owned and operated by indigenous Fijians. This has created 724 employment opportunities and contributes an estimated $2.5 million in annual gross earnings. The eco-tourism sub-programme, which comes under the Integrated Human Resource Development Programme for Employment Promotion (IHRDPEP), has contributed significantly to the creation of employment and the establishment of eco-tourism operations, with assistance from the SCARF programme and Eco-Tourism Grants through the Ministry of Tourism.

Development Constraints and Challenges

Up-market accommodation will be increased by the construction of three major hotels over the next two years. Government will provide infrastructure support for the Marriot Resort and the Natadola Resort in the Coral Coast, which are anticipated to be completed in 2007. However, there is a lack of infrastructure development in the emerging eco­tourism destinations: Kadavu, Yasawa, Vanua Levu, the Lau Group and in the interior part of Viti Levu. This is being partly addressed through the Eco-Tourism Project, with support from the SCARF programme under FDB.

Sustainable utilisation of coastlines and marine ecosystems in the major tourism development areas such as the Coral Coast, Nadi Bay, and Mamanuca Group is essential for their long term survival. Work is under way on addressing qoliqoli issues. To support human resource development, a Tourism and Hospitality Training School commenced construction in 2005. Government will continue to subsidise the cost of training construction workers in the FIT and TPAF to address skill shortages experienced in the construction industry.

3.2.9 Manufacturing and Commerce

Manufacturing

Manufacturing is a major sector, contributing 14.5% of GDP in 2005, and is a key growth area. The sector includes manufacture of textiles, garments and footwear, sugar, beverages and tobacco, food processing, and wood and metal based industries. Growth in the sector is largely expected from efficiencies derived from the sugar industry restructure and the new FMF biscuit factory operating at full production.

Over the review period, growth in this sector has been largely driven by the strong production performance of beverages and tobacco and food industries which includes production of canned fish and biscuits. Other non-food industries has also performed relatively well over the period. Natural resource based sectors have huge potential for development and this requires closer linkages with the manufacturing sector.

The TCF industry’s rapid development over the 1990s has been largely attributed to the preferential trading arrangements in various markets, relatively low labour costs, an attractive package of fiscal incentives and the gradual contraction of the industry in neighbouring countries. The industry is now in decline. The clothing and footwear industry is expected to decline in the medium term due to loss of US garment quota and declining margin of preference into the Australian market. However, the extension of SPARTECA-TCF scheme for another seven years and other donor assistance for the necessary structural adjustments is expected to assist the industry. 

Construction

The construction sector has performed strongly, as indicated by the high level of construction activity in recent years. The sector declined in 2000 and 2001, but has since been growing, led initially by Government’s capital infrastructure spending and a substantial increase in private sector projects. Major projects which are implemented during the review period include Suva Central, Mana Island Resort, Fiji School of Medicine, Denarau Villa Stage II, Momi Marriot, rehabilitation of the Kings Wharf, Natadola Resorts, Hilton Denarau, Sofitel Island Resort and Spa, First Landing Resort and construction of the new Rewa Bridge. The sector growth in 2005 experienced an all time high of 25.9% due to the spill-over effect of most projects coupled with the commencement of new major projects in particular the Great Council of Chief complex, FIRCA headquarters and Carpenters Towers. With the already high level of construction activity, the industry is expected to grow at a slower pace.

Wholesale and Retail

The wholesale and retail sector, which includes hotels and restaurants, contributed 17.9% to GDP in 2005. After a strong performance in 1999, sector output declined in 2000 as tourist demand slumped. The sector has since recovered strongly recording an average growth of 3.3 % from 2000 to 2005. Significant increase was recorded in 2004 due to higher visitor arrivals and domestic consumer demand, which has also been boosted by cuts in income tax. The sector is expected to record a slower growth in the medium term.

Whole Manufacturing and Commerce Sector

The manufacturing and commerce sector as a whole contributes an average of 28.1% to GDP and provides direct employment for around 50,000 people. The sector is divided into two sub - sectors: manufacturing and commerce. The manufacturing sector comprises textile, clothing and footwear (TCF) production, sugar production, beverage and tobacco production (including mineral water), food-processing and wood-based industries. It continues to be a dynamic and significant industry, contributing an average of 14.0% to GDP in 2005 and employing around 29,000 people. Except for sugar and clothing and footwear, the main manufacturing sub- sectors have continued to perform well. The commerce sector comprises the wholesale and retail sector and contributes an average of 11.9% to GDP in 2005, employing around 20,000. 

TCF (or garment) production has been hindered by the uncertainty surrounding the renewal of the SPARTECA TCF provisions and closure of a large garment factory. This, together with the disruption caused by the 2000 crisis, has seen exports fall significantly from 2000 to 2002. However, in August 2004 negotiations with the Australian Government successfully concluded with an extension of the SPARTECA TCF scheme. In the beverages sub-sector, mineral water exports have significantly increased from $5.9 million in 1999 to $67.9 million in 2005 and this upward trend is expected to continue for 2006 and beyond. In the wood-based manufacturing sub-sector, the commencement of commercial mahogany harvesting will provide the opportunity for a significant boost to manufacturing production.

In the commerce sector strong growth is linked to increasing consumer expenditure and the booming tourism industry. The sector has performed well and is anticipated to expand further, with additional retail outlets being established. The growth in the sector has slowed down as a result of measures taken by RBF to reduce consumption imports.

In order to stimulate growth through increased investment and exports, Government has reviewed and amended the Foreign Investment Act, to accelerate the approval of Foreign Investment Certificates. In addition, the FTIB approval process has been streamlined and a Commerce Commission has been established, together with a competition policy to guide operations.

Development Constraints and Challenges

Despite the growth in the manufacturing sector, there exist a number of impediments which include the following:

• the deteriorating performance of the sugar industry, which is compounded by the delay in implementing reforms;
• the delay in finding a strategic partner for processing ventures of Fiji’s mahogany products and the delay in increasing involvement of landowners and community based forestry projects;
• the continuing shrinking surrounding future markets for Fiji’s textile, clothing and footwear industry;
• the weak linkages existing between the natural resource sectors and the manufacturing sector;
• time to register business is very long due to outdated regulation and legislation; and
• lack of market support for agro-based products.

3.2.10 Information and Telecommunications

Much greater use of information and communications technology (ICT) is essential for social and economic development in Fiji. The contribution of the communication sector to Fiji’s GDP has risen from 2.7% of GDP in 1989 to 3.6% by 2005, and is expected to remain around 3.5 % up to 2008. Another measure often used to weigh the impact of the telecommunication sector is the share of telecommunication revenues to GDP. In 2001, Fiji’s telecommunication revenue as a percentage of GDP stood at 5.9%, compared to that of Jamaica at around 7%, the Maldives at close to 10% and Kiribati at 10%.

Despite the relatively low contribution of communications to overall economic output, as a business, telecommunication firms are among the largest in the country. In Fiji, access to traditional ICTs such as radio and television is high. Over 90% of households are estimated to have a radio and over half the population has access to television. Internet use is increasing and people are also becoming more exposed to ICTs through their mobile phones and use of text messages. Electronic transactions in Fiji have also become widespread, spearheaded by the banks. ANZ has established an international call centre and Affiliated Computer Services (ACS) has set up a back-office processing centre. 

ICT has the potential not only to create new jobs through call centres and other related activities, but also to empower rural dwellers with information and provide low-cost tele­services in some cases. The adoption of ICT is also the key to improving productivity, especially in the public sector. Government intends to deliver as many online services as possible by 2006 and make greater use of ICT, in order to improve internal processes.

The current initiative of Government to develop and E-Commerce Bill will ensure that the interests of suppliers and buyers engaged in transactions over the internet are adequately protected. E-community learning centres are being established in rural areas to enable communities to access information, Government services, and business products and services on the internet.

The liberalisation of telecommunication services is critical for development of this sector. The absence of competition is the basis of some of the key problems facing the telecommunication sector, namely high prices for international telecommunications and for leased lines. In particular, the high price for international voice and data communications is a major impediment to development of ICT services, including Internet development. A new Telecommunications Bill will be tabled in Parliament in 2006. The legislation will establish an appropriate regulatory framework for the industry and ensure it supports development and growth in the ICT sector.

The IT Advisory Council (ITAC) which was set up in 2001 includes representatives of key government ministries, the academic community and the private sector. The ITAC has drafted an ICT Policy with the vision “to harness Fiji’s ideal geographic location, competent workforce and world-class information technology infrastructure to promote Fiji’s international competitiveness and create a dynamic, vibrant and well-connected e-society”.

Development Constraints and Challenges

Development constraints and challenges include the high cost of telecommunications and associated activities, and the monopolistic framework for telecommunications in Fiji. New development challenges are the lack of awareness about the benefits of ICT to meet development goals, with resulting delays in introducing ICT.

3.2.11 Financial Services

The financial services sector comprises three major institutions: the banking industry, the insurance industry, and other non-bank financial institutions, which include the Fiji National Provident Fund (FNPF), the Home Finance Company, the Unit Trust of Fiji, the South Pacific Stock Exchange (SPSE) and the credit unions⁴.

Developments in the capital market include an increase in the level of activity on the SPSE, with the Amalgamated Telecom Holdings (ATH) share sale by Government and the subsequent listing of the company. A further boost was provided by the listing of the RB Patel Group, a major retailer of household items including groceries.

⁴ For GDP computation of “Finance Sector”, the Unit Trust of Fiji, credit unions and SPSE are not accounted for and non-bank financial intermediaries include Home Finance, Housing Authority and Fiji Development Bank.  Activity in the Real Estate and Business Services industry is also embedded in the Finance Sector. On this broader definition of the Finance Sector, even with the exclusions noted above, the contribution to GDP averages about 12.7%.

Recent developments have seen the RBF taking up regulatory supervision of the FNPF, through amendments to the Insurance Act, together with a strengthened role in the supervision of the banks and the other insurers. The RBF’s supervisory role has also been extended to include smaller financial enterprises such as foreign-exchange dealers. The RBF has also been delegated with the responsibility to implement the new Financial Transactions Reporting (FTR) Act following a delegation of powers, functions and duties of the Minister for Justice to the Governor of the Reserve Bank of Fiji. In addition, a money-laundering unit has been established within the Serious Crimes Investigations Unit of the Police Force to investigate finance-related crimes. Disclosure of bank fees and charges is being enforced and closely monitored. Fiji agreed to participate in the joint International Monetary Fund World Bank Financial Sector Assessment Programme. The first mission was in December 2005 and the second mission in July 2006. The Report identified conditions and challenges facing Fiji’s financial system, in particular, the size of FNPF. It also describes steps taken to strengthen the financial system and makes recommendations for the authorities’ consideration.

Progress has also been made to modernize Fiji’s financial system with the introduction of a Real Time Gross Settlement (RTGS) system which will be implemented in 2006.

Development Constraints and Challenges

Securing improvements in banking services is being pursued through the implementation and monitoring the progress of the Committee of Inquiry into Financial Services (COIFS) Report. The COIFS inquiry was conducted to review the financial services available to the people of Fiji. Many comments and complaints made to the Committee concerned high fees and charges, the quality of service and low deposit rates. The need for the establishment of a Banking Commission and a Banking Ombudsman was highlighted, stating that if the banks failed to address complaints, then Government would need to introduce greater control. 

Liberalisation of the capital market is an ongoing objective of the Government. The domestic debt and equity markets remain relatively undeveloped. Buy orders on the stock exchange have been exceeding sell orders with the market providing the stock-owners with positive returns. The bond and trust markets have performed similarly. Recently, a $0.5m rights issue was successfully completed. Several initiatives have also been undertaken to increase public awareness about capital market practices, issues and developments.

Although yet to be tested, the smallness of the labour market has made the deregulation of the superannuation market difficult. The FNPF has undergone internal re-structuring to ensure that its members receive the best returns on their compulsory savings. Deregulation of the market may result in loss of intended purposes of the savings and pension scheme. Some studies are being contemplated regarding the size of FNPF and its implication on market interest rates.

The inadequate rural banking services remain a concern to Government. Findings of a survey recently conducted by the Ministry of Finance indicate that the banking sector is reluctant to venture into rural areas due to the high costs involved. However, banks are starting to implement innovative ways of taking banking to remote areas.

The National Centre for SMEs will continue to play an important role in the provision of business support and micro-finance to small and micro enterprises. The lack of such support for small and micro enterprises is the major constraint in their development.

Bond Market and Unit Trust Market

The Fiji bond market has grown significantly over the past decades, and has been a major source of financing for the public sector. Although Fiji’s bond market is large in absolute value, it is still at a nascent stage of development. Activity in the secondary bond market has been relatively thin. There are some inherent constraints in the development of the bond market in Fiji and the RBF with the help IMF Technical Assistance are examining options to address the issue of deepening and promoting liquidity in the domestic securities market. 

The unit trust market has shown strong growth over the years. At the end of 2005, local unit trust managers had a pool of investment funds totalling $162.08 million, a significant increase on the $18 million under management in 1996. The number of unit trust holders has also shown considerable growth.

Export Finance Facility, Insurance and Guarantee

The EFF was introduced by the RBF in 1983 to assist exporters in obtaining credit at concessionary rates of interest. Under the facility, commercial banks and Fiji Development Bank are able to obtain back-to-back finance from RBF for lending to exporters subject to eligibility and value added rules. The facility is being reviewed regularly. There are now plans to set up other schemes to include insurance and guarantees.

3.2.12 Micro, Small and Medium Enterprises

The Micro, Small and Medium Enterprises (MSMEs) continue to strengthen and contribute to national development, particularly in improving the quality of life of the disadvantaged. Substantial untapped economic development opportunities remain for the sub-sector to expand and grow, especially in rural areas where natural resources remain under-utilized. 

1996 estimates indicate that 57% (170,000 people) of the entire labour force were involved in various forms of activities which are classed as small and medium enterprises. MSMEs generate more livelihoods than paid or formal employment, which absorbed a total of just under 120,000 workers in both the public and private sectors at time of the estimate. 

The Government established the National Centre for Small and Micro-Enterprises Development (NCSMED) as a statutory organisation in 2002, to co-ordinate assistance to SMEs and to provide some direct services to entrepreneurs. Cabinet in 2003 expanded the NCSMED mandate to include Medium Enterprises. The Centre merged with the Government’s National Micro-Finance Unit (NMFU) in early 2004. The Centre’s partner microfinance institutions (MFIs) had more than 21,000 clients in early 2006 and $1.6 million in savings deposits in commercial banks. 

The Reserve Bank of Fiji has identified MSMEs as a priority area for making development more balanced and broad based. MSME stakeholders, including enterprise owners, service providers and financial institutions meet annually to discuss issues and make appropriate recommendations for policy directions. 

MSMEs are expected to grow positively during the next plan period, particularly now that various other supporting services were being established. The ANZ Banking Group had opened its rural banking support services on Viti Levu, Vanua Levu and in the outer islands. In 2005, a Business Incubator was established in Ra. The Ministry of Youth, Employment Opportunities and Sports has piloted a beehive manufacturing project for graduates of the National Youth Training Centre. The project is jointly supported by NCSMED, Japan International Co-operation Agency, Ministry of Agriculture and Training and Productivity Authority of Fiji. 

Development Constraints and Challenges

Although considerable progress is being made in the MSME sub-sector, the major constraints and challenges are:

• lack of sufficient business support services and infrastructure;
• poor financial management skills of MSME operators;
• restrictive laws of the local councils;
• lack of knowledge about the existence of MSME service – providers; 
• a lack of data for the MSME sub-sector; and
• lack of finance for business start-ups.

3.2.13 Transport

Transport is a most important component of the economy. It contributes on average about 10% of GDP and provides employment for around 40,000 people, including some 10,000 in the formal sector. The transport sector supports and facilitates growth and development in other sectors.

Government continues to play a lead role in creating a conducive and enabling environment for the provision of transport services and infrastructure. However, as with elsewhere in the world, Government has come to recognize limitations in its ability to meet transport infrastructure and services. Government sees the benefits of private sector involvement utilizing the potential to raise capital and provide management efficiency, through systems of public-private partnerships, such as the BOOT (Build Own Operate Transfer) system.

Land Transport

The main developments in the sector include major road construction under the three road programmes, FRUP (Fiji Road Upgrading Project) I, FRUP II and FRUP III. Similarly, FRUP IV proposes upgrading 100km and rehabilitating 100km. About 450km of road have been improved under these projects. Over the past five years, capital expenditure on road infrastructure has averaged $57 million per year or 25% of the total capital budget. There have also been organizational changes, including the establishment of the Land Transport Authority, through the amalgamation of the former Department of Road Transport, Transport Control Board and the Principal Licensing Board. Growth in the sector can also be seen by the increase in motor vehicle registration and significant rises in motor vehicles imports.

The main issues and constraints in the road transport sector relate to lack of road maintenance, poor control of vehicle overloading, lack of emphasis on controlling vehicle emissions, increased level of traffic congestion/dwindling capacity of the roads, and slow progress in cost recovery.

It has been estimated that $50 million will be required to adequately fund maintenance, compared to the current annual provision of $13 million, which is grossly insufficient to cover periodic and routine maintenance. Vehicle overloading is a contributing factor to road damage and thereby contributes to the increase in maintenance costs. In response to vehicle overloading, a Compliance and Standards Unit has been established in the LTA, to address the legislative and operational aspects of vehicle overloading, in particular commercial vehicles. Weighbridges will also be installed by the LTA at different locations, to enforce vehicle overloading.

Increased vehicle emissions have become a prominent problem, especially as a consequence of the inappropriate emissions standards and the inadequate capacity to monitor emission levels. LTA currently uses the Queensland standard, which is considered inappropriate for Fiji. To address this problem, an ADB Technical Assistance Project to review aspects of vehicle pollution standards, is currently in train. The study will produce a 4-year Action Plan to reduce vehicle emission.

Traffic congestion has mounted considerably in recent years, due to the increase in the number of vehicles, especially heavy vehicles. To address traffic congestion along the Suva-Nausori Corridor, a Greater Suva Transportation Study was undertaken in 2002. The study recommended a 30-year plan for traffic management, road network development and public transport services, to meet the mobility needs in the greater Suva area. The long-term development options in addressing traffic include proposals for a new regional road and a new coastal road network for the Suva-Nausori Corridor.

Reforms in the Public Works Department are currently under way. The reform process will take a phased approach, with the initial establishment of a Department of National Roads (DNR), and later the establishment of a Fiji Road Authority, to enable greater autonomy. To ensure cost recovery, the introduction of a ‘road fund’, either through the introduction of fuel tax or using vehicle registration revenue, must be considered. 

Marine Transport/Ports and Shipping

Total cargo movements are increasing largely through growth in international cargo movements. This expansion has been supported by increased storage space for containerized goods and the improved capacity of the major wharves. Growth in domestic cargo movements is attributed to the improved frequency of RORO services, the increase in general shipping services, the reliability of services to the outer islands and the support provided under the shipping franchise subsidy scheme.

Major developments in the sector include upgrading and redevelopment of the port facilities in Suva and Lautoka and upgrading and construction of new jetties. The Kings Wharf and the Lautoka Wharf are currently being upgraded, co-financed by the ADB, ANZ and MPAF. Since 1999, three new jetties have been constructed (Totoya, Cicia, and Moala) and two have been upgraded or rehabilitated (Taveuni and Kadavu), to remedy damage sustained during Cyclone Ami in 2002.

Marine transport, ports and shipping are usually constrained by the high cost of capital and uneconomical cost of providing services to remote and outer islands. Whilst the uneconomical routes are continually serviced under the Shipping Franchise Scheme, RORO services are profitably provided by the private sector. The Franchise scheme, which was reviewed in 2003, has generally been effective in terms of providing services to remote island areas.

In respect of port development, Government has approved in principle, the process for the further restructuring of the port sector, to improve the efficiency of operations for international shipping services. A Charter Administration Committee has been established to draw up a detailed implementation plan for the reform. In addition to commercial ports, there are some 29 public wharves and jetties handling local traffic. Maintenance of these is built into the PWD’s budget but there is no formal assignment of management responsibility for the infrastructure. 

Following the September 11, 2001 attacks, the international community is placing increased pressure on safety and security of ports around the world, through the introduction of the International Port and Shipping Security (IPSS) code, under the Safety of Life at Sea (SOLAS) Convention. Fiji was fully compliant for all the major ports: Suva, Lautoka, Levuka and Malau by the deadline of July 2004. The safety of local vessels is a special concern in the light of the Ovalau disaster.

There is a clear need to improve the efficiency of Government shipping operations, domestic shipping services and the ship repair business. Whilst Government owns vessels and facilities and ship repair services, its role in terms of the provision of these services needs to be reviewed. A review and update of the shipbuilding and repair facilities in Pacific countries (undertaken for Fiji Ships and Heavy Industries Ltd) clearly indicates that there is lack of shipping facilities in the region and there is real potential for Fiji to capitalize on the opportunity that this presents.

Aviation/Air Transport

Growth in this sector is mainly driven by expansion in the tourism industry, contributing significantly to the number of passengers, as well as by growth in air cargo. Major developments in the sector include, reform of AFL and CAAFI, upgrading of Nadi Terminal, upgrading of the Nadi runway, and the upgrading and development of outer island airports. Air Pacific has also made significant investment in the purchase of new aircraft, and this has contributed to its improved profitability.

A domestic aviation review study in 2003, found substantial social and economic justification for continuing the payment of service subsidies to certain isolated routes. Most of the population on outer islands has difficulty affording normal airfares. Government will consider extending the subsidies to other airlines to service additional routes.

Airport operations and maintenance need to be addressed, given the condition and standard of outer island facilities. The major problems are the overall deterioration in safety and efficiency in civil aviation systems as these relate to airports, a lack of periodic and routine maintenance at airports and the absence of a modern airport-specific safety regulatory environment. 

Lack of competition with Air Pacific on regional routes has constrained the development of tourism in Fiji and the capacity for raising exports of goods into the region when PICTA comes into force. The aviation environment is changing, as a result of growing competition from low-cost carriers and technological advances. Airfare competition has increased in recent years as a consequence of new charter and scheduled flights to Fiji. The issue remains whether domestic airlines should have the flexibility to set airfares and rates based on market forces.

According to Air Pacific, the outward freight capacity is currently under-utilized and hence there is potential for growth. For example, less than 50% of its freight capacity to NZ and USA is utilized. This is despite the fact that specialized freighters (offering services in peak periods) charge about double the rates offered by Air Pacific. 

Additionally, Fiji is being pressured to consider the regional aviation initiatives, which advocate the ‘open sky policy’. Government will also need to continue to monitor international developments on liberalization of international air services on a multilateral basis, as advocated by the World Trade Organization.

3.2.14 Energy

Around 60% of the country’s electricity requirements continue to be supplied by indigenous hydro and other renewable resources. This is provided largely through the FEA’s grid network on our two main islands and Ovalau, and to a lesser extent from solar home systems, micro hydro installations, and biomass. Imported petroleum for diesel back-up generators, meets the remaining balance of 40%. For the rural areas, the Department of Energy (DOE) has installed about 500 diesel based systems in rural communities around the country.

The amount of electricity generated and sold by the FEA reflects the level of economic activity in the country. The contribution of the electricity industry to GDP was 3.6% in 2005 and is expected to rise to 3.8% in 2007.  Growth of 2.5% and 1.2% in 2004 and 2005, respectively, is projected to increase to 6% in 2007 due to the forecast increase in demand from industry and the rural community. Access to electricity in rural areas has improved, with over 100 schemes each year under Government’s Rural Electrification Programme.

Major changes have taken place within the FEA, following its restructuring. This reduced staff from 1000 in 2001 to 650 in 2003 on the basis of natural attrition and voluntary redundancy. Measures have also been put in place to improve the efficiency and effectiveness of FEA’s operations. Government is reviewing the regulatory role of FEA with the intention of removing this role from FEA and which will enable the company to concentrate on its core business. FEA plans to invest $350m up to 2011 in parallel with some $150 million of private investment in IPP and PPP arrangements. 

Government is developing a national energy policy and a strategic action plan that provides the framework for energy sector activities. This is expected to be completed in 2006 for implementation from 2007. A study on the bio-fuel initiative is currently under way, in order to assess the viability of producing ethanol and coco diesel on a national scale, using sugarcane, cassava and copra has been completed. These various bio-fuels will be used to supplement our electricity supply and provide an alternative to imported diesel fuel for industrial and transportation purposes. 

A Charter for Renewable Energy-Based Rural Electrification with participation of the private sector, was developed with UNDP-GEF assistance, and approved by Government in March 2003. The charter provides a mechanism for renewable energy service companies to install and maintain renewable energy-based projects. The formulation of a ‘Renewable Energy-Based Rural Electrification Bill’ has also been approved and consultations are ongoing with enactment envisaged by 2007. With ADB support, Fiji completed a Renewable Energy and Energy Efficiency Programme (REEP), which was aimed at building capacity to develop, fund and implement renewable energy and energy efficiency projects, while emphasizing market driven structures.

Development Constraints and Challenges

Development constraints and challenges include; the current high price of oil and the impact of this on domestic costs and the fuel import bill; current regulatory arrangements in the electricity industry; the lack of a regular energy sector information database; and weaknesses in the delivery mechanisms under the current Rural Electrification Policy.

3.2.15 Water and Sewerage

The portion of Fiji's population with access to pipe, safe water was latest measured in 1996 and then reported to be about 70%. The proportion of the population connected to sewerage facilities was then about 15%. Once more recent census data is available the coverage for water and sewerage utilities in Fiji can be measured.

Indeed water is very important for both rural and urban population. Also, for Fiji's economic growth and commercial developments, notably tourism, the availability of sufficient and reliable services for water and sewerage is crucial. Government acknowledges these strategic policy objectives and sets out to achieve firm improvements in the next 5 years. In the next five years, inhabitants of some of Fiji’s most densely populated areas will have a more reliable and regular water supply and in time access to a environmentally friendly sewerage systems.

Government is continuing to implement works for the extensions of reticulation systems and treatment capacity. Capital expenditure for these works has more than doubled over the past 5 years. For Fiji's largest urban area, the ADB-assisted Suva/Nausori Water Supply and Sewerage project is well up and running. It includes major works, which will be completed by 2009, like refurbishments of the water treatment plants Tamavua and Waila, construction of new reservoirs and bulk water transport mains, new sewer reticulation and refurbishment of pumping stations. The first components have recently been commissioned, like extension of Kinoya wastewater treatment plant and sea-outfall, new reservoirs at Tovata and Colo-i-Suva and others. In many other urban areas works projects are also under construction and further planned for.

In the rural areas many villages were assisted in the provision of piped water and sanitation. Government will continue to promote and support rural water projects to improve public health and quality of life in these areas. 

Water sector reforms

Government has declared the Water and Sewerage Department in the Ministry of Public Utilities and Infrastructure Development as a Reorganization Enterprise and will become the Fiji Water Authority. The Ministry of Public Enterprise and Public Sector Reform will further drive these reforms. 

The institutional reforms will result in a public water utility service provider, which will be oriented to deliver customer satisfaction in relation to water quality and continuity of service. The water and sewerage company will be responsible for operations and maintenance of all of Fiji's urban and peri-urban water supply and sewerage infrastructure. A customer service plan will document the levels of service the company is to provide for. The company will operate on a commercial basis, which implies revenue collection to cater for all operational, maintenance, renovation and capital costs. Furthermore, this company will provide assistance to initiatives for rural water and sanitation projects.

Government will develop and implement a water management policy. This policy will safeguard the proper management of all of Fiji's fresh waters and the marine environment as well. New legislation and regulation will ensure the framework for a sustainable exploitation and environmental protection of fresh water rivers and ground water aquifers. 

Development Constraints and Challenges

The major constraints include the: financing infrastructure upgrading, low level of cost recovery and lack of professional and technical staff.

In the past decades there has not been duly recognition for the aging of existing infrastructure. Capital works were [almost exclusively] for extensions or new systems. The process of deterioration of old infrastructure assets now needs to be reversed and major renovation works need be planned and executed. Brain drain of technical staff has caused a too limited capacity and quality in the relevant organizational units.

The major challenge is to create the new Water and Sewerage Company as an efficient, well resourced entity, which will be fully focused on its tasks, with a customer orientation.

It will be a challenge to improve the discipline with Fiji's population to fully pay for the services and have sufficient cost-recovery.

Low levels of cost-recovery continue to constrain investment. The poor cost-recovery in the provision of both water and sewerage services is a result of low water charges and substantial arrears.

Lack of technical capacity constrains implementation of PWD’s major programmes at a time when there is a need to implement individual master plans for expanding rural communities. These include Tubou on Lakeba and Wainikoro in Macuata.

Increase in demand for infrastructure from the upcoming tourism, business centres and industrial estates.

3.2.16 Foreign Affairs and External Trade

The Ministry of Foreign Affairs and External Trade is accountable for the establishment of diplomatic ties, political, economic, socio and cultural relations. It plays an important role in shaping Fiji’s global image and has contributed significantly to the improvement of Fiji’s image and trade relations overseas after the political instability of 2000. Fiji maintains diplomatic missions in Beijing, Canberra, Kuala Lumpur, London, New York, Port Moresby, Tokyo, Washington, New Delhi, Brussels and Wellington and 12 honorary consuls in other centres of the world are accredited to foster Fiji’s interests abroad.

Fiji has adopted an export oriented, outward looking approach to trade relations with import restrictions lifted in favour of export promotion. This has resulted in Fiji becoming a more open economy with increased volumes of both exports and imports. The current bilateral, regional and multilateral trading agreements offer great benefit and opportunities to Fiji in terms of increased access to foreign markets under WTO membership, duty free access to Forum Island Countries (FICs) products to the Australian and New Zealand markets and EU markets under the Cotonou Agreement.

A major challenge for the Ministry is the freer global trade which calls for greater competition for domestic producers and the erosion of the preferences that Fiji export industries currently enjoy. The other constraint for trade is the market access restrictions due to non-tariff barriers applied by many countries. 

The Ministry also plays an important role in the negotiation and administration of foreign aid. The Ministry’s achievements include full restoration of foreign aid funding from the EU, NZ and Australia, the opening of the Fiji Embassy in India and India’s technical assistance on the Fiji Sugar Industry, the extension of SPARTECA and the ratification of the PICTA and PACER.

The respective Divisions of the Ministry namely the Political and Treaties Division including the Protocol Division and the External Trade Division perform all these functions diligently despite resource constraints in the period assessed.

3.2.17 Employment and the Labour Market

Around 120,000 people, one third of the labour force, are estimated to be in paid or formal sector employment. With increased investments and future growth in the ICT and Audio visual industries, employment is expected to increase in the medium term. Government still remains the largest employer with some 25,000 employees, accounting for a large proportion of total paid employment.

There are signs of skill shortages in both the public and private sectors. However, unemployment in urban areas was estimated at 14% in 2002 within an overall national rate of 6%, according to the Household Income and Expenditure Survey.

The challenge is to ensure that economic growth is sufficient to absorb the estimated 16,000 people that enter the labour force each year. With current equilibrium of relatively low economic growth, the formal sector is unable to create sufficient jobs.  Many are left to make their own opportunities in the rural economy and in small and micro-enterprises. Government’s Integrated Human Resource Development Programme for Employment Promotion (IHRDPEP), which began in 2000, and the National Centre for Small and Micro-Enterprise Development (NCSMED) established in 2002 are spearheading efforts to support employment creation in both the informal and formal sectors. However, the economic growth which is needed to raise the levels and quality of employment can only be achieved through the economic restructuring to traverse to a high growth equilibrium, as discussed in Chapter 4 and the following chapters of Part Three.

Additional opportunities of securing employment are affected by skill shortages. Government has established a fast-track system for approving work permits in sectors faced by skill shortages. Poor dissemination of information about job opportunities and the skills required exacerbates skill shortages. Employment placement centres, where job seekers have access to information on available positions and to job-interview training, are to be incorporated into the National Youth Option Centres. Government’s Internet-based placement service, CareerNET, which started in 2004, and the expansion of the Computerised Human Resources Information System (CHRIS) would also assist in job placements. 

Obtaining a job is also hampered by the lack of recognition of many training qualifications now available. Preliminary work by the Training and Productivity Authority of Fiji (TPAF) on developing a comprehensive accreditation system of qualifications, commenced in 2004.

Data on the labour force and employment is very limited. A Labour Force survey, conducted in 2004, will provide valuable information about employment in the informal, as well as formal, sectors. The Computerised Human Resources Information System (www.fijichris.gov.fj) aims to improve the collection and dissemination of labour market information from various stakeholders, including the private sector. 

Wages and Productivity

Fiji’s wage-setting is largely based on annual COLA (Cost of Living Adjustment) awards as opposed to merit or productivity based increments. Many private sector employers follow the wage increases awarded in the civil service and the wider public sector. When wage increases tend to be based on the cost of living, there is little incentive for employees to improve work performance or gain new skills, and this creates inflationary pressure.

Basing pay increases on performance and productivity is preferred. It helps in achieving higher productivity in both the public and private sectors, which is necessary to gain higher real incomes and higher economic growth. International experience of development shows that higher living standards come about only with high productivity which is continuously improved. Increasing productivity will come from higher investment in modern machinery, as well as from improved work methods. Pay systems which link wage increases to performance provide a strong incentive for employees to improve productivity. However, indications are that productivity levels are low in Fiji and that there has been little growth in productivity.

Recently Government has agreed to a Partnership Framework Agreement with the Public Sector Unions whereby wages and performance based payments were negotiated. The Partnership Agreement is an Industrial Relations Framework involving a comprehensive study of the current system of annual pay review in the Public Service to determine a system which is more appropriate to the Fiji Public Service.

In 2005, Government introduced the Civil Service Excellence Awards aimed at improving productivity and quality in government organisations. In addition, job evaluation studies have been completed for the service. The new CEO performance contracts, and the new performance budgeting system under the Government’s Financial Management Reform Programme, is intended to assist public servants to become more productive.

Part 3

Future Priorities and Strategies 2007-2011

Chapter 4 Medium Term Strategy: Maintaining Stability and Sustaining Growth

“Maintaining Stability and Sustaining Growth to Achieve a Peaceful, Prosperous Fiji”

4.1 Strategic Priorities

The SDP Medium Term Strategy for 2003-2005 sought to recover from the events of 2000 by rebuilding confidence for stability and growth and these Strategic Priorities are considered to have been substantially achieved. The Medium Term Strategy for this 2007-2011 Plan will build on these achievements to lead Fiji to enhanced social stability and a higher level of sustainable growth.

As described in Chapters 2 and 3, progress has been satisfactory but has not yet achieved the development potential of which Fiji is capable. The key to unlock potential in both social and economic development is considered to be the removal of constraints which hold back economic development and, thus, also limit our ability to make social progress.

Investment levels have improved, but remain below target. Exports have grown, but not fast enough. Employment and self-employment has increased, but not enough to absorb all school-leavers. Incomes have risen, but some sections of the community remain poor and are unable to equitably participate in the benefits of progress. This Medium Term Strategy aims to continue the progress in the previous Plan but strengthen achievement by increasing emphasis on higher economic growth through greater investment and exports and through more fundamental restructuring of the public and private sectors and their ability to work effectively. The Strategic Priorities for 2007-2011 are given here:

Strategic Development Plan 2007-2011: Part Three 

Figure 11 : Plans Supporting Strategic Priorities

Fiji’s economy is in equilibrium, but a low growth equilibrium which is not realising our full potential for economic development and, consequently, not realising the social development which we need. In the Medium Term Strategy we need to accomplish the difficult task of “traversing” from this low growth equilibrium to a new equilibrium of

80

sustainable, higher growth. Such a traverse is difficult as it is not simply about doing more or working harder. It requires a fundamental change in the way our economy works. The key to the change is in the productive use of resources. At present, too much of Fiji’s resources are inappropriately managed in the public sector - doing things which Government should not do at the expenses of the tasks of which Government is uniquely able.

To increase growth we must increase the returns on our productive resources. We must extend the frontiers of growth by redefining the boundary between the private sector and public sector to gain from the unique private sector skills in securing high value in the use of assets and the unique public sector skills in providing those public goods and services which markets fail to provide.

For the private sector to create higher growth it is necessary to reform the policy, legal and institutional framework within which our economy operates. In parallel, the public sector must be fundamentally restructured to transfer the ownership and management of under-performing assets to the private sector and re-focus the public sector in raising the efficiency and quality of public goods and services which it supplies to the people.

This essential restructuring, in a stable macroeconomic environment, is the core of the Medium Term Strategy which will determine our success in economic development and, using the resources such development creates, our success in social development.

4.2 Maintaining Stability

Society requires harmony in which individuals and communities peacefully co-exist to secure better lives for themselves and their families, contributing to the accomplishments of individual communities and the whole nation. The Plan aims to maintain and strengthen the social stability which facilitates such progress and addresses issues of equity in addressing the needs of the poor and disadvantaged and of better government in security, law, justice, good governance and appropriate development of constitutional rights and obligations.

4.2.1 Promoting peace and harmony

The Multi Party Government is built on the fundamental principles of trust, respect and mutual co-existence of all sections of Fiji’s communities. In itself, it demonstrates the progress made in rebuilding stability since 2000. The Ministry of Multi Ethnic Affairs and National Reconciliation is responsible of leading coordination of Government efforts to raise awareness, facilitate nation building and harmony, and monitoring key results towards peace-building. Governmental, intergovernmental and community-based organisations all make important contributions to maintaining peace in Fiji. The Ministry and the United Nations Development Programme (UNDP) have commenced a participatory process for development planning that uses a peace-building and conflict prevention approach.

The Peace and Stability Development Analysis (PSDA) seeks to help identify responses, opportunities, initiatives, and strategies based on building a peaceful and stable community for prosperity in Fiji. Government acknowledges the fact that more prosperous and developed economies tend to suffer less from violent conflicts and have more robust mechanisms to deal with conflict when it arises and to do so in a more positive way. Government will mainstream strategies for conflict prevention and preparedness at all levels of development planning. This includes increased emphasis on public consultation during development planning processes, increased flow of information within and beyond government, greater “whole of government” planning and implementation, and renewed attention to the efficient delivery of services to the public.

Ministries will also undertake programmes to foster cross cultural understanding and multi-racial communal development, building the foundations for peace. Citizenship Studies has been introduced into schools. Government is strengthening the partnership with NGOs and a framework for co-operation has been prepared. Government acknowledges that more prosperous and developed economies tend to suffer less from violent conflicts and have more robust mechanisms to resolve conflict if and when they arise. Government will increase prosperity and undertake to mainstream strategies for conflict prevention and preparedness at all levels of development planning.

Most of the social development plans described in Chapter 7 will support this Strategic Priority, as illustrated in Figure 11.

4.2.2 Enhancing security, law and order

The rule of law is essential for social stability as well as for economic growth and sustainable development. Progress in maintaining law and order has been good. The police have dealt effectively with criminal and civil cases, with the courts functioning completely independently without interference from Government.

The trend in the numbers of reported criminal offences has generally been downward due to better enforcement of the rule of law. This is largely a result of more resources, better co-ordination between law and order agencies, and capacity improvements. Funding of the major security and law enforcement agencies⁵ has increased by 28 % since 1999.

Since 2003, an AusAID-funded Fiji Law and Justice Sector Programme has given technical support to the Police, Prisons and Judiciary. AusAID’s Pacific Regional Policing Initiative provides improved training of police officers. Streamlined court processes and consolidation of prosecution functions into a National Prosecution Service, are helping to reduce the backlog of court cases. The Fiji Prison Service is reviewing a policy shift from ‘containment’ to ‘correction or rehabilitation’. This process of

⁵ Includes Solicitor General’s Office, Prisons, Justice, Ministry of Home Affairs & Immigration, RFMF, Police, Judiciary and DPP’s Office.

improvement will continue and new challenges to security and the rule of law - including international terrorism, trading in illicit drugs, people smuggling and money-laundering - will be met. 

Plan sections which support this Strategic Priority are indicated in Figure 11, including developments which assist law enforcement and those which develop more law abiding citizens.

4.2.3 Alleviating poverty

Comprehensive information on poverty in the 2002-2003 Household Income and Expenditure Survey and a 2003 assessment of poverty and hardship show that increased efforts are needed to alleviate poverty. A critical concern has been the lack of adequate new income generating opportunities in employment and self employment compounded by insufficient basic service provision, including clean water.

Increased resources have been devoted to social welfare in the Family Assistance Scheme, which provides a monthly grant to those who are unable to work. However, Government stresses the need to create more formal and informal income generating opportunities, including small and micro-enterprises and equipping the poor and disadvantaged with the skills to exploit such opportunities. The sustainable use of natural resources will also be encouraged to alleviate poverty. Government’s National Sugar Adaptation Strategy, Alternative Livelihoods Project and Rural and Outer Island Project have all been designed to create livelihoods and income generating opportunities for cane farmers and related workers, landowners and rural and island communities.

However, major progress in alleviating poverty will only be achieved with higher and more balanced economic growth. Greater achievement of Strategic Priorities for economic growth will enable increased achievement of poverty alleviation.

Figure 11 indicates the wide range of planned activities which support alleviation of poverty, which include social development to increase provision of basic services to the poor and also economic development to create the income generating opportunities which can lift the poor out of poverty. The large number of agencies which contribute to the poverty alleviation outcomes requires that overall responsibility be taken by a central agency, and that role will be taken by the National Planning Office.

4.2.4 Strengthening good governance

Strengthening good governance is an on-going process of improving the ethical and professional standards and quality of the public sector, stressing increased transparency and accountability at all levels and removal of areas of administrative duplication of effort. This strengthening will complement the performance and structurally oriented reforms in Chapter 6 to create a public sector of higher standards and productivity.

Strengthening governance requires changes in people’s attitudes to work and the way work is done, so can be a lengthy process. All levels of the public sector will be involved, including Parliament, national and local government agencies. The Public Accounts Committee will provide checks and balances on the expenditure of funds by Government. The consideration of social, economic and environmental considerations in decision making will be encouraged and strengthened.

To strengthen good governance, Government will promote accountability by: (i) processes which fully inform Parliament on budgets, loans, and guarantees; (ii) timely audit and publication of accounts of Government and public sector entities; (iii) transparent public sector contracting; (iv) prompt discipline for breach of financial regulations; (v) strengthening the Public Accounts Committee of Parliament, the Auditor General and Ombudsman; and (vi) Reserve Bank of Fiji will continue to non-partisan monitoring and advice.

Measures promoting good governance are particularly included in the areas of financial management (5.2) and public sector restructuring (Chapter 6) as well as Law and Justice and other sections indicated in Figure 11.

4.2.5 Reviewing the Constitution

The successful completion of the 2006 National Elections and formation of a Multi Party Government has created a positive political environment which is important to creating conditions for sustainable development.

The review of the Constitution is an on-going participatory approach and consensus building between the members of the Multi Party Government on the more substantive parts of the Constitution, which may include changes to the rules on the formation of a multi-party Government. 

Plans which may be influenced by such a constitutional review are indicated in Figure 11 and include Social Justice and Affirmative Action (7.2) and Law and Justice (7.4.2).

4.2.6 Resolving the agricultural land lease issue 

In addition to a wider review of constitutional issues, the Multi Party Government creates a political environment which is more conducive to a healthy dialogue and possible resolution of the land lease issue. Government’s proposed native land lease system is based on providing secure, longer term leases for tenants and fair rental returns to landowners. A fair rental enables landowners to channel proceeds into viable investments and human resource capacity building for their children.

Land not required for the daily sustenance of the Mataqali or landowning units will be offered at fair rental terms and conditions, giving increased availability and use of land by tenants to contribute to growth. Longer term leases enable tenants to undertake longer term investments for a market rate of return. Government will also identify land for the resettlement of urban squatters, apart from efforts to encourage squatters to utilize vacant lands in villages and rural areas. Sustainable land practices will also be encouraged to protect land from soil erosion and degradation and ensure that Fiji’s environment is adequately protected. A Land Use Policy adopted in 2005 will guide Fiji’s future land use development programmes.

The Native Lands Trust Act (NLTA) is the legal framework that Government will promote to safeguard the interests of landowners and tenants. A land lease system that promotes fair rental and security of tenancy will provide an environment of political and social stability in Fiji.

Directly related plan sections are those concerned with agriculture (8.3.1 and 8.3.2) and land resources (8.3.5).

4.2.7 Implementing affirmative action 

The enactment of the Social Justice Act in 2001 has created special recognition for the disadvantaged in society and for Government’s affirmative action programmes. Since the implementation of the Act in 2001, Government has allocated substantial sums for the various disadvantaged groups under the Social Justice Act programmes. 

The major part of the Social Justice programmes is focused on the poor and those living in rural areas. This complements poverty alleviation programmes by using affirmative action to benefit the poor. Other disadvantaged groups who are supported include women, children and youths and people with disabilities.

An important component of the Affirmative Action policy is the implementation of the Twenty-year Development Plan (2001-2020) for the enhancement of participation of indigenous Fijians and Rotumans in the socio-economic development of Fiji.

Social justice and affirmative action is supported by measures included in plans for both social and economic development as indicated in Figure 11.

4.3 Sustaining Growth

The discussion of Strategic Priorities in 4.1 indicates that, whilst sustained growth has been achieved, the economy is in a low growth equilibrium. The targets for higher economic growth, which also underpin the ability to develop socially, require a traverse to a high growth equilibrium. This requires a restructuring of Fiji’s economy, fundamentally changing the way the public sector operates and the way that the private sector does business. The interaction and partnership between public and private sectors is critical in this difficult task.

Restructuring will move the economy from growth driven by debt and consumption to a more competitive and efficient economy led by investment and exports. For Fiji to compete, the “easy” low growth options of protection and inefficient, supply driven allocation of resources must be replaced processes and market systems which allow land, labour and capital to be put to their highest value use, and the owners of each of those resources rewarded equitably for their contribution to economic production and growth. The priorities proposed address these needs.

4.3.1 Macro-economic stability

Macro-economic stability is a critical requirement of the Medium Term Strategy as it is a pre-requisite for higher investment and growth which, in turn, are required to provide the environment and resources for social development as well as economic development. 

Present macroeconomic conditions and challenges are set out in detail in 3.1. These lead to the Medium Term Strategy, summarised in 4.1, to traverse from the present low growth equilibrium to a high growth equilibrium to achieve the sustained growth required to meet Strategic Priorities. The monetary and fiscal policies of the Plan are set out in

Chapter 5.

Achievement of macroeconomic stability in inextricable linked with Restructuring the Public Sector (Chapter 6) which is necessary to support the projected fiscal balance and economic growth. In addition to public sector restructuring, macroeconomic plans also require increased private sector participation and performance which must be facilitated through successful implementation of plans for Financial Services (8.1.1) and Employment and Labour Markets (8.1.4).

These reforms in the use of, and markets for, resources provide a framework within which development plans to reform and readjust, including sugar, agriculture and forestry amongst natural resources sectors and transport, water and sewerage, and telecommunications amongst the infrastructure sectors. Measures to promote competition and efficiency will strengthen manufacturing, commerce and tourism to increase foreign currency earnings and contribute national economic development.

4.3.2 Restructuring to promote competition and efficiency

In order to reach a high growth equilibrium, a substantial restructuring of both the public and private sectors is required. These are best considered as part of one Strategic Priority as an essential feature of the restructuring is moving the boundary between public and private sectors by transferring assets and tasks out of the public sector and into the private sector.

In addition to the sharper definition of responsibilities for public and private goods, the public sector restructuring also requires now financing modes which are consistent with fiscal and debt strategies. Within tighter fiscal and debt strategies the increased provision of public goods and services - especially infrastructure - require new sources of funds and these are seen to be in the form of increased use of public private partnership (PPP) financing modalities.

As buyer of Government’s commercial assets and co-financier in the provision of public infrastructure and services restructuring of private sector institutions is integral to restructuring of the public sector. The plan sections indicated in Figure 11 as supporting this Strategic Priority mostly concern the need to create a business environment which is conducive to entrepreneurial private sector activities, including strengthened property rights, contract law, and land tenure (7.4.2), improved financial services (8.1.1) and a higher skilled, more mobile labour market (8.1.3 and 8.1.4).

Analysis of the present position is included in 3.1 and plans for restructuring are presented in Chapter 6.

4.3.3 Raising Export Earnings

Challenges facing traditional export sectors of garments and sugar and the potential impact on the balance of payments and foreign exchange reserves are discussed in 3.1. Exports are always an important part of economic development and macroeconomic management but they are particularly so given the challenges of this plan period. Government recognises that growth in exports is essential for achieving sustainable economic growth and development.

Monetary and fiscal policy will be tightened to restrain imports of consumer goods and a National Export Strategy, currently being prepared, will be implemented to develop medium and long term exports. The present trade support network is seen as jointed and poorly coordinated, with strongly organised lobbies for tourism and sugar tending to diminish support for other potential export sectors. This issue will be addressed in a national strategy in place of ad hoc and sector strategies which have created distortions and disincentives.

Recognizing the narrow export base and lack of market oriented diversification, the Strategy will address the need to improve the business environment in which exporters operate in order to enable the private sector to develop export markets, invest and bring the performance benefits of entrepreneurial management to the export sector. The Strategy seeks a substantial reduction in Government interventions which hamper export development.

Success in exports requires Fiji’s producers to become internationally competitive in both export and domestic markets – industry and agriculture sheltering behind tariffs cannot compete and export. An essential purpose of restructuring plans is to create an environment which promotes the realisation of productive efficiency to compete with foreign producers in external trade and domestic markets.

Plan sections which are expected to contribute to this Strategic Priority include all the economic development activities in Chapter 8 as export competitiveness cannot prosper in an inefficient economy. Education and Training (8.1.3) has a major role to play in developing the vocational, technical and professional skills required. Restructuring of the environment in which business operates will also be critical to export success.

4.3.4 Raising investment levels for jobs and growth

Although investment has risen in recent years it remains below the average of 20% of GDP for developing countries and below the SDP target of 25% of GDP. Of particular concern has been the low rate of private sector investment. Although private sector investment has doubled since the low of 2000 it remains less than 7% of GDP. Productive, private sector investment has greater impacts on jobs and growth than public sector investment, whether in infrastructure or low return public enterprises. The key to increasing jobs and growth is increased private sector investment rather than simply increasing total investment.

Restructuring of the public sector will transfer assets and business opportunities to the private sector. Macroeconomic management will establish an environment conducive to investment and re-orientation of public debt management, to lower levels of borrowing and a higher proportion of external debt. This will increase the availability of funds for debt and equity finance of productive investments in Fiji. Redrawing the boundaries between public and private sectors will be supported by changes in the policy and institutional environment which will increase business confidence and the efficiency of doing business.

Public private partnerships (PPP) provide a variety of modalities through which the private sector may help fund public infrastructure and services and manage them more efficiently. Government will enter such partnerships for infrastructure to provide water, roads, sewerage and the like to citizens, to meet their essential needs. National networks and local distribution to serve the general public may be funded under PPP. However, the boundary must be defined between public goods and the distribution, utilities and service which serve private business needs, and for which the incremental costs of the infrastructure form part of the private investment cost.

Whilst the above measures tend to be directed at larger enterprises offering formal employment, Government is well aware of the impact which investment in small and micro-enterprises (SME) can have on increasing employment and growth. The capital intensity of SME is typically low and increased investment of relatively small amounts can have a substantial impact on jobs and growth. SME are particularly suited to rural enterprises and thus serve a distributive role on allowing people in remote communities to develop livelihoods and participate in Fiji’s developing economy.

The redefinition of the public sector, combined with PPP in infrastructure and public service provision, requires a role for almost all economic development plan sections in promoting investment for jobs and growth. Several social development sectors also offer potential opportunities for investment as well as implementing the institutional development required to create an attractive investment climate (see Figure 11). The core support to promote investment is described in Government’ plans for macroeconomic management (Chapter 5) and plans for restructuring of the public sector (Chapter 6).

4.3.5 Rural and outer island development

The rural and outer island areas continue to be the home of the majority of Fiji’s people, although the rural population is declining overall due to rural-urban migration and the growth of urban and peri-urban squatter settlements.

In many areas old, traditional economic activities of coconut production and subsistence farming have formed the basis of livelihoods. As traditional coconut markets have declined, particularly with the high costs and low capacity of inter-island shipping, the rural areas have tended to decline as poor access to markets and services has been a bar to change and development of new products and markets to support improving livelihoods.

Major government initiatives in the rural sector have focused on the provision of basic services and the development of rural business. Education remains critical for the development of the rural areas and is being facilitated by an EU grant-funded Fiji Education Sector Programme. Education alone tends to increase rural urban migration as a better educated population looks for employment. Development then must be balanced between increasing skills and capacity in rural and outer island areas matched by development of access to employment and self-employment through improved access to markets and the infrastructure needed to support that. 

Government’s Rural and Outer Island Project, with ADB support, is designed to promote such balanced development of inter-island and international maritime infrastructure and rural roads with livelihoods supported in tourism, agriculture and agro-processing and enterprise development in MSMEs. Government will strengthen the capacity of provincial governments to actively participate in planning and implementation in development.

Within this wider context of rural development Government recognizes that Vanua Levu, Fiji’s second largest island, is a depressed area which needs particular support to income generating opportunities and the infrastructure required to provide access to markets and services. Priority measures to redress infrastructure provision in Vanau Levu will include new international port at Savusavu and upgraded roads to support development of more competitive tourism and agri-industry sectors. 

The Strategic Priority will be most directly supported by the Rural and Outer Island Development Plans (7.1.2) but is also a major outcome of the Poverty Alleviation (7.1.1) and Social Justice and Affirmative Action (7.2) plans and others indicated in Figure 11.

4.4 Plans to Implement the Strategy

The remainder of this Strategic Development Plan sets out the detailed plans by which Government intends to achieve the Strategic Priorities presented in this Chapter.

A pre-requisite of success in Plan implementation is the maintenance of a sound macroeconomic environment through prudent monetary and fiscal policies. The plans for macroeconomic management are set out in Chapter 5.

For the Plan to succeed, Government itself must be restructured to become more efficient and effective in its task of serving the people. Efficiency not only produces a better quality of public services but allows more of the Government’s resource to be dedicated to service delivery rather than administration. The critical and challenging plans to restructure the public sector are presented in Chapter 6.

In 4.2 the Medium Term Strategic Priorities for Maintaining Stability are described. In Chapter 7 the plans addressing these priorities are set out in terms of Alleviating Poverty, Social Justice, Social Services, and Security, Law and Justice. For its component sectors, each section of Chapter 7 presents the goals, development rationale, policy objectives, strategies and key performance indicators of success in achieving plan outcomes. Links to the strategic priorities are clearly stated as well as links to the Millennium Development Goals, to which Government is firmly committed.

In Chapter 8 the focus turns to the second part of the Medium Term Strategy, Sustaining Growth. Development depends on the increased resources and prosperity which growth alone can bring. As discussed in this chapter, moving to a sustained, higher level of growth demands new ways in which we carry out our business activities, not just “more of the same”. Chapters 5 and 6 lay the foundation for this “traverse” to higher growth through macroeconomic management and public sector restructuring.

But higher growth cannot be achieved by Government alone. It depends on the public and private sectors working in effective partnership. Chapter 8 sets out the plans for such partnership in Economic Restructuring, International Trade, Natural Resources, and Infrastructure development. For each of the component plans, as in Chapter 7, there are clear statements of goals, rationale, objectives, strategies and key performance indicators.

Chapter 5 Macroeconomic Management

5.1 Monetary Policy

Exchange Rate and Reserves

Through demand management and policies to support exports and investment, the balance of payments will be managed to restore and maintain reserves equal to some 3 to 4 months cover for imported goods.

Inflation

For 2007, the year end inflation is projected at 4.0% in the light of the inflationary pressures emanating from higher and volatile crude oil prices. In 2008, inflation is expected to ease back to 3.5% against the back drop of lower trading partner inflation resulting from a slightly weaker global economy and anticipated steadiness in international crude oil prices. Continued demand management is then expected to maintain inflation below 3% for the remainder of the Plan period.

5.2 Fiscal Policy

Budget Deficit

Government reduced the net deficit and will continue prudent fiscal management so that the deficit will not significantly exceed 2% of GDP in any year of the plan period. By restraining expenditure growth below the level of GDP growth, the deficit is projected to fall to 1% of GDP by 2009 and, potentially, to a balance by 2011. Such a balance will increase Government’s ability to use fiscal policy in response to changing macro-economic needs.

Debt Management and Contingent Liabilities

Continued reduction of deficits over the medium-term will allow better management of public debt and encourage greater use of the country’s savings in the private sector. The primary balance – net deficit less interest payments – will be in surplus from 2007 onwards to allow reductions in the debt as a proportion of GDP to less than 48.5% by 2009 and to a medium term target of 45% by 2011.

Though reduced in proportion to GDP, the nominal value of total debt will continue to rise, at sustainable levels, and allow Government to diversify its debt portfolio and also FNPF to diversify its investments. Government will adjust the mix of debt to minimize interest costs and better manage exchange risks. Contingent liabilities are declining and not a current concern, but they may impede restructuring of public enterprises and need to be managed to facilitate restructuring.

Revenue

Revenue projections are based on a minimum continuation of present levels of some 27% of GDP. The principles guiding revenue collection are that: (i) Government’s operating revenues should always be more than recurrent expenditures; and (ii) Government savings should be increased, in part, by increasing operating revenues. This will be supported by continued strengthening of tax compliance and increased efficiency of tax collection, identifying the leakages in tax revenue and measures to promote compliance and prevent identified leakages. Exemptions will be reviewed in terms of economic efficiency to identify those without net economic benefits. This continues the policy which has already increased revenue’s share of GDP.

Expenditure

In the plan period expenditure will be managed to achieve the targeted level of deficit so that it does not significantly exceed 2% of GDP in any year. Expenditure will be controlled by increasing productivity and accountability in the use of Government resources. Overall achievement of Strategic Priorities will be maintained by focusing budget resources on clearly stated priorities of: (i) the core priority areas of health, education and infrastructure;

(ii) promoting export growth and investment, particularly in the resource-based sectors; and

(iii) maintaining support for law and order, and addressing poverty reduction through the creation of employment opportunities for all, particularly those in the rural areas and the outer islands. 

These measures are supported by financial management reform, which introduces a performance focus and strengthens accountability. A new Financial Management Information System has been introduced to provide the timely, accurate information on Government’s financial position which is essential for effective control and decision making.

The linkage between planning and the budget process has been weak but will be strengthened through greater coordination of this Plan with Corporate Plans and Budgets. The budget process will become better informed on implementation performance through effective and timely feed back of the monitoring and evaluation systems proposed in Chapter 9. The focus of the Public Sector Investment Plan will also be sharpened to improve the quality of development expenditure. Proposals will be screened to be developmental and aligned with the Strategic Priorities. Proposals will also be reviewed for appropriateness in their use of Government funds to create public goods which cannot be better provided by the private sector or through public private partnerships.

Asset Sales and Public Private Partnerships

Selective corporatisation of agencies which can be commercially viable and operate without Government funding will reduce the burden on Government financial support. Government will examine its shareholdings and identify those which it is appropriate to sell. Government owned entities that are best owned and run by the private sector will be divested. In the use of asset sales proceeds, priority will be given to repaying debt and investing in high-return projects in the PSIP.

Public Private Partnerships will be used for investment in and the operation of infrastructure that is attractive to the private sector, where viable returns can be realized through cost recovery and user pay systems. In the process, it reduces the burden on Government finances and allows Government to direct public funds to investment projects to create public goods, with greater social benefits, which can less easily be developed into viable cash flows. This refocusing of Government and restructuring of public services and assets is central to the achievement of the Strategic Priorities.

5.3 Summary and Key Performance Indicators

Goal

Maintaining macro-economic stability to facilitate social and economic development.

Link to Strategic Priorities

Macro-economic management will determine the extent to which Government achieves the Strategic Priority of maintaining macro-economic stability. Achievement of this outcome is critical to Government’s ability to achieve all other Strategic Priorities through establishing the necessary facilitating context and providing the resources necessary to support the other priorities.

Development Rationale

The major challenges for the medium term are to maintain prudent monetary and fiscal management in order to protect exchange reserves, continue with low inflation, and ensure sustainable fiscal deficits and debt levels. The medium-term approach by Government recognizes the importance of consolidating fiscal policy and increasing export earnings to reduce the widening trade account of the balance of payments. 

Policy Objectives, Strategies and Key Performance Indicators

Chapter 6 Public Sector Restructuring

6.1 The Public Sector

6.1.1 The Need for Restructuring

The public sector in Fiji is large, using a high proportion of the nation’s assets and skilled labour. The public sector has extended to undertake economic activities in which private sector management typically produces higher returns to resources. A rapid improvement in productivity and managerial effectiveness is critical to the effective implementation of this Plan and Government programmes and policies in general.

The size of the public service increased from 10,000 in 1971 to 25,888 in 2005, much more rapidly than the growth in population. The number of established and un-established posts increased between 2003 and 2005 by 1,787 or (6.5%) of the overall establishment. The public sector is consuming an increasing proportion of the nation’s assets due to wage growth and the increasing size of the workforce. This growth in expenditure undermines the Government’s fiscal policy, service provision and economic growth. 

Over recent years a number of productivity initiatives have been implemented, but they have not translated into a reduction in the size of the workforce or in any visible improvements in productivity. A radically new approach is now needed to fundamentally restructure the public sector.

6.1.2 The Approach to Restructuring

To meet these challenges, Government has developed plans to address: (a) financial management reform - discussed above in 5.2; and (b) public sector reform, including both civil service reform and public enterprise reform - discussed in this chapter. Significant reform, though difficult, is essential and it is incumbent on officials to respond by strategically realigning resources and offering value for money.

Reform must be made in a planned and coordinated manner. Improvements in governance, planning, coordination, donor assistance and communication between the key stakeholders need to be efficiently harmonized and synchronized. To support such an approach, a Civil Service Reform Programme is currently being developed for implementation over the Plan period through a common management structure.

Such a programme requires commitment and leadership at the highest levels of Government to champion the cause of reform and lead its implementation. To this end, Cabinet has decided to form a Steering Committee of key stakeholders under the chairmanship of the CEO of the Prime Minister’s Office reporting directly to a Public Service Cabinet Sub-Committee led by the Prime Minister. 

The reform strategy also needs to take into account that CEOs of ministries have been given contractual responsibilities without being given the appropriate delegations, legislative backing, systems and procedures to assist in the management of  resources or delivery of services for which they are accountable. Restructuring will require further delegation accompanied by legislative reform, improved management of capital infrastructure and the fleet, systems, training and strengthening of accountability mechanisms. A broad based reform strategy can address many of these issues without diminishing service delivery. This can be achieved through restructuring, job redesign and strengthening and streamlining policy and procedure.

The broad objectives for Public Sector restructuring can be summarised as:

• Objective 1: Mobilize programme resources, commence and sustain communication and consultation with all key stakeholders;
• Objective 2: Divest functions to the private sector and restructure and right size all Government Ministries and Departments to maximize the efficient and effective use of public resources and enable them to operate within a sustainable budget base;
• Objective 3: To strengthen systems and processes in human resource management, fleet and capital infrastructure;
• Objective 4: Create a cadre of future leaders, delegates and corporate resource managers who are better informed, trained and equipped to manage the major assets of Government; and
• Objective 5: To strengthen the ethics, values, integrity and impartiality of key decision makers.

Communication and the opportunity for involvement by the community, the private sector, unions and the workforce in the design and implementation of new structures is an essential component to successful restructuring. Effective communication will address community concerns and emphasize the Government’s commitment to effective public sector management, the desire to lift productivity and improve efficiency in service delivery.

The objectives require that parts of the present public sector be re-organised and corporatised or privatised by divesting functions that are better delivered by private enterprise. This public enterprise restructuring is discussed in 6.3. The core functions then need to be addressed and re-organised to increase productivity and efficiency whilst improving service delivery. This civil service reform is addressed in 6.2.

Recognising their vital importance during the Plan period, a Summit Working Group on Public Sector Restructuring will be dedicated exclusively to support, monitor and evaluate implementation of the Plans in this Chapter.

6.2 Civil Service

6.2.1 Civil Service Structure

The reform of the civil service aims at reducing costs – by restructuring, right-sizing and increasing efficiency - and improving service delivery. This will reduce the burden on Government budget and allow more resources to be applied to providing the community with more and better public goods and services. This potentially supports all of the Strategic Priorities of this Plan by releasing Government resources for more productive uses.

At present the civil service comprises 41 Ministries, Departments and Statutory Authorities. Comparative industry benchmarking suggests this is disproportionate to the size of the civil service, representing a significant over investment in senior management and service structures. Preliminary analysis suggests that the number of ministries could be reduced. There is significant scope to flatten management structures, remove overlapping functions, broaden roles and responsibilities and shift delegations away from central agencies to increase flexibility and responsiveness in the deployment of resources. 

To strengthen management, a leadership development programme must implement a succession planning approach to identify the next generation of leaders. This needs to target talented employees with the potential for future leadership positions. Selected employees could be exposed to training in leadership, people management, public administration, corporate governance and the importance of strategically managing public assets. This would be delivered through accredited tertiary study, job rotation and mentoring in the work place. Emphasis will be placed on improved knowledge and skills in resource management, strengthened ethics and integrity and the importance of impartiality in decision making. 

6.2.2 Human Resources

The number of industrial disputes has declined in recent years but there has been little evident progress to improve productivity through initiatives such as performance management or service excellence. Thus, a new approach is needed to restructure in order to achieve greater productivity and seek to secure genuine productivity agreements that build on the consensus reached under the Productivity Charter Fiji 2005.

Right-sizing employee numbers during restructuring can include natural attrition, recruitment freezes, divestment or outsourcing of functions and the application of departure packages either by voluntary or targeted redundancy programmes. While a ‘no redundancy policy” has been maintained to date, redundancy is a viable strategy that can help employees who cannot be retrained and redeployed. Without this provision meaningful restructuring may not succeed but, if adopted, this strategy must be adequately funded.

The approval of this strategy would be subject to consultation with the unions and the preparation of a redeployment and redundancy policy that is supported by a fully costed business case. The policy and procedures would need to ensure that skilled employees are not lost to the service with these officers being redeployed and retrained rather than declared redundant.

In April 2006, a three year Partnership Agreement was reached with six public service unions to resolve outstanding disputes and establish a partnership to move forward with reforms. As a forum for this process, a Joint Committee has been established composed of CEOs of appropriate ministries and representatives of the public service unions. A comprehensive study will be undertaken to agree a system of annual pay review for implementation from 1^st January 2008.

6.2.3 Human Resources Management

The weakness of present human resources management is demonstrated by the apparent discrepancy between the number of authorized positions and the number of positions funded in the budget. The World Bank Report in (2005) estimated this variation to be as much as 4,381 positions -a number almost equal to the 5,000 target reduction in civil service employment. This discrepancy must be addressed urgently to establish effective control of human resources and establish a baseline for measuring reform performance.

At present, human resources management is dependent upon stand-alone databases and hard copy record-keeping which severely limits the ability to manage a workforce of over 25,000 employees. New technologies common elsewhere have revolutionized how human resource management information is captured, stored and used as a powerful tool to strengthen accountability and improve strategic workforce planning.

To advance this key strategy, structural integration of the payroll and establishment functions must occur to align human resource policy and procedures with future systems development. A fully integrated and networked Human Resources Management Information System (HRIS) needs to be implemented. It should be noted that the progressive loss of control over resources can largely be attributed to the lack of access to the reliable and credible management information needed for control and decision making.

6.2.4 Asset Management

To complement stronger human resources management capability, a strategy to improve the management of capital assets must be developed which provides the basis for restructuring and consolidation of the existing functions.

The fleet of vehicles used by the service is recorded to number 1,744, but may be considerably more as vehicles are not always disposed of when a replacement is purchased. Current fleet management policies are 20 years out of date and management practice for the procurement, maintenance and disposal of vehicles is open to abuse.

It would be possible to implement more modern, effective fleet management systems with clearer control and accountability. However, it may be more appropriate for Government to cease involvement in vehicle management - not a core Government function - and instead lease its fleet under private sector management and maintenance. 

Such an approach would be consistent with the emphasis on increased public private partnerships and follow the practice in which government offices are generally tenants of buildings rather than landlords. The leasing principle could be extended to the financing and management of other Government capital, such as computers, office furniture and the like.

6.3 Public Enterprises

The government has capital equivalent to 30% of GDP tied up in largely unprofitable public enterprises. Few public enterprises are able to finance their investments from internally generated funds and the modest target of a 10% return on assets is rarely achieved, overall returns are some 3% and well below the opportunity cost of capital.

The failure of entrepreneurship in public enterprises results in the diversion of scarce Government resources to support activities which should be commercially owned and managed by the private sector. By doing so, the public enterprises deny communities access to the public goods and services which only Government can supply and for which they pay their taxes.

Restructuring of such enterprises onto a financially viable commercial basis, ultimately with entrepreneurial ownership and management, will save scarce Government resources and allow increased funding of genuinely public goods and services. The greater impact, however, is that the assets transferred will secure higher returns through entrepreneurial management and, thus, create increased growth and employment in the national economy.

6.3.1 Restructuring Principles

Government has endorsed a three-step reform process: (i) introduce measures to reorganize, commercialize and corporatise public enterprises; (ii) enhance competition in the markets in which particular public enterprises operate; and (iii) privatize the restructured public enterprises. The Government has made significant progress in reorganizing, restructuring and commercializing some of the commercial operations. Less progress has been made in corporatisation, constrained by the “no redundancy” policy and almost no significant privatizations have been made recently, which is especially unfortunate because even partial privatization can add significant value to an enterprise.

Government is dissatisfied with this rate of progress and, in August 2006, adopted a programme of accelerated restructuring so that substantial progress is made in the first two years of this Plan period and effective consolidation of the gains is achieved before 2011.

The public sector has encroached on activities which are best undertaken by the private sector and, by doing so, has both blurred the boundaries of responsibility and reduced economic performance. Restructuring will adopt clearer definitions of individual public and private sector responsibilities as well as establishing a sound basis for mutually beneficial public private partnerships (PPP).

The fundamental economic distinction is between public and private goods. A public good or service is one in which the consumption by one person in no way limits the ability of other people to benefit - a nature which makes it difficult to create a market which yields revenue. Private goods are those for which the consumption by one person excludes consumption by another person - a nature which makes the goods highly suitable to rationing by price in a competitive market.

National security, law and justice, environmental protection and the like are public goods which cannot be directly priced and marketed but which bring benefits to the entire country. They are clearly the responsibility of Government to be financed from general taxation. Electricity, drinking water, a hospital bed, or a telephone call consumed by one person excludes consumption by another. They are clearly subject to pricing in competitive markets and are potentially the responsibility of the private sector, financed on a user pay basis.

Reality is not so simple. Price alone would exclude the poor and disadvantaged groups from consumption of essential private goods, such as basic drinking water and electricity supplies. At present, such “private goods” are supplied by the public sector inefficiently and at high cost which entails Government subsidy of rich and poor alike, as well as the inefficient public sector supply providers. Studies are in hand to identify the most cost effective means by which such non-commercial obligations can be met whilst maintaining the drive to achieve efficient resource allocation and use.

6.3.2 Public Sector Structures

Few entities can move directly from public sector to private sector without substantial changes. Government has established a series of transitional stages between fully public and fully private ownership. It is also recognized that many entities will best remain part way between full public and full private ownership in PPP structure.

Reorganisation

Reorganisation under the 1996 Public Enterprise Act is a structural reform process for nominated Government entities that allows changes in the conditions and structure under which the entities operate so that, as far as practical, they operate on a commercial basis in a competitive environment. The entities remain under public ownership and the State, as owner, provides strategic direction in setting financial and non-financial performance targets and in meeting non-commercial obligations.

The purpose of these re-organisations is to create organisations which are: (i) more efficient and productive; (ii) more accountable; and (iii) better organised. Government companies, statutory authorities, ministries and departments may all be nominated for the re­organisation process. This will bring greater efficiency to reduce the demands on the Government budget and/or increase their contribution to Government revenues.

In the context of restructuring, the increased efficiency will add value to the marketability of the assets. Whether privatised as a going concern or contributed to a PPP as Government equity it will increase the value realised by Government and contribute to a reduction in Government debt and/or capital expenditure programmes. Re-organised entities are likely to move on into other ownership arrangements. 

Public Private Partnerships

In the Public Private Partnerships Act 2006 the Government establishes a range of legal options for ownership and operation of entities which fall between full public or private ownership. PPPs are arrangements which, irrespective of the corporate or legal form, bring together state assets or expertise and private sector assets or expertise to provide infrastructure or services at competitive prices.

These forms are aimed primarily at supplying public goods, including both infrastructure and services. The forms are varied and have different impacts on Government finances. Some forms are simply an alternative form of debt financing in which the cost to Government is deferred and contingent liabilities are increased rather than public debt. These simple “debt substitutes” are likely to be least attractive to Government.

Outsourcing and management contracts will introduce private sector management to the provision of Government services, increasing efficiency and providing cost savings for Government without present or deferred investment costs. These can be applied to existing services or maintenance of existing infrastructure as well as to design-build and turnkey contracts.

Concession contracts are used to provide new, rehabilitated or upgraded infrastructure which is designed, financed, constructed, operated and maintained by the private sector for an agreed period of time. Within this time the user charges reimburse the costs of the concessionaire, including financing costs and a fair return on the investment. Such long term arrangements with Government clearly require confidence in Government and in the legal and judicial system to uphold agreed contracts.

These forms of PPP and the variations on them will provide an effective means of establishing PPPs which will increase the overall efficiency of public infrastructure and service provision whilst reducing demands on Government resources, thus allowing it to concentrate public funds on provision of those goods and services which cannot generate adequate financial returns but do create the social and economic outcomes which Government seeks.

Privatisation

There is a clear distinction between a PPP under which the private sector partner supplies public infrastructure and services on behalf of the State and a privatisation in which assets are sold to the private, market sector and are no longer owned or controlled by Government.

Goods and services which are clearly marketable private goods and services should have no claim on scarce public funds and the tax revenues which provide those funds. In these cases the reorganised entities should be moved from reorganisation to privatisation. Reorganisation will ensure that Government receives a fair market price for the entity by increasing efficiency and returns so that the private sector is willing to pay for the business on a going concern basis.

It is possible that some entities cannot be made a going concern. In these cases the consumer of the private goods is unwilling to pay a full cost recovery price for even the most efficient enterprise. Market forces then require that the entity be closed and its assets sold at asset value so that Government may recover some value from the investment and the assets be more productively used elsewhere in the economy.

In the privatisation process the Fiji Investment Corporation Limited (FICL) may facilitate the transfer to full private ownership. The Government owned FICL provides a means by which entities can move beyond corporatisation within the public sector and become fully privatised and commercial in structure and management. In such cases Government would act in partnership with the private sector on the private sector terms of shared equity and liability. This could be a long term investment by FICL or used to establish a sound commercial track record which allows Government to ultimately divest at a higher price.

In cases of privatisation, any residual regulatory functions of the entity must be removed and vested in the Commerce Commission, the Government’s purely regulatory entity. In practice, Government policy is to separate commercial and regulatory functions on principle, including in wholly Government owned entities.

Public Sector Investment Programme

Government must identify a pipeline of projects suitable for PPP and private sector financing models. This will require evaluation of financial viability so that those projects which have a financial internal rate of return in excess of the weighted average cost of capital can become candidates for PPP or privatisation. If the goods and services are of a public goods nature then the investments will be directed towards the PPP pipeline and if of a private goods nature towards private sector finance.

In neither case would they be approved for funding solely under the PSIP. PPP proposals which had been agreed as financially viable and for which a financing plan had been agreed would be eligible for PSIP financing of the agreed Government portion if required. Such screening will allow public funds allocated under the PSIP to be concentrated on raising the level of investment in development projects and programmes producing the public goods and services which Government is uniquely able to supply.

6.3.3 Accelerated Restructuring Programme

In August 2006, Government agreed to accelerate the pace of restructuring. Slow progress in the past was considered to have been due to a natural wariness of such large changes and to a predominance of information focusing on the negative aspects of restructuring, such as redundancy. Importance is attached to increased awareness of the positive aspects of restructuring: a lower tax burden; improved public services, including social services; increased investment in construction and maintenance of infrastructure; increased economic growth and employment through more efficient management of assets.

A further impediment to progress was seen as a fragmentation of Government in which some Ministries and Departments acted almost autonomously and pursued their own agenda. Such agencies tend to behave territorially, defending their own patch with inadequate regard for whole of Government policy and the national interest. Government, therefore, has made a clear and firm commitment to the framework and sequencing of restructuring under clear, coordinated political and administrative leadership. The time line for accelerated implementation is:

• by mid-2008: review the legislative framework; accelerate reorganisation, corporatisation and divestment giving priority to the most difficult areas; develop public awareness of the benefits of restructuring;
• between mid-2008 and the end of 2009: review the measures taken and concentrate new efforts on perfecting the reforms and promoting their benefits; and
• by 2011: consolidate the reforms and continue to promote achievement of the benefits.

A set of priorities have been established for the accelerated programme with an indicative work plan up to mid-2008 which includes:

• re-organisation of: (i) Department of Immigration; (ii) Department of Quarantine;

(iii) Ministry of Agriculture; (iv) Fiji Islands Maritime Safety Authority; (v) Management of Government Quarters; (vi) Fiji Film and TV Unit; (vii) Coconut Industry Development Authority;

• corporatisation of: (i) Department of Water and Sewerage; (ii) Mechanical engineering and electrical sections of the Public Works Department; (iii) Department of Government Supplies; (iv) Department of National Roads; (v) Trade and Manufacturing Accounts (TMA); and
• divestment/privatisation of: (i) Fiji Broadcasting Corporation Ltd; (ii) Food Processors Ltd; (iii) Fiji Tannery; (iv) Ports Terminal Ltd; (v) Fiji Hardwoods Corporation Ltd; (vi) Yaqara Pastoral Company and Batiri; (vii) Airports Fiji Ltd;

(viii) Fiji Ships and Heavy Industries Ltd; (ix) Rewa Rice Ltd; (x) Government Printing.

This can be considered an ambitious, stretch target which recognises the scale of the challenge. But it is achievable. And the greater the extent to which it is achieved the greater the benefits which will be gained for Government and for national economic development.

6.4 Public Sector Restructuring Plan

Goal

To promote macroeconomic stability through a stronger fiscal position and increased economic growth through transfer of the ownership and management of assets to more productive uses.

Links to Strategic Priorities 

Restructuring the Public Sector is essential to achievement of macroeconomic stability and economic growth. Proposals also directly address the Strategic Priorities of: (i) reforming the public sector to reduce the cost of doing business; (ii) structural reforms to promote competition and efficiency; (iii) strengthening good governance; and (iv) promoting public private sector partnerships (PPP). Achievement of these priorities will also contribute substantially to Government’s ability achieve others.

Development Rationale

Continuance of the present large public sector is neither appropriate nor affordable. Scarce Government revenues must be better focused on providing the wider community with the public goods and services which they need. The large share of both human and physical resources in the public sector can be more productively employed in the private sector to create the economic growth which is essential for poverty alleviation and national development.

The boundary between public and private sectors will be moved so that each undertakes those tasks which it is best able to do. Private goods and services and the assets to produce them will be transferred from inefficient public sector management to gain productivity from the entrepreneurial skills which are unique to the private sector. A downsized public sector will focus on more efficient provision of higher quality public goods and services which the private sector is unable to provide. 

Policy Objectives, Strategies and Key Performance Indicators

Chapter 7 Maintaining Stability

7.1 Alleviating Poverty

The Strategic Priority of alleviating poverty intends to provide benefits to those members of the community who are economically or materially disadvantaged, helping them to meet their basic needs and creating increased opportunities for incomes generating activities. Many parts of the Plan contribute to alleviating poverty, including the parallel social justice programmes and sustaining economic growth. Three key sections are directly focused on poverty: poverty alleviation programmes, rural and outer island development, and housing programmes. A Summit Working Group on Poverty will support, monitor and evaluate implementation.

7.1.1 Poverty Alleviation

Goal

To enable people to sustainably meet their basic needs in order to eradicate extreme poverty.

Links to Strategic Priorities 

Poverty alleviation is itself a Strategic Priority supporting the maintenance of stability. In addition, poverty alleviation measures support the Strategic Priorities of promoting peace and harmony, implementing affirmative action, and rural and outer island development.

Link to UN Millennium Development Goals (MDGs)

Fiji is party to international conventions on poverty alleviations, including the Monterrey Consensus and World Summit on Sustainable Development (WSSD). The poverty alleviation activities will directly address the eradication of extreme poverty and hunger, defined by the UN as less than US$1 per day (MDG 1), and contribute to promotion of gender equality (MDG 2).

Development Rationale

The underlying objective for poverty alleviation is ensuring that all categories of the poor are able to sustainably and affordably meet their basic needs. Promoting consensus on the definition of the poor and their needs will sharpen and focus government’s assistance to the poor. The creation of income-earning opportunities for the poor, review of housing and poverty related policies and the partnership arrangement with Government and civil society organization would promote the eradication of poverty.

Fiji is working to create its own national poverty eradication strategies based on local needs and priorities. The strategies in the plan advocate nationally-owned solutions and help to make them more effective through ensuring a greater voice for poor people, promoting their self reliance and self esteem. Strategies will expand access to productive assets and economic opportunities by linking poverty programmes with economic, social and financial  108

policies. The plan looks at innovative projects and brings Government, civil society and donors together to coordinate their efforts.

Policy Objectives, Strategies and Key Performance Indicators

7.1.2 Rural and Outer Island Development

Goal

Promoting equal opportunities and access to basic services, livelihoods and markets.

Links to Strategic Priorities 

Rural and outer islands development is itself a Strategic Priority but the development also strongly supports the Strategic Objectives of poverty alleviation, affirmative action and peace and harmony priorities. 

Link to UN Millennium Development Goals (MDGs)

The population of the rural and outer island areas tend to be poor and disadvantaged so the activities will support the alleviation of poverty (MDG 1) as well as supporting increased access to education (MDG 2) and access to health (MDG 4, 5 and 6).

Development Rationale

Rural and outer island areas are unable to effectively participate in and derive benefits from national economic and social development due to the high costs of transport and communications in terms of both money and time. By improving access from and to the remoter areas the development may also contribute to increasing the opportunities for investment, including in tourism, and making increased exports of rural and island outputs, such as coconut products, honey, and timber.

Devolution of planning and administrative authority to provincial and local government levels is expected to better identify and respond to priority needs of the communities whilst improved transport, including inter-island shipping services, will reduce the costs of meeting those needs.

Improved infrastructure will allow development to proceed beyond meeting basic needs to providing opportunities to improve the livelihoods and quality of life of themselves and their children through better access to services and markets. Improved education and skills training, including in entrepreneurship, SME development and tourism will enable the people to exploit those opportunities.

Policy Objectives, Strategies and Key Performance Indicators

7.1.3 Housing

Goal

To provide equal opportunity and access to quality and affordable accommodation for all.

Links to Strategic Priorities 

Affordable housing and a reduction in the numbers of homeless or in poor quality housing will support the Strategic Priorities of alleviating poverty and promoting peace and harmony as well as contributing to rural and outer island development. The obligation to provide housing is a requirement of the constitution.

Link to UN Millennium Development Goals (MDGs)

Provision of affordable shelter will contribute to the eradication of extreme poverty and hunger (MDG 1) and by reducing poorly planned and serviced informal housing, including in squatter settlements, it will contribute to environmental sustainability (MDG 7). 

Development Rationale

The plan recognizes the need for quality and reasonable housing at affordable prices for all. Squatter Resettlement Unit (SRU) is established to carry out development in all aspects like topographical survey, scheme plan engineering, drawings and physical development. As discussed in the policy objectives and strategies, the overall aim is to provide decent housing and to reduce the squatter settlements. While access to better housing is a basic need, it is also prerequisite to social and community development. Government continues to inject resources to upgrade squatter settlements and provide affordable accommodation to the needy.

Policy Objectives and Key Performance Indicators

7.2 Social Justice

Programmes serving the objective of Social Justice address the needs of those who are socially or culturally disadvantaged. Although deprived of equal opportunities, these groups need not be materially poor – but often are. Social Justice programmes are set out in three sections of the plan to address the needs of: indigenous Fijians and Rotumans, people with disabilities, women, children and youths. Government implementation will be supported, monitored and evaluated by the Summit Working Group on Social Justice.

7.2.1 Social Justice and Affirmative Action

Goal

Equitable participation of all in socio-economic development.

Links to Strategic Priorities 

Social Justice and Affirmative Action has a direct bearing to the Strategic Priorities of implementing affirmative action, promoting peace and harmony, enhancing security and law and order, and alleviating poverty. These stability priorities are pre-conditions for a peaceful and prosperous Fiji.

Activities which form part of Social Justice and Affirmative Action initiatives are also included in sections 7.1.1, 7.2.2, and 7.2.3, which address social justice issues specifically related to poverty alleviation, gender equality and women in development and protection of children and youths.

Link to UN Millennium Development Goals (MDGs)

The affirmative action programmes will address the needs of various disadvantaged groups and promote achievement of the first three MDGs: eradication of extreme poverty and hunger (MDG 1), universal primary education (MDG 2), and gender equality and empowerment of women (MDG 3).

Development Rationale

The Plan recognises the need for balanced development and equality of access to economic and social development benefits. Improving access and participation of indigenous Fijians and Rotumans, minority groups, women, youths, children and people with disabilities to education and training, commerce and business is critical to achieving social justice. The Plan emphasises the provision of a social safety-net through the family assistance scheme to those in severe state of deprivation. A comprehensive review of the Social Justice Act and the 29 affirmative action programmes is essential for transparency and accountability.

The programmes range from small business equity scheme, improving educational infrastructures, technical and vocational training, special education, squatter settlements upgrading, education scholarships, rental subsidies, poverty alleviation projects and family assistance scheme. Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the Strategic Priorities.

Policy Objectives, Strategies and Key Performance Indicators

7.2.2 Gender Equality and Women in Development

Goal

Achievement of Gender Equality and Empowerment of Women.

Links to Strategic Priorities 

Gender and development contributes to maintaining stability by addressing the Strategic Priorities for implementing affirmative action, alleviating poverty and strengthening good governance. Enhanced cash income opportunities through private sector development, improved access and quality of basic social services and effective development processes for women will promote and support the Strategic Priorities of raising export earnings as well as rural and outer island development.

Link to UN Millennium Development Goals (MDGs)

The MDG 3: - “promote gender equality and empower women” –sets a target to eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015 The other two indicators are included as KPIs are: “Share of women in wage employment in the non-agricultural sector” and “Proportion of seats held by women in national parliament.” According to the  2004 Annual Employment Survey around 36% of women are economically active whereas in the not economical active sector 71% are Females.  The proportion of seats in Parliament held by women had increased from 9% in 2000 to 13% in 2006.

Under MDG 6 there should be a gender specific indicator to address the increasing number of diabetes and anaemia amongst women.  This is a public health issue and women's health being a prioritized area of action under the National Women's Plan of Action must be given due priority.  In accordance with MDG 5 for improved maternal health there is a need to promote family planning programmes.  This is also stated as an Area of Action under the National Women's Plan of Action.  In keeping with MDG 6 and in accordance with government's policy on gender mainstreaming a strong emphasis on gender issues is needed to reduce HIV transmission.

Development Rationale

The Plan emphasizes the cross sectoral breadth which needs to be addressed on the need for implementing and monitoring Equal Employment Opportunity (EEO) policy in all workplaces, eliminating all forms of discrimination and violence against women and the girl / child; the need for effective social safety nets for the unemployed in particular, training and investment to promote alternative livelihoods for women displaced from the manufacturing and formal sector employment, and increasing accessibility to economic opportunity for rural women.  Access to improved public health services in particular maternal health and focused emphasis on gender issues to reduce HIV transmission will provide on enabling environment to fully recognize the benefits outlined in various Action Plans.

Policy Objectives, Strategies and Key Performance Indicators

7.2.3 Children and Youth

Goal

Protection and development of Children and Youth.

Links to Strategic Priorities 

Programmes to support children and youth directly support the Strategic Priorities of implementing affirmative action and alleviating poverty. In the long term, the development of children and youths as good citizens for Fiji’s future is the cornerstone of national development and supports all of the Priorities.

Link to UN Millennium Development Goals (MDGs)

Programmes addressing the needs of children and youth support goals of eradicating extreme poverty (MDG 1), universal primary education (MDG 2), reduced child mortality (MDG 4), and combating HIV/AIDS, malaria and other diseases (MDG 6). Activities will also contribute to promoting gender equality and empowering women (MDG 3).

Development Rationale

The plan requires the need for protection of youth and children. The National Coordinating Committee on Children will coordinate the implementation of the convention into Fiji’s laws and procedures while the Family Law Act will address the problems faced by children who are from divorced families. As indicated in the policy objectives and strategies, the overall aim is to reduce the number of street kids, child abuse and, teenage pregnancy.

Policy Objectives, Strategies and Key Performance Indicators

7.3 Social Services

Social Service programmes address the common needs of all members of the community. Urban development and governance is particularly important as towns and cities expand to accommodate half the population. Health services and sports development enhance well being and quality of life and there is a shared benefit from reduction in risks of and improved responses to natural disasters. The Summit Working Group on Social Services will assist, monitor and evaluate implementation of the programmes.

7.3.1 Urban Development

Goal

An efficient, effective and sustainable urban sector raising living standards for all.

Links to Strategic Priorities 

Better planning and urban development will contribute to increasing investment, raising exports, rural development, poverty reduction, enhancing security, law and order and to strengthening transparency and good governance.

Development Rationale

Fiji is an increasingly urbanised society with about half of the population living in cities, towns and peri-urban areas. Government also recognizes that the urban economy is a major driver of the national economy. Therefore, to support Plan objectives, an effective, integrated urbanization strategy is needed as a key mechanism for achieving sustained socio-economic development within an integrated planning framework for urban centres and regional areas. The Urban Policy Action Plan and review of the Local Government Act, supported by the good governance and leadership campaign at the local level, are considered crucial parts of the national economic development process.

Policy Objectives, Strategies and Key Performance Indicators

7.3.2 Health

Goal

Quality, affordable and efficient health services for all.

Links to Strategic Priorities 

Health activities will support achievement of the Strategic Priorities for peace and harmony, strengthening good governance and restructuring to promote competition and efficiency.

Link to UN Millennium Development Goals (MDGs)

The Integrated Management of Childhood Illnesses strategy implementation and extended immunization programme is intended to address child mortality thus satisfying MDG 4. Implementation of Clinical Services Plan, Health Information System and identifying alternative sources for funding will improve maternal health for mothers (MDG 5); helps combat HIV/AIDS through greater awareness and improved resource (MDG 6). Through improvement in health and life expectancy the programmes also support Fiji’s improvement in terms of the UNDP Human Life Quality Index.

Development Rationale

Health continues to be a growing and increasingly complex field of competing priorities from all perspectives – from the individuals to governments, businesses, health professionals and the health services system. A healthy and productive population is a key for sustainable economic development.

The plan recognises the need for adequate access to primary and preventative health care services for all. These services must be provided efficiently and effectively with the emphasis on the quality and scale of service delivered to beneficiaries. Comprehensive health care programmes in the strategies will generally contribute to overall well being of the society. As indicated in the policy objective and strategies the overall aim is to increase average life expectancy and reduce life lived with disability.

Policy Objectives, Strategies and Key Performance Indicators

7.3.3 Sports Development

Goal

Promoting sports for healthy lifestyles, employment opportunities, peace, unity and harmony.

Links to Strategic Priorities 

Sport contributes to the Strategic Priorities of promoting peace and harmony, enhancing security, law and order and alleviating poverty and may also support restructuring to promote competition and efficiency through development of partnerships with the private sector.

Link to UN Millennium Development Goals (MDGs)

Sporting activities, through contracted players overseas and locally staged international events, are bringing remittances into the country, helping to eradicate extreme poverty and hunger under MDG 1.

Development Rationale

Sport moulds better citizens through the inculcation of important values such as goodwill, tolerance, understanding, teamwork and healthy living. Sport has also become a major source of employment locally and abroad and has promoted Fiji internationally.

The plan recognizes the need to promote healthy lifestyles and to facilitate lucrative employment opportunities through sports. With non-communicable (life-style) diseases on the increase, the Ministry of Youth and Sports is continuing to promote “Sports for All”, targeting public service offices around the country and rural and urban population. Ministry of Health is emphasizing on the facilities for improving adult health counselling. Further, it is also recognized in the priorities that effective cooperation and partnership between agencies, private sector and the community are essential to the effective achievement of the outcomes intended by the Government.

Policy Objectives, Strategies and Key Performance Indicators

7.3.4 Disaster Risk Reduction and Disaster Management

Goal

Reducing vulnerability to disasters and risks and promoting sustainable development.

Links to Strategic Priorities 

Disaster risk reduction and management contributes to the Strategic Priorities of restructuring to promote competition and efficiency, raising investment levels for jobs and growth, and rural and outer island development by increasing the sustainability of development, reducing risks and uncertainty and protecting people and property from natural disasters.

Link to UN Millennium Development Goals (MDGs)

The activity contributes to ensuring environmental sustainability (MDG 7).  123

Development Rationale

A principal recommendation in the review of the 1998 Natural Disaster Management Act and the 1995 National Disaster Management Plan is to focus on community capacity building in order to reduce dependency and to achieve community resilience and sustainable development.

The Plan recognises the need to maintain effective planning in order to reduce disaster impact, improve community capacity in dealing with disasters and risks, and to conduct analysis and evaluation of hazards, vulnerabilities and risks and invest in risk reduction projects and activities. The shift towards a comprehensive and an integrated approach towards risk reduction on hazards are reflected in the policy objective and strategies under disaster management. Further, it is also recognized in the strategies that effective cooperation and partnership between Civil Society Organisations, the Government and the community are essential to the effective achievement of then outcomes intended by Government.

Policy Objectives, Strategies and Key Performance Indicators

7.4 Security, Law and Justice

Programmes for security, law and justice provide necessary protection against international and domestic terrorist, criminal and economic threats and the foundation for confidence and stability in effective law enforcement and justice systems. As such, they support all other social and economic programmes. A Summit Working Group on Security, Law and Justice will support implementation, monitoring and evaluation.

7.4.1 National Security

Goal

Maintaining national security effectively and efficiently.

Links to Strategic Priorities 

Security contributes directly to the Strategic Priorities of promoting peace and harmony, enhancing security and law and order. They also contribute to the secure environment needed to promote increased investment.

Development Rationale

The Plan recognises the need for security agencies to secure and protect the nation’s sovereignty and borders with appropriate capacity for identified defence and security requirements. Whilst security is primarily concerned with external terrorist, criminal and economic threats, vigilance is also required to support maintenance of internal security and to safeguard against civil unrest. It is also recognized in the strategies that effective cooperation and partnership between agencies and between them and the community are essential to the effective achievement of then outcomes intended by Government.

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the Strategic Priorities

Policy Objectives, Strategies and Key Performance Indicators

7.4.2 Law and Justice

Goal

Maintaining law and justice and upholding the rule of law effectively and efficiently.

Links to Strategic Priorities 

Law and justice contribute directly to the Strategic Priorities of promoting peace and harmony, enhancing security and law and order and strengthening good governance. They will also support the establishment of a business environment conducive to achievement of the Strategic Priorities of restructuring to promote competition and efficiency and top raise investment levels for jobs and growth.

Development Rationale

The Plan recognises the need for strong institutions for policing, administration of justice, containment and rehabilitation of law breakers. Independence of institutions is recognized in the different policy objectives and strategies for each aspect of law and justice. Further, it is also recognized in the strategies that effective cooperation and partnership between agencies and between them and the community are essential to the effective achievement of the outcomes intended by Government.

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the Strategic Priorities.

Policy Objectives, Strategies and Key Performance Indicators

Chapter 8 Sustaining Growth

8.1 Economic Restructuring

The Strategic Priority of Restructuring to Promote Competition and Efficiency relates to the Public Sector Restructuring proposed in Chapter 6 and to economic restructuring covering finance and human resources discussed here. Regulatory reform is also necessary to meet the Strategic Priority and is addressed in individual sections, particularly in relation to manufacturing and commerce (8.2.1). Increased competitiveness and efficiency will contribute to Strategic Priorities of macroeconomic stability, increased exports and increased investments. By promoting economic growth, these programmes will provide the resources needed to implement the programmes to Maintain Stability set out in Chapter 7. A Summit Working Group on Economic Restructuring will support implementation, monitoring and evaluation of the economic restructuring programmes as well as the macroeconomic plans.

8.1.1 Financial Services

Goal

An effective, competitive and stable financial system that will enhance economic growth and development.

Links to Strategic Priorities 

Financial services are essential to creating an environment conducive to private sector investment and economic growth, hence well managed financial services contribute to the Strategic Priorities of maintaining macroeconomic stability, restructuring to promote competition and efficiency, raising export earnings and raising investment levels for jobs and growth. 

Development Rationale

Resilient, well-regulated financial systems are essential for macroeconomic and financial stability in a world of increased capital flows. The implementation of the recommendations of the Commission of Inquiry into Financial Services (COIFS), Financial Sector Assessment Programme (FSAP), Export Finance Facility (EFF), the superannuation sector study and the introduction of the Real Time Gross Settlement (RTGS) are key strategies to achieving a vibrant and efficient financial sector. 

Development also requires the extension of formal retail banking services to rural and outer island areas so that their populations are better able to establish and expand businesses and meet social needs. This will build upon present development of micro finance - including savings and credit unions and the Micro Finance Unit - and increased access to rural commercial banks.

To ensure that the financial system is adequately supervised, a financial services regulator will be identified. Review of the appropriate legislations including the RBF legislations and the Banking and Insurance legislation coupled with increased data coverage will reflect performance and standards of the financial sector. Enhanced disclosure of the financial transactions is envisaged with the implementation of the new Financial Transactions Reporting (FTR) Act. For the development of the capital markets, appropriate incentives will considered for companies to list on the stock exchange.

Policy Objectives, Strategies and Key Performance Indicators

8.1.2 Micro, Small and Medium Enterprises

Goal

Creating sustainable livelihoods through enterprise development.

Links to Strategic Priorities 

MSMEs create employment and self-employment opportunities and increases production, particularly in rural areas, so serving the Strategic Priorities of rural and outer island development, raising investment levels for jobs and growth, raising export earnings and alleviating poverty.

Link to UN Millennium Development Goals (MDGs)

The involvement of people in MSMEs contributes to eradication of extreme poverty and hunger (MDG 1), promotes gender equality and empowers women (MDG 3) and contributes to a global partnership for development (MDG 8). 

Development Rationale

Placing emphasis in small and medium enterprises would engage people in employment opportunities, thus alleviating poverty. In addition, those entrepreneurs having the potential to expand will be assisted through various initiatives for potential exporters, thus contributing towards achieving growth.

This sub sector continues to strengthen and made significant impact to national development, particularly in improving the standard of living in the rural and disadvantaged areas. It is an area of priority in the medium term because of its potential contribution towards economic growth. However, more research is required in this area, especially in the rural areas where natural resources are underutilized.

Policy Objectives, Strategies and Key Performance Indicators

8.1.3 Education and Training

Goal

Educating the nation for peace and prosperity.

Links to Strategic Priorities 

Education and training are essential to raise the quality and skills of all levels of employees to support achievement of the Strategic Priorities for economic development by restructuring to promote competition and efficiency, raising export earnings, and raising investment levels for jobs and growth. Education and training will also develop the capacity of individual to lead more rewarding lives through Strategic Priorities of alleviating poverty, implementing affirmative action, and promoting peace and harmony.

Link to UN Millennium Development Goals (MDGs)

Education and training activities address the goals of universal primary education (MDG 2) and promotion of gender equality and empowerment of women (MDG 3). Through improvement in adult literacy education will also support Fiji’s improvement in terms of the UNDP Human Life Quality Index.

Development Rationale

A literate nation is a productive nation. Education allows individuals and communities to articulate their aspirations and to be active in creating meaningful lifestyles. While access to education is considered as a basic human right, it is also a pre-requisite to social and economic development. Productivity gains are considered to be much higher with higher education levels.

Fiji is on target to achieving MDG goals with a Net Enrolment Rate of over 90%. Gender parity is almost achieved and is on track to achieving the Education for All goal of eliminating gender disparity in primary and secondary education. Class 5 survival rate is 95.2%, which indicates that drop-out rates need to be further addressed to ensure that all students enrolled in Class 1 reach at least Class 5.

The plan recognises the need for access to quality education which will enhance social and physical development. Quality of teacher and time spent per student are most important factors influencing the quality of student learning outcomes. Further, it is also recognized in the strategies that effective cooperation and partnership between schools, parents and communities are essential to the effective achievement of the outcomes intended by Government.

Policy Objectives, Strategies and Key Performance Indicators

8.1.4 Employment and the Labour Market

Goal

Fullest and most productive utilisation of our human resources.

Links to Strategic Priorities 

An efficient, productive, and mobile labour force is an essential counterpart to increased availability and utilisation of investments and land in traversing to a new, sustainable, high growth equilibrium. Employment and labour market development are critical to achievement of Strategic Priorities of restructuring to promote competition and efficiency, raise export earnings and raise investment levels for jobs and growth. In supporting these Strategic Priorities it will also contribute to alleviating poverty, rural and outer island development and promoting peace and harmony.

Link to UN Millennium Development Goals (MDGs)

Sustained employment is helps to eradicate extreme poverty and hunger (MDG 1) and reforms promote gender equality and empower women (MDG 3). 

Development Rationale

In addition to the direct support for MDGs contribute to other MDGs indirectly. The employment reforms promote the role of women in development and employment of school leavers, the proportion of women in wage employment in the non-agriculture sector and employment of 14-25 year old are used as indicators. Reforms also improve maternal health for working mothers; reduces child mortality through enhanced maternity protection; and promotes education of children though its child protection policy.

The Labour Reform brought about by the enactment of the Employment Relations Bill (ERB) will restore confidence, stability and growth in the labour market and contribute to creation of a business environment conducive to increased private investment and business activity, thus further increasing employment opportunities. Employment is a means to maintaining stability by alleviating poverty; it sustains growth through productive employment by reducing the cost of doing business; promotes competition and efficiency hence raising exports and productive investments. 

The policy objectives summarize the supply and demand side of the labour market, and the development and utilisation aspect of the human capital. It reflects governments’ commitment to improving the functioning of the labour market. The strategies on the other hand, highlights the need for effective and consistent inter/intra agencies consultation to ensure the realisation of that broad policy objectives defined by government. The specific KPI’s therefore are arrived at through the strategies and are considered as a means of achieving the policy objective.

Policy Objectives, Strategies and Key Performance Indicators

8.2 International Trade

The manufacturing and commerce sectors, including extractive industries for minerals and groundwater, are projected to be the major source of increased export earnings and major areas of increased investment and employment - service sectors, including tourism, are projected to provide 80% of the increased foreign exchange earnings with most of the balance provided by manufacturing and extractive industries⁶. Hence the manufacturing and service sectors addressed here are critical to serving the Strategic Priorities of Raising Export Earnings and Raising Investment Levels for Jobs and Growth. They underpin the macroeconomic management plans in Chapter 5 and are closely related to economic restructuring (8.1) particularly in relation to the regulatory reforms in manufacturing and commerce. A Summit Working Group on International Trade will support. monitor and evaluate implementation of the following plans.

⁶ Trade and balance of payments data and projections are presented in Appendix 1.  137

8.2.1 Manufacturing and Commerce

Goal

Globally sustainable and competitive manufacturing, commerce and industry to compete with imports and expand exports.

Links to Strategic Priorities 

Manufacturing and commerce activities are central to Sustaining Growth and support the Strategic Priorities of restructuring to promote competition and efficiency; raising export earnings, and raising investments levels for jobs and growth. Through support for those Priorities the sector will also contribute to rural and outer island development and alleviating poverty.

Link to UN Millennium Development Goals (MDGs)

Measures to develop institutions more conducive to business will also support Global Partnership for Development (MDG 8) through open, rule-based and predictable trading and financial systems, and also the use of new IT technologies.

Development Rationale

A major factor constraining Fiji’s growth is the inadequate institutional environment which impacts on our ability to compete with imports, penetrate export markets and attract foreign direct investments (FDIs). Despite the generous incentives offered over the years, Fiji has not been able to attract high levels of domestic and foreign investments due to problems related to land and the business and policy environments.

The Plan aims to create an enabling environment by providing: supportive legislation to give legal protection to investors; policy for research and development; adequate market support, low cost business inputs, conducive private sector development policies, efficient financial system, and policies for small and medium enterprises to achieve the objective of sustainable and competitive manufacturing, commerce and industry. Issues of inadequate infrastructure will be addressed through increased participation be the private sector in the financing and management of such infrastructure, including through divestiture and public private partnerships.

Policy Objectives, Strategies and Key Performance Indicators

8.2.2 Tourism

Goal

A sustainable, growing and globally competitive industry.

Links to Strategic Priorities 

As the leading economic sector tourism contributes Strategic Priorities for growth in raising export earnings, raising investment for jobs and growth, and restructuring to promote competition and efficiency. The geographical distribution of tourism means that it may also support alleviating poverty, implementation of affirmative action and rural and outer island development.

Development Rationale

The plan primarily focuses on a two fold increase in growth and spreading the benefit to the local community, especially to our indigenous people. It sets systematic direction to have a sustainable growth in the tourism sector. Particularly in the rural and outer island areas, tourism has the greater potential to involve local communities in national economic development.

Tourism growth places considerable demands on infrastructure and is often located in areas which lack infrastructure. Attempts to provide such new infrastructure have tended to direct funds away from maintenance of existing infrastructure, leading to dis-benefits outside tourism areas. Clearer definition of public and private infrastructure will allow a focus of Government spending on public infrastructure and, for that, an increased use of PPP modalities.

Comprehensive measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the strategic priorities, reflecting the broad impact of tourism on wholesale and retail sector, construction, transport, demand for supporting supplies or service. 

Policy Objectives, Strategies and Key Performance Indicators

8.2.3 Culture and Heritage

Goal

Protection and management of our culture and heritage for current and future generations.

Links to Strategic Priorities 

Culture and Heritage contributes to the Strategic Priorities of promoting peace and harmony, alleviating poverty, and implementing Affirmative Action. It can also contribute to the growth priorities by providing opportunities to raise investment levels for jobs and growth and promote Rural and Outer Island development.

Link to UN Millennium Development Goals (MDGs)

MDG 3 is to promote gender equality and empower women. Due consideration should be placed in the association between gender and culture, where the challenge is to develop an agenda that recognizes women as significant actors in development and as bearers and signifiers of their culture.

MDG 8, relates to culture and its impact on the environment. Local ecological knowledge and traditional management practices, as part of the local systems of values and meanings, have proved to be environmentally sustainable. The challenge is now to translate this into practical projects and to change policies that strengthen the cultural dimensions of the relations between the environment and development.

Development Rationale

The Plan recognises the need to preserve and manage Fiji’s cultural and natural and cultural heritage, increase cultural and cross cultural understanding, promote creativity at all levels of society, promote conservation and resource development, and develop creative performing arts and visual arts. The diverse manifestation of culture is recognized in the different policy objectives and strategies for each aspect of culture and heritage. Further, it is also recognized in the strategies that culture in its all embracing approach, demands effective cooperation and partnership between cultural heritage agencies and between them and the community, and other government agencies. This is essential to the effective achievement of the outcomes intended by Government.

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the Strategic Priorities.

Policy Objectives, Strategies and Key Performance Indicators

8.2.4 Mineral and Groundwater Resources

Goal

Pursuing growth through sustainable mineral and groundwater resource management.

Links to Strategic Priorities 

Mineral resources support the Strategic Priorities of raising investment levels for jobs and growth and raising export earnings. It is also linked to strengthening good governance in relation to the welfare of workers and resource owners.

Development Rationale

EGM and Natural Waters of Fiji are the two major players in the mineral and groundwater sector. Compared to other industries, the potential for new entrants is limited. Recognizing this, the policy objectives and strategies of the Plan is focused on strengthening the institutional support mechanisms to guide the development of the sector. Where there is scope, the potentials for developing other minerals and subsidiary industries will be pursued.

Policy Objectives, Strategies and Key Performance Indicators

8.2.5 Environmental Sustainability

Goal

To sustainable use and development of Fiji’s natural resources and ecological processes.

Links to Strategic Priorities 

Environmental Sustainability is one of the three pillars of sustainable development. so contributes to the Strategic Priorities of sustaining growth, including rural and outer island development, raising export earnings from production in a quality environment and contributing to restructuring to promote competition and efficiency, including in the sustainable use of natural resources.

Link to UN Millennium Development Goals (MDGs)

Environmental sustainability is an MDG (MDG 7) but many indicators are not yet available, including forest cover, biodiversity protection, and carbon dioxide emissions.

Development Rationale

The Plan recognizes that there is an environmental threshold that development should not cross. The protection of national biological resources through the reduction and elimination of pollution, sound resource managements and proper management of waste is critical to environmental sustainability. Enforcing the Environment Management Act and other environmental legislation will be the thrust of the Ministry’s operation.

It is cross-cutting to the stability and sustained growth strategies. The strategies to address sustainable development issues across the various sectors include Environmental Management Act, National Biodiversity Strategy and Action Plan, and Solid Waste Management Strategy.

Policy Objectives, Strategies and Key Performance Indicators

8.2.6 Foreign Affairs and External Trade

Goal

Global integration for Fiji’s cultural, political and diplomatic advancement and socio-economic development. 

Links to Strategic Priorities 

Good diplomatic and trade relations with other countries will facilitate the move towards a more open and export-oriented economy. This contributes directly to the Strategic Priority of sustaining growth through raised investments and export earnings. Achievement of this outcome would consolidate Government’s fiscal position and help maintain macroeconomic stability.

Development Rationale

The Plan recognises the importance of increased export and that the proliferation of trade agreements could result in excessively complex and opaque trade regimes which increase the cost of doing business. This can prove costly on opportunities for trade and investment in the private and public sectors. Policies will be formulated, in cooperation with the private sector, that allow regional integration to complement most-favoured-nation-based trade liberalization and avoid undesirable trade diversions. Through her membership in regional and international organisations Fiji will negotiate increased access to global markets and emphasise the needs of small developing countries in multilateral negotiations.

Fiji will also strengthen diplomatic relations with sovereign states and international institutions. 

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving Strategic Priorities.

Policy Objectives, Strategies and Key Performance Indicators

8.3 Natural Resources

The renewable natural resource sectors can contribute to increased export earnings and are projected to do so in fisheries, forestry and horticulture. Valuable though these contributions are they cannot offset the overall decline in the sector’s exports caused by the fall in value of sugar exports as a result the reduction in preferential prices in the EU. The Plans for natural resources development are, therefore, focused on the Strategic Priority of Restructuring to Promote Competition and Efficiency by developing stronger, more competitive natural resource sectors. This restructuring will be led by Government plans to restructure the sugar sector. The Summit Working Group on Natural Resources will support, monitor and evaluate implementation of these plans.

8.3.1 Sugar

Goal

A locally vibrant and globally competitive sugar industry.

Links to Strategic Priorities 

Development of the sugar sector is directly linked with the Strategic Priorities of both Maintaining Stability and Sustaining Growth. With regards Maintaining Stability, priorities of poverty alleviation, resolution of the agricultural land tenure issue, and affirmative action are pivotal. The priorities under Sustaining Growth include restructuring to promote competition and efficiency and raising export earnings.

Link to UN Millennium Development Goals (MDGs)

Developments will contribute to eradication of poverty (MDG 1) and promotion of environmental sustainability (MDG 7).

Development Rationale

The loss of preferential access to the EU market through declining preferential prices has necessitated reform in the sugar sector. Supported by development partners, such as the EU and ADB, a restructure plan has been developed by Government and the industry and elements of this plan are reflected in the sector strategies. The plan combines initiatives to recapitalize FSC with support from the Indian Government, improve sugar research and extension services, revamp the transport logistics to make it more efficient, and address production and yield at the farm level. The programmes and projects under the National Adaptation Strategy will provide a cushion to those adversely affected by the restructure to secure sustainable on-farm and off-farm livelihood opportunities. Apart from sugar, other opportunities will be explored such as co-generation.

Measurable outcome indicators have been set to monitor the progress of the reform plan and its success in achieving the sector goal.

Policy Objectives, Strategies and Key Performance Indicators

8.3.2 Agriculture and Livestock

Goal

Sustainable community livelihood through competitive exports and efficient food security.

Links to Strategic Priorities 

The agriculture sector, as the principle source of rural livelihoods, has a vital contribution in terms the Strategic Priorities of rural and outer island development, raising export earning, raising investment for jobs and growth, resolving the agricultural land lease issue, implementing affirmative action and alleviating poverty.

Link to UN Millennium Development Goals (MDGs)

Developments will contribute to eradication of poverty (MDG 1) and promotion of environmental sustainability (MDG 7) through promotion of sustainable agriculture.

Development Rationale

While the economy remains largely agro based, the annual food import bill continues to rise, exceeding $350m in 2005. The focus for the agricultural sector therefore in the plan is geared towards increasing local production as substitutes for imported items. This import substitution stance relates closely with efforts to improve the linkages with the booming tourism industry. With the emphasis also on private sector led development, a facilitative and proactive approach will be pursued to attract large investment to drive the commercial agriculture and livestock sectors.

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the Strategic Priorities.

Policy Objectives, Strategies and Key Performance Indicators

8.3.3 Forestry

Goal

Sustainable management and development of forest resources.

Links to Strategic Priorities 

In terms of its Strategic Priorities, forestry supports raising export earnings, investment for jobs and growth and will form part of the restructuring to promote competition and efficiency. The involvement of the indigenous community in rural areas means that the sector may also make significant contributions to the Strategic Priorities of implementing affirmative action, alleviating poverty and rural and outer island development.

Link to UN Millennium Development Goals (MDGs)

Developments will contribute to eradication of poverty (MDG 1) and promotion of environmental sustainability (MDG 7) through adoption of sustainable forest management.

Development Rationale

The plan recognizes the potential in the forest sector in contributing to the economy. However, the current institutional environment in which the sector operates needs to be revamped and this is the focus in the plan. In addition, with the harvesting of the high value mahogany resource, issues of sustainable forest management, value adding and effective involvement of resource owners are prominent in the sector strategies. 

Measurable outcome oriented KPI’s have been set which will allow monitoring of the success in achieving the strategic priorities.

Policy Objectives, Strategies and Key Performance Indicators

8.3.4 Marine Resources

Goal

Pursuing growth through sustainable marine resource management.

Links to Strategic Priorities 

The marine sector supports the Strategic Priorities good governance, poverty alleviation and affirmative action and also support growth outcomes in restructuring to promote competition and efficiency, raising investment levels, raising export earnings and rural and outer island development.

Link to UN Millennium Development Goals (MDGs)

Marine development supports eradication of poverty (MDG 1) and ensuring environmental sustainability (MDG 7), focusing on resource management and conservation as a major strategy in the Plan.

Development Rationale

The Plan recognizes the erratic performance experienced in the fisheries sector and the need for clear demarcation between the role of Government, and the role of the private sector. Reforms in the Department of Fisheries and in the administration of its functions are emphasized with the move from a production oriented approach towards resource conservation and management. This focus is translated through the sector strategies. The strategies also reinforce a more facilitative approach from Government in the development of the industry.

Outcome indicators set are intended to monitor the development of the sector in tandem with the utilization of the resource.

Policy Objectives, Strategies and Key Performance Indicators

8.3.5 Land Resource Development and Management

Goal

Effective and coordinated land management to support economic development.

Links to Strategic Priorities 

Land is a basic resource and it is an essential part of indigenous culture, thus it plays a significant role in almost all the Strategic Priorities. In Maintaining Stability land has a role in promoting peace and harmony, enhancing security and law and order, alleviating poverty, strengthening good governance, resolving the land tenure issue and implementing affirmative action. For Sustaining Growth, land is an economic resource and access to land is essential to support restructuring to promote competition and efficiency, raising export earnings, raising investment levels for jobs and growth, and rural and outer island development.

Link to UN Millennium Development Goals (MDGs)

Land’s central role in rural livelihoods means its effective use is an important contributor to eradication of extreme poverty and hunger (MDG 1) and its management is key to ensuring environmental sustainability (MDG 7).

Development Rationale

Land slides, flash floods, and prevalent soil erosion is testament to the destructive land use practices that have persisted. Recognizing the urgent situation, the Plan emphatically espouses sustainable land use practices with appropriate sector strategies for awareness, training and enforcement. The current haphazard nature of development (industrial, housing, commercial) is also a clear indication of the absence of coordination between agencies concerned. The Plan recognizes this weakness and recommends closer coordination. As a basic factor input, the Plan also recognizes the significance of resolving the land tenure issue for future development and prosperity.

The outcome indicators set are intended to monitor the rate of land development.

Policy Objectives, Strategies and Key Performance Indicators

8.4 Infrastructure

Infrastructure facilitates achievement of economic and social objectives and is particularly relevant to the Strategic Priority for Rural and Outer Islands Development, in which transport and communications are needed for the remote communities to participate in economic development and to access essential social services. During the Plan period it is necessary to address issues of quantity, quality and management of infrastructure as reflected in the prominent role of infrastructure in the Accelerated Restructuring Programme presented in 6.3.3 and use of Public Private Partnerships discussed in Chapter

6. The Summit Working Group on Infrastructure will support, monitor and evaluate implementation of plans for infrastructure development and management.

8.4.1 Information and Telecommunications

Goal

Universal access to internationally competitive information and telecommunication services.

Links to Strategic Priorities 

Information and telecommunications are essential to modern commerce and support the Strategic Priorities of restructuring to promote competition and efficiency, raising export earnings, and raising investment levels for jobs and growth. Use of the communications technology also supports strengthening good governance and enhancing security and law and order.

Links to UN Millennium Development Goals (MDGs)

Improved communications supports the global partnership for development (MDG 8) by making available the benefits of new technologies, especially information and communications. The indicator for which is, “Telephone lines and cellular subscribers per 100 people”, as included in the table below.

Development Rationale

The strategy is concerned to, first, provide access to modern communications technology by extending coverage geographically and to an increased number of people. Benefits will then be substantially increased through improved technology and competition to reduce cost and increase the impact on the community. A key strategy in this development focus is the restructure of the current sector and industry structure to facilitate and support increased effective market liberalization, whilst ensuring that universal access needs of citizens are met.

The availability of timely and accurate information in Government and society generally contributes to the ability of leaders and communities to make better informed decisions and to reinforce the foundations of peace.

Policy Objectives, Strategies and Key Performance Indicators

8.4.2 Transport

Goal

To provide efficient transport services at reduced costs to enhance access to services and markets.

Links to Strategic Priorities 

Transport is a major part of economic and social infrastructure and supports the Strategic Priorities of restructuring to promote competition and efficiency, raising export earnings, raising investment levels for jobs and growth, rural and outer island development, alleviating poverty, and enhancing security and law and order.

Development Rationale

Development of efficient and cost effective transport systems is a pre-requisite for economic development and affordable access to services provided by government and private sector. Particularly shipping and aviation development of shipping services are essential to raise export earnings and for rural and outer island development. More broadly, cost effective transport is necessary to attract investment, including PPP, and creating the employment and poverty alleviation impacts of such productive investments.

The development strategies focus on development of infrastructure which will facilitate private sector investment in increased land, sea and air transport services. These developments are accompanied by institutional developments to increase efficiency and raise standards of facilities and services provided.

The KPI are outcome oriented, not concerned with the outputs of the civil engineering investments but with the scope and quality of transport services subsequently enjoyed by the communities in Fiji.

Policy Objectives, Strategies and Key Performance Indicators

8.4.3 Energy

Goal

To facilitate the development of a resource efficient, cost effective and environmentally sustainable energy sector.

Links to Strategic Priorities 

Energy is a required input for most economic activities so supports Strategic Priorities of restructuring to promote competition and efficiency, raising exports, raising investment levels for jobs and growth, leading to a contribution to alleviating poverty.

Link to UN Millennium Development Goals (MDGs)

Efficient and sustainable energy use contributes to ensuring environmental sustainability (MDG 7).

Development Rationale

Availability, reliability and cost of appropriate forms of energy are necessary as a basis for viable production investments needed to attract private productive investments to create employment, alleviate poverty and increase exports. Energy directly supports growth of the economy and indirectly influences stability of the country as well. As a fundamental element to any commercial businesses operation energy directly contributes to the formation of capital investment that sustains economic growth.

Government will increase access to provision of energy during the planning period through supporting FEA in energy production to extend its grid and assist others through diesel-powered generators. Equally importance will focus on educating and advocating minimizing utilization of energy. Operation of regulator will hopefully be established to look at interest of both the provider and user addressing both tariff and technical issues.

Consumption led growth has contributed to a decline in efficiency of imported oil products use from $8.27 of GDP (at 1995 prices) in 2000 to only $5.01 in 2004. Increased efficiency in the use of imported oil is needed. Recognizing the parallel need to pursue alternative sources of energy, Government realizes how vulnerable to risk is involved relying on fossil fuels. Extensive planning, research and development will be required to look at avenues to enhance and support provision of energy from renewable energy sources.

Realizing the need to boost the supply of energy to the economy, Government will identify PPP projects to support the sector.

Policy Objectives, Strategies and Key Performance Indicators

8.4.4 Water and Sewerage

Goal

Increasing access to continual safe drinking water and appropriate sanitary waste disposal systems.

Links to Strategic Priorities 

Water and sewerage support sustainable economic activity and healthy urban environments, thus supporting the Strategic Priorities of restructuring to promote competition and efficiency and raising investment levels for jobs and growth.

Link to UN Millennium Development Goals (MDGs)

Improved access to safe water and effective sewage collection and treatment systems promotes good health for children (MDG 4), mothers (MDG 5) and general prevention of diseases (MDG 6) as well as helping to ensure environmental sustainability (MDG 7).

Development Rationale

Water is important for both rural and urban population. Also, for Fiji's economic growth and commercial developments, notably tourism, the availability of sufficient and reliable services for water and sewerage is crucial. Water and Sewerage is contributing to the Strategic Priorities for raising investment for growth, reforming the public sector to reduce the cost of doing business, structural reforms to promote competition and efficiency and promoting Public-Private Partnership. Improved access to water and sanitation is a basic necessity and is covered by indicators under MDG Goal 7, to ensure environmental sustainability.

The plan recognizes the need to provide access to reliable and adequate supplies of clean water for both urban and rural centres through extending and upgrading major urban and regional water schemes, improving the water supply schemes and providing sanitary and environmentally safe sewerage collection and treatment systems.

The plan will develop and implement a Water Management Policy, which will increase efficiency and better meet the needs of the communities and other users of water.

Policy Objectives, Strategies and Key Performance Indicators

Chapter 9 Implementation, Monitoring and Evaluation

9.1 Purpose

The Strategic Development Plan sets out how progress will be made towards the Government’s vision of a peaceful, prosperous Fiji. It is not a detailed operational plan, but guides the setting of operational plans by Government and, through setting out broad strategies and key performance indicators, invites the private sector and civil society to join with Government in meeting those objectives which Government cannot achieve alone.

As set out in the SDP, Government will implement its part in the achievement of SDP objectives through the Annual Corporate Plans and budget allocations of Ministries and Departments. The SDP is implemented through all Government agencies. This requires vertical and horizontal coordination in the annual planning round, in implementation of annual plans and in monitoring and evaluation for both accountability and lesson learning.

Progress towards better co-ordination in implementation and monitoring was made in the previous Strategic Development Plan through the then newly established arrangement of Summit Working Groups (SWG). However, building on that experience, a consensus has developed that it can be improved further. In response to the specific request of the National Economic Development Council in August 2006, the SDP 2007-2011 incorporates this chapter and Annex 2, detailing the processes and methodologies to be adopted for effective implementation.

9.2 Vertical Coordination

Implementation will be guided by the hierarchy of plans introduced in the Financial Management Act 2004, which must be carefully coordinated in their preparation and implementation.

• Strategic Development Plan focuses on policy objectives and outcomes which reflect Government’s Strategic Priorities derived from the political manifestoes of the Government parties; strategies to support these outcomes will guide the annually reviewed SPS, ACP, and PSIP so that plans and allocation of resources are aligned to the outcomes.
• Strategic Policy Statement is a rolling three year plan to refine the Medium Term Strategy in terms of the benefits to be targeted within the development funds available. The SPS sets the near term framework, within which agencies develop their ACP programmes and projects to support their contributions to outcomes.
• Annual Corporate Plan alignment with whole Government outcomes will be based on a pro-active partnership of NPO with PSC and agencies to identify activities and outputs which best respond to Government objectives.
• Public Sector Investment Programme, as part of the budget process, will focus on capital investment and development projects which produce the public goods and services – deliverable outputs of the ACPs – which support achievement of the SDP outcomes.

Responsibility for ensuring that vertical coordination takes place starts with the CEO of each Ministry, who will set up quality control procedures for the ACP and budget bids that encourage alignment with the hierarchy of plans set out above.

Guidance and supervision will be provided by the Ministry of Finance and National Planning, which is involved at each level and must ultimately advise the Minister of Finance in the budget process that budget proposals are consistent with the SDP. To avoid the processing of non-aligned proposals up to budget stage, Ministries and Departments will seek Ministry of Finance and National Planning review of all policy papers with fiscal implications for confirmation in principle that they are consistent with the SDP at the earliest possible stage of drafting.

In ACP preparation the coordination role is shared between the Ministry and the Public Service Commission to address needs for both financial and human resources. 

9.3 Horizontal Coordination

Horizontal coordination across agencies is more complex. Implementation involves many agencies, some of which have an autonomous tendency to “do their own thing”. The SDP Outcomes – impacts on the community – are normally the joint outcome resulting from several related outputs of different agencies - Figure 11 on page 80 clearly illustrates that no Strategic Priority is served by the outputs of a single agency. As such, autonomous implementation by individual agencies is likely to produce sub-optimal achievement of Outcomes consistent with Strategic Priorities.

Horizontal coordination, therefore, needs to ensure that agencies are working in parallel to achieve the national outcomes rather than narrowly pursuing individual agency objectives. Plan implementation involves different levels of decision making and implementation. Horizontal coordination is needed at each of those levels and between them. This coordination between levels is concerned with operational matters rather than the planning and administrative matters discussed above as vertical coordination.

• The Political Level is concerned with decisions of Cabinet, Cabinet Sub-committees and individual Ministers. Such decisions provide overall guidance and direction to Plan implementation. To support Cabinet deliberation of proposals, all Cabinet papers with fiscal implications or related to SDP policies will be reviewed by the Ministry of Finance and National Planning and a note provided as to the proposal’s consistency with the SDP and requirements for coordination with other programmes, Ministries and Departments. 
• The Administrative Level is concerned with direction and coordination of Government agencies in the execution of the agreed programmes and projects of corporate plans, which are aligned towards Plan outcomes and Strategic Priorities. Coordination will be undertaken through regular meetings of the CEO Forum and Development Sub-committee. This may be strengthened by including coordination within the performance contracts of CEOs.
• The Stakeholder Level is critical for coordination between all those involved in achievement of Plan outcomes – Government, private sector and civil society – and between those implementing the Plan and the communities who are intended to benefit from the Plan. Coordination will take place in the National Economic Summit, National Economic Development Council and Summit Working Groups. Emphasis will be placed on monitoring and evaluation to provide feedback for improved implementation.

In the 2007-2011 Plan, it is proposed to adopt a strengthened SWG system to monitor and support coordination of implementation. SWGs have been reconfigured based on “clusters” of KPI, matching activities and sectors to a limited set of related Strategic Priorities. All of the KPI monitor outcomes and most are quantifiable. Annex 2 lists for each KPI the source, frequency and timing of the information, responsibility for its presentation, and further definition where required. The new KPI will provide much clearer and more meaningful information for SWG’s and Government to assess performance and identify areas in which performance can be enhanced.

The National Planning Office will continue to act as secretariat to support coordination and to implement the outcome-oriented monitoring and evaluation system outlined in the following section.

9.4 Coordination of External Assistance

Government endorses the Paris Declaration adopted by partner countries and donors in March 2005. The Declaration focuses on improving aid effectiveness by aligning aid flows to national priorities; strengthening Government, Donor and Non-Government Organization coordination; strengthening member country capacity for coordinated support; use of common arrangements or frameworks; increasing use of domestic financial and procurement systems; adoption of performance measurement frameworks; improving aid predictability; and monitoring and evaluation.

Within this SDP, Government has set its priorities and these will be complemented by strategies Government is putting in place, for example, for public sector restructuring and export development. These reflect the consensus of Fiji citizens expressed through the democratic process successfully completed in 2006.

Government development programmes and donor assistance will be closely aligned to the Strategic Priorities of the Plan. Greater partnership between Government and donors is required to ensure the effectiveness of aid delivery and the achievement of Strategic Priorities. Government’s measures to improve financial management and good governance should also facilitate the efficient and effective use of donor assistance, whether through grants or technical support, and Government expects that improved performance reporting by Ministries and agencies will lead donors to draw on such reporting to assess the impact of their own programmes and reduce the need for parallel monitoring at least at outcome level.

Government recognizes the policies and strengths of different donors and the objectives of their development programmes. Government will work with donors to establish programmes which are congruent with Government and donor objectives.

Donor development programmes to Government and the submission of development assistance to donor agencies will be channelled through the Government’s Budget Aid Coordinating Committee to ensure that development assistance programmes are well coordinated according to Government’s stated policies and priorities. This will be supported by regular Government and Donor Agency consultations during the Plan period, including regular reviews of the impact of donor programmes.

9.5 Monitoring and Evaluation System

In assessing progress periodically on the SDP the key monitoring questions will be:

• Are corporate plans and budget spending plans in line with the SDP (including in such cross-cutting areas as poverty reduction, gender equity, social justice and encouragement of the private sector)?
• Are Ministries and Departments achieving against the objectives in their corporate and annual plans?
• What progress is being made against the key performance indicators?
• Are the private sector and civil society able in the current policy environment to contribute to the achievement of SDP objectives?

These questions will be answered in part through normal control mechanisms in the Government - for example, Ministry of Finance scrutiny of budget bids and reporting processes on annual and corporate plans. But they should also provide a more focused agenda for the SWGs.

SWGs will not limit themselves to assessing progress against the KPIs. Their remit is monitoring of performance, not simply monitoring the KPIs. To that end they will need to consider a wider range of performance information including information generated by the multilateral development banks, academic and statutory institutions in Fiji, NGO reports and performance information from Ministries and Departments. 

9.5.1 Monitoring the Key Performance Indicators

The KPIs have been designed to be more precise than those in the previous SDP, and to capture changes in people’s lives as a result of Government policy or other factors. They  168

have only been included where information is already available or where it seems likely that it will become available over the SDP period.

They have been deliberately set in a number of cases at a point which is beyond the control of any one Department. However, it will be necessary for the responsibility for tracking the indicator to be allocated at some point within the machinery of Government. Internal control systems, and SWGs, will need to make an explicit distinction between those outcomes, typically at the level of corporate plans, where a Department is accountable for delivering and those where it is accountable only for measuring. In some cases the responsibility for measurement will lie with the Bureau of Statistics.  

The National Planning Office, as secretariat to the SWGs, will aim to set a forward agenda for each group under the direction of the Chairman within which the SWGs’ two meetings per year will be timed according to the availability of new data. Many of the KPIs will yield only annual data, and some will be measured more infrequently. Groups may therefore need to plan to use one of their meetings, when new annual information at the level of the KPIs is not available, to consider progress against intermediate objectives in corporate plans, based on reporting from Ministries and Departments.

It should become an important part of the function of the SWGs to assess the continuing relevance of KPIs and the quality of information they are providing so that the adequacy of all KPIs is kept under review and not left until the mid term review to be assessed.

The National Planning Office, with support from the Bureau of Statistics, will convene a technical working group on the KPIs which will meet as required to make recommendations on changes to the KPIs either as the Plan progresses or at the time of the mid term review.

9.5.2 Managing the Process and Reporting

SWG chairs will report to six-monthly meetings of the NEDC, to be timed following each round of SWG meetings. A synthesis of the reports, together with any recommendations from the NEDC, will be put to the Cabinet through the Development Sub-Committee and will be forwarded to the Public Service Commission to be taken into account as necessary in the assessment of CEO performance.

During 2008, the Ministry of Finance and National Planning will undertake a mid term review of the SDP, collating information against the KPIs and analysing the implications for action in the remaining Plan period. Given the smaller number of KPIs involved, the process and the review report should both be shorter than previously. As an input to reviews, the Ministry may commission specific evaluations to provide deeper analysis in selected areas, or draw on existing material generated from public institutions, such as the Reserve Bank of Fiji or development partners. At the National Economic Summit in September 2007 it was agreed, at the suggestion of the Prime Minister, that a National Economic Summit be convened in the second half of 2008 to receive a report on performance in the first two years of the Plan and consider changes to increase the effectiveness of the Plan and, if need be, adjustments in objectives and strategies.

As well as more detailed specification of the KPIs, Annex 2 sets out the responsibilities of the various contributors to these monitoring and evaluation arrangements.

9.6 Timeline for Coordination

After approval of the Plan by Government and Parliament it will provide a context for finalisation of corporate plans in November and December 2006. At the commencement of implementation in 2007 a joint meeting of Ministers and CEOs will be held to review the needs of implementation and reinforce the coordination programme.

The annual implementation and monitoring cycle, begun in 2007, will continue each year on the following pattern:

• January: Each ACP will be aligned to SDP outcomes and commence implementation in January. Monitoring and evaluation will be on-going but also start a new cycle with the new ACPs in January.
• June: By the end of June, progress in implementation will be reviewed internally in each Ministry and Department to identify progress and measures which could better achieve objectives. The results of these reviews will be shared with the relevant SWG.
• July-October: The June review will coincide with the Strategy Policy Statement and Budget Strategy. These three will provide a basis for the development of proposals for the next year’s ACP and budget over the period from July to October each year. This period will be a demanding time for effective coordination vertically and horizontally.
• November-December: When the Budget is finalized in November, each agency will know the precise resources available for its ACP in the next year so will finalise its ACP by end December, ready for implementation to begin the following January.

Annex 1

Macroeconomic Data and Projections

List of Tables

Table 1: Gross Domestic Product by Sector ($000), 2001-2009....................................172 Table 2: Gross Domestic Product by Sector -Growth Rates 2001-2009 .......................173 Table 3: Gross Domestic Product Shares by Sector (%), 2001-2009.............................174 Table 4: Exports by Major Commodities ($), 2000-2009...............................................175 Table 5: Exports by Major Commodities - Growth Rates (%), 2000-2009....................175 Table 6: Imports by Major Commodities ($m), 2000-2009 ...........................................176 Table 7: Imports by Major Commodities - Growth Rates (%), 2000-2009....................176 Table 8: Balance of Payments ($m), 2001-2009 ............................................................177 Table 9: Real GDP Growth Rates, Foreign Reserves, Interest Rates, and Government

Revenue, Expenditure and Debt............................................................................178 Table 10: Actual and Budgeted Expenditure (VAT inclusive), 1999-2006....................179 Table 11: Government Expenditure on Key Priorities, 1999-2006................................179 Table 12: Direct and Indirect Tax Concessions, 2002-2005...........................................179 Table 13: Gross Domestic Product at Constant 1995 Prices, 2000-2009.......................180 Table 14: Gross Domestic Product at Current Factor Cost, 2000-2009 .........................180 Table 15: Gross Domestic Product at Current Prices, 2000-2009..................................180

Strategic Development Plan 2007-2011: Annex 2: Implementation Monitoring and Evaluation 

Table 1: Gross Domestic Product by Sector ($000), 2001-2009

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

 172

Strategic Development Plan 2007-2011: Annex 2: Implementation Monitoring and Evaluation 

Table 2: Gross Domestic Product by Sector -Growth Rates 2001-2009

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

 173

Strategic Development Plan 2007-2011: Annex 2: Implementation Monitoring and Evaluation 

Table 3: Gross Domestic Product Shares by Sector (%), 2001-2009

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

 174

Table 4: Exports by Major Commodities ($), 2000-2009

Commodities 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(r) (r) (r) (r) (r) (r) (f) (f) (f) (f) Sugar 233.9 221.6 230.7 222.5 204.2 217.9 241.8 229.3 191.0 172.3 Molasses 9.5 12.3 12.4 6.9 9.6 9.9 10.4 9.2 12.1 12.1 Gold 69.7 85.4 67.8 76.5 88.5 59.3 55.7 64.5 79.0 84.3 Timber, Cork & Wood 43.4 39.6 38.9 30.8 42.0 45.1 37.2 40.9 44.2 47.7

Manufacturers Fish 86.2 93.0 78.4 79.4 81.4 82.9 89.6 94.1 87.5 92.7 Fruits & Vegetables 19.3 19.3 17.9 23.9 31.0 29.0 31.2 34.3 37.8 41.5

-Dalo 12.3 10.3 11.1 14.9 18.7 19.0 19.9 21.5 23.6 26.0 Copra 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Yaqona 5.7 5.0 1.7 1.6 2.2 2.6 3.0 3.0 3.0 3.0 Coconut Oil 3.6 2.4 5.9 4.9 3.6 3.5 3.5 3.7 3.8 3.7 Textiles, Yarn & Made up Article 30.7 16.9 8.3 6.6 6.3 13.1 10.5 10.7 10.9 11.1 Garments 322.4 305.2 222.9 243.2 226.4 120.4 83.1 84.3 86.5 88.2 Footwear 23.5 22.0 20.7 20.2 19.2 8.5 4.8 4.9 5.0 5.1 Mineral Water 9.9 24.5 28.8 45.6 52.3 67.9 78.8 85.0 90.0 95.0 Other Domestic Exports 134.9 139.5 136.1 193.1 178.9 181.9 183.5 192.7 202.3 212.4 Total Domestic Exports 992.8 987.0 870.6 955.1 945.6 841.8 833.1 856.6 853.0 869.2 Re-Exports 158.8 230.6 258.1 310.9 254.8 345.0 390.4 404.3 420.4 434.6

Total 1151.6 1217.6 1128.7 1266 1200.4 1186.8 1223.5 1260.9 1273.4 1303.8

Source: FIBOS, Macro Policy Committee. Key: r = revised; f = forecast.

Table 5: Exports by Major Commodities - Growth Rates (%), 2000-2009

Commodities 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(r) (r) (r) (r) (r) (r) (f) (f) (f) (f)

Sugar -11.1 -5.2 4.1 -3.6 -8.2 6.7 11.0 -5.2 -16.7 -9.8 Molasses -23.4 29.5 0.8 -44.3 39.1 3.1 5.1 -11.5 31.5 0.0 Gold -8.8 22.5 -20.6 12.8 15.7 -33.0 -6.1 15.9 22.4 6.7 Timber, Cork & Wood 22.0 -8.9 -1.7 -20.7 36.3 7.2 -17.4 10.0 8.0 8.0

Manufacturers Fish 49.9 7.8 -15.7 1.3 2.6 1.8 8.1 5.0 -7.0 6.0 Fruits & Vegetables 67.8 0.0 -7.3 33.5 29.7 -6.5 7.6 10.0 10.0 10.0

-Dalo 38.4 -16.6 7.6 35.2 225.1 1.7 4.7 8.0 10.0 10.0 Copra -100.0 0.0 -100.0 0.0 0.0 0.0 -100.0 0.0 0.0 0.0 Yaqona -4.3 -13.1 -65.3 -9.4 40.5 16.1 17.5 0.0 0.0 0.0 Coconut Oil -62.9 -33.3 145.8 -16.9 -26.5 -2.8 0.0 5.7 2.7 -2.6 Textiles, Yarn & Made up Article 1.8 -45.0 -50.6 -21.0 -5.3 109.0 -19.6 1.5 2.5 2.0 Garments 0.1 -5.3 -27.0 9.1 -6.9 -46.8 -31.0 1.5 2.5 2.0 Footwear 72.7 -6.3 -5.9 -2.6 -4.6 -55.7 -43.7 1.5 2.5 2.0 Mineral Water 68.3 146.9 17.4 58.2 14.8 29.7 16.1 7.9 5.9 5.6 Other Domestic Exports 34.6 3.4 -2.4 41.9 -7.4 1.7 0.9 5.0 5.0 5.0 Total Domestic Exports 4.8 -0.6 -11.8 9.7 -1.0 -11.0 -1.0 2.8 -0.4 1.9 Re-Exports -37.2 45.2 11.9 20.5 -18.0 35.4 13.2 3.6 4.0 3.4

Total -4.1 5.7 -7.3 12.2 -5.2 -1.1 3.1 3.1 1.0 2.4

Source: FIBOS, Macro Policy Committee. Key: r = revised; f = forecast.

Table 6: Imports by Major Commodities ($m), 2000-2009

Economic Category 2000 2001 2002 2003 2004 2005 (p) 2006 (f) 2007(f) 2008(f) 2009(f)

Food 225.1 313.1 314.8 335.2 351.6 355.5 376.5 391.6 407.2 423.5 Beverage & Tobacco 10.4 14.8 16.3 17.5 20.4 21.7 22.1 24.5 27.2 30.2 Crude Materials 15.9 13.7 13.8 16.3 20.2 21.7 31.2 33.4 35.4 37.7 Mineral Fuels 332.4 443.5 435.4 463.0 587.0 784.1 1077.1 1120.2 1165.0 1200.0 Oils & Fats 13.9 16.1 15.4 20.9 15.8 18.1 17.4 18.8 20.1 21.5 Chemicals 117.7 144.8 147.5 162.8 196.5 206.2 230.2 253.2 278.5 306.3 Manufactured Goods 492.2 423.1 384.9 445.5 486.2 452.2 478.4 515.4 556.1 600.7 Machinery & Transport 363.3 420.5 429.1 579.4 559.1 591.1 787.2 664.1 681.3 703.5

Equipment

Miscellaneous 244.3 217.9 206.2 236.7 253.5 264.0 271.5 288.3 306.2 325.4 Manufactured Goods Other Commodities 7.0 9.5 6.6 7.4 11.3 8.3 9.8 10.8 11.9 13.1

Total 1822.1 2017.0 1970.0 2284.7 2501.6 2722.8 3301.4 3320.3 3489.0 3662.0

Source: FIBOS, Macro Policy Committee. Key: p = provisional; f = forecast.

Table 7: Imports by Major Commodities - Growth Rates (%), 2000-2009

Economic Category 2000 2001 2002 2003 2004 2005 (p) 2006 (f) 2007(f) 2008(f) 2009(f)

Food 18.9 39.1 0.5 6.5 4.9 1.1 5.4 4.0 4.0 4.0 Beverage & Tobacco -26.8 42.3 10.1 7.4 16.6 6.5 4.2 11.0 11.0 11.0 Crude Materials 65.6 -13.8 0.7 18.1 23.9 7.3 19.9 7.0 6.0 6.5 Mineral Fuels 21.8 33.4 -1.8 6.3 26.8 33.6 37.4 4.0 4.0 3.0 Oils & Fats -13.7 15.8 -4.3 35.7 -24.4 14.7 -4.0 8.0 7.0 7.0 Chemicals 6.8 23.0 1.9 10.4 20.7 4.9 11.6 10.0 10.0 10.0 Manufactured Goods 14.1 -14.0 -9.0 15.7 9.1 -7.0 5.8 7.7 7.9 8.0 Machinery & Transport -24.9 15.7 2.0 35.0 -3.5 5.7 33.2 -15.6 2.6 3.3

Equipment

Miscellaneous 4.1 -10.8 -5.4 14.8 7.1 4.1 2.8 6.2 6.2 6.3 Manufactured Goods Other Commodities -57.1 35.7 -30.5 12.1 52.7 -26.5 18.4 10.0 10.0 10.0

Total 2.4 10.7 -2.3 16.0 9.5 8.8 21.3 0.6 5.1

Source: FIBOS, Macro Policy Committee. Key: p = provisional; f = forecast.

Table 8: Balance of Payments ($m), 2001-2009

Source: FIBOS, Macro Policy Committee. Key: p = provisional; f = forecast.

Table 9: Real GDP Growth Rates, Foreign Reserves, Interest Rates, and Government Revenue, Expenditure and Debt

Source: FIBOS, Ministry of Finance and National Planning. Key: p = provisional;  f = forecast.

Table 10: Actual and Budgeted Expenditure (VAT inclusive), 1999-2006

Infrastructure Health Education $m % of Total $m % of Total $m % of Total

1999 113.41 11% 89.19 9% 165.85 16% 2000 119.63 12% 98.92 10% 184.14 18% 2001 147.01 13% 107.9 10% 203.25 18% 2002 196.09 16% 124.2 10% 224.13 18% 2003 198.41 15% 129.86 10% 243.33 18% 2004 185.24 14% 125.84 10% 267.85 20% 2005 (r) 183.66 13% 126.59 9% 279.49 19% 2006(B) 209.28 14% 131.31 9% 277.36 18%

Source: Ministry of Finance and National Planning. Key: r = revised; B = budget.

Table 12: Direct and Indirect Tax Concessions, 2002-2005

2002 2003 2004 2005

Table 13: Gross Domestic Product at Constant 1995 Prices, 2000-2009

Year GDP @ constant 1995 prices ($000) Growth Rates %

2000 2,637,934 -1.7 2001 2,690,539 2.0 2002 2,777,433 3.2 2003 2,804,366 1.0 2004 2,954,237 5.3 2005 (p) 2,975,144 0.7 2006 (r) 3,081,819 3.6 2007 (r) 3,142,403 2.0 2008 (r) 3,212,129 2.2 2009 (r) 3,294,181 2.6

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

Table 14: Gross Domestic Product at Current Factor Cost, 2000-2009

Year GDP @ current factor cost ($000) Growth Rates %

2000 3,063,077 -0.6 2001 3,249,127 6.1 2002 3,386,850 4.2 2003 3,563,995 5.2 2004 3,856,101 8.2 2005 (p) 3,977,450 3.1 2006 (r) 4,209,825 5.8 2007 (r) 4,442,076 5.5 2008 (r) 4,693,451 5.7 2009 (r) 4,960,461 5.7

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

Table 15: Gross Domestic Product at Current Prices, 2000-2009

Year GDP @ market prices ($000) Growth Rates %

2000 3,496,977 -3.0 2001 3,745,727 7.1 2002 3,929,424 4.9 2003 4,134,947 5.2 2004 4,473,848 8.2 2005 (p) 4,614,637 3.1 2006 (r) 4,884,239 5.8 2007 (r) 5,153,697 5.5 2008 (r) 5,445,342 5.7 2009 (r) 5,755,127 5.7

Source: FIBOS, Macro Policy Committee. Key: p = provisional;  f = forecast.

Annex 2

Implementation, Monitoring and Evaluation

Implementation, Monitoring and Evaluation

1. Introduction.  

Chapter 9 of the SDP sets out in general terms how the implementation of the Plan will be co-ordinated and monitored. This annex defines the responsibilities for individuals contributing to the monitoring system. It also contains a technical table defining for each KPI:

• Where the information will come from and when
• How it will be measured, where this is not fully set out in the KPI itself
• A single point of responsibility for collecting and disseminating the information.

The following paragraphs set out the responsibilities of:

SWG Chairs The SWG Secretariat The Ministry of Finance and National Planning Chief Executive Officers of Ministries and Departments

2.  SWG Chairs

The Chairs of Summit Working Groups will:

• Each December/ January, set a broad agenda for the two SWG meetings in the coming year in consultation with the Secretariat. These agendas should have regard to the likely availability of information on progress towards the KPIs, other forthcoming performance information, and the timing of known milestones in the programmes of the Ministries and departments contributing towards the KPIs (such as legislation, regulations, major capital investment or divestment, or major strategy launches or reviews). The agendas will be informed among other things by the Annual Corporate Plans of the relevant Ministries and Departments.
• • Hold meetings in accordance with the forward programme, with the assistance of the Secretariat. These meetings should be framed around the last three key monitoring questions in Chapter 9, that is:
  • o Are Ministries and Departments achieving against the objectives in their corporate and annual plans?
  • o What progress is being made against the key performance indicators?
  • o Are the private sector and civil society able in the current policy environment to contribute to the achievement of SDP objectives?

The objective of the meetings will be to monitor performance (of all potential contributors, not just Government), not simply to monitor the KPIs. The SWGs should form a view of the likelihood of the overall strategic objectives of the SDP being achieved, and consider the reasons for possible shortfalls. They may recommend to the Ministry of Finance and Economic Planning that further economic or social research be carried out where it appears that information on the achievement of objectives is lacking⁷; or recommend the scrapping or amendment of KPIs if they no longer appear relevant or if the information to assess them is not available.

• Provide an oral report and recommendations to the next meeting of the NEDC

3.  SWG Secretariat

The Deputy Secretary (Planning) will assign staff in the National Planning Office to the role of secretaries to the SWGs. Secretariat staff will:

• Determine with the Chair which Ministries and Departments have responsibilities relevant to the work of the SWG.
• Determine from the KPI table and ACPs of relevant Ministries and Departments what key progress should be expected, and what information available,  in the forthcoming financial year and assist the Chair to set a forward agenda.
• Communicate the forward agenda to all members and to CEOs of relevant ministries and Departments.
• Maintain contact with relevant Ministries and Departments to determine the range of performance information available.
• Set up an information and co-operation network with relevant Ministries and Departments so that they actively support the Secretariat role 
• Set dates for meetings and inform members; ensure as far as possible that information relevant to the discussion is circulated beforehand; and where final published information is not available, obtain estimates or provisional data. 
• Record the discussion to form a basis for the Chair’s oral report to NEDC.
• Transmit any views on the validity of KPIs to the Technical Working Group on KPIs.

4. Ministry of Finance and National Planning

Apart from its role in providing the Secretariat, the Ministry will:

• Oversee vertical co-ordination of Government planning instruments. This will involve guidance and supervision to Ministries and Departments over the extent to which their ACPs and budget bids are consistent with the SDP and the SPS,

⁷ Budgetary provision for these cannot be guaranteed; however, MFNP will consider possible sources of finance in each case.

and direct responsibility for the consistency of the SPS with the SDP. To ensure a closer partnership between the Ministry and agencies completing corporate plans, Ministry staff (or technical assistance contracted by the Ministry) should participate from an early stage in the development of plans. The Ministry will also consider measures to ensure that ACPs are prepared in a timely way concurrently with the budget; and consider with the PSC changes to the ACP template and guidance to give clearer direction and consistency on the definition of outputs and performance measures.

• Co-ordinate the implementation and monitoring of the SDP by:

• o Organising workshops and meetings as necessary for Chairs of SWGs to promote consistency in practice across the groups and sharing of views on key systemic issues;
• o Holding meetings of the NEDC following each round of SWG meetings and preparing a synthesis of discussion and findings for presentation to the Development Sub-Committee and the Cabinet, copied to the Public Services Commission.
• Set up a working group on the KPIs to be chaired by the National Planning Office with support from the Fiji Islands Bureau of Statistics. The role of this group will be to assess on approximately an annual cycle whether information on each KPI is being received in a timely and accurate way; to receive through the Secretariat any views expressed by the SWGs on the KPIs; to propose improvements or additions to KPIs on the basis of new sources of information which become available during the lifetime of the SDP; and to prepare consolidated advice on the future of the KPIs to those undertaking the 2009 mid term review.
• Carry out a mid term review of the SDP in 2009 for submission to a National Economic Summit in the second half of 2009. This review may draw on specially commissioned studies as well as performance material collected in the normal course of monitoring the SDP.

5. Chief Executive Officers

CEOs will contribute to the implementation and monitoring of the SDP by:

• Ensuring that there are direct links between their Annual Corporate Plans and budget bids on the one hand and the SDP and SPS on the other. Performance indicators and milestones in ACPs should be realistic, achievable within the resources of the Ministry or Department with appropriate collaboration from other parts of Government, and capable of being achieved within the year covered by the Plan. They should not duplicate the KPIs, which are outcomes at the whole of Government level.
• • Being specific about the areas of horizontal co-ordination for which they will be accountable. This will involve setting out for each major objective within their ACPs what co-ordination will be required with, or services required from, other Ministries and Departments to meet the objective. There is no need to record each piece of routine co-ordination, but those areas where the CEO’s personal attention needs to be engaged to establish or improve co-ordination should be identified.
• Aligning their personal performance agreements to the outputs and co­ordination requirements identified in the ACP.
• Attending personally meetings of the SWGs to which their Ministry or Department is relevant, and taking a personal interest in the quality and timeliness of the information being provided by their Ministry or Department to the SWGs.
• Participating in the twice yearly post NEDC review of progress before submission to Cabinet, concentrating particularly on systemic issues such as finance, personnel, public service rules and co-ordination which are affecting SDP implementation.

SWG on Public Sector Reform

Chapter 6

⁸ This column has only been completed where necessary to clarify the KPI  184

SWG on Alleviating Poverty

Chapter 7.1

SWG on Social Justice

Chapter 7.2

SWG on Social Services

Chapter 7.3

SWG on Security, Law and Justice

Chapter 7.4

SWG on Economic Restructuring

Chapter 8.1 with Chapter 5

SWG on International Trade

Chapter 8.2

SWG on Natural Resources

Chapter 8.3

SWG on Infrastructure

Chapter 8.4