Chikahisa Sumi
Compiled by RACHNA LAL and RANOBA BAOA
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A team from the International Monetary Fund who were in the country for the past two weeks has indicated optimism for our economic growth.
The team, led by IMF assistant director Asia and Pacific Department, Chikahisa Sumi, held discussions with the Fijian authorities and other stakeholders on the 2013 Article IV Consultation.
They have projected our economic growth to be around three per cent this year which is nearly the same as the Reserve Bank of Fiji’s projection of 3.2 per cent.
They have however stressed Fiji cannot be complacent about this and there are a number of areas which could be looked at to boost economic growth.
Structural reforms and increased investments are seen as most important which go hand-in-hand.
Questions for Chikahisa Sumi, IMF assistant director Asia and Pacific Department:
1. What are some of the things that could affect the projected growth for this year and 2014?
There are risks to our forecast and that’s the domestic and the external.
The domestic risk is the political uncertainty and slower progress in the structure reforms.
For the external risk, if the regional economic growth, including Australia and New Zealand, slows, it reduces the tourist arrival to Fiji. That could adversely affect the economy.
Also as it was shown in last December, Fiji is still susceptible to natural disaster. So these are the risks I think facing the economy.
2. What are your views post-2014 elections?
At the moment, we project the growth to moderate at about 2.25 per cent (for 2014). That is of course after the successful transition to parliamentary government. The demand for investment appetite for both the foreign and domestic investor should increase.
But unless Fiji increases the absorptive capacity in the economy by going ahead with the structural reforms and to improve the business confidence to have more investment, the increase in demand is very much constrained by the supply side bottleneck.
So we believe it is imperative to increase the business investment as it increases the absorptive capacity of the economy.
It increases the jobs and adds to the capital focus of the economy and increased energy supply. These things increase the supply capacity of the economy and then Fiji can enjoy much higher growth.
So in absence of the structural reforms even, though the investor may want to come into Fiji they will face the poor availability of land lease or long period of waiting for approval.
Even though they are may be interested in the Fijian economy but that is the constraint with the economic growth. So if you take care of these issues and boost investor-confidence, then the supply side constraints gets away so that Fiji can enjoy higher growth.
3. Are you satisfied with RBF projection of economic growth of 3.2 per cent?
The RBF projection – we share many of the data behind that projection and of course when we make projections, it’s unlikely that any two observers regard the economy exactly the same. But 2013 and for last year, I think the difference is not that large.
So we have envisioned around three per cent and they have 3.2 per cent, so in this context, the difference is not that significant.
4. Which areas in Fiji do you think has a lot of potential?
Fiji is a very richly-endowed country. Here, land seems to be very abundant, water is available and weather is very nice. Fijian export base is somewhat limited to sugar and tourism.
I think that there should be more scope for non-sugar agriculture and institutions do not have any comments on what kinds of industry you should be looking at. And international experiences of trying to pick a winner i mixed. But I think the Fijian people should know better than us which are the advantages.
On a personal note, I think that in terms of the time zone, Fiji is four hours ahead of Hong Kong, located just in between Los Angeles and Asia.
You can probably have call centres which can utilise that geographic advantage. And of course this warm weather with high precipitation is very good for agriculture. But of course picking up the winner in a sense is not what the IMF should comment on. But we would like to encourage and giving the industry equal opportunities of chance in the pathway.
5. Where is Fiji headed
The Fijian economy has picked up from the low growth of the previous years and now it’s growing robustly but this is no time for complacency. So I keep on saying, Fiji is doing well but Fiji can do better. In order to do better, you need to address these supply bottlenecks.
So like infrastructure improvement, roads and bridges which the 2013 Budget has undertaken we believe is commendable.
But we have to continue on that and like I say supply needs to be increased. In order to engage in a good business you need to have infrastructure and you need to have stable supply and easy access to land and electricity, running water and human resources and predictable regulation.
These are the kind of things like the Fijian economy to have so that the economic productive environment and business confidence will be increased through business investments which in turn increases the absorptive capacity of the economy and prepares Fiji for the next level of high growth.
6. How would you rank Fiji in terms of growth?
We have a publication called World Economic Outlook published twice a year. Most recent updates have posted that the emerging market economies are at around six per cent, so Fiji at three per cent is no means high.
But again this has been constrained by a series of natural disasters, political uncertainties and the slow progress generally in the structure reform in the past decade. With enhanced structural reform initiatives, the growth of Fiji’s economy will be much faster than the current two to three per cent per annum.
7. Are there any areas of assistance that IMF is helping Fiji in terms of technical assistance?
We believe that statistics is very important in gauging the economic activity. Fiji has had a period of low growth and now growth is picking up. So at the moment, the price pressure, inflation, is not too much of an issue.
But as we continue this two to three per cent growth, unless the supply side constraints are not gauged, we may face the overheat of the economy. So in that case, the price indicator like the CPI (Consumer Price Index) and other statistics are very important.
And IMF is providing technical assistance to the Fiji Bureau of Statistics on how to improve the quality of statistics including the Balance of Payments and the GDP (Gross Domestic Product) data. So these are the major areas in which IMF has been active in technical assistance.