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EXCLUSIVE INTERVIEW WITH THE MINISTER FOR FINANCE, NATIONAL PLANNING, SUGAR INDUSTRY AND PUBLIC UTILITIES (WATER & ENERGY) – MR MAHENDRA PAL CHAUDHRY Date: 14 April 2008 By: Anshoo Mala Chandra Department of Information DINFO: Can you briefly explain the reason for recent price hike in consumer goods and fuel? MINISTER: Yes this is a result of substantial price increases in the global market for these commodities, oil prices have almost doubled in the last twelve months and so have prices of food items like wheat, dairy products so as a result of the global price rises we have seen similar sorts of increases in the cost of these items locally it is because we import all of these items and this is imported price increase rather than fuelled by local factors. DINFO: As the Minister responsible for Finance Ministry what advice could you give to cushion the impact of price increases? There is sound advice we have been saying this for a number of years now Fiji is importing too much food that we can locally produce and I think we think we need to concentrate more on that we need to invest in agricultural production and cut back on these imports of these items. MINISTER: Secondly Government has done everything it can possibly do to cushion the impact of price increases both in the 2007 revised budget and again in the 2008 Budget government has done duty on imported food items and we also do not have VAT on these items, now again in 2007 the Interim Government decided not to increase VAT from 12.5 to 15 per cent as was done by the Qarase administration in December 2006 so wherever we have been able to do so we have done everything possible to see that the impact of price increases is cushioned and people do not pay as much as they would otherwise have to pay, so duty reductions would have of course helped but we’re also at the moment carrying out an exercise to ascertain whether the duty reductions and other concessions granted by government are being passed on by the Merchants to the consumers. We have had some reports where there is reductions of concessions are ending up as increased profits for traders and merchants and we would like to now see that this is passed on to the consumers. DINFO: In regards to the fuel alternative what is your view on the ethanol plan? MINISTER: Well we have a programme in place for substituting imported fuel with bio-fuel produced here with ethanol produced here, but we are at the early stages at the moment but the policy is there the preparations for that is being done and we hope that in the next two to three years we will be producing bio-fuel to supplement the imported fuel but as I said it is a medium to long term project and nonetheless we’ve made a start and we hope that this will bare a result in the medium term. DINFO: Is the Ministry of Finance working alongside Departments like the Fair Trading and Consumer Council of Fiji to ensure that consumers are getting the quality products at a right price? MINISTER: Yes the Prices and Incomes Board which comes under the Finance Ministry the other two that you have named they come under the Ministry of Commerce we’ve tried to get the three institutions to work closer together to ensure that the consumers are not exploited and that the prices are in so far as price control items are concerned that they stay within that and also that the quality of goods and products which are sold in our shops or other wise are available to our citizens are of an acceptable quality and standard we’ve also had complaints about cheap quality goods being dumped in the market , and these goods then of course don’t last and the consumers are ripped off, so we’ve also started checks on that that is properly within the province of the Fair Trading Department. Yes, steps are also being taken also to see if we can consolidate the three institutions which are at the moment working separately into one entity as a single regulatory authority. DINFO: Does Govt have an option in terms of reducing duties and tariffs on imported goods? MINISTER: Well as I said there is no duty on basic food items so its zero or very low duty rates. Let me quote from the 2007 Budget duty on imported liquid milk was reduced from 27 percent to 15 percent on yoghurt from 27 percent to 15 percent and also on cheese from 27 to 15 percent and bulk cheese the duty was reduced from 27 percent to just 3 percent. All breakfast foods the duty was reduced from 15 percent to 3 percent and on meat also from 27 percent to 15 percent. In the 2008 budget duty on imported rice was reduced from 27 percent to 15 percent on peas in was reduced from 27 to 15,and like wise on beans and other leguminous vegetables dried leguminous vegetables split peas this was reduced from 15 % to 5% and on canned fish products like salmon, herring, sardines, tuna, mackerel these were reduced from 27 to 15 percent and other canned fish was also reduced from 27 to 15 percent. Beef was reduced from 27 to 15 percent, pork as well saw a similar production together with chicken so duties come down on all of these items and that’s about all that the Government can do really we can’t do much more than that and as the Prime Minister said we got yo rear our own chicken rather than importing it and grow our own beef and pork rather than importing it and also fruits and vegetables that can also be grown here. DINFO: On that same note the Interim Government has come up with a new initiative, which looks into export promotion and import substitution. Could you please briefly explain about the reason for setting up this Programme and how would it affect Fiji in the long run? MINISTER: The programme which is to provide incentives and encourage import substitution industries in Fiji as I said we import about $300 to $400 million worth of food into Fiji every year and even if we are able to reduce this by one half in the next 4 to 5 years there will be substantial savings in terms of foreign exchange we would not have to import these food items we will grow them here likewise we also need to ensure that agriculture remains a lucrative investment because when we are talking about import substitution for food products we are talking about raving up our agricultural industry and making sure that farmers are rewarded financially . This also plays a role with regard to export of food items from Fiji, these fetch very good prices in the foreign market so if we can export what we grow here in terms of vegetables and fruits to destinations where we have former Fiji citizens living now that it self will provide substantial foreign exchange earnings as well as it will supplement the incomes of the farmers it will give them a higher income, enhance their incomes so that we can attract more and more of our people to take up agricultural activity . DINFO: Currently there is rice shortage in Fiji and prices for it are also increasing. In this regard is there any alternatives? MINISTER: Yes the price of rice in increasing there’s no doubt about that we already now about that there is a shortage and the countries that were previously exporting rice like India its not exporting rice any more because there’s a shortage and it wants to save the rice for its own people so that’s one market that is out, there is international global shortage of rice and this of course will result in higher prices but for the time being we haven’t awarded any price increase and we will look at the situation as it develops will see what other relief we can give at the moment as I said we’ve reduced the duty on white imported rice from 27 % to 15 % in the last budget and we’ll see if we need to reduce it further to provide the kind of relief that our people would want to see so we are watching the situation and we will take action as warranted when the time comes. With regard to shortages, I believe now the situation is returning to normalcy we had a survey done and we are continuing with the survey as to which supermarkets are supplying rice to its customers or rice is being sold on the shelves. There is some type of rice where there was a shortage long grain I believe the situation has improved somewhat but we are closely monitoring it and we’ll take necessary steps as and when necessary warranted. DINFO: So far how has the Ministry of Finance been working alongside Ministry of Primary Industries in terms of pushing and developing the Rice Industry in Fiji? MINISTER: Well yes we have given substantial increase to the agriculture budget in 2008 and we hope that this increase will translate into increased agricultural productivity. So far as support for agriculture is concerned the budgetary support has increased in 2008 when compared to 2007 and depending on the results that we see the allocation for agriculture would increase. DINFO: There have been concerns raised that the 5% turnover tax rate for the hotels would make tourism industry less competitive in the global market. What are your views on this? MINISTER: I must disagree with that because tourism industry is bouncing back and I think the industry needs to look internally to see what it can itself do to become cost competitive, look at its room rates, look at its food and beverage rate and other service rates which it chargers. Now I have been to a number of countries around the globe and 5% turnover tax is one of the lowest that anyone will find anywhere in the world. This sort of tax goes up to 12% to 15% in many countries and in countries with which we are competing so I do not agree that this tax would affect tourism. DINFO: We begin to hear continuous reports on water shortage in both the Central and Western Divisions. As the Minister responsible are there any proposed plans to reduce the water shortage in the country? MINISTER: Well the water problems have eased in the last month or so. There were a lot of problems these problems are inherited from long period of neglect of the water infrastructure and also of incompetence and also it has been ravaged by corruption in the Water and Sewerage Services. A lot of money has been spent in the last seven to eight years on water infrastructure, on bringing about improvements by way of capital works but much of this money has not produced the desired results. We have reviewed the entire capital works program, we have looked at the operation of the Water & Sewerage Department, we have identified where the problems were and we are now taking the corrective actions. The Water Authority of Fiji will be established soon, the legislation or the promulgation has already been approved and the members of the Water Authority Board will be appointed shortly. They will take over the functions of the water and sewerage supply services from the existing Water and Sewerage Department. So yes the public can expect improvement but as I said when this portfolio came under my charge that will take us at least 12 months to normalise things. But I am glad there have been some improvements and there will continue to be further improvements as we progress towards the formation of the Water Authority and transfer of this responsibility from Government to the Water Authority of Fiji. DINFO: Are there any long-term to short-term plans for the revival of sugar industry in Fiji? MINISTER: Well off course we have targets, which we have identified the mill upgrade work is going on this will now be completed by next year which will eventually give the mills the capacity to crush something like 4.5 million tonnes of cane per year. Our biggest challenge is now to cultivate cane and produce a crop of 4.5 million tonnes. We are below 3million tonnes at the moment so it’s a big challenge and we have to get there by the year 2010, by when the reforms in the industry will be completed. So it is a huge challenge and we have off course the constraints in the way, which are land leases, expiring land leases much of cane land has been taken away on account of leases of not having been renewed and right as the moment as I speak to you there were some 2090 leases which were previously under cane but on expiry they were not renewed so we have that much less under cultivation. We are now trying to encourage and attract the landowners to renew land leases, the Committee on the Better Utilization of Land (CBUL) has been appointed under the Prime Minister’s charge. This committee is doing all it can to encourage leases renewals, land rentals have gone up as a result of a scheme, which was approved by the Cabinet not too long ago whereby the rental would be subsidised by Government. We hope this will provide the incentive to some landowners to renew land leases. We are also trying to bring down the costs of harvesting and transportation of cane from the fields to the mills this has been a big cost component and an expense on the farmer and we are trying to bring down these costs by way of a new scheme which has been introduced and which is being trailed at the moment in various sectors and if those trails proves as successful as I think they will that scheme will this year will also be put into practise in the other areas. So we hope that by the time we come to the concluding stages of the reform programme that is by the time we arrive in 2010 season we will have overcome many of these constraints and difficulties which we are currently facing but again these go back to a number of years when not much was been done to have leases renewed and to bring in other reforms which they have seen us gain efficiency and competitiveness which we will have to attain in order to survive in the open market in the years to come. DINFO: How is the Ministry of Finance and its various departments working towards the People’s Charter since this has been a requirement that all the Government Department and Ministries be made aware of the People’s Charter for Change and Progress? MINISTER: Yes we are contributing towards the Charter process by having our staffs accorded to the Secretariat of the Charter preparation committee and besides from that as you know one of the major functions of the Charter or the Task Team is to make recommendations on growing the economy and we are working on that all support is being given to the process to see that so far as the role of the Ministry of Finance and economic planning is concerned this is well articulated in the papers that are emanating from the Secretariat so that in terms of building an economy which is robust and healthy we have done our bit and as I said that we are giving it budgetary support this year we have allocated something like $2.3m for the process and I think that is all about we can do. DINFO: Is there any other comments on any other issue that you would like to highlight? MINISTER: Well the other comment was on I believe on the oil prices. The bus companies have said that they might make an application for another fare increase but let me say that the bus companies, the bus operators do not pay any duty on fuel. The fuel that they take for the bus operations is totally duty free, being no duty on it so there is a concession, which they are already enjoying and I feel that they ought not to be making any more demands on the Government. They also need to look at their own operations in terms of how they can possibly cut back on costs. I know many instances have been pointed out where the bus companies on account of internal competition with each other are not cost effective. So I think these are certain things that they need to look at internally and I hope that they will be able to cushion the impact of the recent price hike for fuel. One must also remember that last month the price of diesel fell by 3 cents so this has increased by 3 cents it means it has come back to the January level. So it’s fluctuating, it up 3 cents now, maybe 3 cents down months later so we are around that so its not that its short out of the portion and this is what I think there is too much hike on everything is increasing on the costs but off course people need to be told why it is happening. We are just a very small economy and we are subject to the influence and movements in the global economy. -End- |
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