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Mahendra Pal Chaudhry, Minister of Finance, National Planning, Sugar Industry & Public Utilities Address to launch the FTIB 2008 Exporter of the Year Awards Tanoa, Waterfront Hotel Friday 1st August, 2008 Lautoka, 6.30pm Fellow Cabinet Ministers The Chairman of the Fiji Islands Trade & Investment Bureau The CEO of Vodafone Fiji Limited, Official Sponsor of the Launching of the 2008 Exporter of the Year Awards Representatives of Sponsors of the FTIB 2008 DHL Prime Minister�s Exporter of the Year Awards Distinguished members of the private sector Ladies and Gentlemen A very pleasant evening to you all. I am honoured to be here invited to officially launch the 2008 DHL Prime Minister�s Exporter of the Year Awards (EYA) and the competition. 2008 marks the 16th year of this annual event, organized and coordinated by the Fiji Islands Trade and Investment Bureau (FTIB) - in recognition of the contribution of exporters to the development of our economy. I note that the theme for this year�s event is Exports Enhancement: The Path to Economic Growth. The export Sector is an important and significant component of our economy. The enhancement of our exports through agro-based industries and the sustainable development of other primary resources, is pivotal to government�s aims to stabilize the economy, create job opportunities and improve the quality of life of our people particularly those in the rural areas. The crucial role exports play in contributing to the Foreign Reserves of a nation is well understood by all. Unfortunately, in the past seven years a number of our key exports declined alarmingly while imports rose sharply, putting our Foreign Reserves and the current account under critical pressure. Indeed, by mid-2006 the economy was seriously threatened and, almost on the verge of collapse. In 1999, our total exports stood at about $1.2 billion; seven years later in 2006 it was still $1.2 billion � in fact, showing an actual marked decline if inflationary adjustments are considered. During the same period our imports rose significantly thus seriously affecting our balance of payments and noting our Reserves. Key exports sectors suffered drastically: Sugar exports fell from $282m in 1999/2000 to about $235m in 2006; garments were the worst hit falling from a peak of $333m in 1999/2000 to $95m in 2006; gold from $76m to $43m. These are shocking performance figures. It is some consolation today that this drastic decline has been arrested and we have made a noticeable turnaround. For the first five months of 2008, exports rose by 25% to $507m compared to the same period for 2006. In 2007, exports for the first five months registered a modest growth of 3.6% over the 2006 figure. Along with improved performance in the sugar and tourism sectors for this year, we are also seeing a more robust fisheries and forestry sector, while gold exports have resumed with Vatukoula Gold Mines back in production. Government is, therefore, optimistic that growth in 2008 will improve on the earlier Reserve Bank forecast of 1.7%. At the same time, Government finances have improved considerably from what the precarious position it was in December 2006: - Actual Budget deficit for 2007 was 1.5% of GDP, even better than a targeted 2%; unlike the high deficits of around 4-5% under the previous administration. - government�s debt position has improved � borrowings fell 4% in 2007, bringing total national debt down to 48% of GDP from a high of 52% in 2006; government�s operating expenditure has declined � in fact, we achieved a $77.4m surplus in the six months to June 2008; - Foreign Reserves are stable � at $878m for May it is up 8% on the previous year and sufficient for about four months of import cover; - investment levels are expected to rise to 18% from an earlier forecast of 15%; this is due to the resumption of a number of stalled projects; and - interest rate is down to about 7% from a high of 14-15% in 2006, and the rate of inflation is slowly coming down. Ladies and gentlemen, the data quoted show the economy is definitely on the mend, and on the move. The Interim Government is delivering on its promise to create a climate conducive to investment and growth. Just today ATH announce a record after tax profit of $46m 11% up on 2007 (March) profit of $41m. However, we are conscious of the still high cost of doing business in Fiji but have made strong moves to address these � energy costs are being contained and despite the accelerating cost of global fuel and the telecommunications sector has been deregulated. In the revised Budget 2007, and Budget 2008, the State has provided a number of incentives and support measures to encourage investment in targeted areas. There in no doubt that exports are the mainstay of our economy. But, like many other small developing countries, Fiji has a relatively narrow export base. Our domestic exports are still largely made up of traditional commodities like sugar, timber, gold and fish. More recently, mineral water exports have featured prominently as a major foreign exchange earner. But that is not enough� We need to broaden our export base, and reclaim what we have lost. I am referring here specifically to the virtual demise of our garment industry � figures I cited earlier show how garment exports declined under the previous government, from a peak of $333m in 1999/2000 to a mere $95m in 2006. The decline of the garment industry was horrendously devastating. Jobs in the industry fell from a high of 18-20,000 eight years ago (in 1999-2000) to some 6000 now. Lautoka City, for instance, suffered a major setback. With the closure of Ghim Li, Lautoka lost a weekly payroll of approx $1.5 million � money that is no longer in circulation and has had an adverse impact on retail business and commerce in Fiji�s second largest city. I appreciate that this was largely attributable to the withdrawal of preferential tariffs for our garments. Nonetheless, I believe better initiative on the part of government and timely action could have softened the impact somewhat. Unfortunately, not enough was done to explore niche markets and other avenues to save jobs and to ensure the industry remained viable. Our garment manufacturers have suffered a long standing grievances in terms of the Rules of Origin restrictions under SPARTECA. I believe a lot more pressure should have applied on Australia to ease these protective restrictions, particularly in respect of wool content � if nothing else, then as a poverty alleviation measure. Likewise, a downturn in the sugar industry with the non renewal of expired land leases had a similar long lasting socio-economic impact as a result of which the economy in the North, particularly the town of Labasa, almost ground to a standstill. Is it any surprise then that poverty levels rose to 35% in the last seven years? Steps are now underway to reform and revive the sugar industry. We must make similar efforts to get the garment industry back to its feet. I urge the FTIB to get cracking on this and see how we can ensure a resurgence of this once flourishing industry. And I assure you government will provide all necessary support. Agriculture is another tragic story. It suffered a drastic setback under the previous administration, despite the agricultural scam! As a result of this negligence, as we have all witnessed recently, Fiji has become badly exposed to global food shortages and prices hikes. We were once virtually self sufficient in dairy produce. Now we import close to 80% of our liquid milk requirement and are forced to pay increased world prices for them. We once had a thriving local rice industry. What happened to it? The Sigatoka Valley was a successful producer of market garden crops under the government assistance. Much of this is now gone. We are importing third grade mutton from New Zealand. Yet meat from our own locally produced sheep is much more tender and succulent. We are currently feeling the pinch of a potato shortage. Why have we made ourselves so vulnerable to outside shocks when we can grow out own potatoes, onions, tomatoes and so on? I throw down the gauntlet to you as investors to show some entrepreneurial spirit and take up the challenge before us to become self-sufficient in food. We have a challenge ahead of us. Let us take it face on! You will have all the support from the Interim Government. We have introduced several incentives and support measures to encourage and promote investment in the agricultural sector and the development of agro-based industries, with a focus on our depressed rural areas. We are now looking for takers. Government�s intention here is two-fold: to increase exports and decrease our reliance on imported food through import substitution. I need not spell out to you the great potential for investment that lies in our largely undeveloped agro-industrial sector. I am talking in terms of large scale commercial farming: fruits, green house farming of vegetables and other market garden produce, horticulture, aqua culture and the livestock rearing and the production of grains and pulses. We have already witnessed a notable increase in exports of agricultural products from Fiji � the potential to build on this is certainly there. Towards this end, I am pleased to inform that the Fiji Sugar Corporation, our biggest exporter in the agricultural sector, has agreed to step in and sponsor an award for agricultural exports. FTIB is also this year extending the awards to offer the Tourism Services Exporter Award, with Air Pacific participating as the major sponsor. Ladies and gentlemen, I am very encouraged by the enthusiasm being shown by our existing entrepreneurs and major exporters and look forward to your increased cooperation in expanding our export base to build a more robust economy. For its part, Government is quite aware of existing constraints to increased investment in Fiji � it is taking steps to address these. Availability of land and security of tenure, as you all know, is a major constraint to the development of commercial agricultural ventures. Government is taking initiatives to unlock these vital resources so that it can be utilised to the mutual benefit of entrepreneurs and native landowners. Government will ensure that landowners get a fair return on land made available. Where justified, Government is also prepared to establish Special Economic Zones with proper infrastructure and incentives, to assist in boosting exports. These are likely to be situated in economically depressed regions like the North. But such zones can also be established in and around urban centres if employment opportunities are substantial. Market access, capacity building, and investments are vital to the long term survival of our island economy. Government realises the need to assist in identifying and extending our existing markets through better market research. The State is prepared to allocate more funds towards this. Further, Government�s commitment to strengthening the country�s exports is clearly reflected in its focus on the National Export Strategy for which it allocated $2.5m in 2008; In addition, financial support has been given for the following:- - $2.5m for the Rural Outer Island (ROI) program; - $2million for Export Promotion Program (EPP); and - $1.3million for Import Substitution Program (ISAP) All these programs are part of government�s initiatives to diversify and increase the country�s exports; and more importantly improve our country�s trade balance. The NES is anticipated to encourage export through value adding and product diversification, and raising competitiveness in six prioritized sectors: i.e. the Agri-business, Forestry, Marine products, Eco-manufacturing such as mineral water, ICT, and the audio visual sector. I urge all exporters to explore new markets and diversify your current export commodities. Our traditional exports are on the decline, and we have lost some preferential access we enjoyed as developing country. But this is the time to aggressively develop new commodities and explore new export markets. Government is fully committed to helping in whatever way it can. All it asks in return is that Fiji gets back a fair share. Export earnings only make sense when a country can benefit from it. It is therefore important that earnings are brought back into the country. At present this is one of Government�s major concerns � there are cases of substantial amounts of off-shore earnings not being repatriated back to Fiji. We are in some cases � not all being deprived of these sources of revenue through tax evasion and transfer pricing. This is hardly fair, and we intended to urgently address these issues for the greater good of the nation. In this regard, I am pleased that a solution has been found to the recent controversy over taxing of bottled water. It has to be understood, and accepted by all, that Government is entitled to compensation for the exploitation of its natural resources for commercial gain. Issues such as environmental impact and the considerable wear and tear of infrastructure that ensues from such commercial exploitation, have to be taken into account as relevant factors for payments of compensation to the State. At the same time, the resource owners must also get their fair share and not just a pittance. Any government that believes in social and economic justice, will have to take account of these matters in the formulation of its economic and fiscal policies. This may also be an opportune time to underscore the Interim Government�s intention to give first priority and due consideration to local investors on the premise that they are based here and have a lasting commitment to Fiji. I look forward to your support and cooperation in helping us achieve our targets for national development. A strong and robust export sector is a crucial aspect of this policy. With that message, I would like to thank the FTIB for organising this year�s EYA, and the sponsors for making this even a reality. I thank all our invited guests for making the effort to be here tonight. Your presence reflects your commitment to our economy and to moving our nation ahead. May I also thank our three new entrants to the Awards programme. They are:- - Flour Mills of Fiji which is sponsoring the Exporter to the USA Awards, replacing Fiji Water which has withdrawn, - Technix Group for it sponsorship of the Exporter to NZ Award, replacing Air New Zealand which has withdrawn, and - FINTEL � taking up a new category as ICT Services Exporter Award I am pleased to note that FTIB has, in fact, increased on the number of sponsors despite some withdrawals. I had already mentioned Air Pacific and FSC�s participation earlier on. A big Vinaka to you and all existing sponsors. I encourage all of you to participate in this year�s awards. I�m also extending the invitation to those of you that won awards last year. We anticipate your participation again this year. In now have great pleasure in launching the 2008 DHL Prime Minister�s Exporter of the Year Awards Programme, and declare the competition open. Please enjoy your evening and I look forward to meeting you again at the Gala Dinner & Awards Night on November 15th. Thank You. -End- |
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