Political stability is the key to economic success

In most of the ACP states featured in our Country Reports, the vital issues are usually economic and social ones. How is a nation with a poor natural resource base to achieve lasting development ? What can be done to improve the skills of the people? How can a vibrant private sector be created ? Can better health care be delivered and how should it be paid for? Some of these questions might well be valid for Fiji but the visiting journalist soon discovers that they are all secondary issues. For this is a country whose political system itself dominates the agenda. The fundamental issue here is the relationship between the indigenous people of Fiji and the descendants of indentured Indian labourers brought in by the British between 1879 and 1916 to work in the sugar cane fields.

Fiji, in fact, is home to people of a variety of cultures. On the indigenous side, the majority are Melanesians but there are also some Polynesians (living on the island of Rotuma). The country even plays host to Banabans, from Kiribati, who were displaced from their homes on Ocean Island to make way for the phosphate diggers. They hold a freehold to the island of Rabi and enjoy a special self-governing status. And while the Indians form the bulk of the non-indigenous population, there are also small Chinese and European communities as well as a number of inhabitants of mixed race.

Despite this diversity, it would be inappropriate to describe Fiji as a melting pot. Ever since the rapid expansion of the Indian population, official policy has tended to accentuate the divisions. In the early days, it was the British who were responsible for this, although one has to be careful to avoid value judgments. The colonial administrators, it seems, were aware of the tensions that would arise by bringing in large numbers of people of a different culture, language and religion. Their eventual response was to provide guarantees for the local population, notably as regards land rights. The effect was to preserve the traditional land tenure system which was based on villages and families. At the time, it seemed a logical thing to do, but several generations on, the country now has a settled population of Indian origin (43% of the total) who have limited opportunities to own land - even though many of them work on it.

As the economy has developed, each of the two main communities has found itself 'specialising' in different fields. For example, cane farmers and retailers tend to be of Indian origin while the public service has traditionally attracted more native Fijians. Significantly, the army is almost exclusively filled by indigenous people - a crucial factor in the 1987 military coup.

On the political front, as Fiji moved towards independence, the idea of providing separate representation for each ethnic group also took hold. The independence constitution of 1970 reflected this with the two main communities being given parity (22 seats each) in the House of Representatives.

Shattered illusion

Although there was no real assimilation between 1970 and 1987, Fiji was seen by many as a model of a successful multiracial society. It was only when the country got its first Indian-dominated administration (sustained in power by a smaller native Fijian party) that this illusion was shattered. There was a military coup led by Lieutenant-Colonel Sitiveni Rabuka, who is now the elected Prime Minister,. Shortly thereafter, Fiji became a republic (Queen Elizabeth was formerly Head of State) and in 1990, a new Constitution was adopted giving political primacy to the indigenous Fijians. Needless to say, it was a time of greatly heightened communal tension.

The 1987 coup and the events that followed have been well covered elsewhere (including our previous Country Report which was published in 1991). It suffices to say here that while the last few years have been a lot less turbulent, tensions remain. In 1997, the country must adopt a new set of constitutional proposals and a big debate is currently under way about the shape of the system of government for the 21st century. This subject is covered in a later article and also features prominently in our interviews with the Prime Minister and Opposition Leader.

The main focus of this article is therefore on economic and social aspects although, as one soon discovers, this frequently leads us back to the ethnic question. This is particularly the case when one considers the overall economic performance of the country. Fiji is not poor by developing nation standards and it has enjoyed modest growth during 1995 and 1996, but there is a widespread view that it could be doing a great deal better were it not for the political uncertainties. The problem is summed up by the Economic Intelligence Unit in its Fiji Country Report for the first quarter of 1996: 'Political instability will continue to deter investment, other than that on highly favourable tax terms.' In other words, Fiji is paying a high economic price for its internal difficulties.

General unease about the future and, in particular, the outcome of the constitutional review process is compounded by specific concerns over land tenure. The long-term leases granted to (mainly Indian) farmers are approaching their end and the government must soon decide what it should do next. Will any of the sugar cane farmers be evicted and if so, how many ? What alternative arrangements will be made for them? These questions remained to be answered when The Courier visited Fiji in July although, as our keynote interviews show, the subject was clearly exercising the minds of the politicians.

A long-term strategy for agriculture?

The way in which the land question is dealt with will have a crucial impact on the sugar industry - still the country's most important product in terms of its contribution to GDP and the jobs that it generates (see the article entitled 'Sugar definitely has a future'). With other uncertainties facing this sector - in particular, the process of global liberalisation - there is a growing recognition of the need for a long-term strategy. The government has a two-pronged approach - improving efficiency within the sector and diversifying into other agricultural products. To learn more about this, we spoke to Luke Ratuvuki, who is the Permanent Secretary for Agriculture, Fisheries and Forests.

Mr Ratuvuki began by stressing the scope for increasing the sugar yield per hectare by as much as 75% (and by even more with irrigation). If productivity could be boosted on this scale, Fiji sugar would be in a much better position to compete in open world markets. He admitted, however, that the country would still face a struggle in maintaining market share and, looking ahead ten years, foresaw a slimmed down industry providing high quality sugar with more of a focus on niche markets. This inevitably meant looking at other agricultural products as possible long-term substitutes. The coconut (or as the Permanent Secretary dubbed it, 'the tree of life') is traditionally grown here and seems poised to enjoy a new lease of life following a period of decline. Fiji has also picked up the taro trade at the expense of Western Samoa, which is affected by taro blight, while there are significant exports of ginger to Australia, New Zealand, Canada and Europe. Mr Ratuvuki spoke enthusiastically about branching out into other areas such as pawpaws, mangoes, bananas and aubergines.

Fiji has potential for growth in a range of non-agricultural sectors, but farming is sure to play a vital part in the economy for many years to come. Currently, sugar represents almost three quarters of all crops by value (excluding subsistence growing) and the Fijians are only too aware that this makes the country particularly vulnerable to external shocks.

The other primary sectors are all present in Fiji, albeit on a more modest scale. There is some deep-sea fishing backed by Asian investors. This provides useful employment although perhaps not the best possible financial return to the country. As one would expect in a nation of three hundred islands, there is also extensive artisanal and subsistence fishing in the inshore areas.

The forestry sector divides into two parts: artificial softwood plantations which are said to be managed sustainably and the naturally growing hardwoods. As regards the latter, the EU is helping with a mapping project. Although Asian loggers do not operate in Fiji, there is considerable land clearance taking place, leading to problems of erosion and silting.

Prospects for mining

Gold is the main mineral being exploited with important deposits around Vatukoula. The sector has had its ups and downs but the Emperor Gold Mining Company has now embarked on an expansion project aimed at raising production from the current level of about 4000 kilos per annum to 6000 kilos by the year 2000. A huge copper and gold mine is also planned for Namosi, some 35 km from Suva. Other minerals discovered but not exploited include bauxite, iron, lead, zinc, phosphates and marble. Mining currently makes a modest contribution to overall GDP but represents an important component in the export earnings figures.

With one key exception, manufacturing is on a fairly small scale with an emphasis on staple items (butter, beer, soft drinks, paint, soap etc.) for the local market. The exception is the garment industry which provides some 20% of the country's export income and a considerable amount of employment.

The investments in garment manufacturing and mining have been important in jobs terms and in improving the trade figures, but there are those who criticise the fact that the government appears to derive little revenue from the operations. The exact fiscal benefits are not easy to determine, prompting some observers to suggest that official secrecy should be eased (see the article on the Constitutional Review later in this Country Report).

In the service sector, long-term growth is foreseen in the key area of tourism. The number of holidaymakers choosing Fiji dipped sharply at the time of the coup, illustrating the importance of political stability in attracting visitors. Tourist arrivals bounced back once Fiji's internal difficulties had receded from the international headlines. The politicians must be hoping that nothing will occur during the current period of constitutional discussion and negotiation to put Fiji back on the front pages. It is worth mentioning here that Fiji's national carrier, Air Pacific, is an example of a relatively rare bird - an airline that makes money ! According to journalist Avin Rahish, writing in the July 1996 issue of The Review (the news and business magazine of Fiji): 'It is one of the few government investments that is profitable on its own.'

If tourism is a success story, there is something of a shadow over the financial services sector, which is more extensive here than in most developing countries. The reason is the collapse last year of the National Bank of Fiji with losses of US$ 142m (equivalent to 10% of the annual GDP). The authorities were accused of a failure in supervision and the taxpayers have had to pick up some of the bill. More serious, however, is the undermining of confidence in the system and it will take time for this to be restored.

Social challenges

As a middle-income country, Fiji has relatively favourable social indicators in the areas of health and education. Medical facilities are provided by the government but it is said that the public health system is not as good as it once was. This is attributed, among other things, to the emigration of highly qualified staff in the aftermath of the events of 1987. Nonetheless, the country does have 27 hospitals and one doctor for approximately every 1900 people. At 72 years, life expectancy is high compared to the ACP average.

The education sector is well-developed with more than 800 primary and secondary schools (for a population of less than 800 000) and 41 technical or vocational institutions. As a result, primary school enrolment is close to 100% while the 1986 census revealed that 60% of 15-year olds were still in education. On the other hand, there are concerns over the proportion of teachers lacking qualifications, notably in the primary school system. In practice, there is considerable racial segregation at both primary and secondary levels, although there is no official policy to this effect.

Educationally, the jewel in the crown is almost certainly the University of the South Pacific whose main campus is in Suva. This regional institution, which has departments in a number of other countries of the South Pacific, draws students from various island nations. Dr Vijay Naidu, who is the USP's Pro-Vice Chancellor, outlined some of the special features of this unique university which has to cater for a highly dispersed population. Like traditional tertiary institutions, it provides a wide range of degree programmes on campus, catering for 3500 students. It has a further 9000 who are being educated using the 'distance mode'. Distance learning is organised through centres in each of the participating countries. Students can attend these centres from time to time but much of their work is done through radio and telephone linkages and, increasingly nowadays, by e-mail and satellite communications. The University, Dr Naidu stressed, also provides continuing education at non-degree level 'in everything from computing to basket-weaving'.

Like the health sector, the USP suffered a loss of highly qualified staff after 1987 - and not just among employees of Indian origin. As the Pro-Vice Chancellor pointed out, the coup created 'a new sense of insecurity' all round and teachers who decided to emigrate were quickly accepted in Australia and New Zealand. The loss has been particularly serious in the scientific disciplines.

90% of the USP's recurrent expenditure is covered by member government contributions with the remainder coming from Australia and New Zealand. For capital investments, there is heavy reliance on external donors.

In both of Fiji's main ethnic communities, a strong commitment to the family ensures that there is relatively little absolute poverty although things may be changing as the country become more urbanised. It is rare to see beggars in the streets in the South Pacific but Suva, sadly, has a number of these.

The overall picture is of a country with very considerable potential in both human and natural resource terms which needs to overcome a number of challenges to secure a more prosperous future. Some of these challenges - adapting to the world of free markets, tackling bureaucratic impediments, bringing development to rural villages, improving the infrastructure, and so on - are familiar to all developing countries. The single most important constraint, however, is the big ethnic divide, and the political uncertainty which flows from this. And this is something which can only be solved by the people of Fiji themselves.