Fiji-EU cooperation: comprehensive package

by Ernst Kroner

Fiji was a signatory of the first Lomé Convention in 1975 and, to date, the country has been allocated some ECU 190m in EU development cooperation funds.

Starting with a relatively modest ECU 9.9m under Lomé I, the national indicative programme rose to ECU 13m under the following Convention. Without neglecting rural development (feeder roads in Vanua Levu), under Lomé I most of the resources were devoted to transport infrastructure (a main road on Vanua Levu). Under Lomé 11, cooperation concentrated clearly on agriculture and rural development, in particular by means of the funding of microprojects, with infrastructural programmes (the extension of the Vanua Levu road, social infrastructure) taking second place. Under this Convention, a new field of action was also addressed: trade development.

Tax free zone

Trade development was addressed further under Lomé III (6th EDF, ECU 20m, of which ECU 5m in special loans), with support given to an Investment and Trade Development Programme. The longer-term objective of the project was to widen the economic base of Fiji and to create employment. The more immediate objective was the i establishment of a Tax Free Zone near Suva. In order to promote this scheme and to secure markets for exporting the goods which would eventually be produced, the project included a programme of trade and investment promotion to be implemented by the Fiji Trade and Investment Board. Due to problems linked with identifying an appropriate site, the project, which had been given the go-ahead in 1990, only came on stream in 1995.

Rural and agricultural development continued to be one of the main sectors of cooperation, with the funding of three major projects. The first was a coconut rehabilitation and development project, situated on the island of Taveuni, which aimed at improving the productivity of coconut plantations through the introduction and multiplication of high yield hybrids. The project also provided for the establishment of a 30 hectare coconut nursery centre, which was expected to finance itself through the sales of seedlings. EC support for this project ended in 1992, since when the scheme has been taken over by the Government. A second project (a large-scale microprogramme divided into two sub-programmes) aimed on the one hand at the construction of access roads to facilitate the development of cocoa plantations, and on the other at the introduction and development of pineapple plantations in Vanua Levu. The first component was closed after disappointing results. The second component, however, produced very interesting and promising results, which will, however, need private and governmental support in order to become sustainable. A rural electrification project involving 28 rural electrification schemes and the supply and installation of a small power plant is still ongoing.

Developing human resources

Under Lomé III, the formerly prominent transport infrastructure sector lost some importance. The Kubulau Peninsula road project on Vanua Levu brought to an end the work started under previous Conventions. This road, which filled the last gap in the circuminsular road, was opened on in July 1994. Lomé III also saw the beginning of human resources development as a new theme of cooperation, with Technical Assistance funded for the logging school. This area, embodying strong links with forestry and environmental issues, has been further developed under Lomé IV with the reconstruction of the school burnt down in 1993, and the enlargement of the training and education provided to what now constitutes a Forest Training Centre.

The national indicative programme relating to the first protocol of Lomé IV (7th EDF, ECU 22m in grant aid) identifies rural development and social infrastructure as the sectors of concentration to which 65% of resources are to be devoted. The remaining 35% will be used for non-focal activities, including trade and services, tourism, cultural cooperation, training and technical cooperation.

Building bridges

Unfortunately, it was only following the very destructive cyclone Kina in January 1993 that cooperation activities could start in the form of the rebuilding of four bridges either severely damaged or completely destroyed by the post-cyclone floods.

Work on two smaller bridges of major importance to Viti Levu (Korovou and Vunidawa, ECU 1.135m) was started in 1994 by the Public Works Department and completed in January 1995.

The Financing Agreement for the two major bridges (ECU 10.24m) was signed in June 1994 and provides for the rebuilding of the bridges of Ba and Sigatoka. These form part of the main road around the island of Viti Levu and are therefore vital for the movement of people and goods on Fiji's main island. The new bridges, 190 and 182 metres long respectively, will be two-lane, and will provide for footpaths and utilities. To enable the traffic to by-pass the often congested towns of Ba and Sigatoka, new sites for both bridges have been chosen, which also call for the building of new approach roads. Building works were under way in early 1996 and completion is expected by April 1997.

Non programmable aid for Fiji has been considerable over the years. While Stabex transfers for losses on coconut oil (totalling ECU 5.4m under Lomé I - Lomé III) came to a halt under Lomé IV (because levels of exports fell below the required dependency threshold), emergency aid (total ECU 9.5m) has continued, unfortunately, to be needed. Time and again the islands have been hit by cyclones (the most recent occasion being in January 1993, when the EU made available ECU 1 m for food rations following cyclone Kina).

In the past, a significant feature of EU-Fiji cooperation was the credits provided by the European Investment Bank. It was very active under Lomé I to Lomé III, providing loans from its own resources to a total value of ECU 87.5m with a further ECU 6.1 m allocated in risk capital. Loans went to the energy sector (hydropower scheme), industry (wood processing) and services (telecommunications, sea and air transport). Considerable interest rate subsidies (totalling ECU 14.1m) have also been made available under the various EDFs in support of these loans. More recently, the EIB has financed an aircraft maintenance centre (1991) and a telecommunications project (1995).

Trade cooperation

Over and above financial cooperation, Fiji benefits from the second largest quota (165348 tonnes per annum) under the Sugar Protocol annexed to the Lomé Conventions. This covers some 45% of its total sugar exports. The yearly benefit from this provision is estimated at between ECU 45m and ECU 55m - in other words, only slightly less than the total of all programme aid granted since Lomé I (ECU 64.9m). About two-thirds of these benefits reach the farmers, so that the EU subsidises every sugar smallholder, on average, to the extent of some ECU 1500 a year.

Recently, Fiji's quota under the Sugar Protocol was increased by 881 tonnes, as a result of the reallocation of the shortfall of deliveries by Barbados. Furthermore, Fiji benefits from an annual special tariff quota to the tune of some 30 000 tonnes up to the year 2001.

Industrial development and external trade have been supported by the relaxation of the rules of origin for exports to the EU of canned tuna to the extent of 500 tonnes a year from 1993 to 1996. A similar arrangement, applicable for certain quantities of garments up the end of 1993 was recently extended to the end of 1996.

Fiji's main exports to the EU (sugar, fish and garments) - and the resulting surplus in its trade relations with the EU - are consequently highly dependent upon the continuity of these preferences.

Support for tourism

In the field of services, and specifically in tourism, the EU - through its support of the Tourism Council of the South Pacific - has contributed to the fact that every sixth tourist or so arriving in Fiji comes from a member country of the Union. Tourism being by far Fiji's most important source of foreign exchange earnings, receipts from European tourists amount at present to some ECU 30m, and are greater than those from the export of fish and fish products

Taking the Sugar Protocol into consideration, the EU is by far the most important of Fiji's development partners, followed by Australia. The country also benefits from bilateral cooperation arrangements with EU Member States (UK, France, Germany).