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“The Reserve Bank and the FNPF: funny business for the guv”. The Fiji Times, 12 March 2002.


When is a “Governor” not a Governor?


When he is sitting where he should not be sitting.


Doing work he should not be doing, for entities he should be keeping his distance from- like the government or a private company.


If there is one public office in the land that may truly be called a “sacred” office, then it is the Reserve Bank.


The Governor of the Reserve Bank has the fantastic arbitrary power to change the value of allFijimoney, income and wealth- at the stroke of his pen.


Change the money market conditions (money supply, the interest rate etc), and the rate of inflation can be changed, changing the purchasing power of everybody’s money.


Change the exchange rate (in concert with the Minister of Finance), and the Governor can arbitrarily change the international value of our money, income, and wealth.


A great variety of sectional interests in the country can lose or gain, and massively at that, because of Reserve Bank policies and decisions.


Given these incredible powers, our Constitution has intended that the Governor of the Reserve Bank act totally independently of  governments, which can come and go, with all their changing political priorities.


It is therefore vital that the office of the Reserve Bank, and especially the Governor, is seen by the public to be totally neutral in the economy.


Unfortunately, this cannot be said at the moment.


The Governor of the Reserve Bank has allowed himself to be appointed chairman of other organisations, with some memberships clearly involving conflicts of interest with his position as Governor of the Reserve Bank.


For example, the Governor of the Reserve Bank has been appointed by Government to be the Chairman of the Fiji National Provident Fund.


The FNPF, whatever its appearance as a social entity, is essentially a private organisation representing all those workers who are saving their pension funds in that organisation.


The board of the FNPF, and especially its chairman, must fight for the interests of the FNPF, and the workers whose savings it holds in trust, and invests.


The vast majority of FNPF funds are invested in Government loans, bonds and Treasury Bills.


Government normally does not allow the FNPF to freely invest its funds overseas, even if the funds are lying idle in the domestic economy.


It could be argued that Government, through its legislation, effectively forces workers’ savings to be lent to Government, at minimal rates of interest, to fund government’s  continuing deficits and public debt.


Can the Governor of the Reserve Bank therefore be comfortable as the Government-appointed chairman of the FNPF?


Especially since over the last ten years, the return to workers has gradually declined from above 10 percent to below 6 percent now, and is still falling?


The conflicts of interest for the Governor are quite clear, from the 2001 FNPF Annual Report.  In recent years, FNPF has been allowed to invest limited funds overseas.


However, during the 2000 coups crisis, there was a capital flight from the country and the Reserve Bank wanted to strengthen its foreign exchange reserves.  The Reserve Bank required the FNPF to liquidate a large part of its foreign investments and bring the foreign exchange back to the country.


FNPF willingly co-operated and the foreign exchange reserves of the Reserve Bank were strengthened.


However, the FNPF itself sustained  losses when the foreign investments were liquidated ahead of time.  And more importantly, FNPF continues to lose millions of dollars, because the Reserve Bank refuses to allow the FNPF to re-invest its surplus funds overseas, not even to the extent previously allowed.  Nor does the Reserve Bank want to place those returned FNPF investments into interest bearing deposits with the Reserve Bank.


Effectively, the FNPF andFiji’s workers are paying for the cost of makingFiji’s foreign exchange reserves look good. Hardly fair, is it?


But what is bad news for the FNPF, is good news for the Reserve Bank.  The Reserve Bank earns income on these returned foreign exchange, and their annual accounts look better.


And of course, the Reserve Bank profits eventually end up in the hands of the Minister of Finance. i.e. yet again, Government directly benefits from its laws which limit FNPF from investing overseas.


What can the FNPF do? The Chairman of the FNPF is supposed to put up a strong fight with the Reserve Bank, to protect FNPF’s interests.


But the Chairman of FNPF is also the Governor of the Reserve Bank.   Is the Governor of the Reserve Bank (as chairman of the board of FNPF) going to take up cudgels with the Reserve Bank?  Does he?


The FNPF Annual Report merely states “the opportunity cost to the beneficiaries of the Fund is a matter of continuing concern”.


Perhaps the Chairman of the FNPF should use simpler language:  why are the workers being ripped off by the Reserve Bank and Government?


The Governor faces other conflicts of interest with his chairmanship of FNPF.


As part of its responsibilities, the Reserve Bank attempts to direct the money market conditions through a variety of open market operations.


The largest financial player in the market, certainly from the point of view of government securities, is the FNPF, more than three quarters of whose investments are loans to government and public enterprises.


How can the Chairman of FNPF (who is also Governor of the Reserve Bank) ensure “arms length” advice when he is responsible also for the Reserve Bank policies in the money market?


Whose interests does the Chairman of the FNPF serve as a priority?  That of the workers whose pension funds he is supposed to safeguard?  Or that of the Reserve Bank from which the Governor earns his bread and butter?


The Governor is also in danger of being tainted by the dirty political goings on.


How does the Governor cope with essentially political decisions by the government of the day, to arbitrarily change employee representatives  on the FNPF Board?  These political machinations on board membership seem to be the order of the day, with every government that comes in.


As for the Governor’s chairmanship of FINTEL- well, well, well.


Cable and Wireless is no doubt pleased as Punch to have the Governor of the Reserve Bank ofFijias their chairman.


But why should the Governor take on this responsibility for this private company?


What if Government decides to put a price cap (price control) on FINTEL’s international charges, or bring in competition (even if FINTEL can sue Government)?


Will the Chairman of FINTEL (who is also the Governor of the Reserve Bank) fight for this private company, against the interests of theFijieconomy?


Fijiis a small country.  Everybody is related to everybody.  Senior administrators socially associate with each other, Government Ministers and politicians, at weddings, deaths, rugby and golf.


In these difficult times, it is already quite difficult for administrators to behave professionally and independently, and be seen by the public to be completely neutral.


Especially given that the appointment of the Governor of the Reserve Bank, and its board of directors, is a political appointment.


But once appointed, the powers and responsibilities of the office are such that the Governor of the Reserve Bank MUST completely maintain, and be seen to be maintaining his independence (and indeed aloofness) from sectional interests.


There should be no real or even perceived conflict of interest with any other role.


The Governor of the Reserve Bank has no business being the Chairman of the FNPF, or FINTEL, or any other board for that matter. (Neither, for that matter, should the Permanent Secretary of Finance be the Chairman of the FNPF).


Should Government be looking for a Fiji citizen, who would be a completely honest, independent, experienced and trusted Chairman of the FNPF Board (and of the Reserve Bank board)?


Perhaps Government can rack their collective brains and identify someone, who has previously been the Permanent Secretary of Finance, and the Governor of the Reserve Bank, and a lot else besides?


Someone who has also never had the misfortune of being in politics?


There must be someone around who fits the bill.




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