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Costly coups: no catching up in GDP [The Fiji Times, 11 December 2007]

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Every group that has instigated a military coup in Fiji, has stated that they will return the economy to healthy growth.

And yes, in the last year, there have been a few positive developments.  Duties have been reduced on a few essential items, helping everyone, including the poor.  The fiscally irresponsible automatic pay increase for civil servants has been reversed; and the telecommunications industry is being deregulated.

But the key question that Father Kevin Barr’s recent article unfortunately ignores is: will future economic growth be fast enough to make up for lost ground?  Father Barr ignores the harsh economic reality that if the national cake does not grow fast enough, it is virtually impossible to help the poor over the long term.

What the facts reveal is that the 1987 and 2000 coups harmed Fiji irreparably.  And the 2008 Budget figures suggest that Fiji is unlikely to recover any time soon.

There has been “no catching up” on past growth.

The Tourism Example

   Tourism illustrates this “no catching up” reality most clearly. Tourism arrivals grew from 1980 to 1986 at a reasonable 5.2%.  Then the 1987 coup slump.  Between 1987 to 1999 arrivals grew at a higher 6.2%.   Then the 2000 coup slump.  Then between 2000 and 2006, arrivals grew at an even higher 10.8%.  And now the 2006 slump.

Look at the graph.   The dotted line shows the arrivals growing at 5.2% per year from 1986 (assuming no coups in 1987, 2000 and 2006).

The heavy black line shows our actual tourism arrivals, with 2007 to 2010 assumed very optimistically to grow at 10.8% per year.

The gap between the dotted line and the solid line are the “missing tourist arrivals” because of the coups.

Assuming each tourist arrival results in $1300 gross earnings (2006 values), then the total lost gross earnings over the period 1987 to 2010 is around $4212 million, or roughly the Gross Domestic Product, the total income of the whole country for a year.    Annual cost since 1987:  $191 million dollars.

Even if by some miracle, tourist arrivals eventually does catch up with the old trend line, what has been lost, is lost forever.

Did tourism business leaders do enough to oppose bad political strategies which all knew were destabilizing the country?

The Lost GDP

   We can do similar simple calculations with GDP.   From 1970 to 1986, Fiji had a moderate growth rate of 2.8% per annum.  We could easily have grown at that rate from 1986 to 2010: that is the dotted line in the graph.  (Remember, Mauritius grew at over 5% during this entire period).

Since 1986, our actual growth has been terribly erratic, with every coup taking us to lower down tiers (solid black line on the graph).

As with tourism, there has been no catching up, is there?   In fact the lines diverge after 2006.  (Note that the graph uses the 2008 Budget figures for the period 2007 to 2010).

   The gap between the two lines is the income that the country has lost because we have not been able to grow at even the low average rate of 2.8% per annum.

The value of the gap for the period 1987 to 2010 is $9482 million. This is roughly two years Gross Domestic Product of Fiji.

On average, every household and every company in Fiji has lost two years of income.

Government has lost a quarter of that in revenue and expenditure- some $2300 million.

For 2006 alone, the value of the GDP gap is $900 million.  Imagine what the Government could have been doing with an extra $225 million in revenue this year.

And Business Leaders?

   We have had many governments and Prime Ministers since 1986. Many have pushed policies which were nationally undesirable  in some sense or the other.

Did the business community leaders stand up publicly, in a transparent and accountable manner,  and firmly and politely express their opposition?  No.

Quite a few individual business leaders, quietly acquiesced or even supported the persons in power, as long as their own business interests were safeguarded.

What the public have seen on the TV screens from 1987: ever changing Prime Ministers, Finance Ministers, and Ministers; but all with the same beautiful garlands, and the same smiling corporate faces close by.

In ideal economics, if all business persons behave selfishly, the economy as a whole benefits.

That is not so when it comes to coups and bad governance.  While a few business leaders have done very well out of every coup, the business community as a whole has lost big time.

Ask Fijian Holdings Limited, Punjas, ANZ, Westpac, Vinod Patel, RCManubhai, what their profits would have been this year, had Fiji’s GDP  been 30% higher than what it is today.

Corporate Unity With Integrity

   Of course, individual business leaders cannot be expected, like foolhardy academics, to openly criticise coup-appointed leaders.  That would be corporate suicide.

But a united corporate body, representing all the businesses in Fiji, with a fully funded CEO without any vulnerable business interests, could surely have been a forceful voice in ensuring that bad political policies are forcefully opposed by a united business community.

But that is unlikely.   Just as our political and social leaders divided, so also are our business communities. All operating in their corporate cut-throat gangs- white expatriate, Gujerati, Hindustani, Chinese, and increasingly, Fijian companies.

All battling away in a Darwinian corporate jungle, where a few sharks have done well, while the majority of medium and small enterprises have staggered along.

The suffering public

   In the last twenty years, the bulk of the ordinary people have battled to survive on the crumbs from a cake which has failed to grow, because of bad political and economic leadership.

There has been massive under-employment (which is really disguised unemployment), with the labour force having an effective unemployment rate of 27%.

The incidence of poverty was about 34% in 2003, and it is probably 40% now, ironically afflicting our whole population, Fijians and Indo-Fijians alike.

If we had good political  and economic leadership, our costly coups could have been avoided.  There would have been more than enough growth in national income, and government revenue, and government expenditure, to satisfy all competing interests.

Everyone’s Affirmative Action Blueprint, cane farmers with expiring leases, re-housing of squatters, rugby world cup squad, netball world cup squad, Charters for People, FICAC, and even Prime Ministers’ opulent residences could have been funded with the extra government revenue.

This is not to be.   Because there has been no “catching up” from the coups.

The really sad continuing reality is that every coup leader or supporter thinks that their coup was justified.

Ratu Mara did not oppose the 1987 coup, and took part in the post-coup government;  Mr Rabuka, while redeeming his role in the first coup by pushing through the 1997 Constitution, still says he would do the coups again if necessary;  Ratu Mara after the 2000 coup said that Mr Chaudhry could not come back as Prime Minister, and Commodore Bainimarama did not bring him back; Mr Qarase kept repeating after the 2000 coup that indigenous Fijians will not tolerate Indo-Fijian Prime Ministers;  and Commodore Bainimarama did the 2006 coup, claiming that this coup will end all coups.

It is not just a failure on the part of our political and military leaders, but a failure of the populace at large.   By now, all major ethnic, religious and social groups in Fiji have justified and supported one coup or another.

There is no light at the end of the tunnel for Fiji’s poor.

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