Your money is not fully yours! [The Fiji Times, 7 May 2011]
You think that the money you earn and save from your labor is yours, don’t you?
You think that as the “owner of the money” you can do whatever you want with it?
You think you can spend it on anything you like?
You think you can save it and invest it wherever your like?
Well, think again. For decades now, you have not been free to send your money overseas; to invest it there on whatever asset you choose.
For decades, you have been forced to spend or save and invest your money in Fiji.
For decades, RBF regulations have strictly restricted the amounts that you Fiji citizens can send out or take out of Fiji.
The Reserve Bank of Fiji should be acting in your interests, shouldn’t it?
But Fiji citizens pay dearly for these restrictions.
Savings deposit rates in Fiji been low, Worse still, you lose a large chunk of the international value of your savings, every time there is a devaluation of the Fiji dollar. And that has happened several times, and at great cost to you.
Without doubt, the poorest amongst the Fiji citizens pay the most.
While foreigners and the rich usually manage to escape the restrictions.
What can you do about it?
Decades of restrictions
For decades, even going back into the colonial era, Fiji governments have used the monetary authority (now the Reserve Bank of Fiji) and its legislated powers to restrict the amount of money Fiji citizens could send overseas.
They were allowed to take their money, if they were emigrating and changing citizenship. But now there are restrictions on even that.
The RBF gave permission for small amounts of “essential” expenditures, such as on education of children, or health and medical bills, or traveling allowances.
But you were not allowed to freely send all your money overseas for investment.
You are not allowed to keep money overseas in case you need it for emergencies like medical evacuation and paying hospitals overseas.
Many Fiji citizens, in serious medical emergencies for their loves ones, had to tear their hair out getting approvals to send the required money overseas.
The RBF of course facilitates as sympathetically as they can, but they fulfil their responsibilities by ensuring that the regulations are strictly followed.
Institutions like FNPF which used to keep moderate amounts of their funds abroad in order to diversify their investments, have also been forced to bring them back, wherever there have been foreign exchange reserves crises.
Of course, whatever the FNPF loses in income, is gained by the RBF, which passes it on to the Government of the day, to spend and enjoy.
Fiji citizens, who were forced to keep their investments in Fiji, have paid a heavy price, periodically.
The devaluation disasters
Since political independence in 1970, Fiji’s government has been forced into several devaluations of the Fiji dollar.
Once upon a time, the Fiji dollar used to exchange for more than a $1 Australian.
If you had Fijian $500,000 in assets in Fiji, and you emigrated just after independence, you would have obtained Australian $500,000 for your Fiji cash.
But after all the devaluations we have had, today you would obtain just over $250,000.
For those who have been building up your savings and assets in Fiji for the last thirty years, you have already lost a half of all your life savings, or thereabouts.
Why? Largely because of political and economic crises caused by bad political leadership, and the resultant military coups of 1987, 2000, and 2006.
But bad economic policies of the past have also contributed, through lack of sustainable economic growth.
The bottom line is: you have lost huge amounts of your savings, because you, the owner of the savings, have not been free to invest your money outside of Fiji.
That is a fundamental “free market” right that is enjoyed by citizens in Australia, NZ, US and all other countries where “ownership” of money really does mean freedom to invest as you wish.
But even in Fiji, the business community (foreign and local) and the rich, still enjoy this right.
The rich escape the restrictions
Fiji’s business community are easily able to evade the foreign exchange restrictions.
Foreign businesses are legally entitled to repatriate their profits- and they do the moment they make it. They try to operate on borrowed money (or consumers’ money) as much as they can.
Even local companies that import or export, make sure that they transfer as much of their profits overseas, by judicious transfer pricing. They also try to operate on borrowed money, as much as they can.
Rich people or professionals who travel often, can also evade the exchange restrictions, by taking out whatever is their legal entitlement.
Not only that, but they also are able to enjoy the duty-free shopping which saves them a few hundreds now and then
Of course, it would be too expensive for the poor, to make a special trip costing two thousand dollars in order to take out ten thousand dollars which you are allowed now.
So ultimately, it is only the savings of the poor and the middle classes that are stuck here in Fiji.
Available for use by all the borrowers- banks, businesses, and of course, the every hungry governments.
Effects of deregulation?
Many in power talk about the need for deregulating the economy, removing the heavy hand of government from the market place. They should start with removing all the RBF restrictions on citizens who might want to invest abroad.
What would happen? If exchange restrictions were removed, many citizens would invest their savings abroad as their returns would be higher.
Their funds would be easily available for medical emergencies, travel, purchase of assets, or any other purpose, any where in the world.
In countries like Australia, there would be little risk of large scale devaluations because of mis-management of the economy, or political instability, or military coups.
Indeed, if invested sensibly in the Australian economy, with its long term prospects of steady economy growth, there might even be the prospect of appreciation of the value of your assets.
Of course, in Fiji, there would be shortages of foreign exchange.
Banks would have to increase deposit rates, to try and retain savings within the economy.
If the reserves fell too low, there would have to be further devaluations of the Fiji dollar, the discouragement of capital outflows, the discouragement of imports and the encouragement of exports and capital inflows.
Every governments would have to restrain their unproductive expenditures, and reduce their deficits.
Every government would have to follow pro-growth policies and ensure an attractive environment for investments, both from local and overseas sources. That would all be for the good.
With a truly open economy, the market would exercise its proper discipline on governments, banks and the private sector.
What can you do?
Fiji citizens should demand that the Commerce Commission remove the “substantial market power” of the Reserve Bank of Fiji over our savings.
Fiji citizens should demand that the RBF allow all Fiji citizens total freedom to invest their savings abroad, if they so wish.
Fiji citizens should demand that the Fiji National Provident Fund be freed up to invest as much of our funds abroad as is prudently advisable.
Will it happen? Don’t hold your breath.
It is abundantly clear that docile Fiji citizens will not do anything despite many adverse developments that should bother them.
As I have been warning for several years now, FNPF contributors are about to see FNPF proposals for a massive 40% reduction in FNPF pension rates from the current 15% down to possibly 9%. Even existing rates may seriously decline.
You will then know the hard way, that you don’t fully own your own money.