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“Remittances: the industry that has saved and still saves Fiji” (FT 29/9/2018)

06/10/2018

“Remittances: the industry that has saved and still saves Fiji” (edited article in FT 29/9/2018)

A most spectacular and unheralded industry has sprung up in Fiji over the last thirty years. It far surpasses the earnings from the sugar industry and I suspect even surpasses the retained earnings from the much touted and valuable tourism industry. I am talking about the “remittance industry”, whereby Fiji residents and former residents abroad send large and small sums of money back to Fiji.

Those sending the money home are Fiji residents working abroad as nurses, caregivers, security guards, fruit pickers, rugby players, and Fiji emigrants living and working in other countries sending money home to poorer relatives.

It is surprising that there has been almost no public discussion about it or even any appreciation of those workers who are the brave initiators of this industry.

Of course, as is nearly always the case, there are always government ministers ready to claim credit and receive salusalus, and some, sadly even try to control it for their own political gain.

The size of the industry

Look at the graph. Remittances exceeded the sugar industry as long ago as 2003 and only dipped below it around 2008 which was the time of the Global Financial Crisis when some sources of remittance revenues declined somewhat.

But they soon recovered and has since been increasing spectacularly.  Remittances are in 2018 likely to earn THREE TIMES the amount expected to be earned by the sugar industry.

While some in the tourism industry like to boast about that industry’s billion dollar earnings, that is unfortunately only the GROSS earnings. Much of that leaks abroad because of foreign ownership and even local owners of resorts exporting their profits abroad for safety.

In contrast, the remittance earnings are pure net inflows of capital.

No burden on taxpayers

The readers should note that most industries in Fiji are huge drains on taxpayer funds.

The tourism industry has required massive expenditures on roads, water, sewerage, electricity, training of staff and even massive tax incentives such as tax holidays. Of course, most of this infrastructure spending, such as on the Suva-Nadi highway or the Vaturu dam, can be justified by the long run benefits from tourism.

But because of the powerful tourism lobby there are some large and questionable expenditures of valuable tax payer funds, such as converting an already good two-lane highway to Denerau to four lanes. I doubt if the extra benefits (and economists must always look at the extra or the marginal benefits) can justify the huge expenditure and huge increase in public debt to pay for the conversion.

I need not remind the reader about the massive amounts of taxpayer funds spent on the sugar industry over the years, and especially on the sugar mills and the road infrastructure. To keep the industry going, there are even calls for subsidies in an industry which supposedly cannot find the labor the cut the cane.

In contrast, the remittance industry has required no tax payer subsidies or government market or politicking whatsoever, beyond the amounts originally spent on educating the human resources that have been exported (and perhaps some effort in one area I discuss below).

How did the remittance industry start?

It is worth asking how the massive remittance industry began and who, in anyone, had a hand in it. This requires and analysis of all the components of the sources of the remittance earnings.            There are some sources which arose out of individuals and groups of individuals taking the initiative themselves to market their skills abroad, such as nurses and caregivers. Nurse training schools in Fiji and the Pacific, in contrast to twenty years ago, today take for granted that they are also training for the international market, with potential remittance benefits down the line.

Some sources, such as security guards, derived their jobs partly out of international goodwill created by the Republic of Fiji Military Forces serving for UN as peace keepers.

The rugby players have marketed themselves through their great flair.  Despite the efforts of one economist for more than fifteen years to convince Australian and NZ governments to encourage Pacific Island rugby teams into their super rugby competitions, that has still not occurred despite periodic noises.  Nevertheless, our great rugby players (and those from Samoa and Tonga) continue to make their mark in the rugby (union and league) competitions of Australia and NZ. They have yet to enter the AFL and our netters also have yet to make a mark.

Some sources such as fruit pickers arose because some economists (including yours truly and a World Bank economist Manjula Luthria) argued quite strongly some fifteen years ago with the NZ Government to open up their labor markets to Pacific Island labor. That importance of access to Australian and NZ labor markets is now part of the regional trade negotiations conducted  by Forum Secretariat, and also part of Government to Government bilateral negotiations.

Unfortunately, Fiji has not been able to take advantage of that because of sanctions over the 2006 and 2009 coups.  The Fiji Government must continue to make access to the labor markets of Australia and NZ a priority for their bilateral trade negotiations, a benefit that is not available to them from China and other new donors to Fiji.

The above also give us a good idea about how Fiji (and other Pacific countries) can try to foster the export of skills that can continue to bolster the massive remittance earnings that Fiji is currently enjoying. These require training schools to ensure accreditation of their qualifications in Australia and NZ, especially in care giving and nursing which are going to be two major areas with supply scarcity in these two countries.

Good coming out of evil?

The money sent home by emigrants from Fiji is a great example of good coming out of evil. Most of the early Fiji emigrants were Indo-Fijians who left Fiji because of the disastrous military coups of 1987 and 2000. Many of these Indo-Fijian emigrants, such as from their telecommunications industry, also encouraged their indigenous Fijians friends back home to also emigrate (and I personally knew quite a few them who did their training thirty years ago at the Brighton Polytechnic in UK- like a certain Aslam who remained in Fiji). Then even more indigenous Fijians emigrated after the 2006 coup.

The great thing was that these emigrants went on to salaries and incomes five to twenty times what they were earning in Fiji, especially with spouses also being able to earn and sometimes do second shifts. Not only were they able to soon acquire their first and second houses but also send money home to poorer relatives for their education and other necessary expenditures.

Aaah.  But would anyone like to advocate more military coups in order to encourage more of our people to emigrate so that they can send home more and more money.

Remember how every military coup in Fiji has been accompanied by the decline in investor confidence and slow-down of domestic economic growth and job creation locally.

The FBS data paradox

There is a great paradox that Fiji’s academics are failing to examine. Why is it that despite many years of supposedly positive growth in GDP data issued by the Fiji Bureau of Statistics, their household survey data does not show any corresponding increase in employment in the money or formal sector? Indeed some of the data shows a strange decline in formal sector employment. So how is it that the rates of “unemployment” are supposedly falling?

I suspect that if “unemployment” is strictly defined by the FBS as “those without a job and looking for employment”  than it is not the employed that matter, but whether those who do not have a job are actively “seeking employment”. If they are not seeking employment, that they are not defined as “unemployed”.

I suspect that it is the massive inflow of remittance money from abroad, more than three times that of the sugar industry, which explains the above paradox that rates of unemployment are falling while the numbers of those employed in the money sector are also falling.

That might also explain why the sugar industry cannot find cane cutters at the rates of pay they can offer.

That might also explain why the Suva retail shops for durable goods have shown booming business over the last ten years, despite the alleged high levels of poverty and low levels of formal sector employment.

What a wonderful research area for Fiji academics.

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