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“Government expenditure, public debt and public intellectuals” (ed. in Fiji Times, 20/4/2019)

20/04/2019

Government Expenditure, Public Debt and Public Intellectuals* (ed. in FT 20/4/2019)

In the last few weeks, a very promising development has taken place in the Fiji public policy arena: a Fijian economist (Savenaca Narube), has gone to the trouble to write four full page Fiji Times newspaper articles warning the Bainimarama Government about its excessive expenditure and public debt.

These articles should be heeded and debated not just because of what they say (much of which has been said before and by others) but because they come from a former Governor of the Reserve Bank and former Permanent Secretary of Finance.

That is not say that Narube’s views must be taken as gospel, and indeed, I suggest that Narube’s observations are not focused enough, relying too heavily on IMF observations which are not only too generalist, but amount to calling “for the stable to be locked after the horse has bolted”.

But it is disturbing that despite the seriousness of the warnings about Public Debt, there has been little to no response from the Bainimarama Government, or the Reserve Bank of Fiji, or even academics at Fiji’s three universities, and unsurprisingly not from the senior accounting and auditing professionals who in previous years used to at least assist in generating public debates.

It is unfortunate for Fiji’s future that unlike the concerned Narube, there are many former senior civil servants and current academics who have declined to raise public awareness about such public policy issues despite their profound and debilitating impact on Fiji people.

No doubt the public silence is in large part due to the climate of censorship and fear that came over Fiji after the 2006 military coup.

But Fiji has now had two general elections, there are many new political leaders in the Fiji Parliament, and much information previously suppressed has become public.

Unfortunately, the climate of fear continues to this day because of the frequent threats of legal action under the imposed 2013 Constitution.

Those wielding power need to encourage free and unfettered public debate by our own local experts and people, so that our people do not rely on external and unaccountable advisers like the IMF or WB, not just for the good of Fiji but for the good of the Bainimarama Government’s own historical record in Fiji, which has some positive elements.

In sum, our own people and experts must take ownership of Fiji’s destiny.

To that end, I urge political, social and religious leaders, and public intellectuals, to rise out of their apathy, fear and cowardice, and engage in public debate for the good of Fiji’s poor and vulnerable, who are being sadly drugged by rugby sevens, Fiji’s current “opiate of the masses”.

The public has no excuse for not knowing the issues and consequences as much has been published in the Fiji Times and books locally, which even Narube appears to have “overlooked” while reaching for IMF’s belated, unfocused,  and unaccountable advice.

Narube’s criticisms

In his series of four Saturday articles beginning with that of FT 16 March 2019, Narube warns correctly that Public Debt has virtually tripled from 2006 till now and government expenditure must be reined in, as others have warned previously.

But while Narube points to some of the undesirable expenditures, such as politically motivated handouts, golf and rugby tournaments, a few CEOs getting blatantly high salaries and bonuses while their public enterprises record losses, and the corruption and lack of transparency in procurement., these examples only add up to a hundred million or so, not the virtual doubling of the public debt by an increase of more than $3 billions in seven years.

Narube failed to point out that what has created this massive three billion dollar increase in public debt has been the willy nilly increase in infrastructure expenditure on roads etc. of more than $600 million extra annually, when prior to 2006, PWD used to receive a mere $40 million  to $80 millions annually.

I say “willy nilly” because these large infrastructure projects should have been done only after

  1. detailed and solid cost benefit analysis had been undertaken
  2. showing economic rates of return higher than the cost of borrowing
  3. while ensuring that contracting firms and the Fiji economy had the capacity to absorb and pay for such large projects
  4. with Government ensuring that the taxpayers were not being ripped off.

There has been no public information or even given to the Public Accounts Committee ridiculously chaired by Government themselves (akin to the accused being the judge), that these four crucial steps were satisfied by the Bainimarama Government.

But the horrendous uncontrolled expenditure started not last year (when IMF and Narube supposedly raised the alarm) but more than seven years ago, when at least one USP Professor of Economics was sounding out the warnings, beginning with Fiji Times articles until blocked by government, following which they appeared on his personal blogsite.

My earlier warnings in Fiji Times

Warnings about the uncontrolled and unaccountable Bainimarama Government’s expenditure and increases in public debt were raised initially in my 27 Nov. 2008 article “A Deceitful 2009 Budget” published ironically in both the Fiji Times and Fiji Sun.

While my further budget commentaries were censored in the local newspapers, that of the 2011 Budget, titled “2011 Budget: Burdening future generations” was published (2 December 2010) in the Auckland University of Technology School of Journalism newspaper, Pacific Scoop, as well as on my blogsite NarseyOnFiji and other international journals, such as out of PIDP in Hawaii.

These articles pointed out more than eight years ago all the ills or symptoms that Narube and IMF are pointing out today without these latter two even mentioning the dreaded words “uncontrolled military expenditure” or massive and uneconomic infrastructure projects.

In 2010 I also wrote about Narube’s gurus at the IMF who were allegedly supporting the Bainimarama Government’s policies then (and I quote):

“How odd that this Military Government chooses to justify their VAT increase and sale of public assets by referring to IMF Mission advice. This Military Government will also use the IMF excuse when they start sacking more public sector employees (in addition to all those over 55 laid off recently). But the Military Government ignores that they could not fulfill the complete set of IMF requirements for a Standby Arrangement.

     We in Fiji should also understand that the experience of the developing world is that the unaccountable, non-transparent, ever-changing IMF missionaries couldn’t give tuppence for the lives of the ordinary people they trifle with all over the world.

     There is no public indication that the IMF recommended that Fiji’s military expenditure must be significantly reduced to pre-2006 levels if the Fiscal Deficits and Public Debt are to be reduced to sustainable levels; nor that any burden of adjustment should be shared by the upper income brackets as well through the income tax, and not just through a VAT increase which will hurt the poorest more.

     The IMF’s key concerns have always been about facilitating and strengthening the private sector, if necessary by privatizing and downsizing public corporations. For the amoral IMF missionaries, a dictatorial Military Government provides a grand opportunity to bring about changes not easily possible through elected accountable governments.

In my budget commentaries of 2014 (five years ago) and  2015 and 2016, I pointed out all the large uncontrolled expenditures, such as that by FRA and fly-by-night overseas companies, which were wildly increasing  Public Debt, with no evidence that there would be sufficient and timely increases in GDP and government revenues, to repay the principal and interest repayments required.

When a few years ago I asked Ministry of Finance for their spreadsheets monitoring the debt payment flows, they asked why this professor of economics wanted such data! Oh dear.

But the public might want to think again about the belated revelation by one FRA CEO that some road making companies were significantly over-invoicing the Fiji Government. For how long had this been going on?

Some may remember the highly paid white NZ workers who were sweeping Grantham Road and driving graders? Or their wives churning 4 wheel drives around Suva or parked at the Vatuwaqa Golf Club and Bowling Club, all paid by the road contractors.

What else have the public never been told about the wastage of taxpayer funds on these massive hundred million dollar infrastructure projects which apparently were not being audited by the Auditor General’s Office, while they subjected minor items of government expenditure to their microscopes?

Why has there never been an inquiry into all these incredibly costly infrastructure projects (part of some of which were washed away after typical Fiji heavy rains), as they have in Australia with their “Royal Commissions of Inquiry”?

The public might want to think further about the recent comment by the RBF Governor explaining the current reduced liquidity in Fiji to the more than $2 billion increase in imports in recent years.

But the RBF Governor could have linked the current problem of reduced liquidity to the last seven years of massive infrastructure expenditure which clearly has not led to sufficiently increased GDP and foreign exchange earnings to pay for the increased imports and the increased Public Debt, despite the frequent boasts of seven years of continued GDP growth.

Better late than never

There is little point in “crying over spilt milk” and complaining that the time for the public intellectuals and academics to have raised the alarm about unsustainable government expenditure and rapidly rising Public Debt was more than five years ago, not today,  as the IMF and Narube are belatedly doing.

Nevertheless, government expenditures MUST BE REDUCED.  But even today, neither the IMF nor Narube state clearly which specific portions of government’s expenditure should be decreased in order to reduce the deficits and public debt, other than the relatively minor items listed by Narube in his articles (although he did not mention the Prime Minister’s per diems).

I suggest here that there must be a stop to all economically unviable and unjustifiable infrastructure expenditure projects such as converting a perfectly adequate two lane road from Nadi and Denarau to a four lane highway; unsustainable public sector salary increases, and excessive military expenditure, in addition to the items listed by Narube in his four FT articles.

But note that Narube advocates that Fiji’s Debt to GDP ratio should be reduced to 40%, using IMF standards and choice of countries very selectively. Even though there are many well performing countries with higher Debt:GDP ratios.

Surely what is far more important is that government infrastructure expenditure must be on economically sound projects which can generate good long term returns, even if it increases Public Debt.

Sadly, this Government will find that it is precisely education and health expenditures that are EASILY constrained, which will, as Narube also points out, harm the poor of Fiji.

I suggest that the IMF will not protest either if health and education expenditures are reduced, even if they undo some of the good policies brought in by the Bainimarama Government.

The public was told seven years ago

There is no excuse for Fiji’s academics or even Narube to not know about these early warnings on Fiji’s increasing public debt as they have been freely available on the internet and even when censored locally, have been on my website NarseyOnFiji which the world has been reading for more than five years when they want the economic truth about Fiji.

Last year, all the macroeconomic articles were published in one book (The Challenges of Growing the Fiji Economy), and the issues that Narube and the IMF are raising today were fully explained in many articles in a section on Government Budgets and Public Debt. This section has articles on how to read government budgets, how to engender budgets, the origins, nature and implications of public debt,  and detailed critiques of most of the recent government budgets under the Bainimarama Government.

This 600 page book has been available at an incredibly low price of $40 in all Hot Bread Kitchen outlets throughout Fiji, due to the courage and commitment of its owner Dr. Mere Samisoni, who apparently is now persona non grata with SODELPA.

I seriously wonder how many of our Opposition Parliamentarians and Fiji’s social and political leaders have even bothered to buy this informative book which tries to explain complex economic issues of Government Expenditure and Public Debt (and many other public policy issues like monopoly regulation) in a simple language that all can understand (as endorsed by FT publisher Hank Arts, editor in chief Fred Wesley, and lawyer and public intellectual Richard Naidu, and the late Ratu Joni Madraiwiwi).

I sadly note that just as good Indo-Fijian political leaders have been historically disregarded and discarded by many indigenous Fijian leaders, so also are Indo-Fijian academics, despite their expertise being laboriously propagated in Fiji’s only national newspaper, often disregarded by indigenous Fijian leaders (another of those historical “frontiers” I wrote about last week).

I note that while former SEDELPA leader Ro Temumu Kepa generously transcended this ethnic divide by sensibly requesting NFP’s Professor of Economics Biman Prasad to deliver the Opposition’s response to the Government Budget, the current SODELPA leaders allocated this onerous task to their own “economists” who gave their nondescript and forgettable replies, easily overshadowed by the ongoing comments of Professor Biman Prasad in Parliament.

I also acknowledge that the Qarase Government, including Finance Minister Yavala Kubuabola, frequently called on Indo-Fijian academics for their advice and contribution on boards like FRCA.

The future

Whether one agrees with Narube’s views or not, there is a huge responsibility on Fiji’s public intellectuals- in universities, commerce and NGOs – to actively discuss and debate the issues that Narube and others have raised.

These debates must be accountable locally, consistently and incrementally to our own people and our local experts, and not with reference to the unaccountable views of some distant IMF “experts” who come and go, with their own international agenda, usually pointing out problems after they have set in concrete.

Ponder about the time when there used to be an intellectually active and highly principled RBF Governor and later USP Vice Chancellor (the late Savenaca Siwatibau) who used to issue public advice to governments and the peoplen not just in Fiji but the region.

Ponder about the time when there were many active USP intellectuals (including Professor Vijay Naidu, Dr. Ganesh Chand, Dr. Steven Ratuva, Dr Claire Slatter, Dr. Satendra Prasad and many others) publicly co-operating with social leaders in NGOs like CCF, ECREA, FWRM and FWCC, after the 1987 coup, to bring in the collectively created 1997 Constitution, passed by both Houses of Parliament.

Or the national cooperation of many academics and civil society leaders that led to the Yash Ghai Draft Constitution summarily rejected by the Bainimarama Government and a pliant President (now Speaker of the House).

The Fiji public does know that over the last twenty years there have a few local economists like Professor Wadan Narsey (now drifting into retirement),  Professor Biman Prasad (now contributing energetically in parliament), and USP’s Dr. Neelesh Gounder (now only sporadically active) who have been frequently raising public policy debates, often without any great support or appreciation from their employers, or the public, who have no shortage of commentary on a game of rugby sevens, generously amplified in the news media.

Archbishop Chong and other Christian clerics (Kevin Barr), and civil society leaders have also bravely raised their voices, out of deep concern for the welfare of the poorest people of Fiji, and, for their efforts, been excoriated by those in power and some in the media.

Sadly, they have been “voices in the wilderness” as Narube himself has been described by a Letter Writer to the Fiji Times.

But for Fiji to be saved from disaster, experienced former civil servants like Narube, and many others who have retreated into the shadows, must continue to engage in calm rational and accountable public debate not just with our young university academics like Dr.Tui Raquita and several others who need to be mentored by senior figures, but also with the Bainimarama Government ministers, the new public officials of today (like the Governor of the Reserve Bank or the Permanent Secretary of Finance, or the many new permanent secretaries) who are also all feeling their way forward in uncharted territories, under the shadows of authoritarian and sometime capricious ministers.

Such active debates used to occur at USP more than ten years ago and be nationally televised or at least reported on, but not any more. (When I have some time, I will put a few clips of these USP gatherings on Youtube, for the younger generations of today to witness and know what is possible today).

Twenty years from now those currently making the budget decisions and other  public policies drastically affect Fiji’s future, may well be gone, with their gains, ill-gotten or otherwise.

But for sure, Fiji’s Public Debt will remain, like an anchor around a drowning man, and our future generations will not understand nor excuse the current silence of today’s public intellectuals.

Citing the Fijian “culture of silence” will  not cut any ice.

Post-script 1

For the use of this term (“public intellectual”), I acknowledge Dr. Chris Griffin, a former Sociology lecturer and colleague at USP some thirty years ago, who sporadically writes pithy letters to the Editor of the Fiji Times. The term applies very much to him, as he commutes between Perth and Rakiraki.

Postscript 2

I found it utterly dismaying (but not surprising any more) that Fijian voters did not vote in sufficient numbers for parliamentary candidate, Savenaca Narube, despite his being a former Governor of the Reserve Bank and former Secretary of Finance, who had unselfishly offered to serve his people in Parliament for a salary which would have been a fraction of the income he no doubt earns as a regional consultant economist.  But over the years, Fijian voters have similarly rejected other capable and education Fijian candidates.

The voting public and those who shape public opinion, such as teachers and other professionals should do some serious soul searching: would Savenaca Narube have been more successful in the 2018 Elections and be today solidly contributing in Parliament if he had been a Fiji rugby sevens representative or a former Commander of the RFMF?

Post-script 3

The failure of good candidates like Narube to enter Parliament is also due to the refusal of candidates to have the humility to understand the lesson that some of us have been hammering for five years now: that it is incredibly risky for small parties to contest because of the 5% threshold. Narube would have been in Parliament had he simply joined proven parties, SODELPA or NFP, or even Fiji First.

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