Fiji: Building Inclusive Institutions for Sustained Growth

Country Diagnostic Study

Place Date here

Edimon Ginting

Director, EREA Asian Development Bank

*The views expressed here are those of the presenter only and do not necessarily reflect the views and policies of the Asian Development Bank, its Board of Governors, or the governments they represent.

Pacific Update Conference

18 July 2016 Suva, Fiji

Outline

2

• Overview of ADB’s country diagnostic study (CDS) and employment diagnostic study (EDS)

• Fiji: country context

• Key messages from the CDS

• First CDS was completed in 2007

• Tool for policy dialogue: Informs medium-term development strategy and strategies for engaging with countries

• 12 completed and 3 ongoing

• Initiated to complement CDSs

• Creating quality jobs is key to making growth inclusive, reducing disparities, and sustained growth

• Collaboration with ILO; 3 completed and 2 ongoing

Country context

4

• One of the larger Pacific island countries

• Upper-middle-income country with one of the highest per capita incomes in the Pacific

• Relatively high level of social development

• Relatively rich in natural resources

• Economic geography: small and remote with dispersed population

• Political climate (1987, 2000, and 2006)

• Vulnerable to natural hazards

5

Fiji is one of the larger Pacific island countries

Economic growth has been volatile, but momentum for higher and stable growth has started since 2010…

6

Source: Estimates based on data from RBF.

-6

-3

0

3

6

9

12

15

1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015

%

GDP Growth 5-Year Moving Average

1987 coup

Global economic crisis

Public Investment Program

2 cyclones, damage and loss, $80 million

Cyclone damage and loss $200 million

Drought damage and loss $120 million

2000 coup

2006 coup

7

Source: RBF.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Per

cen

tage

po

int

con

trib

uti

on

to

GD

P g

row

th

Private investment Government investment Investment by statutory bodies and public enterprises Total investment

…supported by strong recovery of private investment

Fiji continues to be a service-driven economy but growth is now more diversified

8 Source: Estimates based on data from RBF.

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1980–1989 1990–1999 2000–2011 2012–2015

Per

cen

tage

po

int

con

trib

uti

on

to

GD

P g

row

th

Agriculture Mining and quarrying

Manufacturing Electricity and water

Construction Trade, hotels, restaurants, and repair

Transport, storage, and communication Finance, real estate, and business services

Public administration and other services GDP

Composition export basket has diversified over time

Source: UN Comtrade.

0 20 40 60 80 100

1980–1984

1985–1989

1990–1994

1995–1999

2000–2004

2005–2009

2010–2013

Food and live animals chiefly for foodBeverages and tobaccoCrude materials, inedible, except fuelsMineral fuels, lubricants, and related materialsAnimal and vegetable oils, fats, and waxesChemicals and related products, nesManufactured goods classified chiefly by materials

10

Source: RBF for 2000-2014 and IMF Article IV Report for 2015 (projected).

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

% o

f G

DP

Balance on goods Balance on services Balance on primary incomeBalance on secondary income Balance on current account

Tourism and remittances provide more stable support for external balance

Extreme poverty is low but inequality is rising

11 Source: Fiji Bureau of Statistics. Household Income and Expenditure Survey 2002/03, 2008/09, and 2013/14. Suva and World Bank.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Fiji

Urb

an

Ru

ral

Cen

tral

East

ern

No

rth

ern

Wes

tern

iTau

kei

Ind

o-F

ijian

Oth

ers

Area Division Ethnicity

Gin

i co

effi

cien

t

2002–2003 2008–2009

0

5

10

15

20

25

30

35

40

Poverty headcountratio

at $1.90 a day(2011 PPP)

Poverty headcountratio

at $3.10 a day(2011 PPP)

Poverty headcountratio

at national povertyline

% o

f p

op

ula

tio

n

2002/03 2008/09 2013/14

Constraints to inclusive growth

12

• Remaining weaknesses in business climate

• Gaps in provision of infrastructure services

• Uneven access to productive assets, particularly to land and finance

• Lack of productive and adequately paying job opportunities

Structural reforms to further enhance the business climate

Notes: Number above the bar indicates Fiji’s how far is Fiji from the frontier of best practices. Methodology has changed over the years. Source: World Bank

• Ease business start-up procedures and licensing

• Enhance single-window clearance

• Implement new Companies Act • Reduce administrative burden

of filing taxes • Expedite dispute resolution and

strengthen contract enforcement

• Review price controls and consider replacing them with targeted interventions

68.2 68.4 68.3 67.5 67.2 62.5 62.6

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012 2013 2014 2015

Fiji’s distance to the frontier in overall ease of doing business (frontier = 100)

Provide quality and adequate infrastructure services

Note: Number above the bar indicates Fiji’s rank in overall ease of doing business and the number in brackets shows the number of countries covered by the survey in that year. Methodology has changed over the years. Source: World Bank.

• Continue to upgrade and rehabilitate road network

• Improve quality and service delivery of maritime infrastructure for both international and domestic connectivity

• Enhance provision of key urban infrastructure services

• Increase private sector participation in provision of infrastructure through various modalities

Enhance access to productive assets and finance

15

• Make access to finance inclusive

– Secured transactions framework

– Introduce a credit legislation bureau

– Enhance sustainability of the microfinance institutions

• Enhance access to land to exploit its economic potential

– Review leasing regulations and procedures in a way that balances the needs and sensitivities of the customary landowners, as well as the interests of the investors

Improve labor market outcomes

16

• Headline unemployment rate is low but it masks the lack of productive and well-paying jobs

• Create productive employment opportunities and address the mismatch between training and demand – Facilitate SME development – Facilitate school-to-work transitions for youth by fostering stronger links between

education/ training institutions and work places – Strengthen placement agencies like the NEC – Encourage more volunteer or apprenticeship schemes to address youth unemployment

Source: ADB staff estimates based on Fiji Bureau of Statistics. Employment and Unemployment Survey 2010/11. Suva.

0

10

20

30

40

50

60

70

80

90

Overa

ll

Ma

le

Fem

ale

Overa

ll

Ma

le

Fe

male

Overa

ll

Ma

le

Fem

ale

Only

mon

ey

Mo

ney w

ith

subsis

tence

Ony

subsis

tence

FN

PF

Pa

id

No

FN

PF

F$0

to F

$1,4

99

F1,5

00

to F

$2,9

99

F$3

,000

an

d a

bove

Labor forceparticipation rate

Unemployment rate Underemployment rate By type of activity By formal/informal jobs

By annual earningfrom primary job

Distribution of employed

%

Sound macroeconomic management is key to inclusive growth

17

• Monetary policy and financial market development

– Price stability

– Safeguard financial stability

– Enhance access to finance

• Fiscal policy

– Support inclusive growth through infrastructure and social spending

– Provide buffer to deal with contingent liabilities and external shocks

18

For more on ADB CDS: http://www.adb.org/publications/series/country-

diagnostic-studies

Vinaka Vakalevu!