Ni sa bula vinaka and a Very Good Morning to you all.
It is indeed a great pleasure for me to participate in today’s forum with the appropriate and topical theme “Indigenous businesses – Creating our future”. At the outset, let me commend the Fiji Indigenous Business Council for holding such an important forum and for looking at such a critical issue as a strategy for encouraging employment and commercial opportunities for our I’taukei. I was asked to speak on the subject “Growing the private sector: the small to medium business”. I have taken the liberty to add Micro businesses as well in my speech today as this is not just a buzz word but a reality, as most, if not all, businesses start as a micro enterprise with Fiji’s well known large businesses being no exception.
My presentation today is divided into four parts.
1. The Current State of the Fiji Economy
Ladies and gentleman, the recovery in the Fijian economy which started in 2010 has now gained a much firmer footing, despite the continued sluggishness in key trading partner economies during the same period. The Fijian economy is estimated to have expanded by 3.6 percent last year following a 2.7 percent and 1.7 percent expansion in 2011 and 2012, respectively. We now have four years of consecutive growth not normally seen in our history. Last year, all sectors of the economy, with the exception of the mining and fishing sectors, contributed positively towards this growth. This improved confidence can be attributed to a number of factors such as increased spending by Government in infrastructure development and social welfare and accommodative monetary policy by the Reserve Bank and the consequent easier access to credit and historical low interest rates. Furthermore, the concerted effort by Government towards an inclusive parliamentary democracy in 2014 has also been a major contributor to regained confidence amongst investors and consumers alike.
The improved confidence is well reflected in our major macroeconomic indicators. Consumer spending has been buoyant throughout 2013 underpinned by better labour market conditions, increases in the income tax threshold and wages for Government workers, higher inward remittances and increased lending by financial institutions. Partial indicators such as Value Added Tax (VAT) collections, new consumption lending, new vehicle sales and imports of consumption goods have all noted annual increases in 2013.
Additionally, investment indicators showed continued resilience and growth last year as well. Total investment is estimated to have been around 28 percent of GDP last year as all partial indicators such as imports of investment goods, lending for investment, domestic cement sales and value of work-put-in-place registered annual increases. The improved investment climate and confidence has translated well into the demand for labour. The Reserve Bank survey based recruitment measure showed that the number of job advertisements rose by 9.3 percent in 2013, driven by improved recruitment intentions in the community, social & personal services followed by the wholesale, retail trade, restaurants & hotels, construction and the manufacturing sectors.
The improved economic prospects are also a result of Government’s expansionary fiscal policy stance in 2013. In an effort to stimulate economic growth and investment, a substantial amount was spent on capital works, particularly infrastructure development. Inflationary pressures remained generally soft in 2013, mainly on account of stable food and oil prices. The year-end inflation rate stood at 3.4 percent compared to 2.5 percent at the end of 2012. However, our external sector continued to face some challenges. Export performance has been unsatisfactory and data up to November 2013 reveal that total domestic exports declined by 2.7 percent. As alluded to earlier, imports continued to surge due to the pick-up in demand across the economy.
As a result the trade deficit widened further last year, though this was supported to some extent by favourable inflows of tourism and remittances. Remittances performed exceptionally well last year and reached a new record of $339 million. Nonetheless, our overall external position remained stable and foreign reserves was recorded at $1.8 billion at the end of last year, sufficient to cover 4.9 months of retained imports of goods and non-factor services. Ladies and gentleman, what is in store for us in 2014? Pre-2014 National Budget forecast for growth in 2014 was 3.0 percent. However, given the significant increase in Government expenditure on infrastructure, wages and salaries and social benefits such as free education as announced in the 2014 National Budget, growth is now forecast to surpass the projection and is currently being reviewed.
Additionally, the surge in consumption and investment spending is expected to continue and can even be further boosted by the increased disposable income. Confidence in the economy is expected to remain strong and is supported by sentiments expressed by retailers and businesses in RBF’s business expectations and retail sales surveys which suggests a positive outlook for consumption and investment activity in 2014. Macroeconomic fundamentals are poised to remain strong and conducive to growth in business in 2014. A growing economy should therefore augur well for the Micro, Small, and Medium Enterprises.
2. Importance of the Micro, Small & Medium Enterprises (MSMEs) to the Economy
We all recognise that micro, small and medium enterprises (MSMEs) play a vital role in economic development. They are an important engine of economic growth not only for less developed economies but also the advanced nations. I am sure you all know why MSMEs are important. I will therefore re-iterate these factors briefly:
3. Let me now move on to Recent Government and RBF Policy Initiatives to Support the MSMEs
Over the years, the Government and the RBF has put in place various incentives and supportive policies to create a conducive environment for MSME activity. As a way to increase the involvement of the financial sector and to enable greater access to finance
by micro-entrepreneurs around the country, the RBF in 2010 required all commercial banks to setup microfinance units at their branches. Commercial banks also established agents in rural areas using merchants and post office agents to facilitate finance activity. At the end of 2013, 81 agents were in operation providing basic banking services such as cash withdrawals, deposits and
payments. In addition, since 2010, a total of 17 Microfinance expos have been held.
These expos bring together financial stakeholders that provide financial services, financial literacy training and create more awareness on microfinance activity to those in the surrounding vicinity of the expo. The RBF’s Import Substitution and Export Finance Facility (ISEFF) was set up to improve Fiji’s BOP position by assisting exporters, renewable energy and import substitution businesses to obtain credit at concessional interest rates. Currently, the maximum interest rate charged on the facility is 5% p.a. The Bank, from July 2010 to 31 January 2014 approved around $54 million under the Facility.
Of this amount, $44.7 million was approved for export finance, around $5.7 million for import substitution businesses, $4.0 million for energy projects. Of the total $80 million allocated by the RBF for the Facility, approximately $25.6 million still remains unutilised. The Government also continues to support MSME development with various funding allocations and policies in its National Budgets. To better monitor the development of the MSME sector, the RBF and Solicitor General’s office will work together to put in place a legal framework for the governance of MFIs. In 2012, the Government announced the SME Credit Guarantee Scheme. Under the scheme, the Government guarantees to pay 50 percent of the principal outstanding amount on defaulted SME loans, up to a limit of $50,000 per business. Today, the total allocation for this scheme has increased to $4 million with a total of 483 loans covered under the scheme at a value of $28.6 million, to date.
Moreover, to support and facilitate economic activity, the Government has in recent years focused its funding on the development of infrastructure
In 2013, the Reserve Bank introduced the first ever National Microfinance Awards with three categories the Best Microfinance Entrepreneur
4. I now move on to Some Personal Observations for we, the I’taukeis to Succeed in Business
I wish you every success.
May your business ventures continue to be a blessing to you, your families and our beloved Country, Fiji.