Fiji: Economy

Fiji is one of the more developed of the Pacific island economies, although it remains a developing country with a large subsistence agriculture sector. In 2011, Fiji's economy grew by an estimated 2.1%. For 2012, the government officially forecasts a 2.3% growth rate, though recent actual growth figures have been practically zero despite similar projections. The government’s year-end 2012 inflation forecast is 3.5%.

For many years sugar and textile exports drove Fiji's economy. However, neither industry is competing effectively in globalized markets. Fiji's sugar industry suffers from quality concerns, poor administration, and the phasing out of a preferential price agreement with the European Union that led to sugar price reductions of 36%. The European Union promised a large amount of financial aid to assist the ailing sugar industry, but, post-coup, has clarified that the aid will only be forthcoming if Fiji improves its human rights situation and moves quickly toward democracy. In 2010, the Fiji Government began implementing industry reforms, but cane and sugar production levels continue to decline.

Land tenure is a main issue of contention. Indigenous Fijian communities very closely identify themselves with their land. In 1909 the land ownership pattern was frozen by the British and further sales prohibited. Today, 87% of the land is held by indigenous Fijians, under the collective ownership of the indigenous Fijian landowning units or clans (mataqali). That land cannot be sold and is held in trust by the iTaukei Land Trust Board on behalf of the landowning units. Indian-Fijians produce more than 75% of the sugar crop but, in most cases, must lease the land they work from its ethnic Fijian owners.

In 2005, the textile industry in Fiji markedly declined following the end of the quota system under the Agreement on Textiles and Clothing (ATC) and the full integration of textiles into the World Trade Organization (WTO) General Agreement on Tariffs and Trade. The income from garments plummeted by 47% in 2005 with the end of the ATC quotas. Garments now account for around 9% of Fiji's exports and sugar approximately 20.9%. Other important export crops include coconuts and ginger, although production levels of both are declining. Fiji has extensive mahogany timber reserves, which are being exploited. Fishing is an important export and local food source. In 2010 and the first quarter of 2011, fish was the leading domestic export. Gold from Fiji’s only gold mine is also an important export industry and is expected to continue its positive performance with rising gold prices.

The most important manufacturing activities are the processing of sugar and fish. From 2000 the export of still mineral water, mainly to the United States, had expanded rapidly. Water exports in 2010 were estimated at U.S. $65.5 million (F$119.2 million).

In recent years, growth in Fiji has been largely driven by a strong tourism industry. Tourism has expanded since the early 1980s and is the leading economic activity in the islands. About 45% of Fiji's visitors come from Australia, with large contingents also coming from New Zealand, the United States, the United Kingdom, and the Pacific Islands. Tourist arrivals grew by about 7% in 2011 and were expected to exceed 679,000. Around 8.4% of the total tourists were American. According to the government’s estimates, Fiji's gross earnings from tourism in 2011 were expected to total $572 million (F$1.051 billion), more than the combined revenues of the country’s top five exports (fish, water, garments, timber, and gold). Gross earnings from tourism continue to be Fiji's major source of foreign currency.

Although tourism revenues yield a services surplus, Fiji runs a persistently large trade and current account deficit. The trade deficit in 2010 was around $1 billion (F$1.9 billion). Australia accounts for between 25% and 35% of Fiji's foods trade, with New Zealand, Singapore, the United States, the United Kingdom, and Japan varying year-by-year between 5% and 20% each. Since the 1960s, Fiji has had a high rate of emigration, especially of Indian-Fijians discouraged by the racialization of domestic politics and seeking better economic opportunities. This has been particularly true of persons with education and skills. The economic and political uncertainties following the coups have added to the outward flow by persons of all ethnic groups. Indigenous Fijians also have begun to emigrate in large numbers, often to seek employment as home health care workers. Remittances from overseas workers, which grew 14% from January to May in 2010 compared with the same period in 2009, are second only to tourism as a source of foreign exchange earnings. The government's 2012 national budget proposed tax breaks for a reported 99% of Fijian citizens and reduced corporate taxes and tariffs on construction vehicles and production machinery, with these tax relief measures to be offset by an upper-income tax surcharge, enhanced revenue collection, and increased airport departure taxes.

Sources:

CIA World Factbook (February 2012)
U.S. Dept. of State Country Background Notes ( February 2012)

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