Oct 27, 2011

Failing Fiji Dictatorship falling into Failed State status

Bainimarama's shadow darkens Fiji's economy

by Danielle Romanes - 27 October 2011 1:04PM

Danielle Romanes is an intern with the Lowy Institute's Myer Foundation Melanesia Program.

Since taking power in 2006 Commodore Frank Bainimarama has made much of his plan to eschew 'neo-colonial' development partners and to adopt a Look North foreign policy premised on engaging emerging economies in the region. While the new relationships are undoubtedly good for Fiji, it's clear that emerging interest in Fiji is too limited to fully rescue its flailing economy.

At present Fiji is benefiting from a moderate level of emerging economy investment into its infrastructure and across a wide range of its industries. Russian mining giant Rusal is looking to explore its bauxite reserves, and this year China has opened a hotel and financed a $4 million fishing vessel, a $20 million government data facility, and a number of roads and ports.

India is present in Fiji as both a creditor and an investor, with Bollywood set to film three productions in Fiji this year, and India's EXIM Bank in talks with the government to revive the Fijian copra industry. Georgia recently held a series of bilateral talks with the Fiji Government about enhanced cooperation, and Indonesia has made noises about doing the same.

While foreign investment is more important to the Fijian economy than official development assistance, it's worth noting that Bainimarama's preference for non-traditional donors is selling the Fiji people short. Aid from emerging economies has primarily come in loan rather than grant form, and left Fiji indebted by a US$50.4 million line of credit from India, and a total of US$253.4 million in Chinese loans (the latter accounted for 8.35% of GDP in 2009).

Development loans are valuable if they actually yield development, but Bainimarama is no Lee Kuan Yew. GDP growth over the last few years has been marginal if not negative. The Asian Development Bank has warned that Fiji's government debt is dangerously high. Rather than diversifying the economy, Bainimarama's leadership has led it to become increasingly reliant on tourism, a sector vulnerable to exogenous volatility.

Bainimarama's intransigence on democracy and human rights has led the Fiji people to miss out on multi-million dollar post-sugar protocol aid from the European Union, and on ongoing financing from the Asian Development Bank, which hasn't approved any new projects there since 2006. Even China is reportedly wary of engaging too extensively in Fiji lest it upset Australia and New Zealand — though this wariness speaks far more to the relatively low marginal gains to be had from engagement in Fiji than it does to China's fear of Antipodean wrath.

Beyond relatively limited mineral resources, its vote in diplomatic wrangles, and a booming but low-profit tourism industry, Fiji just doesn't have that much to offer in its present state. The Commodore's heavy hand isn't helping, with a recent World Bank report showing increased difficulty in every evaluated aspect of doing business in Fiji. That the regime felt the need to falsify its ranking in the report is unlikely to inspire much further investment interest.

Bainimarama's 'Look North' foreign policy offensive is driven by a lack of options in the region and a need to justify authoritarianism at home, but the regime has failed to sell Fiji's people on the relative value of the new emerging economy relationships over the old ones.

Bainimarama may find this task increasingly difficult if his administration doesn't yield tangible development gains soon, because there are clearly limits on emerging economy interest in his regime. For all the rhetoric about South-South cooperation, developing economy donors have their own poverty problems to address and any development assistance they shell out internationally is going to be strongly premised on mutual gains.

Fiji has geo-strategic and infrastructure advantages it should be leveraging in this 'Asian century' to stimulate record economic growth and opportunity for its people. That it is failing to do so is an indictment of Bainimarama's leadership.

No comments: