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COUNTRY BRIEFS


POLITICAL SITUATION

On 10 April 2009, the President of Fiji, Ratu Josefa Iloilo , announced that he had abrogated Fiji's 1997 Constitution and declared himself Head of State. He said Fiji would be ruled under a New Legal Order. Under the order, all judicial appointments were revoked pending new appointments for all judges, magistrates and other judicial officers. President Iloilo subsequently reappointed Interim Prime Minister Commodore Bainimarama and all nine members of the previous Interim Cabinet. The Interim Government has since confirmed the President's declaration that elections may not be held until 2014.

The abrogation of the Constitution followed a decision by Fiji's Court of Appeal that the dismissal of former Prime Minister Qarase in December 2006 had been unlawful and therefore invalid. On 5 December 2006 Commodore Bainimarama had assumed executive power in a military coup. Following the coup, Bainimarama dismissed the duly elected government of Fiji and declared a state of emergency. He subsequently claimed to have returned executive authority to the President, who then appointed Bainimarama 'Interim Prime Minister'. On 9 April 2009, the judges found that the dismissal and appointment was illegal. The court made the decision on the basis that if the President's powers of prerogative to appoint Bainimarama Prime Minister did exist after Fiji became independent, they did not exist after the 1997 Constitution came into effect. The issue of the President's powers of prerogative, through which the interim administration was appointed, was the crux of the appeal brought by Qarase.

The Australian Government strongly condemns both the most recent abrogation of Fiji's Constitution and the military's unconstitutional removal of Fiji's elected government in 2006. Despite claims to the contrary by the military regime, Bainimarama's take-over is illegal and cannot be justified. The international community has joined Australia in its condemnation of the regime. The United Nations Security Council, the Commonwealth Secretary General and the United Nations Secretary General have all called for a prompt return to constitutional democracy in Fiji and a respect for the values of free speech, human rights and the rule of law which underpin it.

The impact of the abrogation on the Fijian people's political rights has been profound. On 10 April, the President implemented a set of Public Emergency Regulations that limit freedom of speech, expand police powers and curb media freedom. Critics of the regime have been threatened, harassed, detained, questioned and/or assaulted. Journalists continue to be harassed, censored and in some cases deported. The Permanent Secretary for Information has been given the power to control broadcasts and publications. Interim administration personnel accompanied by police have been placed in all major news outlets, which may be shut down if they publish stories deemed 'negative'. The independence of the judiciary has been undermined and judges who are considered unsympathetic to the regime have been removed. Military personnel have the power to use arms to break up gatherings and have detained individuals without charge.

In response to the 2006 coup, Australia imposed travel restrictions on Bainimarama, his supporters and their families. These restrictions also apply to members of the unconstitutionally-appointed Interim Government, military officers and their families. The bans also apply to rank and file members of the Fiji military forces, but not their families. Defence cooperation and ministerial-level contact with the Interim Government have been suspended. However, contact at officials-level continues to take place in order to pursue key interests.

Australian aid sets out to support the people of Fiji, but does not support activities which have rendered our programs ineffective or have compromised their integrity. Australia has not withdrawn significant portions of its aid program in response to either the 2006 coup or the abrogation of the Constitution in April 2009. Although some existing and planned programs were suspended immediately following the December 2006 coup, assistance has not been removed where removal would harm the people of Fiji. Australia's aid program has, however, been reoriented to help mitigate the impact of the global economic crisis and ongoing political instability

The aid program aims to ensure essential services are maintained, particularly in health and education, enterprise development and financial inclusion programs, and to assist vulnerable groups. Australia continues to provide scholarships for study in Australia and the region.

On 27 January 2009, the Pacific Islands Forum (PIF) Leaders and Commonwealth Ministerial Action Group (CMAG) met in early 2009 to consider whether Fiji had met its obligations to make progress toward holding elections in 2009. [CMAG decided that Fiji would be fully suspended from the Commonwealth at the next CMAG meeting in September 2009 if Fiji did not meet its undertakings]. Forum Leaders announced that the Interim Government had until 1 May 2009 to begin serious preparations for elections by the end of 2009, including the announcement of a firm election date. These steps were not taken and Fiji was suspended from the meetings and events of the Forum from 2 May. The 2 May announcement means that the Leader, ministers and officials of the Interim Government are suspended from all PIF meetings and events. The Interim Government is now ineligible to benefit from PIF regional cooperation initiatives, and new financial and technical assistance, other than assistance toward the restoration of democracy.

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POLITICAL BACKGROUND

On independence in 1970, Fiji adopted a constitutional democratic form of government based on the Westminster model. Fiji has a bicameral parliament consisting of a nominated Senate, an elected House of Representatives and a Cabinet presided over by a Prime Minister.

Indigenous Fijian concerns are taken account of through the Bose Levu Vakaturaga (Great Council of Chiefs). This is the highest assembly of traditional chiefs of Fiji and meets at least once a year to discuss matters of concern to the Fijian people. The Council appoints the President of Fiji, a power embodied in the 1997 constitution.

In 1987 the democratic rule of Fiji was interrupted by a military coup led by then Lieutenant Colonel Sitiveni Rabuka. A four month period of interim rule by the Governor General ended with a second coup by Rabuka on 25 September 1987. Rabuka abrogated the 1970 Constitution and declared Fiji a republic. A short period of military government and two subsequent interim administrations followed and a new constitution was promulgated on 25 July 1990, with elections held in May 1992. Subsequently, after extensive consultations, a new Constitution was adopted in 1997.

Fiji suffered another period of political, social and economic instability beginning on 19 May 2000, when a group led by George Speight seized control of the Parliament and took hostage then Prime Minister Mahendra Chaudhry and members of his government, holding them for 56 days. The hostage-taking was followed by the purported abrogation of the 1997 Constitution; the departure of then President Mara; and the installation of three successive unelected interim administrations. Rulings by the Fiji High Court and Court of Appeal that the 1997 Constitution remained the supreme law of the land led to the general elections of 25 August -1 September 2001 and Fiji's subsequent return to parliamentary democracy under the Prime Ministership of Laisenia Qarase, who had led the caretaker and interim governments.

The general elections of 2001 were won by the Soqosoqo Duavata ni Lewenivanua (SDL) Party, headed by interim Prime Minister Qarase. Following these elections, and in accordance with a Constitutional provision for multi-party representation in Cabinet, Prime Minister Qarase invited members of the Fiji Labour Party (FLP) to join Cabinet. Qarase refused, however, to include FLP leader Chaudhry in the Cabinet lineup. In November 2004, the FLP announced that they were no longer interested in participating in the Qarase-led government.

Prime Minister Qarase's SDL Government was returned to office with a narrow majority at the elections held in May 2006. A multi-Party Cabinet, including members of the FLP, was then formed. Prime Minister Qarase, FLP Leader Chaudhry and Opposition Leader Beddoes extended an end of September deadline to agree on rules for the operation of the multi-party Cabinet but had not reached agreement by 5 December 2006, when the latest coup took place.

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FOREIGN POLICY

Fiji is a member of the United Nations, the Commonwealth, the Pacific Community (http://www.dfat.gov.au/geo/spacific/regional_orgs/pc.html) , and the Pacific Islands Forum (http://www.dfat.gov.au/geo/spacific/regional_orgs/spf.html). It also has trade and political links with Papua New Guinea, Solomon Islands and Vanuatu through the Melanesian Spearhead Group (MSG), and is a member of the African-Caribbean-Pacific Group associated with the EU. Fiji became a member of the General Agreement on Tariffs and Trade (GATT) in 1993 and is an active member of its successor organisation, the World Trade Organization (WTO). Following the removal of the democratically elected government, Fiji was suspended from the Councils of the Commonwealth.

Because of its central location in the South Pacific and relatively well-developed economy and infrastructure, Fiji is host to many regional organisations. These include the Pacific Islands Forum Secretariat, (http://www.dfat.gov.au/geo/spacific/regional_orgs/spf.html#secretariat) the University of the South Pacific (http://www.dfat.gov.au/geo/spacific/regional_orgs/usp.html) , and part of the Secretariat of the Pacific Community.

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ECONOMIC OVERVIEW

The 2006 coup, like its predecessors, has had significant economic consequences for Fiji and for the living standards of its people. The uncertain political and economic climate has impacted negatively on investor sentiment. The military regime continues to interfere in the economy, including through the appointment of military figures and regime supporters to senior board positions.

Fiji experienced negative growth of 6.6 per cent in 2007 (a year when most economies were performing well). The Reserve Bank of Fiji (RBF) has forecast a contraction of 0.2 per cent in 2008 and a further contraction of 0.3 per cent for 2009. The ADB estimates growth in 2009 will in fact decline by 0.5 per cent. This follows signs of further declines in key revenue sources such as sugar, tourism and remittances. In March 2009, Standard and Poors' downgraded Fiji's credit rating from stable to negative based on weak economic growth. In April 2009, Moody's downgraded Fiji's government bond rating to B1 from Ba2 in view of political uncertainties and the increasingly constrained foreign exchange situation. In response to declining foreign reserves, the RBF implemented exchange controls and, on the 15 April 2009, devalued the Fiji dollar by 20 per cent. On 30 March 2009, the regime announced a 50 per cent cut to the operational budgets of public service agencies. This decision may impact on the delivery of essential services to the people of Fiji.

Sugar is Fiji's largest export industry. Already struggling, in large part because of inefficient mills and lack of resolution of the land lease system, the sugar industry suffered significant infrastructure damage and lost production during the January 2009 floods. The EU's guaranteed price for Fiji sugar will drop by 20 per cent on 1 October 2009. The EU's sugar adaptation package of assistance worth a total of €200 million, which was originally designed to manage the impact of the phasing out of preferential pricing, is being gradually lost to Fiji as the regime fails to meet its commitments on credible progress on a return to democracy. On 18 May 2009, the EC cancelled €24 million worth of funding, saying it had taken the decision in the absence of any sign that a legitimate government would be in place in 2009. The prospects for the industry in the future are poor, with the IMF forecasting sugar exports to drop from FJ$246 million in 2008 to FJ$173 million in 2009.

Tourism is Fiji's biggest source of foreign exchange, followed by remittances from Fiji citizens living abroad. While tourism arrivals have remained relatively flat since the 2006 coup, earnings have declined steadily as the industry has become increasingly reliant on heavy discounting in order to maintain tourist numbers. Prospects for 2009 are uncertain. Visitor arrivals fell in January 2009, partly because of significant flooding in parts of Fiji. The ADB forecasts a further downturn in 2009 as all of Fiji's key tourism markets face recession. Remittances have continued to fall – down from FJ$326 million in 2006 to FJ$200 million in 2008. Remittances may drop to FJ$100 million in 2009, reflecting the impact of the global recession on expatriates in Australia, New Zealand and North America.

Aid program response

Australia's aid to Fiji aims to mitigate the economic and social impacts of the 2006 coup and the global recession. The expected outcome of total ODA to Fiji for 2008-09 is estimated out A$37.9 million. Total Australian ODA to Fiji for 2009-10 is estimated at A$35.4 million. Australia's aid focuses on providing social protection and financial inclusion measures to support vulnerable communities; supporting health and education systems; and partnering with civil society and regional organisations to promote an environment for improved governance. Major components of the bilateral country program are health and education services, rural economic development, support for civil society organisations and technical support to the textile, clothing and footwear sector.

Australia will continue to monitor the economic situation with a view to considering options for providing support for the ordinary people of Fiji, especially vulnerable groups. The people of Fiji also benefit from regional programs such as those focusing on climate change, disaster risk reduction, scholarships, HIV/AIDs and access to the Australia-Pacific Technical College.

In response to the January 2009 floods, Australia provided $3 million assistance to provide emergency relief and support longer-term recovery focused on the health, education and agricultural sectors.

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BILATERAL ECONOMIC AND TRADE RELATIONSHIP

Statistical data

Australia is the largest foreign investor in Fiji, and two-way trade is worth nearly $1.6 billion annually. In 2007, Australia was Fiji's fourth biggest export destination and second largest source of imports. Two-way trade has, however, steadily declined since 2000, largely due to a reduction in Australian exports of refined petroleum and falling textiles, clothing and footwear (TCF) trade. Two-way trade in goods in 2008 amounted to A$545 million (Australian exports to Fiji at A$401 million; Fiji exports to Australia at A$144 million). Two-way trade in services was valued at A$1.05 billion in 2008, with Australia's imports of services from Fiji valued at A$877 million. Fiji is an important market for Australian value added products and for small to medium enterprises. Australia's share of the Fiji import market is around 22.8 per cent.

Major Australian exports to Fiji in 2008 were wheat (A$18 million), liquefied propane and butane (A$16 million), man-made fabrics (A$9 million) and woven cotton fabrics (A$9 million). Major Fiji exports to Australia in 2008 were clothing (A$75 million), gold (A$24 million), cereal preparations (A$15 million) and vegetables (A$5 million).

Australian trade and investment strategies

TCF is a major industry in Fiji, employing some 4,000 people, many of them women. However, Fiji's TCF industry has been declining over recent years. Concessional market access arrangements under SPARTECA and the SPARTECA (TCF Provisions) Scheme (S-TCF) at present play a major role in the industry. SPARTECA is a non-reciprocal trade agreement between Australia and New Zealand and Forum Island Countries (FICs), one of the objectives of which is to achieve progressively, in favour of FICs, duty free and unrestricted access to the markets of Australia and New Zealand for as wide a range of products as possible.

The S-TCF scheme, which facilitates duty free access to Australia for textiles, clothing and footwear products manufactured in Forum island countries, had been due to expire on 31 December 2004, but has now been extended until 31 December 2011. In 2009, Australia granted Fiji's TCF industry a reduction in the Minimum Local Area Content from 35 per cent to 25 per cent, thereby lifting the number and type of garments able to be exported duty-free to Australia.

The extension of the S-TCF scheme will provide some assurance to those workers and companies as they adjust to the competitive international trade environment. Australia is also providing up to FJ$3.28 million in support to Fiji's TCF industry. This program is helping the industry through improvements in efficiency, productivity, quality and market reach.

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EXPORT OPPORTUNITIES

Textiles clothing and footwear

Opportunities exist to supply textiles to the garment industry in Fiji, which specialises in cut, make and trim of garments for re-export. Major Australian textile exports to Fiji include:

-- Woven fabric - yarn of combed wool

-- Woven cotton fabric - unbleached

-- Terry fabric - knitted or crocheted

-- Woven fabric - metal thread

-- Non-woven special yarns

-- Synthetic woven fabrics - unbleached or bleached

Much of this material will be re-exported to Australia as made up garments, under Cut, Make and Trim (CMT) arrangements. Textiles not imported under CMT arrangements are normally priced on metre lengths.

Business and financial services

-- Australian organisations dominate the local market in banking services with representation from ANZ, Westpac and Colonial (CBA).

-- Insurance companies with local presence include Queensland Insurance (Fiji) Ltd (QBE), Fiji Care Insurance Ltd, AON, Marsh Ltd and Tower Insurance.

-- Local accounting companies have a close association with counterparts in Australia.

Processed food

Australia is well placed to enhance its position as tastes in Fiji and eating habits are changing and becoming more 'westernised'. The majority of processed foods are imported. Australia is already a major supplier contributing around 46 per cent of imports in this sector. There is increasing scope for convenience foods like noodles, TV dinners and dehydrated meals. Cereal consumption is also on the rise and there are opportunities for new products.

There are specific opportunities for Australian exporters in the following product areas:

-- Supermarket lines and food service lines for resorts

-- Beer, wines (mainly for resort wine lists), spirits and liqueurs

-- Equipment and accessories for food processors and domestic kitchens, including packaging and flavours

Sugar

The Fiji sugar industry needs to be modernised and reformed. Substantial opportunities may be available for Australian industry to assist in this program, notably in the areas of harvesting, transport and milling.

Dairy products

There are opportunities for Australian products in:

-- retail pack and other cheeses

-- yoghurt

-- bulk butter

-- bulk instant and normal powdered milk for further processing and packaging by Rewa Dairy (Fiji's only dairy producer) and other repackers and manufacturers.

Education and training

Australian institutions contribute substantially to this sector in Fiji.

-- The University of Southern Queensland (USQ) has established campuses in Suva and Nadi

-- Other institutions offer courses via joint venture partners for particular disciplines

-- Individual professionals visit Fiji on a regular basis conducting training courses for individual organisations or as a group session

-- AusAID offers scholarships to students from Fiji for tertiary study in Australia, regional institutions and courses at the Australia-Pacific Technical College.

Energy and utilities

Consultants, contractors and equipment suppliers have delivered services and equipment to the Fiji market over many years. Power line equipment and generators are supplied on a regular basis.

-- Opportunities exist for supply of renewable energy technology and equipment as Fiji tries to move away from dependence on diesel generation.

Information and communication technology

There are opportunities in Fiji for products and services that enhance the efficiency and reach of the telephone system. The introduction of the Southern Cross Cable has increased the need for sophisticated equipment and services. Improvements are being sought for the remote area communication systems which use satellite technology.

Substantial opportunities are present in the information technology sector as Fiji endeavours to develop its capabilities in the field

-- The Studio City development is aimed at attracting investors ranging from film and audio to software products and services

-- Fiji is not a signatory to the Information Technology Agreement of the WTO

-- The importation of computers and accessories is duty free.

Meat

The best opportunities for meat in Fiji are:

-- Lamb/mutton for the retailing industry

-- Special cuts of beef and lamb for the hospitality industry

-- Poultry may not be imported from Australia (with the possible exception of Western Australia) because of strict quarantine regulations.

Mining and minerals

Fiji is not a big market for Australian mining equipment suppliers as there is only one large mine in operation in Fiji, but almost all mining systems and equipment are imported.

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VISITORS TO FIJI

Australians wishing to visit Fiji should consult the DFAT travel advice at Smartraveller.gov.au (http://smartraveller.gov.au/) or contact the Fiji High Commission in Canberra on (02) 6260 5115 to check entry requirements.

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Last Updated: February 2011

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