The sad news that Fiji Airways had laid of 758 workers has brought home clearly the magnitude of the COVID-19 crisis that we and the entire world are facing.
These workers join the 50,000 that had already lost their jobs in the tourism industry.
I estimate that half of our two workers have now lost their jobs or are on leave without pay or reduced hours. Yes, that is half the formal employment in Fiji. And that is not even counting the casual workers.
Never in our history have we faced this magnitude of disaster. The sources of income of 100,000 families have disappeared. Their suffering is immense and real. Our prayers are with them.
The reality is that no one else can do anything about this except Government. But Government is dragging its feet. While supporting companies is important, Government should not ignore the suffering of families.
Government will now bail out Fiji Airways to the tune of a $480 million guarantee. Most, if not all, of this money will flow out to repay the debt of Fiji Airways. Very little will remain in Fiji.
Had we tried to restructure this debt? Or return some of the aircraft, like other airlines have done?
Had we tried to sell other assets? Or use retained earnings from past profits? In the COVID-19 Budget, Government gave $40 million to FSC. How many more companies will Government need to bail out?
Uncertainty will become desperation
My plea to Government is this: What about the people?
Like many of us, I am shocked at the dismissive way the Government has treated the airline workers, as if only the company matters.
As the FNPF money dries up and savings are exhausted, I am afraid that the growing uncertainty will quickly turn to desperation. Government should immediately reassure the people that they matter, that their suffering has been noticed, and that their cries have been heard.
I am most disappointed by the slow action and the lack of transparency by Government. It is drip feeding the people. It brings out solutions in a piecemeal fashion—a bit here and a bit there. This adds to the uncertainty.
Is Government not sure what to do? Is it hoping that this will blow away quickly? Is it waiting for divine intervention?
We all know that the crisis will be here for a while. And as someone recently reminded me, divine intervention only happens to those that humble themselves.
Better options than FNPF to help the people, government’s only solution is the FNPF. I understand that members may now be allowed a second bite at the FNPF cherry.
The Minister for the Economy assured us that members are drawing from the general fund and not the members fund. But that should not fool anyone. The fact is that whether the fund is from the general or members fund, it still belongs to the members.
But the most important issue to me is that the FNPF option is seriously insufficient given the severity of the situation. This is a far greater crisis than a natural disaster where FNPF monies may be enough.
Considering that over $2 billion in worker incomes has disappeared, the FNPF amount is small. It would have been spent by now.
The FNPF solution is inappropriate and insufficient.
I have received a lot of support for my suggestion of a cash injection of $1 billion directly to the people and small businesses as a grant. It is big enough, bold enough and timely. The money is to be doled out monthly or fortnightly.
I had proposed that half be financed from government savings and half be lent by the Reserve Bank which could charge a zero or even a negative interest rate.
Realism
I urge Government not to make the mistake of underestimating the impact of the crisis. The Reserve Bank has said that GDP will decline by only over 4 per cent this year. I heard a minister say that the tourism industry will recover soon.
This optimism does not help find the right solutions. We must hope for the best, but we must plan for the worst.
My estimate is that the economy will decline by around 10 per cent in 2020. The decline will be higher under a worse-case scenario.
How long will this go on for? In my view, it will take the economy three years to recover to its pre-COVID level. The economy will not start to grow until late next year. Why?
Firstly, we are so dependent on tourism, which is the worst hit industry in this crisis. I estimate that 45 per cent of our economy is related to tourism.
There is no other industry that can quickly take over the lead role of tourism. Secondly, there are so many uncertainties that even the experts do not know the answers to.
While Fiji can join the travel bubble with Australia and New Zealand and even open our borders to international travel later this year, I expect that it will take some time for tourists to muster confidence to travel for holidays outside their own country.
Don’t get me wrong. We should join the ANZAC bubble but there are so many other factors that will determine how soon the tourism industry will start to grow again.
It is not surprising that government’s pants are on fire. It will only be able to collect 25 per cent of its budgeted revenue.
Part of the problem was its optimistic revenue forecasts. With the reduction in revenue of this magnitude, Fiji will tumble over the financial cliff if the Government chooses to borrow the entire shortfall. It has no choice but to adjust its expenditure.
It is time to take bold and decisive steps. This is not the time for Government to let pride stand in the way. This is not the time to continue to play politics. The costs are too high.
My budget wish list
The national budget for the next financial year will be handed down next month. Because of reckless economic and financial management, Government has handcuffed its hands behind its back. It does not have the financial freedom to move. But it must do something.
The keys to unlocking the cuffs are in putting the right things first, thinking smart and taking decisive steps. My budget lists are:
To cut out wasteful expenditure
and strengthen control
Close unnecessary embassies. Government has recently closed offices in Brazil and Ethiopia. The logic of opening these embassies in the first place boggles the mind. It needs to close more embassies.
Return 30 per cent of leased vehicles. Do we need the long lines of vehicles escorting ministers when people are suffering? When will Government show us that it is sacrificing some comforts?
Government should only complete infrastructure projects that have started and concentrate on doing the road maintenance right.
Eliminate all grants to SOEs and statutory bodies.
Replace expatriates with locals.
Centralise all government payments and the issues of LPOs.
Pull back to the Ministry of the Economy delegated authority to spend by line ministries.
To find additional revenue
Impose a temporary COVID-19 tax surcharge of 15 per cent on people earning more than $150,000 a year and a company tax surcharge of 20 per cent on companies that are making super profits.
Raise import duties on passenger vehicles and other luxury goods.
To reduce debt servicing
Ask China to convert our loans to grants. In my experience, China always dangles this carrot at loan negotiations. I know that China has forgiven debt in at least one Pacific Island country.
Restructure existing debt with multilateral organisations like the ADB and World Bank.
No one foresaw this tragedy. My only motive in sharing these views is to contribute to finding solutions in these difficult times.
This is the most dangerous crisis of our lives and I strongly feel that we must put the Government to account to ensure that it does the right thing at the right time for our sake. We must expect nothing less from them.
