TRANSFORM the economy, not reset it, said Unity Party Leader, renowned economist and former governor of the Reserve Bank of Fiji, Savenaca Narube. He was responding to a Cabinet decision late last month on an “economic reset package” in which some measures were announced to help the ease of doing business. “I have stressed many times that the transformation will only come by growing our resource-based sectors and the micro, small, and medium businesses. The secret of our economic success is in these two sectors. I urge this Government to show us a plan
on how this can be achieved,” Mr Narube said.
The Fiji Times caught up with Mr Narube last week for more details.

FT: Your view is that Fiji needs an economic transformation, not a “reset”. Please elaborate.
Mr Narube: “Reset” is not a proper word for this. When you reset, you’re just taking it back to where we were and where we were is not good enough for the country and the people. We really need to transform the economy and its components, its sectors, and so forth. That was my view in responding to
the reset. I only hear what the cabinet release was saying. No more. I don’t know the details. I think there were three issues they were talking about and I think that’s not adequate either. Those three issues are important and we need to address them. But I think we need to get to the bottom, the foundation of our economy and change that. And I think you have subsequent questions on the sectors.

FT: Yes. Production in our resource sectors have been declining according to Reserve Bank of Fiji’s monthly economic reviews. Sugar, gold, mahogany, etc.
Mr Narube: The sectors have been declining for over a decade or more. I think the cardinal sin here is we haven’t done anything. No one has really done anything to address this. And that’s what I said in the reset. They coming up with the same old incentives for people that are already well off. What about those that are struggling now with the cost of living? With poverty? What is the reset going to do about that? Nothing. I think it’s the age old kind of thing that OK, we give more money to those that provide investment and jobs, and through that the economy will grow. Yes, here will be a bit of that. But I think for us, we need to target the sectors that will make the economy grow, and then address some of the very fundamental problems that we face. So that’s my point – transform and reform. Please don’t reset.

FT: What are some areas that we need to reform?
Mr Narube: It’s staring us in the face. It’s our resource based industries. But we have nothing, no plan. We know the problems of these sectors, there’s no question on that. But I think what we really need to do is have a clear roadmap to how we can do that.

FT: Is this a serious economic issue to neglect?
Mr Narube: When you talk about the economy, you talk about economic growth, Gross Domestic Product (GDP), those are universal indicators of the economy. But we should take a look back at poverty. That’s where the measure of economic well-being is. You look at the widening gap between the poor and the rich, that is where the measurement should be. So if you look at that, we are in a very terrible situation. It will take years for us to address those very fundamental economic issues.

FT: Where do we look for that? The Bureau of Statistics?
Mr Narube: Yes, the Bureau Statistics should do it and I hope the government can update the study that was done by the previous government on poverty, income disparity. The Bureau of Statistics does that through a survey called the Household Income and Expenses Survey or HIES for short. They don’t do that every year. That is quite an expensive survey. They do it every five years. So I hope this government can bring that forward if it can, to update themselves on where they are as a starting point. And then we’ll see how they actually improved from that starting point. So to me, that is the key to economic well-being.

FT: A HIES study was done by the last government.
Mr Narube: Yes, but I have no confidence in the statistics of the previous government. No confidence whatsoever, because they have been heard and seen to doctor those kinds of statistics, which is not what we want. We want an independent measurement of those statistics. So the poverty level, according to them is around 30 per cent of the population. My calculation is 40 per cent of the population. With the cost of living the way it is more people have been pushed over the poverty line. So I think it’s around 40 per cent of the population that is humongous for Fiji. That 40 per cent – 400,000 people are living below the poverty line. That’s the yardstick that we need to measure – any government.

FT: So we need to start with an independently done HIES then move forward from there?
Mr Narube: Yes. Then devise a roadmap, clear one, a sectoral roadmap to take us to where we should be in, say five years then. Right now we don’t have anything.

FT: At the moment, we’re simply moving along from where things were?
Mr Narube: Yes. We see it in this government. Where are the priorities of this government?
How do we know where their priorities lie – economic, financial, as well as sectoral as well as other social priorities? We don’t. Well, I don’t. They came up with a reset, only three issues there as far as I know, but what about the rest? So there’s nothing there. There’s no vision of where we want to go. And it has been 10 months since this government took power and we have not seen anything on the economic front.

FT: A fiscal review committee was set up which led to an economic summit in April.
Mr Narube: That’s not enough. But it’s not their fault because their Terms of Reference is just limited to what they were asked to do, which is basically just looking at improving the balance sheet of government, which is the government deficit.

FT: So the government needs to set in place another committee for the roadmap? Would you advise government if you were asked?
Mr Narube: I’m ready to help government in any way I can, I’ve told them that that. We need a wholesome look at the economy, not a piecemeal look at the revenue, which is what the fiscal review committee did. We need to look beyond that? You need to look at what is the driver of the economy into the future. We need to look at technology, we need to look at all those things that can drive the economy – capacity, skills and so forth. So that’s not being done and I don’t hear anything being done. There’s too much talk, no action. And this government is doing the same thing, I’m sorry to say. Maybe worse than the previous government – I haven’t seen anything substantial.

FT: Like a roadmap?
Mr Narube: A roadmap, a view, a vision, where the whole thing is being pulled along by government. The sectoral plans and how they fit into national vision. How do we build the kind of capacity to take us where it is. We really need that. We need to have that plan and we need to implement it. We have the economic summit, we have the education summit, we have so many summits in the last six months.
What have they produced? I think if you come into government, at least the government has that position to say OK, this is what we think should be done. And then the economic summit or any other summit just validates that. And then you move on. Likewise, in Unity Fiji, our manifesto sets very clearly
that once we get into government, this is something that we will do.

FT: Should they do it within government or hire someone to do it?
Mr Narube: I think they should hire somebody. We have the capacity outside government. Why I want us to look from outside government is to bring in that innovative, wholesome, holistic look that I think
is quite needed. Those inside can then provide information, screening of those thinking, but somebody from outside. And we are prepared here to go to give some help in that regard.

FT: Production in our resource sectors have been declining. Are we doing enough to address the “structural challenges” that RBF has been saying for many months now in its monthly economic reviews?
Mr Narube: We know those structural challenges. We have been talking about structural challenges for decades in the resource-based sectors. We know that. What we need to do is convince the decision makers to do something about it. Unfortunately the structural changes remain unresolved. And the thing for us is when we go to those challenges, don’t do what we have done in the past that hasn’t worked. That’s no use for us. I find a tendency for us to say okay, let’s try again what we did the last time.

FT: In sugar?
Mr Narube: Sugar is in a big hole. It has been in that hole for two, three decades. What have we done to sugar? Same old, same old.

FT: Not much has been done in agriculture?
Mr Narube: No. Nothing. Our share of the economy of agriculture is now around seven per cent of GDP. It used to be 25 per cent. Where has the 18 per cent gone? I think there’s some uptick in yaqona and dalo, but not much to write home about. So we need to try to devise an innovative framework that
addresses the constraints, the problems, the challenges in those sectors. What are those challenges? We know them. One is that they don’t have finance, so where can the finance come from? They don’t have management capacities, so where do they get it? Above all, they should have the right mindset. And that’s what I’m saying and I’ve been preaching please, get a program to change the mindsets of resource owners and those in the rural sectors or even in the urban sectors as well. Without that change in mindset, we will be stuck to where we were before.

FT: If they asked you today to work on agriculture, what would you do?
Mr Narube: Come up with a road map, a plan. Sequence that plan properly, make sure all the present constraints are solved and then go in and implement that plan in phases. But we need to start with the mindset and also production.

FT: We have a new trend where America and Australia have strengthened their partnership in the Pacific, which to us, comes with economic opportunities. How can we use that to our interest, say in
agriculture?
Mr Narube: I think there’s a lot of goodwill in all countries that are friendly to us and we can tap on those resources that they have. I think they are just waiting. Yes, they will come with the technical knowhow, technology and of course, the capital. We don’t need to reinvent the wheel. Research has been
done elsewhere on how things can be done properly, productivity can be raised, machinery
available but how can we tap into that if we don’t know how to use their skills and their help? We need to take care of our own planning first, which we haven’t done.

FT: What’s the danger in us neglecting our resource sectors?
Mr Narube: Well, the economy won’t grow as much as it should. So when the economy doesn’t grow as fast as it should, and you have the ramifications of that to the people’s lives. When we talk about sugar for instance, there are thousands of families that depend on sugar. When the price of sugar or the production of sugar drops, then we face the consequences by those families, their incomes are lost. So what happens, sometimes they get into poverty, and so forth. That social dimension of poverty is not even being mentioned. In many of these analysis on the economy, they go hand in hand with all sorts of problems: prostitution, drugs, and so forth are prevalent. Where would we be if we continue to be stumbling on our economy for another 10 years with these social problems? I wouldn’t like to imagine
where we would end up. So those social dimensions are quite important when we do not have
economic capability or economic potential that we don’t reach because of that. We are seeing that now and that to me, is a dangerous. The value system breaks down, families are struggling – those are social manifestations whose roots are found in the sectors of the economy.

FT: So it comes back to what you said about not having a plan or roadmap.
Mr Narube: We need to set our priorities right. And that’s what I said in the beginning. I don’t see any priorities. I think our priorities right now is the cost of living. Have you seen anything that the government has said to reduce or moderate the cost of living? No.

FT: What can they do?
Mr Narube: Well, they raised VAT to 15 per cent – made things worse. What have they done? Nothing.

FT: They recently announced a Back to School assistance.
Mr Narube: Yes, that helps. But that doesn’t go very far. The cost of living is a crisis around the
world right now. And I’ve said it to the previous government, and I’m saying it again to this
government, they haven’t done anything to share the load. You see, the burden of this high cost of living is entirely now on the consumers. What about what about the capitalist or about the companies? What
share of that burden do they bear? So, I’ve said it before, the companies need to share this burden, they need to reduce their profit margin. We have an instrument called price control. We use that instrument
to better share the burden on the cost of living. You bring some of those items under price control. Over time we have been reducing the items in our price control, which economically is the sensible thing to do. Let the market operate. But in such a situation where the market failures are there, and where the
prices are rising, not so much because of local factors but overseas factors, we need to do something. So I think the price control mechanism could be a lever for us to help our people deal with higher cost of living. The second is the exchange rate. Nobody is talking about exchange rate.

FT: How can that be used?
Mr Narube: People will be surprised. As a former governor, I’m talking about the exchange rate as an instrument. But because the cost of living is being generated from offshore, prices of our imports are rising, the prices of freight and transport are rising, and we are passing the whole thing onto consumers and they pay higher and higher prices. The prices for everything now is virtually double. And because
it’s inflation that’s driven from offshore, exchange rate is what we use to convert the offshore prices to our Fiji dollar. It’s pegged to five currencies but for us, because it’s pegged, we have a mechanism where we can influence that peg. To make it cheaper in Fiji dollar terms to buy our imports.

FT: This can be influenced by RBF?
Mr Narube: Yes.

FT: And it’s not doing that?
Mr Narube: I don’t know. I can’t tell.

FT: So if it’s doing that, the cost savings need to be transferred right down to the consumers. Is that where price control comes in?
Mr Narube: Yes. But no one is thinking along that line. If they are, they’re not saying it. So we do have those instruments that can help us weather the cost of living. And then we have the poverty figures. That’s quite, quite serious for us. And the disparity between the poor and the rich. The previous government rewarded the rich a lot and this government is simply continuing with it.

FT: Headline inflation is a little over two percent according to RBF’s October Economic Review. That seems like a small number compared to the high prices of things right now. How does that figure in the cost of living?
Mr Narube: That is how we measure inflation. It doesn’t measure the rise of individual
items. It is an averaging mechanism. Inflation is a universal measurement of the cost of living, but it is an averaging process where prices of some things have gone up higher and some things are not going up as much, so the average is somewhere in the middle. But in fact food prices can be up to the roof. So they
have what they call the sub-indicies of inflation. They divide everything into sub-indices. There is a food category, there is a transport category. There is another category in the housing for instance. So every month, their surveyors go out and ask what is the cost of this housing, is it on rent and so forth. So they go back and then they calculate, for each category, this has risen by such and such. And then they take the average of all those commodities under each category, and then they average out all the other categories. So in that averaging process, the whole thing doesn’t seem too high. But if you are interested
in looking at the food, go to the food sub-indices, not just look at the headline inflation, go to the food. If you’re looking at housing, go to the housing. The Bureau of Statistics publishes those indices. But a lot of averaging processes are going on there. The price of sugar might go down, coffee might goes up, they average all that in the food sub index alone and then they average again in the total, so in that averaging process, you lose a lot of individual rises in the food item. But we see the prices when we go shopping at our supermarkets, particularly food prices are quite high now.