Investing In Our Future
One of the major components of Fiji’s recent successes in terms of economic growth has been our increase in the proportion of the national budget spent on capital expenditure as compared to decades ago. Today, we explore the importance of maintaining this trend and break down capital expenditure versus operational expenditure.
Operational expenditure in basic terms is the amount of money spent on the day to day running of Government.
For example, the salaries of civil servants, the fuel used in vehicles, and all other day to day expenses that allow the government to function and provide essential services to Fijians are all operational expenses.
Operational expenses are a reality of every government, every business and any organisation around the world. Previous governments spent up to 85 per cent of taxpayers’ money on operational costs, as opposed to capital costs.
This level of expenditure in operational costs was extremely inefficient and it meant that there was less infrastructural development.
Many of the facilities such as hospitals, jetties, schools that are being constructed now could have been constructed at much less cost years ago if previous governments had the foresight and a long-term strategic plan.
Unfortunately, there was no efficient long-term strategic plan and certainly no implementation as shown by the high operational expenditure that previous governments incurred.
Capital expenditure is the money spent on building fixed assets such as land, infrastructure and equipment. In the past few budgets, Fiji has spent a considerably larger percentage of our national budget on developing infrastructure for future generations.
We must, of course, bear in mind that even though previous governments spent up to 85 per cent of our budget on operational expenditure, their revenue was considerably less. Thus, even though the current government spends less of a percentage of the national budget on operational expenditure, the amount spent is actually more in terms of dollar value and most of this is because of the fact that civil servants now get paid more than ever before in our history.
Investing in capital expenditure now means investing in the future of our children. It would be a lot costlier for them to buy materials for a building 20 years from now because of inflation, just as it is more expensive for us to buy materials now than it was 20 years ago when previous governments should have invested in infrastructure.
It is very important that good levels of capital expenditure are budgeted for, for Fiji to maintain a healthy economy.
The building up of capital as a result of investing in infrastructural development is just like investing the country’s money in assets which give returns to her people. For example, if we spend 85 per cent of all our money to eat, drink
and have a party, we will wake up the next day and realise that we have nothing left in our pockets. However, if we had spent, let’s say even 30 per cent of our money and invested in a house, we would have something to show for our expenditure.
The house is now an asset of value that we own. We can now give the house for rent and start earning an income, or we can sell the house at a profit and get more money, but most importantly we now have something for our children and their children. This simple example illustrates the importance of smart and responsible spending with our future generation of Fijians in mind.
More than 50 per cent of our population is under the age of 30. Fiji has a very young population and a young population procreates more. This means that we are going to see even more young Fijians born and the need for more and better infrastructure, facilities, schools, hospitals, bridges, jetties and other important things for our children. We must also bear in mind that not only have Fiji and the world advanced tremendously on the technological front, but younger Fijians are now very technologically savvy. Government must invest, as part of capital expenditure, in technology and facilities that can compete with international equivalence.
This will not only allow Fijians to be on par with people around the world, but maintain our dominance as the pre-eminent nation in the Pacific.
And of course better facilities encourage Fijians to stay in Fiji while at the same time gives international and local investors’ confidence when investing money into our country.
This will help grow our economy and better the lives of our people and future generations on Fijians to come.
The house is now an asset of value that we own. We can now give the house for rent and start earning an income, or we can sell the house at a profit and get more money, but most importantly we now have something for our children and their children. This simple example illustrates the importance of smart and responsible spending with our future generation of Fijians in mind.