Helping ride out global shocks

THE public and private investments could cooperatively assist the local economy ride out the global shocks.

This was highlighted by Professor of School of Business University of New South Wales Satish Chand.

He said the IMF had a downgraded growth of the global economy to 3 per cent in October which was the lowest since the Global Financial Crisis with a startling similar slowdown projected for China, Japan, and the USA.

“The Fijian economy has grown at an average rate of 3.5 per cent annually for the past six years, largely on the back of large capital investments including an outlay of some 30 per cent from the public sector,” he said.

“Fiji will be affected by the global slowdown, and room for further fiscal injections from the national budget are limited for at least two reasons.

The first reason was highlighted to be the public investment which was facing strong diminishing returns.

He said the examples of remaining major investments were the completion of Nausori and Labasa airports where return on investment is likely to be lower than those for Nadi airport.

The second reason was revealed to be the public debt which was at 47.1 per cent of GDP.

Dr Chand added this left little room to raise it further as it would adversely impact on the country’s sovereign credit rating and thus the budget bottom-line.

“It is therefore time to rebalance investments where the private sector takes lead,” he said.

The benefits of rebalancing investments would result in to return of investment for the private sector to exceed that of the public sector given the complementary nature of public investments, according to him.

“The special economic zone already provides tax incentives and access to subsidised infrastructure for growth of private enterprise for example, ICT, age-care, etc.

“A new ‘state of the art’ Investment Act is being finalised, thus the soft infrastructure is being put in place for private investments.

“The Act allows national treatment for FDI which can be a source of much-needed capital and technology, and provide market access,” he added.