FHTA Tourism Talanoa: Investing in Real Economic Growth

FHTA Tourism Talanoa: Investing in Real Economic Growth

Fiji Hotel and Tourism Association, 23 May 2024 – As we get closer to the end of the fiscal year, the topic of conversation regardless of which industry you are in or where you are gathered; discussions are in full flight on the expectations of the national annual budget and its multi-faceted impact with a range of confidence levels on predictions.

As the Fiji Hotel and Tourism Association (FHTA); we give voice to our tourism sector challenges and recommendations through our own submissions to Government on behalf of the industry that we listen to with keen attention all year.

What can we expect from the national budget given the ever-fluctuating global economy, where factors such as interest rates, exchange rates, and economic development play pivotal roles in shaping fiscal policies and their impact on growth and stability?

And for Fiji, this impact is more pronounced given our susceptibility to external uncertainties that include commodity price increases, the Russia-Ukraine conflict, the Middle East crisis and restrictive monetary policies.

Let’s start with what’s happening with budget trends at a global level.

We have seen an increase in social spending where governments are allocating more resources to social protection, education, and healthcare.

We expect that Fiji would be no different, given the historically poor attention provided to this before, and widespread calls for this to change.

There has also been recognition and therefore policy support for digital transformation through investments in digital infrastructure, cybersecurity and e-governance, and Fiji will no doubt follow this trend too.

The global focus on sustainability through climate change awareness and the subsequent increased support of environmental protection, renewable energy and sustainable development can also be expected to be considered in our budget.

Additionally, the increasing rate at which governments are recognising the need to collaborate more strongly with the private sector through public-private partnerships (PPPs) to finance, design, build and operate infrastructure projects makes sense, so we might expect this to come through as well.

Finally, the recognition of demographic shifts within countries is usually based on how young or old your population is, and thus the need for policies to adapt accordingly.

And while globally most countries are having to deal with ageing populations and therefore healthcare, pensions and the care of the elderly; Fiji will be addressing (or should be) a younger and declining population through migration and outward labour mobility.

We predict that the upcoming budget will shape Fiji’s next few years and significantly affect MSMEs and the private sector, and we hope that with the repeated messaging from the Government on the need to diversify the economy, this is supported alongside the nurturing of existing industries that are holding their own and contributing to tax revenue and employment.

The outward movement of our population in response to both greener pastures and the demand for labour in our key markets has put inadvertent pressure on employers from all sectors.

It has resulted in the inflation of the formal sector wage bill with both private and public sectors desperately trying to attract and retain workers. The calls for an increase to the minimum wage therefore – both from the unions and political party manifestos, deliberately ignores this fact, and what we can therefore expect will be the domino effect any further increase will have on pushing inflation up even further.

Along with the approximately 15% increase in wages post-COVID, there has been a considerable increase in the cost of training for employers with the private sector footing much of its own in-house training programs based on the urgent need to do so, and the condescending attitudes of higher education and TVET institutions that their programs could not possibly be out of touch with employer expectations.

This has, in turn, resulted in calls on the Government, including from FHTA, to return the FNU Levy (1% of total employee wages) that is paid by employers for training, when in fact 50% of the levy monies are used for general practitioners for consultation fees, 40% goes towards the Accident Compensation Commission of Fiji (ACCF) and from the balance of 10% that goes to FNU for administrative purposes, the actual benefit to employers paying the levy claimable for training is only 1%.

For the fiscal year 2024-2025, Government is targeting a net deficit of $494.5 million, about -3.5 percent of GDP, which is an improvement from last year’s deficit of $639.1 million or -4.8 percent of GDP.

The strategy for the upcoming year will again be focused on boosting revenue through effective tax reforms and disciplined spending, with a more determined approach to growing the economic pie.

The VAT increase from 9% to 15% implemented in FY 2023-2024 was expected to boost Government revenues to commence a more effective debt reduction plan (which it has) by about 5 percentage points of GDP, but like it or not, it has also impacted inflation.

On the expenditure front, the plan is to cap operating costs while prioritising high-impact capital projects and improving service delivery through increased efficiency and reduced waste.

Easier said than done as we know, with no actual easing in the “ease of doing business” space despite consistent calls for attention in this area because this requires government agencies and ministries to collaborate, cooperate and be accountable.

The government proposes raising the departure tax from $140 to $170 beginning in April 2025. Despite industry opposition, we have also proposed that these additional funds could be more effectively utilized for tourism infrastructure development and waste collection projects aimed at cleaning public beaches and safeguarding the environment. This could potentially boost access into less developed or rural areas, and boost SME participation that has the added potential to create new tourism experiences.

For accountability purposes, local councils could work directly with tourism.

There are a number of plans already in place that require funding and policy support to see expected outcomes, especially now – with heightened urgency. These include the Fiji National Infrastructure Investment Plan 2023-2034 with a comprehensive strategy that involves the expansion of Nadi International Airport to handle future passenger growth and air traffic demands up to 2043 while emphasizing maritime safety and the need for resilient and sustainable maritime transport.

Then there is the Fiji National Sustainable Tourism Framework (NSTF) 2024 – 2033 which will require the introduction of new policies aimed at ensuring the sustainability of the tourism sector with a focus on the economic and social well-being of our people, our environment, and our cultures.

We hope this will also begin the process of providing the Ministry of Tourism with a stronger mandate to manage or coordinate tourism-related policies and regulations.

They might be the only ministry responsible for the largest industry without any actual regulatory authority, while tourism regulations are spread over many ministries with a negligible understanding of how this diversely segmented industry works.

The NSTF also provides a strategic direction for the next ten years, highlighting the importance of tourism in achieving the Sustainable Development Goals (SDGs) – an area Fiji has had very poor outcomes on thus far, including low-carbon transport, energy transitions, and biodiversity conservation.

Cultural tourism is also a priority, aiming to promote sustainable cultural tourism that nurtures Fijian culture, heritage, and the arts.

These major changes are expected to significantly influence the future of Fiji’s tourism industry, aligning it with broader economic, social, and environmental goals.

Finally, investment indicators have not been the most positive so far, and investment, especially foreign direct investment, is what Fiji will need to grow that economic pie we’ve been trying to bake up through the right policy support frameworks.

While we acknowledge that wider consultations have been taking place, it has not stemmed the trickle of often pompous statements on policy changes that have yet to be consulted on, agreed with, or even passed by Government; prickling the tenuous confidence in government stability the private sector is holding on to.

The private sector needs confidence in the economy, in the government, in the consultation process and in the understanding that we are a critical part of the full process for building the pathways to Fiji’s economic success.

Fantasha Lockington – CEO, FHTA (Published in the Fiji Times on 23 May 2024)