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Investment critical for economic growth

Ropate Valemei
Monday, August 26, 2013

INVESTMENT is critically important not only to Fiji's economic recovery but also to sustaining long-term economic growth.

In a paper prepared for the Fiji Economy Update 2013 on Tuesday in Suva, University of the South Pacific economist Professor Biman Prasad said pre-2006 data showed that the average annual level of total investment between 2001 and 2005 was around 18.5 per cent of gross domestic product (GDP).

"The management of the macroeconomy over the last two decades has clearly not fostered a climate conducive to a higher level of investment," Prof Prasad said.

Referencing a 2005 report by the Asia Development Bank, he said high interest rates (7-8 per cent) and low levels of credit to the private sector (about 16 per cent of GDP) were among factors that hampered the financial sectors' ability to finance investment and encouraged savings in the past.

He said foreign direct investment (FDI), which was an important component of private sector investment and implemented in 2012, totalled $104.5m.

"FDI in 2012 was sourced from three countries with Canada leading to the value of $30m," he said.

"The total proposed FDI registered last year was $31.68 from 10 countries. The US dominated the share of proposed FDI with $104.5m followed by Australia with $31.9m.

"FDI implemented in 2009 was $857.6m but had decreased in 2012 to $31.75m. In fact, FDI implemented has not been more than $152m from any year from 2009 to 2012."

Prof Prasad said this was a huge decline compared to 2009 and it was important for policymakers to figure out and analyse the reasons for the low level of FDI implementation.

Reserve Bank of Fiji governor Barry Whiteside said there were some numbers shared that needed to be discussed.

"For different economists, you have different numbers. The idea is to get everyone together and see what we can do in terms of looking at the numbers, how accurate they are and move forward in terms of what we can do to promote the economy," he said.

Mr Whiteside said it was not about protecting their own numbers but seeing where they collected data from, comparing and discussing it together.





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