A new report recommends the Government to consider a large construction project to absorb some of the economic shocks of widespread job losses.
The ANZ Research – Pacific Insight on Fiji’s experience with the COVID-19 pandemic crisis – believes that a “big” construction project would stabilise Fiji’s economy. Authored by ANZ’s international economist Dr Kishti Sen and senior international economist Tom Kenny, the report states that construction generally punches well above its weight in the broader economy, because of its high multiplier effects.
It goes on to say that construction draws heavily on local labour and locally produced upstream inputs and it includes significant downstream expenditure on fit-out items and on new machinery and equipment.
Dr Sen said this meant that the construction sector, or projects in particular, had a disproportionate effect on domestic employment and activity.
The report also recommends that further, investment in infrastructure projects was not only a key driver of economic growth in the short-term, it was also a major determinant of the economy’s growth potential over the medium to long-term.
It highlights that investment that enhances productive capacity, or the nation’s overall capital stock – rather than just replacing obsolete assets – will lift the economy’s growth potential which was crucial if moderate-to-high rates of economic growth were to be sustained.
According to Dr Sen, project candidates could include an upgrade of the sugar railway track so it can be used for tourist travel during the offseason (six months of the year); making school buildings cyclone resilient; or a new rail track between Suva and Korovou to reduce congestion and pollution.
Based on the research by Dr Sen and Mr Kenny, a greenfield project perhaps, such as a Suva to Korovou passenger railway line, would be difficult to get off the ground quickly because of the long lead times in project scoping, drawings and planning.
“Nonetheless, if there are any projects in advanced stages of planning, it could be rolled out quickly.
“Alternatively, we believe upgrading school buildings to make them cyclone resilient, or investigating an upgrade of the sugar cane freight rail track so it can be used for scenic rail trips during the off season could be projects worth considering.”
The authors note that although Fiji is a middle-income economy, it is eligible for concessional financing from multilateral agencies after the World Bank approved its inclusion as an International Development Association-eligible economy in March 2019.
“Approaching multilaterals or development partners for concessional financing would be the cheapest way to fund a large project.
“Fiji has signed a memorandum of understanding on cooperation within China’s Belt and Road Initiative (BRI). Accessing funds under this policy may be an option as well.”
