July 27, 2014

Prof Wadan Narsey: Fiji Times - The facts on Poverty and Social Justice

Professor Wadan Narsey
The Fiji Times, 26 July 2014

[Qualification: There are many voters who believe that an unelected government, deemed illegal by the highest Fiji Court of Appeal, should not be changing policies on taxation, government expenditure and public debt for eight years. One founding slogan for the American War of Independence was: “no taxation without representation”.]

Economies can show high rates of growth, but have mixed results on the poor:

(1) the poor can  become poorer, because the cost of living increases more than their incomes (some evidence of this).

(2) the poor can become poorer because of increased Value Added Tax, while the rich can become richer because of reduced direct taxes reduced (some evidence of this).

(3) the poorest can become better off even as the rich become richer, and income distribution can still become worse (no evidence of this).

As with the economic growth analysis, the analysis of changes in poverty may also be broken into two periods: one of increasing poverty between 2005 and 2011, and the second between 2011 and 2014 when many positive budget measures were brought in in the areas of education and infrastructure especially.

The likely changes in poverty are examined through household survey data form the Fiji Bureau of Statistics, the Wages Councils, changes in taxation, and the annual budget measures of the last three years.

Changes between 2002-03 and 2008-09
The FBS Household Income and Expenditure Surveys (HIES) for 2002-03 and 2008-09 give the changes in poverty between these two survey periods, with four years during the Qarase Government, and two years during the Bainimarama Government (the Bainimarama coup took place in December 2006).

Poverty between 2002-3 and 2008-9:
* in rural areas increased from 40% to 43%
* in urban areas reduced from 28% to 18%.
* Fiji as a whole, reduced from 35% to 31%.

Given the declining agricultural output in the sugar and non-sugar sectors, one can say confidently that rural poverty would have increased steadily through this entire period, both under the Qarase Government and the Bainimarama Government.

But because of the overall cumulative positive economic growth rate of 15% between 2000 and 2006, urban poverty under the Qarase Government would have been decreasing.

Changes in poverty between 2004-05 and 2010-11
The first year of this period was under the Qarase government, while the remaining five years were under the Bainimarama Government.

Assuming that the patterns of remittances were roughly the same throughout, the Employment and Unemployment Survey (EUS) data for 2004-05 and 2010-11, can be used to examine poverty at both the individual worker level, and also at the household level.

The EUS data at the household  level indicate that the percentage of population in households below an estimated poverty line, changes as follows, between 2004-05 and 2010-11:
*  in Fiji overall, poverty increased from 30% to 45%
*  in rural areas, poverty increased from 34% to 55%
*  in urban areas, poverty increased from 25% to 35%

The EUS individual worker data indicate that
*  poverty of the workers depending on subsistence increased from 35% to 67%.
*  the poverty of employees not covered by Fiji National Provident Fund, increased from 50% to 60% (those covered by FNPF remained the same at 20%).

This last result is not surprising given Governments’ failure to implement Wages Councils (next section).

Government failure to implement Wages Councils
The poorest wage earners who are not represented by unions are supposed to be protected by the ten Wages Councils, set very sensibly at different levels for different sectors depending on how well each sector was doing.

For most of the post-coup period, the Wages Councils were under the Chairmanship of Father Kevin Barr.

Unfortunately, Father Barr’s Wages Regulation Orders were postponed year after year by the Minister for Labor under orders from the Bainimarama Government, because of unethical pressures by employers and the Employers’ Federation.

While the stagnating economy after the 2006 coup may well have been an important factor for some employers, not a single employer ever showed their audited accounts in justification for their inability to pay, to the Wages Council Chairman (Barr) or the Labour Minister.

After postponement for four years, small partial adjustments were allowed, which did not keep pace with the large increases in the cost of living, and most of these workers, already extremely poor and numbering about 50,000, slipped further into poverty (as the EUS data indicates).

Eventually, Father Kevin Barr was sacked as Chairman of Wages Council, after accusing the Bainimarama Government of practicing “crony capitalism”, and threatened with expulsion from Fiji (Father Barr is an Australian citizen).

Then there was the National Minimum Wages debacle by the Chairman of the Commerce Commission (Dr Mahendra Reddy), who with great public fanfare, set a “scientific” national minimum wage of $2.32 per hour, only to retreat into silence, when the Bainimarama Government unilaterally, again under pressure from employers, reduced it to $2 per hour.

Regressive taxation: taxing the poor and helping the rich
There has been a false claim that because of the raising of the income tax threshold to $15,000, the poor now do not pay any tax, but the reality is that all consumers pay tax through VAT, on essential and non-essential expenditures alike.

Since 2006, the Bainimarama Government has changed the taxation system heavily in favor of the rich and increased the burdens on the poor:
(a) VAT has been increased from 12.5% to 15% increasing the cost of living for the poor;
(b) Income tax at the highest income levels has been reduced totally unnecessarily from 30% marginal tax to 20%, lower even than all our neighbouring countries, thereby increasing the after-tax income for the rich (except for those earning over $270k).
(c) Corporate tax has also been reduced totally unnecessarily from 28% to 20%, with most foreign companies repatriating their increased profits.

These tax reductions have probably given back more than $150 million to the rich, and the lost revenues regained by taxing the poor and the middle classes more, through the VAT.

Income distribution and social justice has worsened in this period.

However, there have been some positive measures for the poor through budget measures in the last two years.

Changes in poverty 2011 to 2014: high growth and budget measures
The period 2011 to 2014 has seen an average growth rate of 3% growth rate, massive infrastructure investments amounting to more than $1 billion, and the continuation of the remittance receipts from abroad (now amounting to more than $370 millions according to RBF figures).

While there is no data to assist, almost certainly, poverty will have been reducing between 2011 and 2014 but annual budget figures also have a bearing on household poverty from the government expenditure side, which may be picked up in future household income and expenditure surveys.

The Bainimarama Government in the last three years has also brought in comprehensive subsidies on bus fares and tuition fees, and increased access to scholarships and loans for tertiary education. Commitments have also been made to make pre-schools free.

These are all clear and much appreciated benefits for the poor and there is statistical evidence of the positive effects.

The EUS data indicates that between 2005 and 2011,  the percentages of children attending  school have increased by 4% at primary schools (to almost complete coverage now), and by 7% at secondary to reach 88%, and by 7% at tertiary ages to reach 40%.

Almost certainly, the improvements in school attendance have continued to grow after 2011, especially at the secondary and tertiary levels given the easier access to scholarships and loans.

Of particular benefit to Indo-Fijian families is that there are no obstacles in their children’s paths to higher education, whereas previously there used to be quotas on scholarships, and limited access to loans.

These education policies by the Bainimarama Government counter, to some extent, the changes in taxation policy described above, but not for those poor families without children at school.

Note that the awarding of scholarships in select areas based totally on academic merit has meant reduced access to indigenous Fijians in these areas.

Given that the emigration data indicates clearly that qualified non-Fijians are far more likely to emigrate than indigenous Fijians, then the current ethnically blinkered scholarship policies, are likely to lead to severe skill shortages in the future in those areas.

Another recent positive measure has been the allowances for the elderly which is of some assistance to the destitute.

More importantly, the building of rural roads and other socially necessary infrastructure on water and sewerage throughout Fiji (especially in the poorest Northern Division) will be of great assistance to the rural poor, facilitating the marketing of their produce and better access to essential urban services, and improving their livelihoods and standards of living.

However, these future benefits will only eventuate, if the increased infrastructure expenditure translates into higher economic growth, which can pay for the current large increases in Public Debt, which will otherwise be a burden on the future generations of the poor and middle classes.

It also depends crucially on the Republic of Fiji Military Forces respecting the democratic outcome of the September 2014 elections and staying clear of politics whatever the result.

June 17, 2014

Prof Wadan Narsey: Letter to Editor - Green sustainable development strategy in Fiji and mangroves

Letter to Editor (The Fiji Times, Fiji Sun, Island Business)
16 June 2014

Dear Sir

Many environmentalists would have been happy to hear the excellent speech made by the keynote speaker to the Green Growth Summit last week, Rear Admiral Bainimarama, who is quoted as saying that (The Fiji Times, 13 June 2014):

“We need to build green economies in which the driver of growth is a more intelligent and effective use of our resources, along with their sustainable management” and that “Fiji was taking the lead in the region”.

Unfortunately, the facts suggest otherwise.

As I have asked previously (with no answers forthcoming) could anyone in the Bainimarama Government responsible for the environment, explain who gave the permission for the massive destruction of mangroves in

(a) Nasese the extent of which can be seen in this Wikimapia map

(b) between Grantham Road and Fletcher Road, the extent of which can be seen in this Wikimapia map.

I would be grateful if  Mr Donald Singh would refrain from replying on behalf of the Fiji Government  as he did previously, without declaring his interest that his employer is one of the companies benefiting from this government’s largesse.

Professor Wadan Narsey

Note: Google Earth will also give you a good picture of any environment destruction that is happening anywhere in Fiji, such as in Lami, Veisari etc.

I have also previously put a video on Utube of the destruction of our mangroves.

Prof Wadan Narsey: Letter to Editor - Accountability of Fiji Roads Authority and PS Finance to tax-payers

Letter to Editor (The Fiji Times, Fiji Sun, Island Business)
16 June 2014

Dear Sir

It is positive that the CEO of Fiji Roads Authority is now frequently in print explaining what FRA is doing with the almost $1 billion (one thousand millions) of tax-payers’ money allocated to roads for 2013 and 2014.

But there have been no replies to several letters to the editor I have previously sent, requesting the Fiji Roads Authority  and the Permanent Secretary of Finance, to explain several matters of interest to the tax payers.

If they feel they are in any way accountable to the Fiji tax payers who fund them, can the PS Finance and CEO FRA please reply to these questions.

(a) who is auditing the expenditure by the Fiji Roads Authority

(b) what is the cost per kilometre of the new roads being build using these funds

(c) what is the total cost of the roads beautification around Cost U Less and USP.

(d) what is the total remunerations (salary and perks) of the top 10 persons employed by the FRA

(e) have tax-payers been responsible for any bad debts of the Black Top Company which closed down in Vanuau Levu.

(f) could the bridge over Nabukalau Creek be safely kept open as a single lane traffic for private and light goods vehicles, instead of closing it down totally OR was closing it down totally “proof of sorts” that the Public Works Department was not doing its job previously?

Professor Wadan Narsey

June 15, 2014

Prof Wadan Narsey: Election Issues 15 - How many voters do you really need?

OR “Do you really need 100% voter registration and 100% voter turnout to have a democratic elections”?
(The Fiji Times, 14 June 2014)

The Elections Office has already registered more than 550,000 voters.
This is pretty close to the number of all potential voters in the country, aged 18 and over.
In September, these 550,000 voters will be asked to make a very simple choice between 5 or 6 political parties, and an Independent candidate or two.
So, here is an interesting question, whose answer can be read between the lines of my previous article (The Fiji Times, 6 June 2014):
How many voters do we really need to vote, in order to get the same result as if all 550,000 voters actually voted?
SHOCKING ANSWER:  If randomly selected throughout Fiji (e.g. by the Fiji Bureau of Statistics), you would only need about 10,000 voters to vote, and the result will be pretty much the same as getting all 550,000 voters to vote.
But as I explained previously, it would be a costly exercise to select a true random sample of 10,000 voters, and if the result is very close between any two parties, then even this random sample will not be good enough.
But remember that the Tebbutt Poll asks only 1030 voters and the Razor Team only asks 600 voters, as to which Party is most popular.
So despite having almost complete coverage already, why is the government still trying to register more and more voters at great taxpayers’ expense, virtually everywhere in the world except Timbuktu?
Is it to back up the frequent claim that this will be the most democratic elections Fiji has ever had?
Cynics might say that this is a “bit rich” coming from a government which has not bothered with voters or an elected parliament for eight years.
But two practical questions voters should consider are: will having all 100% of voters registered , or having all 100% of registered voters vote, make Fiji a more perfect democracy?
What is the voter turnout in most democratic countries?
Voter turnouts and democracy
Throughout the democratic world, the percentage turnout of voters for national elections show great variation without any significant impact on the democratic process.
Voter turnout can be around 50% (as in United States or Switzerland), or around 60% (as in India), or in the 70% zone (as in UK or France), in the 80% zone (as in Australia, Sweden or Germany), or in the 90% zone (as in Belgium and Austria).
Very rarely, the outcome might have been changed, if those not voting, had voted.
For a contrary example, there is a view that in a US election not too long ago, non-white voters in one state were deliberately discouraged from voting because they would have supported the Democratic Party and that state went to the Republicans by the narrowest of margins, also thereby giving the national presidency to the Republicans that year.
But that is hardly the case in Fiji even if some political strategists might be thinking that these extra voters being registered overseas will vote for a particular party (“the best laid plans of mice and men tend to go awry” – Robert Burns).
Voters should remember that in the past Fiji elections, only some 85% to 90% of all registered voters have actually voted, and that is pretty high by international standards.
There would have been very little difference to the outcome, if the remaining 10% to 15% not voting, had actually voted.
Often those not voting are old and infirm (remember that 4% of Fiji’s potential voters are more than 70 years old), or sick, or occupied in some other activity far more important to them personally than voting for a political party who will care little about them for the next four years.
In any case, most absentee voters would have voted in exactly the same way as their other family voters, making little difference to the eventual outcome.
But of course, it always makes a great media story (on television or newspaper) to show a hundred year old staggering along or being carried to a polling booth.  Hurray for democracy!
But political parties, candidates and voters should not suffer from any illusion  that all these extra voters being registered or the small numbers not being registered, will make any great difference to the final outcome in September.
A financially responsible government would ask:  are the extra votes worth the huge extra costs to tax-payers?
Please do note that money for the September election is flowing like water under the Niagara Falls.
When all the costs are added up, these elections will be the most expensive Fiji has ever had, ironically engineered by an unelected government.
Other democratic choices?
For months now, the public has been inundated with messages that in these September elections, Fiji people will have their say on the government they want.    Again, hooray for democracy!
But why don’t we take the same principle a step further, on other  important and contentious issues where national decision making is just as urgently needed.
For example, in addition to choosing one number from 280 numbers on the ballot paper, why not also ask voters (i.e. in a national referendum):
(1) which constitution do you want? (tick one):
A         The 1997 Constitution
B         The Yash Ghai Draft Constitution
C         The 2013 Bainimarama Constitution
(2) tick “Yes” or “No” to the question: do you want the GCC returned?
(3) tick “Yes” or “No” to the question: should all Fiji citizens be called “Fijians”?

These are contentious issues on which the people of Fiji can very legitimately give their collective view on, thereby making politicians’ lives that much easier:  “if that is what the people want, let them have it”.
Who knows, if all the Opinion Polls are reasonably  accurate, the September elections might see the Fiji First Party form government
the people’s democratic choice in the three referenda might give you the majority answering A or B to question 1, and “No” to questions (2) and (3).

But that would really test the Bainimarama Government’s commitment to genuine democracy, wouldn’t it?