Fiji’s Prime Minister and Minister for Finance & National Planning, Commodore J.V. Bainimarama, recently delivered his Government’s revised budget (Revised Budget). The Revised Budget amends the Government’s 2010 Budget address delivered on 27 November 2009 (November Budget).

It appears that the International Monetary Fund’s (IMF) recent discussions with the Government on a possible IMF-supported programme for a stand-by arrangement (or SBA) could be one of the triggers for this Revised Budget. There have also been unexpected Government expenditures in Fiji since the November Budget, namely two cyclones, a termite infestation and the urgent dredging of waterways like the Rewa River.

The Prime Minister stated that given these imperatives a revision was necessary as:

.....[it] will not only give the true position but it will create transparency, ensure that policies are made using sound and accurate financial records and practices.

..... the financial sector will act responsibly and maintain its interest rates within a reasonable band that is conducive to savings, investment, national development and sustained economic growth.

Various examples of liberalising the economy

Commodore Bainimarama, in his capacity as Finance Minister, reiterated various reorganisations of state owned entities. Examples include:

• the commencement of the reforms to the Fiji Sugar Corporation;
• the reorganisation of the Government Supplies Department into the Fiji Procurement Office;
• the transfer of the assets and liabilities of the former Water & Sewerage Department to the now operational Water Authority of Fiji; and
• preparatory works on the reorganisation of the Fiji Electricity Authority.

Removing price controls

The Government will also focus on removing price controls where appropriate, and at the same time will be referring matters to the Commerce Commission (Fiji’s competition regulator):

...where collusion and anti-competitive behaviour exists.

Proposed Land Use Decree

It appears that Fiji’s Cabinet has approved a proposed Land Use Decree. According to Commodore Bainimarama:

....[E]ssentially this law provides the legal framework for leasing of iTaukei  and State owned land at market rates. The law allows for the establishment of a land bank from which potential investors and farmers can sub-lease or lease land from the State for a lease period up to 99 years. It will provide certainty of tenure, improved rental return to the iTaukei landowners and to the State.

Proposed Mahogany Industry Decree

Additionally, a Mahogany Industry Decree appears to have been finalized. The purpose is to issue licences, with the intention of to creating a mahogany industry based on value adding and employment creation.

Dividends paid by listed companies

To further encourage listing on the South Pacific Stock Exchange (SPSE), new tax measures are to be implemented, namely that the distribution of dividends from SPSE listed companies to shareholders will be treated as deemed tax paid in the hands of shareholders.

Proposed rewrite of the Income Tax Act

Commodore Bainimarama also stated that there will be a rewrite of the Income Tax Act with the assistance of the IMF.

The above are encouraging in that the Fiji economy is under-going decades delayed reforms, and such new ideas as the ‘imputation credit scheme’ for SPSE listed company shareholders are being implemented.

This article has been prepared for the general information of clients and contacts of PLN Lawyers Sydney and the affiliated firms of the Pacific Legal Network. While it deals with and comments on the law in specific areas it is not intended nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

PLN Banknote July 2010