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Analysis & opinionAugust 1 2019

Fiji economy minister pushes financial independence through green bonds

Fiji’s attorney-general and minister for economy, Aiyaz Sayed-Khaiyum, explains to Kimberley Long how the country is expanding its economy and encouraging international investment through green bonds. 
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Aiyaz Sayed-Khaiyum

Aiyaz Sayed-Khaiyum

Q. Climate change is a major concern in the Pacific Islands. How is it affecting Fiji? 

A: The impact of climate change is being felt disproportionately in Fiji and the Pacific Islands. When Cyclone Winston hit in 2016, Fiji lost one-third of its gross domestic product [GDP] in 24 hours. Fortunately most of the hotels were spared the worst damage. A huge amount has to be invested into climate change planning, accounting for 10% of all Fiji’s debt. 

There is much greater scope for the Pacific Islands to receive help in making provisions to counter the impact of climate change. Fiji has raised this point from our position as chair of the Small States Forum at the World Bank. As small states, we are the biggest victims of climate change, and need to be proactive in how we protect ourselves. It is a huge burden on our population, because they are encouraged to take out even basic levels of insurance cover against cyclones. But even $100,000 in cover would likely not be enough to cover their property, and the individuals then have to pay the premium on damage. 

Q. Tourism is a key industry for Fiji. What is being done to support the sector? 

A: Tourism is still the largest industry sector in Fiji, accounting for up to $2.8bn, [or] about 46% of annual GDP. This is higher than the other countries in the region.

Fiji Airways has committed to the industry with investment in new Airbus A350s, which will fly between Los Angeles and Sydney. This has the added benefit of boosting trade through the increased amount of cargo these aircraft can transport. Through this we can look to expand trade links to the US. It also helps to mitigate risk by taking the focus away from Australia and New Zealand for both trade and tourism. 

Q. While tourism is Fiji’s largest industry, the government is focusing on expanding other industries. Which do you see as prime for development? 

A: While tourism still plays a central role, Fiji also wants to diversify its economy. International call centres are a growing industry, because we have native English speakers with neutral accents. Fiji has a reliable telecommunications system because it is part of the Southern Cross cable network that connects Australia to the US. 

The local financial industry is also growing, with accountancy firms expanding to manage the tax returns of Australian companies and individuals. 

We are also seeing the growth of medical tourism and retirement villages. Fijians are well known for their hospitality and work in the healthcare industry. Our universities and colleges are developing courses to fulfil the rising need for trained staff to fill these roles. 

Q. There has been much reported on the increased support from China in the Pacific Islands. How does this fit with the loans provided by multilateral institutions? 

A: The Asian Development Bank [ADB] has changed its view of Fiji in recent years, limiting the projects it will invest in. While the country has become more affluent, it is in great need of infrastructure development. Limiting the loans is a myopic view. 

Fiji no longer has access to International Development Association funds from the World Bank as the country is deemed to be 'middle income'. However, Fiji is a vulnerable country. If a cyclone hits, it has the potential to set the Fijian economy back decades. We hope the ADB decides to make an exception and be open to providing support in the event of a natural disaster. 

China first started to invest in Fiji in 2012 as part of its Belt and Road Initiative. While the funds may be on offer, we will only borrow if they are needed. We will always take funds from the best source, and keep an open mind about who that may be. 

Fiji tries not to exceed 70% domestic borrowing and 30% foreign investment. We don’t want to be overly exposed to foreign exchange fluctuations. 

Q. Fiji is keen to attract greater levels of international investment through issuing green bonds. Is there more that could be done to encourage their success? 

A: Fiji has issued green bonds and blue bonds, which specifically support ocean environmental projects, on the London Stock Exchange. But for the bonds to be successful we need international support. The cost of the funds is not coming down, so what can be done to make the bonds more attractive? We believe that centres interested in helping both Fiji and the environment can subsidise the bonds to develop the value and boost appetite for the bonds. We have to inculcate moral obligation among investors. 

Ideally, we want to raise our own funds to support our projects and not have to look to the development banks. With the bonds we are not asking for free money, but help to get affordable pricing to attract investors. Increasing investment in green bonds is good for all the Pacific Island financial centres, not just for Fiji. 

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Read more about:  Analysis & opinion , Asia-Pacific , Fiji
Kimberley Long is the Asia editor at The Banker. She joined from Euromoney, where she spent four years as transaction services editor. She has a BA in English Language and Literature from the University of Liverpool, and an MA in Print Journalism from the University of Sheffield. Between degrees she spent a year teaching English in Japan as part of the JET Programme.
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