The Fijian Government is considering divesting its interests in a number of State-owned enterprises, partly to raise capital for funding infrastructure projects and public utility services and partly to promote Public-Private Partnerships.
Presenting Fiji’s Budget for 2014 at a public gathering in Suva on November 8, 2013, Prime Minister & Finance Minister Commodore Josaia Voreqe Bainimarama said that partial divestment of Government shares in a number of enterprises was essential to fund a number of projects and programmes.
The Fijian Government had made major spending commitments in education, health, water, housing, electricity, roads, government services and other sectors, he added.
“This is being financed through the partial and responsible divestment of certain Government assets, which will create new value in the economy and grow our capital markets,” he said.
Major undertakings
Among the companies that would trade their shares in the country’s bourse are Airports Fiji Limited, Fiji Ports Corporation Limited and Fiji Electricity Authority. An interesting proposal also includes properties of Fiji’s foreign diplomatic missions to the Fiji National Provident Fund (FNPF).
Pension Fund
The Fund (which operates under the Finance & National Economy Ministry) is reportedly a sound and profitable investment avenue. A KPMG audited statement of accounts as at the end of September 30, 2013 showed a record surplus of F$ 293 million, an underlying improvement of 21% from the previous year.
The Fund has been undergoing reforms since 2010 and is today the only compulsory Superannuation Fund in Fiji, promoting savings and supporting pensioners and disabled citizens.
Mr Bainimarama said that FNPF has made significant progress ensuring sustainability of the Pension Scheme and improving the governance, accountability and transparency.
Offshore Fund
Stating that brightening economic prospects and Official Cash Rate (0.5%) encouraged refinancing several high-interest government bonds, Mr Bainimarama said that Budget 2014 provided F$20 million for the purpose, saving the Fijian taxpayer about F$3 million in interest payments.
“We have built our Offshore Sinking Fund to US$128 million through prudent financial management, which is equivalent to about 2% of GDP. This Fund, effectively a national savings account, will allow Fiji to make bond repayments due in 2016 on time and in full. The Sinking Fund is expected to surpass US$150 million by the end of 2013,” he said.
New Commercial Bank
One of the most significant announcements made by Mr Bainimarama in his Budget 2014 speech related to the establishment of the Home Finance Company Limited (HFCL) as a full commercial bank.
The new Bank is expected to become operational shortly.
As at the end of June 2013, the Company’s total assets were about F$260 million with a net profit (after tax) of about F$5.7 million. It is owned by FNPF (75%) and Unit Trust of Fiji (25%).
“But this is not just any bank; HFCL belongs to the Fijian people. With strong and transparent governance, the Bank must compete in the marketplace with other commercial banks and operate as a profitable business. The difference is that the people of Fiji are its shareholders, and the profits will help ensure their future,” Mr Bainimarama said.
Bonds Issue
He said that there was unprecedented demand for Viti Bonds (an alternative investment product) indicating that ordinary Fijian investors, especially pensioners, have confidence in the Fijian economy.
The Government will continue to float Viti Bonds in 2014, but there are also plans to review the issue of bonds to streamline the process of tendering and administration, he said.
Foreign Reserves
Mr Bainimarama said that rate of inflation is expected to be around 3%.
“Our foreign reserves are comfortable at F$1.8 billion, sufficient to cover five months of import of goods and services. With the improvement of the reserves position, exchange controls have been further relaxed, which investors will find attractive. Interest rates are expected to remain low in the medium term. The Reserve Bank of Fiji has maintained an expansionary monetary policy, which should adequately support foreign and local private investment, expected to grow to 28% of GDP,” he said.
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