Sayed-Khaiyum Proposes Reforms to Curb Fiji's Debt

Ahead of the upcoming Budget announcement, former Economy Minister Aiyaz Sayed-Khaiyum has set out the background to the Budget and what has led to his policy suggestions, sharing his assessment in a social media post. Sayed-Khaiyum argued that Prime Minister Rabuka has not benefitted from sound advice over the past 3 and half years or so, leading to regular backtracking, conflicting advice, and a lack of critical thinking and analysis as policies are reversed or changed within short periods of time.

As a prime example, he highlighted the decision to increase VAT by 66% and then, within two years, reduce it by about 16.6%—a reduction that has had very little impact for the everyday Fijian. He questioned why it was raised in the first place if it was to be reduced very shortly thereafter.

"The Prime Minister’s ministers are not singing from the same song sheet and are acting in their own silos which is contrary to national economic interests," Sayed-Khaiyum stated, adding that this has led to deteriorating socio-economic conditions, undermined business and overall confidence, and compromised the national interest to prop up the interests of a select few. He noted that the interests of everyday Fijians have been compromised, creating a daily growing gap between the rich and poor, a point simply brought home much quicker by the recent fuel situation.

Burgeoning Debt and High Deficit

Government’s economic policies, primarily under the patronage of Biman Prasad, have resulted in debt increasing at an exponential rate with extremely high operational costs. Sayed-Khaiyum stated that PAP, as the largest political party in the coalition government, accepted everything Biman Prasad presented without much critical thinking, long-term thinking, or high-level scrutiny, appearing preoccupied with matters other than the finances and socio-economic conditions of ordinary Fijians.

Debt levels have increased even though there has been no devastating cyclones, any pandemic, or any new major capital project(s). This occurred despite the government unnecessarily increasing VAT by 66%, increasing corporate tax to 25%, and increasing tariffs, fees, and charges to collect an additional 600 million dollars ($600,000,000).

"Over 80% of the budget spend has been in operational expenditure and the deficit is devastatingly critical. Therefore, there is not much fiscal space now for government to maneuver itself."

Sayed-Khaiyum stressed that Prime Minister Rabuka needs to be realistic about where the finances are and enforce the foundation for the medium to long term. With lenders, multilateral agencies, and development partners closely watching this Budget, the government must show it can contain its deficit, cut operational expenditure, increase revenue, and make structural changes without stifling confidence and growth prospects.

Proposed Budget Measures

To reduce government expenditure without affecting ordinary, working-class families and small-to-medium businesses, Sayed-Khaiyum proposed the following measures:

Revenue and Tax Reforms

• Hotel Bed Tax: Introduce for a fixed term of 2–3 years a modest 3% to 5% tax on hotel/resort beds across the board, or alternatively, completely exempt small hotels/motels below a particular turnover and levy a 10% tax on properties with higher turnover.

• Social Responsibility Levy: Reimpose this levy on high-income earners, which was removed by this government as recommended by the fiscal review committee that Biman Prasad set up. The levy should be increased from its previous 5% to 7% or 9%. Sayed-Khaiyum noted that a number of those on the fiscal committee would have been the beneficiaries of this tax cut for the rich.

• Remove Specialized Tax Benefits: Remove the tax benefit given to Fiji Water and Pacific Koro Park, as they are true partners that are not struggling and need no assistance.

• Water Resource Tax: Have a modest increase in this tax, particularly for large extractors of this limited resource.

• Corporate and Income Tax: These thresholds should not change, except for those eligible to pay the social responsibility levy. Duty/excise on motor vehicles should not be increased unless it is restricted to luxury vehicles, ensuring working Fijians can still afford fuel-efficient and affordable Chinese-made vehicles.

Civil Service and Political Cost-Cutting

• Reduce Ministerial Positions: Immediately cut back the size of ministerial and assistant ministerial positions by two-thirds to save money and divert funds to critical areas. The proposed pay cut with the current numbers will hardly make any difference.

• Civil Service Freeze: Put a freeze on all unfilled vacant positions in the civil service to cap the wage bill and control operational expenditure.

• Withdraw Bills and Stop Committee Sittings: Government should table no new bills except strictly budget-related ones, and immediately work with Parliament to withdraw all current bills before parliamentary committees. This will cease committee sitting costs, where MPs receive at least $200 a day tax-free, alongside transportation, accommodation, meals, and secretariat costs. With a maximum of 6 months remaining before the election period ends in February 2027, processing bills is unnecessary.

• Halt Ad-Hoc Bodies: Funding for the ad hoc Truth and Reconciliation Commission, the Constitutional Review Commission, and the Electoral Law Review Committee should be immediately ceased to save money spent on sitting allowances, secretariats, accommodation, meals, and transportation. Sayed-Khaiyum stated it is against set principles to have such bodies promoting alternative constitutional and legal frameworks during a campaign period, which could undermine established election conventions.

Fiji Airways and Aviation Reform

• Offshore Ticket Fuel Surcharge: Introduce a fixed-term fuel surcharge levy of approximately FJD 30 on all airline tickets purchased offshore by non-Fijian residents. Sayed-Khaiyum suspects Fiji Airways is in some strife because it has not increased airfares to reflect exponential jet fuel price growth, and may ask for government assistance.

• Assistance Conditions: Any assistance should be contingent on need and hitting milestones, including addressing increasing wastage and recruitment personnel at the managerial level (noting that when one senior manager was let go under a cloud about 3 years ago, 4 to 5 people were brought in for that job).

• Board Restructuring: Get the right people on the board based on skill sets and fiduciary duty, rather than appointing politically aligned members or failed coalition party candidates.

Transport and Deregulation

• Direct Bus Subsidies: Directly subsidise the consumer for travelling on the bus via the bus card rather than subsidising bus companies. This reduces leakage, manipulation, and bureaucracy while helping the FRCS monitor bus company revenues. It will require the FCCC to urgently carry out a review of bus fares, and the Minister for Transport should meet the Fiji Bus Operators Association as a body.

• Reverse Taxi and Rental Restrictions: Reverse the decisions placing restrictions on a liberalised taxi industry and reducing transparency in granting new permits. Irrational decisions affecting the rental car sector must also be reversed, as smaller Fijian-owned businesses have started downsizing or moving away due to a lack of sector input.

• Express Lanes: Implement a dedicated left lane for public transport, buses, taxis, and hire cars between certain hours in the morning and evening on the 4-lane highway from Nausori to Suva. This requires no budget allocation but saves money and reduces fuel usage. The coalition government previously canned the prior government's advanced ground work on building bus terminals in Valelevu and 8/9 miles.

Citizenship Regulations and Immigration

• Bring Back 15-Year Citizenship Law: Revert the citizenship law back to the 15-year residency requirement that stood at the end of 2022 to add value to the Fijian passport. The incoming coalition government reversed it and made an amendment nowhere near 15 years. Sayed-Khaiyum stated the government should dust off completed, unimplemented regulations to allow quick turnaround times and permanent residency for specific skill sets and high-net-worth individuals without giving away citizenship. This would fix the reported 1,000 pending work permit applications at the Immigration Department that take up to 8 months to process, delaying over 1 billion dollars worth of approved projects.

Land Development and National ID

• iTaukei Land Development: Make a budget allocation to complete the fully funded iTaukei Land Development started by the previous government, which appears incomplete or held up by bureaucracy. This initiative should be handled by experts, such as the previous Construction Implementation Unit (CIU).

• Fast-Track National ID Card: Expeditiously implement the National ID Card project, which has been languishing with this government for 3 years, to ensure targeted assistance and reduce leakage, abuse, and bureaucracy.

Infrastructure and Major Capital Projects

Sayed-Khaiyum noted that since the coalition alliance came into government, there have been essentially no new major capital projects except those instigated by the previous government. He called for the mobilization of several projects:

• ADB Bridge Projects: Start the 4 critical bridge projects funded by ADB to replace aging bridges using new construction technology rather than old PWD ways.

• Health and Highway Projects: Fast-track the Pacific Island Health Transformation project, commencing the new hospital earmarked for Tamavua. Allocate funding to mobilize the 4-laning of the Nadi to Lautoka highway (with street lights and bicycle tracks) and the cross Viti Levu Nadi to Suva Highway, which he understands were canned simply because they were announced by the previous government.

• Nadi River Project: Rekindle the Nadi River Project, noting the Japanese Government agreed to fund the first stage via a complete grant, alongside blended finance from ADB, Australia, and the EU for stages 2, 3, and 4. The project was taken off the burner in 2023 over whether the river should be widened or deepened; the prior position was that it should be deepened to its original natural depth to bring back river biodiversity.

• Small Infrastructure Repairs: Allocate funding to FRA for small infrastructure repairs that impact confidence, such as fixing broken-down dividers on the 4-lane road from Nadi Airport to Martintar and between Nausori and Suva, repairing broken street lights, fixing the traffic lights at Mt. Mary's school that stopped months ago after an accident, and repairing dug-up kerbs.

• Reconstitute the CIU for PPP Projects: Commence Public-Private Partnerships (PPPs) for office and residential construction by reconstituting the CIU with its previous leadership. The disbanded CIU had already vetted a company to construct a modern office block at 8 miles to house the ministry of education and two other ministries under one roof at the private company's cost, which government would rent. Similar plans were in place for police apartments in Vomo Street on the existing police barracks site to give officers strata title ownership, alongside similar plans for civil servants and disciplined forces.

Social Safety Nets and Judiciary

• Divert Savings to the Vulnerable: Divert saved funds to assist those who have fallen through the cracks of the social welfare system, such as families with disabled members. Bring back free education gradually by targeting the most needy families first, and consider increased electricity subsidies for working families.

• Judiciary Technology: Make a specific allocation to the judiciary to implement up-to-date technology to modernise the court system and increase efficiency in handling complex and high-volume cases.

• Independent Wage Review: Appoint an independent expert from outside Fiji (suggesting the same expert from Australia utilized by the previous government) to carry out a nationwide consultation and assessment of the minimum wage and wage sectors without politicising the process.

General Election Funding

Sayed-Khaiyum concluded by stating that no allocation should be made in the budget for the Fijian Elections Office to hold a referendum. Instead, the Electoral Commission and Fijian Elections Office should be fully funded and allowed complete independence to hold the General Elections as per the Fijian Constitution, ensuring they are free, fair, and credible.

As it appears that not many potential local and overseas-based Fijian voters are registering or updating their information, the Budget must provide enough funding to extensively carry out voter registration both in Fiji and overseas. By taking these steps, late as it may be, Sayed-Khaiyum noted that Prime Minister Rabuka will demonstrate strong leadership and win political trust and accolades which could translate into support in the elections.