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$1 Billion 'Salvage' Plan

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SUVA: Fiji's military installed interim government plans to spend more than F$1 billion in an effort in jump-start the economy in its 20001 budget announced yesterday but reaction has been mixed.

The Fiji Times today quoted Interim Finance Minister Ratu Jone Kubuabola as urging taxpayers not to be "short-sighted amd think only of our lot".

"Rather, if we are struggling to find jobs now, we sould pose the question - what can we do to create more jobs for our children? Following the path we are currently on has not, and will not, give us the economic wellbeing that we desire," he said.

The $1.096 billion budget has a net deficit of $145 million, or about four percent of the gross domestic product.

The total deficit (net deficit plus debt repayments next year) is about $253 million.

The administration plans to finance this through overseas and domestic loans.

Highlights include:

* An investment incentive package with reduction in cxompany taxes and concessions.

* A reduction of corporate taxes for residents and non-residents by one percent to 34 percent, which will be further reduced to 32 percent in 2002 and 30 percent in 2003. No tax would be charged for locals who earn less than $6500.

* An increase in duties on beer, spirits, cigarettes while petroleum duties have been reduced.

* An increase of the military budget to $102 million.

* An allocation of $212 million for education.

* Restoration of the 12.5 percent civil servants' pay cut from December 1.

* Reintroduction of the 10 percent value added tax on staple foods of flour, rice, tinned fish, edible oil, powdered milk removed by the deposed coalition government. But duty will also be removed from these items.

* A $28.65 million affirmative action plan for indigenous Fijians and Rotumans. This will include a $10 million trust fund for indigenous business and an interest-free loan of $5 million for the Fijian Affairs Board to purchase shares in Yasana Holdings Ltd, and a $0.5 million interest free loan to assist Fijians buying back ancestral land.

Independent economist Dr Mahendra Reddy, of the University of the South Pacific, said the rich would get richer and the poor become poorer under the budget.

"The 2001 budget is simply a rich man's budget," he told the Daily Post.

He said the reintroduction of VAT on staple foods exempted by the Mahendra Chaudhry government would mean an increase of prices which would not help low income earners or those living below the poverty line.

"An ordinary Fijian will find it difficult to have these basic food items on his table each day," he said.

Dr Reddy said the administration's move to offer concessions to attract foreign investment would not be of much help.

"Unless we have political stability in this country, the interim administration can forget about investment."

He added that the budget was too "slanted" to just one section of the country's population. Other communities, particularly ethnic Indians, had been left out.

A statement by the ousted coalition government highlighted the delivery of the budget in a hotel room in contrast to the usual presentatation of the budget in the House of Representatives.

"The budget was presented despite the High Court ruling that the interim regime has no legal basis," the statement said.

The deposed Assistant Minister for Fijian Affairs in the People’s Coalition Government, Ratu Isireli Vuibau, was filing for a judicial review in the High Court against the decision of the civil servants to disburse funds "to the people holding power illegally".

The Fiji Times described the budget in an editorial as "pragmatic" and what might be expected of experienced businessmen and government administrators.

"An unelected government should have been able to do more. This was a golden opportunity to introduce some much-needed measures that an elected regime would shy away from," the paper said.

It said the administration was justified in increasing revenue from alcohol and tobacco but it should have gone further.

"For example, a government that believes in the user pays principle might have sought to make the revenue raised from those two sources at least match their cost to the nation in terms of health treatment, lost productivity and family disruption."


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