Larry Claunch probably has one of the world’s most breathtaking commutes into work. The American businessman, who moved to Fiji 10 years ago and owns four islands in the northern reaches of country, flies several times a month by private seaplane over the exquisite greenish-blue tropical waters for business meetings on Fiji’s main island, Viti Levu. While Mr. Claunch openly admits he loathes leaving his tropical island paradise for long periods of time, he’s pretty excited for the casino license that his company, One Hundred Sands, was granted by the Fijian government last December. It is the first gaming license the government has given and it means One Hundred Sands will hold the exclusive rights to operate up to three casino gaming facilities in two locations. The $290 million (Fijian) investment will break ground in March on Denarau Island—close to the country’s main airport in Nadi—and will include 2,700 square meters of casino space, 500 slot machines, 57 game tables and an exclusive 160 square meters high stakes gaming area. The luxury property—at the end of island that is also home to exclusive hotels like Sofitel, Hilton and Westin—will also include 190 hotel rooms and villas, a 1500 seat conference space, an outdoor amphitheatre, two pools, two bars and a nightclub. A second phase of the resort will add an extra 200 hotel rooms, golf course apartments and a themed water park.
Another bonus of the project is that Fiji does not currently have any large conference facilities, which has meant economic opportunities in the conference industry have had to be turned down in the past. “One company from India wanted to have a film industry awards show here but we could not do that because we did not have the facilities,” said Aiyaz Sayed-Khaiyum, the country’s attorney general whose portfolio also includes Minister for Justice, Anti-Corruption, Public Enterprises, Communications, Civil Aviation, Tourism, Industry and Trade. “So now we can have all sorts of events.” Conference facilities will also mean that during the off-seasons—after New Years until Easter and August through October—they can focus on conferences, meaning there will be spillover into other hotels. “Pre and post programs are also really big selling points for conference planners,” said Mr. Claunch. “So I think that is definitely going to help change tourism here.”
While Fiji may be an island paradise for holidaymakers—tourism represents one-third of the country’s GDP—it’s political situation over the last two decades has made investors wary. Since 2006 the country has been under military rule by Commodore Josaia “Frank” Voreqe Bainimarama (see sidebar) with Mr. Sayed-Khaiyum—whom everyone refers to in shorthand as “AG”—as his right-hand civilian deputy. Since gaining independence from the UK in 1970, the country has gone through four coups, leaving some critics stating the country suffers from a “coup cycle.” All four coups have been bloodless and have all revolved around the ethnic tensions between Indo Fijians—who make up almost 40% of the population—and indigenous Fijians. The issues go as far back as the late 19th century when the British brought Indians over to the Pacific island nation to work in the sugar cane fields; to this day, as Fiji’s most important crop, sugar cane contributes greatly to the agriculture sector, which accounts for nearly 20% of the country’s GDP. And while the current government—which in January lifted Martial Law that had been in place since 2009—still has sanctions placed against them in countries like Australia and New Zealand and has not been reinstated back into the Commonwealth after being kicked out in 2009, there are strong signs that things are changing in a more positive direction.
The two most important are that Commodore Bainimarama has stated there will be free elections to be held on or before September 2014 and that consultations are currently taking place to create a new constitution, which will come into play by early 2013. Those promises can only help boost an economy that has remained weak over the last five years. Real GDP has averaged only 0.2%, though Mr. Sayed-Khaiyum told fDi during an interview in Suva that both the IMF and World Bank have noted that Fiji’s GDP has been undervalued due to the “archaic” methodology of Fiji’s Bureau of Statistics. The Fijian government has asked the IMF and World Bank for assistance with those figures and a recalculation is expected by the middle of 2012. A World Bank 2011 report stated that Fiji’s economy was forecast to grow from 2 to 2.5% in 2011 (compared to 0.3% in 2010) and last August Standard and Poor’s (S&P) raised Fiji’s foreign currency long-term sovereign rating from a B- to a B. The S& P report also revised the outlook from “stable” to “positive” and cited continued improvements to the Fiji’s external position as the main reason behind the upgrade.
Fiji has been keen to make itself competitive in the global market and there has been a concerted effort to diversify into sectors including BPOs, mining, telecoms and wood manufacturing. As an enticement, the country has brought
The corporate tax down to 20%. “It’s an amazing incentive,” said Mr. Sayed-Khaiyum. “We are hoping that will mean that lots of manufacturing companies will look to relocate from Australia or New Zealand. The cost of labor is competitive, the people are well educated, we have all the fundamental amenities so I think these are our strengths.” That may be a reason why last year, according to fDi Markets, over $178 million was made in new investments, up from $117 million in 2008. While the country dropped five points in the World Bank’s “Doing Business Report” for 2011—going from 72 to 77—there are moves to make serious changes to the ease of licensing businesses in the country. “We have tried to get rid of the bureaucracy we have had in the past and we are certainly trying to improve ways to get investors in,” Commodore Bainimarama told fDi. Invest in Fiji has recently set up an economic development board and they have been in talks with Mauritius (see fDi Magazine’s Special Report “Mauritius: Free and Clear” published in December 2009/January 2010), to get advice on granting company approvals, where it takes only three days in that Indian Ocean nation. “What we are focused on is transparency,” said Mr. Sayed-Khaiyum. “When we came into government, title searches had to be done by hand, which makes me cringe. No one had bothered to computerize it. Titles for businesses are supposed to be in fireproof areas and they weren’t. So we are dealing with rudimentary issues that need to be changed.”
One of the things that Commodore Bainimarama has been heralded for has been bringing telecoms to some of the most remotes part of Fiji. Vodafone—which has been in Fiji for 17 years—won the tender to provide mobile communications for the country and now provides network coverage to 97% of the country’s population. To date the company has invested in access of $650 million (Fijian) in infrastructure, modernization of network and related products and services. Bermuda-incorporated Digitel has also invested in the country and offers everything from 3G services to prepaid phones. The government has also been working to liberalize the telecoms industry by removing monopolies and a transparent regulatory system has been implemented. The BPO sector has also seen growth in the last few years; though Fiji will never compete with countries like India on outsourcing, the country has taken advantage of more boutique-style call centers with personnel in the 200-250 range, including companies like Australia’s OCIS.
Meanwhile the mining industry is also expecting to see growth this year. The Namosi Copper Mine—a joint venture between Australia’s Newcrest Mining and the land owners in the area— have plans to begin mining operations in June after completing the environmental impact assessments and the government expects the mine to be a billion dollar project. Last May the Chinese mining company, Xinfa Aurum, was awarded a license to mine bauxite in the country and it’s estimated that Fiji could make over $20 million (Fijian) from that project. The country— which has the largest planted mahogany forests in the world— is building the Fiji Pure Mahogany brand and recently granted a license to US-owned Sustainable Mahogany Industries Limited (SMIL). SMIL makes lumber, parts and components for Pacific Western Timbers, which supplies musical instrument manufacturers like Nashville’s Gibson Guitars.
Thanks to projects like the casino, tourism is also expected to see growth this year. While celebrities like Oprah Winfrey, Nicole Kidman, Bill Gates and John Travolta jet off to five star retreats in islands off Viti Levu, there is also room for three and four star hotel growth. There has also been a move to try and market the country more to North Americans, Russians, Chinese, Indians and Europeans (Australia and New Zealand currently represent 60% of the tourism patronage). “Unfortunately we still battle with the perception that we are a far away destination,” said Josephine Smith-Moffat, who is the company director and co-owner of Musket Cove Island Resort and is also the director of the Fiji Hotel and Tourism Association. But, said Mr. Claunch, the trek is well worth it. “Fiji is the Hawaii of tomorrow,” he said, sipping a fresh watermelon and mint daiquiri on the beach at Musket Cove. “I have been to Hawaii over 30 times and never found a beach to myself. But there are a whole bunch of beaches like that in Fiji.”