The Problems in Fiji

What a mess in Fiji. The WSJ is writing that the Fijian economy is declining because of it, tourism is down, and sugar exports are in danger, not to mention NZ taking hardline trade sanctions against Fiji. Australia has held out the carrots of aid, which have been ignored. There is also disquiet amongst Fijian elites who want the sanctity of the juducial system returned.

An interesting statistic from the WSJ op-ed is that the 2000 coup led to a 7.7% contraction of the Fijian economy. So far this year the Fijian economy has contracted 2.5%. Bad government is bad for business.

I can recall when India and Pakistan were threatening to lob nukes at each other about six years ago. Out-sourcing from the US to India for tech industries was relatively new back then, and when American companies feared the region would become unstable through warfare, they immediately cancelled contracts and backed out investments.

The message was clear, and Indian business leaders went straight to the government; political instability is bad for business in a globalised economy. India quietened the sabre rattling, an accommodation was achieved and Indian technology companies went back to trading with US companies.

Zimbabwe and North Korea are two stunning examples of this effect. The problem is that a dieing economy doesn't touch the leaders. They can still import Harley Davidsons and Cadillacs even though the North Korean country from satellite at night is pitch black - courtesy of no electricity for lighting outside of Pyongyang.

Fiji is not the wealthiest place either, and the economic woes from the political instability Bainimarama has introduced with his coup, will only exacerbate those issues. Very foolish.

cam 2007-06-30 15:52:40.0
cam :
Sri Lanka:

Foreign investors are souring on Sri Lanka as the war drags on. Potential foreign investment lost during the period of war from 1984 to 1996 amounted to 71 percent of Sri Lanka's gross domestic product in 1996, according to a study by the Colombo-based Institute of Policy Studies.

...

Meanwhile, the war's direct economic cost has been enormous. Over the course of the conflict the Sri Lankan army has grown from a few more than 6,000 soldiers in the early 1980s to a force of 150,000 today. Direct expenditure on defense has risen from 1.3 percent of gross domestic product in 1980 to between 4 percent and 6 percent in recent years.

Estimates for the total price tag of the war vary. The Institute of Policy Studies reckons the cost of the war from 1984-1996 as nearly equivalent in value to two years of the entire nation's economic activity.

The Central Bank of Sri Lanka estimates that the conflict has reduced the country's economic activity by 2 to 3 percentage points per year.


Sri Lanka has liberalised their economy over that period, so a lot of the gains are structural, potential gains from that liberalisation are being eroded by the conflict. And here:

Apart from a boost to the overall economy of the country, the North and Eastern parts of the country, too, are likely to benefit from stability and peace. Statistics show that the cease-fire period has seen on average a growth rate of 10-12% for the Northern and Eastern provinces compared to 3-4% rate prior to the cease-fire.


Some info on Iraq from 2003:

Iraq's economy will shrink 22% this year, having fallen 21% in 2002 and 12% in 2001, the United Nations and the World Bank have estimated.


and:

Iraq's $42 billion economy continues to be hobbled by rampant unemployment, sluggish growth, and insufficient oil revenue. Joblessness is anywhere between 30 and 50 percent, while a private sector has failed to materialize. "Of the nearly $20 billion of U.S. appropriated funds to reconstruct Iraq, only $805 million was directed toward jump-starting the private sector," write Johanna Mendelson-Forman of the Center for Strategic and International Studies and Merriam Mashatt of the U.S. Institute of Peace. Meanwhile, economic growth in Iraq remains around 4 percent, according to the World Bank, though estimates vary. And revenue from oil production - whose monthly levels of roughly 2 million barrels per day (bpd) falls short of the 2.5 million bpd target - is about $3 billion per month, a pittance given Iraq's vast, though undeveloped, oil reserves.


A state of emergency and coup are very obvious indicators of political instability and potential arbitrary governance. This scares of people and capital.