On the other hand, we will also take a forward-oriented approach and address the challenges ahead.
•  Challenge 1: Underperforming resource based sectors  •  o  Gold production has performed poorly in spite of favourable international prices recorded in recent years  o  Forestry showing signs of recovery in the medium term  o  Fisheries sector has shown some growth but is still below potential  o  Mitigating factors:   A company restructure is underway at the Vatukoula gold mine    Incentives are being offered by Government for investment in agricultural production    Greater public-private partnership is being encouraged    Government is looking at ways to improve market access for these sectors    Value adding initiatives are also being promoted  Challenge 2: Sugar o  Sugar production is far below its potential with sugar exports performing poorly when compared to previous years  o  Preferential pricing is gradually being withdrawn:  o  o  BIS Review 94/2006    60 percent of Fiji’s sugar is exported to the EU market    EU preferential price will undergo a 36 percent reduction over a period of 4 years, beginning in 2006  Expiring land leases also pose a challenge for the sector:   Around 2,800 farm leases will expire by 2008    About 10,300 farm leases will be expiring over the next 25 years  Mitigating factors:   Sugar reforms are underway with support from the Indian Government    ADB support through the Alternative Livelihoods Programme is ensuring that those displaced by the reforms have assistance    EU support has also been promised  1  •  •    The multi-party system will facilitate the passage of land tenure legislation through Parliament    Diversification within the industry to produce ethanol is also being considered  Challenge 3: Debt o  Increasing Government debt is becoming an issue of sustainability  o  While, the higher fiscal deficits in the past worked well to raise economic growth, we now need to relook at our strategy to secure sustainability  o  Mitigating factors:   Strategic Development Plan 2007-2011 has a strong commitment to lower deficits to around 2 percent in any year of the SDP plan period    This is expected to help bring the level of Government debt down to 49 percent of GDP by 2009  Challenge 4: Balance of payments o  Strong demand is leading to an increase in imports  o  Unfortunately, this is happening at a time when our exports are performing poorly  o  This is unsustainable given that it is leading to a widening trade gap  o  While a surplus from the services and transfers accounts are growing, the surplus generated is still insufficient to offset the trade gap  o  As a result, our current account imbalance is worsening, thus placing pressure on Fiji’s balance of payments  o  Mitigating factors:   RBF has raised interest rates to quell the surge in consumption driven demand    Fiscal consolidation plans is a part of the SDP commitment    This means that there will be greater policy coordination between monetary and fiscal policy    Government has successfully conducted an international bond issue    National Exports Strategy has been developed in order to raise Fiji’s exports    Alternative sources of energy are being pursued to reduce our dependence on fuel imports    Import substitution is being considered for relevant and viable areas  3.