Fiji National Provident Fund writes off millions in member's funds

[Stacey King]

ABC Radio Australia Updated May 7, 2010 07:55:02

Fiji's National Provident Fund has announced it is writing off millions of dollars in member's funds.
About 327 million Fijian dollars or about 165 million US dollars have been lost, that's about 9 per cent of the total value of the fund.

Presenter: Helene Hofman
Speaker: Satish Chand, Professor of Economics, currently at the Centre for Global Development in Washington DC

• Listen:
• Windows Media

CHAND: You have to remember that the Fiji National Provident Fund is the only superannuation fund in Fiji and every worker is mandated by regulation to contribute to the fund. And I think this has been long coming, but this is a major loss, it's a loss of about 10 per cent of the total value of the fund.

HOFMAN: And a loss for who, the pensioners?

CHAND: Yes it will be the pensioners who have lost equity to the tune of ten per cent and unfortunately they have had no choice with this. And it is due to one major investment that has fallen apart. But god knows, I mean there may be others.

HOFMAN: Yeah because the write-off of 327-million, apparently 301-million of that comes from the Natadola Beach resort development, and that's an investment that was entered into only after the government of Laisenia Qarase allowed for the funds to take up riskier investments. It's hardly a coincidence that the current interim government is highlighting that fact?

CHAND: Yes but remember the problems for the Fiji National Provident Fund have been much deeper than that. Governments in the past including that of Laisenia Qarase have limited the opportunity of the fund to invest abroad. So the fund to a large extent has been captured to either buying government bonds, which means funding the budget deficit, or investing elsewhere domestically. And when the Qarase government came in there was a lot of pressure on the fund. And you have to remember that the government has a seat in so far as the fund is concerned, there's a lot of pressure on the fund to invest domestically. Now apparently tourism investments are never risk-free, I mean they're always very high risk. So the fund was caught in a double whammy of one investing in a risky sector, but two, investing at home and you would recall that tourism in Fiji has gone through a tough period over the last few years. And that hasn't helped the cause of the fund.

HOFMAN: Now is this write-off likely to be the end of the issue or are we still dealing with the same problem?

CHAND: Well probably not, the government is trying to help recoup some of those written off money in terms of selling off land from that tourism development. But as I understand it the landowners have been pursuing the investors with regards to compensation. So this issue is probably likely to drag on despite the fact that the government has just pronounced a new decree which says now an end to all this court battles. But as to whether that will bring it to an end, nobody knows.

HOFMAN: I guess the most important question for Fijians, the fund says their assets are safe, does that appear to be the case to you?

CHAND: Well their contributions are safe to the extent that they are invested in secure assets, and government bonds in Fiji are probably safe, but the rest of it I think is highly questionable. Any investment into private enterprise within the Fijian economy I think remains questionable in terms of its security. But the fund has also invested quite heavily into real estate and the real estate market in Fiji has also gone through a tough period. So even there they may have to write off at least on paper some of the value of those assets.