Larry Claunch 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 waters for business meetings on Fiji’s main island, Viti Levu. While Mr Claunch openly admits that he loathes leaving his private paradise, Bekana Island, he is excited about the casino licence that his company, One Hundred Sands, was granted for Denarau Island by the Fijian government in December 2011.
It is the first gaming licence that the Fijian government has given and it means that One Hundred Sands will hold the exclusive rights to operate up to three casino gaming facilities in two locations. The F$290m ($164.75m) investment will break ground in March 2011, on Denarau Island – close to the country’s main airport in Nadi – and will include 2700 square metres of casino space, 500 slot machines, 57 game tables and an exclusive 160-square-metre area for high-stakes gaming.
The luxury property – at the end of an island that is already home to exclusive hotels such as 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.
Catering for a crowd
Another advantage of the project is that Fiji does not currently have any large conference facilities, which has meant that opportunities in the conferences sector 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. Now we can have all sorts of events,” says Aiyaz Sayed-Khaiyum, the country’s attorney general and minister for justice, anti-corruption, public enterprises, communications, civil aviation, tourism, industry and trade.
Conference facilities will also mean that during the off-seasons – the first few months of any given year, and between August and October – One Hundred Sands can focus on conferences, which will create spillover into other hotels. “Pre- and post-[event] programmes are also really big selling points for conference planners,” says 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 only one-third of the country’s GDP. The political situation over the past two decades has caused investors to view the country with caution. Since 2006, Fiji has been under military rule, with the commander of the Fijian military forces, Josaia 'Frank' Voreqe Bainimarama, acting as president and Mr Sayed-Khaiyum acting as civilian deputy.
Since gaining independence from the UK in 1970, Fiji has gone through four coups, leading to concern that the country suffers from a 'coup cycle'. All four coups have been bloodless and have revolved around the ethnic tensions between Indo Fijians – who make up almost 40% of the population – and indigenous Fijians. The issues date back to the late 19th century, when the British brought Indian labourers to work in Fiji's sugar cane fields. Sugar cane is still Fiji’s most important crop and a significant contributor to the agriculture sector, which accounts for nearly 20% of the country’s GDP.
While Fiji's current government still has sanctions against it in countries including Australia and New Zealand, and has not been reinstated back into the Commonwealth after its suspension in 2009, there are strong signs that things are changing in a more positive direction from within. In January 2012, the government lifted a state of martial law that had been in place since 2009, while Mr Bainimarama has stated that there will be free elections held on or before September 2014 and that consultations are currently taking place regarding the creation of a new constitution, which will come into play by early 2013.
These promises can only help boost an economy that has remained weak over the past five years. Real GDP growth has averaged just 0.2%, although Mr. Sayed-Khaiyum told fDi during an interview in capital city Suva that both the International Monetary Fund (IMF) and the World Bank have noted that Fiji’s GDP has been undervalued due to the 'archaic' methodology of Fiji’s bureau of statistics.
Consequently, the Fijian government has asked the IMF and World Bank for assistance with these figures and a recalculation is expected by the middle of 2012. A 2011 report by the World Bank stated that Fiji’s economy was forecast to grow by 2.5% in 2011 – compared to 0.3% in 2010 – and in August 2011, Standard and Poor’s (S&P) raised Fiji’s foreign currency long-term sovereign rating from B- to B. The S&P report also revised the country's outlook from stable to positive and cited continued improvements to Fiji’s external position as the main reason behind the upgrade.
Fiji has been keen to increase its competitiveness in the global market and there has been a concerted effort to diversify into sectors including business process outsourcing (BPO), mining, telecommunications and wood manufacturing. To encourage investment, the country has brought the corporate tax down to 20%. “It’s an amazing incentive,” says 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 labour is competitive, the people are well educated, we have all the fundamental amenities, so I think these are our strengths.”
Getting up to speed
That may be one reason why in 2011, according to greenfield investment monitor fDi Markets, more than $178m in new investment was made in the country, an increase from $117m in 2008. While Fiji dropped five positions in the World Bank’s 2011 doing business report – going from 72 in 2010 to 77 – action has been taken to bring about serious changes to ease the problem of licensing businesses in the country.
“We have tried to get rid of the bureaucracy [that] we have had in the past and we are certainly trying to improve ways to get investors in,” says Mr Bainimarama. Invest Fiji, the government investment promotion agency, has recently set up an economic development board and it has been in talks with Mauritius, getting advice on the most efficient systemt for granting business licensees.
“What we are focused on is transparency,” says 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 computerise 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.”
Profit from high and low
One of the things that Mr Bainimarama has been praised for has been bringing telecommunications to some of the most remote parts 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. The company has so far invested more than F$650m in infrastructure, and the modernisation of network and related products and services.
The government has been working on liberalising the telecoms industry by removing monopolies and a transparent regulatory system has been implemented. In 2008, Vodafone's monopoly was broken by Bermuda-incorporated Digitel, which now offers a wide array of services, from 3G to prepaid phones.
The BPO sector has also seen growth in the past few years. Although Fiji does not realistically expect to compete with countries such as India in terms of outsourcing, the country has taken advantage of more boutique-style call centres – where the number of personnel are limited to between 200 and 250 – and it currently provides this service to companies such as Australian telecoms company OCIS.
Meanwhile the mining industry in Fiji is also expected to grow in 2012. At the Namosi copper mine – a joint venture between Australia’s Newcrest Mining and the land owners in the area – mining operations are expected to begin in June 2012, following the successful completion of an environmental impact assessment. The government expects the project to be worth $1bn or more.
In May 2011, Chinese mining company Xinfa Aurum was awarded a licence to mine bauxite in the country and it is estimated that Fiji could make more than F$20m from the project. With the largest planted mahogany forests in the world, Fiji is also working on establishing its Fiji Pure Mahogany brand, which recently issued the first licence to US-owned Sustainable Mahogany Industries Limited (SMIL). SMIL makes lumber, parts and components for Pacific Western Timbers, which supplies musical instrument manufacturers such as Nashville’s Gibson guitars.
Thanks to projects such as the casino, tourism is also expected to be another growth sector in 2012. While celebrities including 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. With 60% of tourists visiting the country coming from nearby Australia and New Zealand, there has also been a push to try and market the country in North America, Russia, China, India and Europe.
“Unfortunately we still battle with the perception that we are a [remote] destination,” says Josephine Smith-Moffat, company director and co-owner of Musket Cove Island Resort and director of the Fiji Hotel and Tourism Association.
However far Fiji might be, according to Mr Claunch, the journey is well worth it. “Fiji is the Hawaii of tomorrow,” he says, sipping a fresh watermelon and mint daiquiri by the beach at Musket Cove. “I have been to Hawaii more than 30 times and never found a beach to myself. But there are a whole bunch of [empty] beaches in Fiji.”