The interface between affirmative action and neoliberalism: The case of Fiji

Affirmative action and regime change: A historical overview

Capitalist development in Fiji during the period British colonial rule had three inter-related aspects: the dominance of European capital, the exploitation of Indian labor, and the use as well as “protection” of indigenous Fijian land. The protection of communally owned indigenous land and the special privileges accorded to indigenous chiefs and people was itself a form of preferential policy which ran counter to the fundamental principles of colonial capitalist accumulation (Narayan, 1984). However, despite the apparent contradictions, provision of indigenous privileges was a leverage used by the colonial state to exercise patronage and hegemony over the indigenous population while using it as a wedge against anti-colonial Indians, demanding more rights and independence and at the same time protecting the interest of colonial capital.

Ironically, the same native policies, which privileged indigenous interests, often referred to as “paramountcy of Fijian interests” (Durutalo, 1985) also undermined their own economic progress (Lawson, 1991). The social Darwinian policy of the colonial state suggested that, to be “protected” from the evil vagaries of foreign cultures, the indigenous population had to be cocooned into traditional cultural institutions and subsistence communal life separate from other ethnic groups (France, 1969). This policy contributed to the indigenous Fijian’s retarded economic, professional, and educational development and nurtured the roots of indigenous grievances and ethno-nationalism, which increasingly became vocal and even violent in later years.

The notion of paramountcy remained an ideological construction to appease the indigenous population but did little to enhance their economic interests in a situation shaped by the dynamic interplay between ethno-cultural identity, socio-economic disparity, and contestation for political power between the various ethnic groups. The major ethnic groups in Fiji, currently consisting of indigenous Fijians—57%, Indo-Fijians—34%, and other ethnic groups—6% (Fiji Bureau of Statistics, 2012), had lived side by side amicably for decades, although the ethnic-based political representation, voting system, and political parties had the impact of creating an ethnicized political culture and ethno-political cleavages (Premdas, 1995).

A number of proto-affirmative action policies were instituted during the colonial period but these tended to reinforce the communal structure under which indigenous Fijians lived than empower and liberate indigenous Fijians economically. It was only in the 1960s that the communal system was liberalized and indigenous Fijians were able to move beyond their local enclaves to directly compete with other ethnic groups in education, professional life, and commerce (Nayacakalou, 1975). This liberalization process was based on the recognition that there had to be drastic proactive action to address the disadvantaged socio-economic position of indigenous Fijians to avoid potential ethnic violence (Burns, 1963; Spate, 1959). This prompted policy makers to incorporate indigenous development provisions in the series of 5-year development plans since independence in 1970. However, indigenous development was largely framed under the broad rubric of rural development and was considered a secondary focus of state development approach (Fiji Government, 1975). This view was based on the stereotypic assumption that due to the centrality of land in their social structure and culture, indigenous Fijians could only thrive in rural-based primary production while urban commerce was seen as the natural domain of Indo-Fijians, Chinese, and Europeans.

This apartheid-type development discourse was predominant throughout the colonial and early post-colonial period (Ravuvu, 1988). Attempts to address the disparity through such programs as scholarship quota were met with opposition by Indo-Fijians who saw preferential policies as tantamount to discrimination. Indigenous Fijians saw Fiji’s rapid modernization, which they yearned for, as something driven by the interests of the vulagi (visitors) and kaitani (foreigners), a reference to Indo-Fijians, Chinese, and Europeans. The discernible absence of indigenous Fijians in the corporate/business sector and their scarcity in higher education and professional positions invoked more grievances, culminating in the formation in the 1970s of the Fijian Nationalist Party, which advocated total political control of the state by indigenous Fijians and repatriation of Indo-Fijians back to India.

In the 1980s, neoliberal reforms started, inspired by the structural adjustment policies of the “Washington consensus” in response to the global economic crisis (Prasad and Kumar, 2000). Among the reforms were the freezing of the civil servants’ pay, retrenchment of government employees, reform of the labor market, and abolition of the tripartite forum, a body which provided dialogue between the employers, employees, and government (Howard, 1989). Resistance to the reform was in the form of industrial unrest by unions and later the formation in 1985 of the pre-dominantly Indo-Fijian Fiji Labour Party (FLP) which came to power during the April 1987 election but was later overthrown in an ethno-nationalist military coup a month later. The capture of state power by the largely indigenous Fijian military saw the establishment of an “ethnocratic state,” to borrow terminology from Brown (1994: 36–37).

The new post-coup indigenous-led regime’s development approach was based on two seemingly contradictory philosophies: growing the economy along the path dictated by the Washington consensus and providing affirmative action programs for indigenous Fijians in line with the aspirations of the ethno-nationalist coup leaders and supporters. The two philosophies were juxtaposed in a paradoxical mix and became part of the broader developmental approach of the 1980s until 2006 when affirmative action was abruptly terminated by the military after it staged an “anti-nationalist coup.”

The affirmative action policies helped to fulfill the demand for indigenous economic advancement as well as served to mobilize indigenous Fijian political support for the indigenous-led political parties. Ironically, the affirmative action policies encouraged neoliberal reforms, which ensured that privatized government assets were transferred to indigenous entrepreneurs. This was emphasized in the Nine Points Plan document, the very first blueprint for affirmative action after the 1987 coup (Fijian Initiative Group, 1992). The role of the indigenous-dominated state in this was to facilitate the process through enactment of decrees and legislations, provision of capital, logistics, and personnel as well as create a nationalist ideology to provide political and moral justification for both affirmative action and neoliberal reforms. The reform of state entities in the form of corporatization and privatization in the 1980s and 1990s were to the benefit of some elite indigenous professionals who were given top positions in the newly reformed entities.

The opening up of special loans for indigenous Fijians during the 1980s and 1990s provided a means by which indigenous Fijian entrepreneurs with no start-up capital to survive the Darwinian competition of the neoliberal market place. The state played a protective and facilitative role in this regard and ensured that indigenous entrepreneurship survived in the midst of competition by Indo-Fijian, Chinese, European and foreign companies. During this period, the state also helped to establish and fund indigenous run companies which could compete in the market place. Some of the subsidized companies survived but some could not compete and died out.

In the 1990s and 2000s, the state redefined the trajectory of indigenous Fijian development and shifted the emphasis from rural development to urban embourgeoisment. The idea was that state resources should be directed toward creating a vibrant indigenous Fijian professional and corporate class to counterbalance economic dominance of Indo-Fijians, Chinese, and Europeans in the commercial sector. A major thrust of the strategy was to ensure at least 50% control of the civil service and economy, once dominated by Indo-Fijians, by indigenous Fijians (Fiji Government, 2001). The government provided capital for a number of projects including the Fijian Holdings Limited (FHL) and shares were to be purchased by indigenous investors. Indigenous Fijians had special provisions for taxi licenses, business licenses, and quota for civil service jobs as well as special access to loans for houses, business, and cars. Some of Fiji’s major public financial institutions such as the National Bank of Fiji (NBF), Fiji Development Bank, Unit Trust of Fiji (UTF), and Fiji National Provident Fund (FNPF) as well as state institutions such as the Fijian Affairs Board (FAB) and Native Land Trust Board were mandated to put in place affirmative action policies to advance indigenous business. At the same time, a number of indigenous Fijian companies were set up to facilitate this new surge in entrepreneurial spirit.

The drive toward creating an indigenous middle class was a major social engineering project to reconfigure the ethnic and class structure through concerted state intervention. To facilitate the process, a constitution which ensured political supremacy of indigenous Fijians was promulgated in 1990 (Fiji Government, 1990). However, the new optimism for a new indigenous-dominated order was thwarted by internal fractures among the indigenous elites, contesting for political ascendency. However, this internal political fragmentation posed no direct threat to affirmative action because the competing factions were still united by their desire to access and gain from the affirmative action programs.

In the ambitious drive to achieve equity in a very short time, significant blunders were committed. Affirmative action resulted in political patronage and widespread corruption that engulfed the entire state bureaucracy involving the president, prime minister, ministers, military officers, senior civil servants, businessmen, and other prominent people in the community. Some well-connected individuals used their privileged positions and powerful links to state power and commercial institutions to access loans and purchase government-funded shares in state-sponsored companies such as the FHL. Commercial logic was overshadowed by the desire to implement the ethno-nationalist policy of using the bank to fund indigenous business without the usual collateral. Getting a “loan” from the government-owned NBF was perfectly possible if one was simply able to provide political collateral simply by demonstrating one’s “indigenousness.” Within months, the NBF was insolvent and collapsed with a loss of more than FJ$400 million and many other affirmative action projects failed (Grynberg et al., 2002).

Major changes took place in the political scene when the 1990 Constitution was reviewed leading to the promulgation of the more multi-ethnic 1997 Constitution. While the 1990 Constitution framed the affirmative action-designated groups as exclusively indigenous Fijians, the 1997 Constitution extended the designated boundary to also include those considered “disadvantaged” (Fiji Government, 1997). To the diehard ethno-nationalists, the watering down of indigenous economic privileges was political sacrilege and some proceeded to burn copies of the constitution.

Perhaps the biggest challenge was how to create a multi-ethnic environment while maintaining economic preferences for the indigenous population. This paradox was first tested during the 1999 election, the first under the 1997 Constitution, when the first Indo-Fijian Prime Minister, Mahendra Chaudhry, was elected. Chaudhry attempted to terminate the affirmative action policies but because of the rising wave of ethno-nationalist protests against him, conveniently abandoned the idea and as the situation became increasingly untenable tried to save his government by publicly promising indigenous Fijians that he would continue with the affirmative action policies. This was to no avail. Chaudhry’s government was overthrown in May 2000, only a year after the election, in a coup which was more complex than those of 1987 because of the involvement of multiple players with diverse interests such as business people, civil servants, and some members of the military (Robertson and Sutherland, 2001).

The ethno-nationalist coup leaders had hoped that the military would intervene on their behalf, but instead, the military had them arrested and jailed and Laisenia Qarase, a banker, was appointed as interim prime minister. Among his very first tasks was to put in place the Blueprint, another indigenous affirmative action plan with the military’s approval (Fiji Government, 2000). The military supported the Blueprint because it was felt that it was a way to appease the ethno-nationalists whose capacity to mobilize and cause havoc was a major cause for concern. The sister document for the Blueprint was the 50–50 Plan which specifically targeted a 50% control of the economy by indigenous Fijians by the year 2020 (Fiji Government, 2001). The 50–50 Plan used the Equity Index (EI) formula devised to calculate the comparative ratio of inequality between indigenous Fijians and other ethnic groups as basis for determining amount of increase of indigenous Fijian participation to ensure equity (Ratuva, 2013).

The two documents were extensively used by Qarase’s ruling Soqosoqo Duavatani Lewenivanua Party (SDL) during the 2001 and again during the 2006 elections to mobilize indigenous Fijian support. This led to a major scandal (Auditor General, 2002) and some civil servants, including the CEO for Agriculture and Fisheries, were found guilty and imprisoned.

However, the tension between the ethno-nationalist policies of Qarase and the military’s desire to create a multi-ethnic society eventually came to a loggerhead. The situation was worsened when two of the government’s affirmative action-related policies were vehemently opposed by the military as posing security risk. These were the Qoliqoli Bill which was aimed at transferring ownership of the foreshore area from the state to indigenous Fijians and the other was the Reconciliation, Truth and Unity (RTU) which was meant to release some of the perpetrators of the 2000 coup as part of a national reconciliation process (SDL, 2005, 2006).

The SDL’s pro-indigenous policies had put the government on a direct collision course with the military and after about 3 years of tense relationship, the military finally moved in to forcefully capture state power through a coup on 6 December 2006 (Fraenkel et al., 2009). Unlike the coups of 1987 and 2000, the 2006 coup was a counter to ethno-nationalism and the military regime proceeded to extricate many of the affirmative action policies.

Protection from neoliberal competition: Preferential policies in investment

The preferential loans and initiatives for indigenous Fijians laid the platform to avoid the negative consequences of direct competition in the market place as dictated by neoliberal forces. The Nine Points Plan framed the initial economic affirmative action policies of the post-1987 coup period. The proposals included FJ$20 million equity to be injected from the FAB to Fijian Holdings Company (FHC), a Unit Trust for indigenous Fijians was to be established, a Compulsory Savings Scheme (CSS) for indigenous Fijians to be set up, Government concession to indigenous business to be enhanced, a Management Advisory Services Department to be established in the FAB, and indigenous Fijians should have a minimum ownership of resource-based industries. Furthermore, certain sectors of the economy were to be reserved for indigenous Fijian investment; there should be ownership of a daily newspaper by indigenous Fijians, and the FAB should be restructured and strengthened (Fijian Initiative Group, 1992).

To help fund these, the government allocated a FJ$20 million grant to FHL via the FAB and cabinet also approved the compulsory savings concept, although it was never implemented. The Fiji Development Bank and government bought shares in the Daily Post, an indigenous Fijian-owned daily newspaper and the idea was that the government shares were to be sold later to indigenous Fijians.

The other major affirmative action document was the Ten Year Plan for Fijian Participation in Business (Ten Year Plan) which suggested that the objective of affirmative action “should be the achievement of overall parity between Fijians and other communities in all spheres of activities within the shortest period of time possible” and should “ensure that indigenous Fijians achieve 50% ownership of the corporate sector and other business sectors by the year 2005” (Qarase, 1994: 4). This was to be based on five strategies: enactment of appropriate legislation with the object of promoting and safeguarding the interest of indigenous Fijians, reorganization and strengthening of the Fijian Administration, accumulation of savings to provide investment capital, encouraging of indigenous Fijians in investment, and development of indigenous Fijian entrepreneurship, business education, and training.

The Ten Year Plan, which later became the government blueprint for indigenous Fijian business, identified a number of government-controlled industries for privatization, with government shares to be transferred to Fijian Holdings and other indigenous Fijian corporations. These included big monopolies such as Fiji Post and Telecom, Fiji International Telecommunications Limited (FINTEL), Fiji Forest Industries Limited (FFI), Fiji Pine Limited (FPL), Tropic Woods Limited (TWL), Pacific Fisheries Company (PAFCO) and NBF, the crisis-ridden state-owned bank.

The major political factor driving the need for corporatization and privatization was the need to ensure indigenous active participation in the corporate sectors, an area which had been largely dominated by Indo-Fijians and other ethnic groups. For instance, in 1986, before the first coup about Indo-Fijians and other ethnic groups dominated the professional, technical and related workers (55%), administrative and managerial (74%), clerical and related workers (62%), and sales (74%) categories (Fiji Bureau of Statistics, 1989: 52). Between 1986 and 1987, of the 700 companies registered by the Registrar of Companies, only 15% belonged to indigenous Fijians, compared to 50% ownership by Indo-Fijians, 20% by others, and 15% joint venture by all the ethnic groups (Office of Registrar of Companies, 1997).

Among the government initiatives was the provision of two major concessions for the Commercial Loans to Fijians Scheme (CLFS), which was set up by the Fiji Development Bank in 1975 to assist indigenous Fijians in business. The concessions were as follows: first, an increased subsidy of 5.5% per annum on loans up to FJ$200,000 under the scheme, giving an effective interest rate of 8% per annum to borrowers, and second, a cash grant equivalent to 10% of the fixed assets cost, with a maximum grant of FJ$20,000 for each project. Through government encouragement, loans under the CLFS increased dramatically after the coup. For instance, in the 12 years between 1975 and 1988 there were only 4720 loans, totaling about FJ$25 million. But in the 5 years from 1989 to 1994, there were 6189 loans totalling FJ$99 million. The upsurge in loan approval from 1989 reflected increased government concessions. Despite the initial optimism, CLFS had a high failure rate, with arrears averaging between 19% and 23% (Fiji Development Bank, 1994).

An area in which the quota system was significant was in the taxi business. The taxi business was always dominated by Indo-Fijians, and in 1990, there was deliberate policy to increase indigenous taxi permits, and on 22 October 1993, a ministerial directive stated that Indo-Fijians were not to be issued new permits. In 1990, 17 new permits were issued, and this steadily increased over the years, so that by June 1994 alone there was an increase of 240 in the number of new permits issued to indigenous Fijians since 1993. In comparison, the number of taxi permits issued to Indo-Fijians had declined from 2265 in 1989 to 2239 in June 1994. As a result of the ministerial directive in 1993, no new permits were issued to Indo-Fijians from mid-1994 onward. By the end of December 1994, 1289 permits were held by indigenous Fijians compared to 2239 held by Indo-Fijians.

The issue of taxi permits was a clear case of reverse discrimination where, while there was a genuine need to increase indigenous Fijians’ share of the taxi business, there was at the same time a deliberate policy to minimize the Indo-Fijian share. Funding for new taxis for indigenous Fijians was provided by the CLFS, as mentioned earlier. But in 1995, CLFS funding for new permits was suspended due to the high rate of arrears.

One of the main indigenous Fijian commercial acquisitions was Fiji Television Limited (FTL). The government granted a 12-year exclusive television broadcast license to FTL on the understanding that indigenous Fijian control of FTL would increase. In 1995, the main shareholders in FTL were FDB, 51%; Television New Zealand (TVNZ), 15%; Fiji Post and Telecom (FPTL), 14%; and the general public, 20%. The 51% of shares owned by FDB were held in trust on behalf of indigenous Fijians, represented by the 14 Provincial Councils (Qarase, 1994). The Provincial Councils owned Yasana Holdings Limited (YHL), a company established by the FAB to look after provincial investment. The Village Housing Scheme (VHS) was set up by the FNPF in 1987 to provide homes for Fijians living in rural villages. A total of 27,373 applications amounting to FJ$53.91 million were approved and paid out. The Small Business Equity Scheme (SBES) was set up by the FNPF in 1990 to provide finance for small businesses, especially those owned by indigenous Fijians. Since it started, a total of 4621 members were assisted, representing FJ$17.22 million in payments. In 1996, a total of 1379 applications amounting to FJ$3.5 million were approved. Of these, indigenous Fijians submitted about 90% or 1200 applications totalling F$2.76 million in payment (FNPF, 1996: 8).

The heavy state subsidies and political patronage by the state was important to shield indigenous entrepreneurs from direct competition in the market place. The dominance of Indo-Fijians and other ethnic groups in the business sectors was an intimidating factor which inspired the indigenous state elites to play the political game of ethnic brinksmanship and scapegoating to justify pro-indigenous policies. Due to their dominance in the economy as well as their close business networks, Indo-Fijian entrepreneurs, who thrived well in a climate of neoliberalism, posed a major challenge to the indigenous-dominated state. Thus, for a government obsessed with both neoliberal reform and affirmative action, the solution lay in three strategies. The first was provision of capital by the state for indigenous business; the second was politically regulated corporatization and privatization to ensure that indigenous entrepreneurs and shareholders are given first preference in equity purchase or ownership; the third was the use of communal investment as a cushion against neoliberal competition.

Politically regulated neoliberal reforms and affirmative action

When neoliberal reforms in Fiji began in the 1980s in the form of the structural adjustment policies of the Asian Development Bank (ADB) and World Bank (WB), Fiji’s foreign debt had been increasing steadily by 754%, from FJ$35 million in 1970 to FJ$264 million in 1981 and the trend continued in the following years (Prasad and Kumar, 2000). This compelled the state to intervene harshly with “rationalisation measures” such as pay cuts, redundancies of unestablished workers and the withdrawal of job guarantees for government-sponsored graduate teachers. This led to widespread protests, including a graduate teachers’ hunger strike. In its 4–5 February 1985 Economic Summit, the government justified the wage freeze thus

… to create savings (of about FJ$36 million) that can be used to spread the benefits of development more evenly among the population. The freeze should result in more money flowing into the banking system. This should make more finance available for loans-especially for projects that will boost industry, agriculture, export earnings and create jobs. It will encourage business to expand and invest. It should help to keep redundancies to a minimum or avoid it. (Fiji Government, 1985: 1)

The corporatist industrial strategy which involved a tripartite engagement between employers, employees, and government collapsed in 1985 as a result of the government’s unilateral imposition of a nation-wide wage freeze, recommended by the World Bank employment mission, which argued that Fiji’s salaries were internationally uncompetitive and needed to be reduced to enhance export potential. The IMF experts also thought that wages in Fiji were “15% too high” (Narsey, 1985: 3).

The push for greater reform took place after the 1987 military coup when initiatives to promote growth through deregulation and corporatization were pursued in earnest under an authoritative regime. Export-led growth became the cornerstone strategy for development and an important component of this was the creation of tax-free zones and factories for exports using cheap local labor (Akram-Lodhi, 1992). The economic rationale was that reform was to make Fiji a competitive economy and some of the strategies implemented included elimination of barriers to trade, which were designed to increase competitiveness by raising productivity relative to wages, in other words, to lower unit labor costs (Reddy, 2004).

By the late 1980s, a series of reforms were instituted to ensure the elimination of quantitative import barriers and reduce tariffs, deregulation of the financial markets, removal of statutory wage guidelines and promotion of enterprise bargaining, reforming of the tax regime to give a larger role to indirect taxes, reforming of public enterprises through corporatization and privatization, and the promotion of exports (Reddy, 2004: 13). After the first post-coup election in 1992, the Value-Added Tax (VAT) was introduced to remove price distortion and to broaden the tax base. These were in stages, and by 1996, the import licensing requirements and quantitative restrictions were removed and only one of the 46 items under license control was still subject to import licensing.

At the regional level, Fiji joined two regional free trade agreements such as the Pacific Islands Countries Trade Agreement (PICTA) and the Pacific Agreement on Closer Economic Relations (PACER) with Australia and New Zealand both of which have not been functional due to political reasons. Both these agreements were inspired by the global trend with regard to the formation of regional trade blocs under the broad auspices of the WTO. Fiji’s regional and global trade engagements were facilitated by a number of earlier regulatory reforms such as the implementation of the Harmonized Commodity Description and Coding System (HS) of the Brussels Customs Co-operative Council (CEC) in 1983. This was for the purpose of classification of imports and exports. In 1988, Fiji converted to the GATT Valuation System, which replaced the 1950 Brussels Definition of value.

These transformations were precursor to Fiji’s membership of the WTO in 1996, after which reform accelerated. However, despite the reforms, Fiji’s export did not perform well as expected and trade balance continually deteriorated because of low investment. One of the reasons was that the reforms were not driven primarily by local aspirations and needs but was inspired by the “new Washington consensus” articulated by the IMF thus:

A key lesson seems to be that the pressures of globalisation, especially in the past decade or so, have served to accentuate the benefits of good policies and the costs of bad policies. Countries that align themselves with the forces of globalisation and embrace the reforms needed to do so, liberalising markets and pursuing disciplined macroeconomic policies, are likely to put themselves on a path of convergence with the advanced economies, following the successful Asian newly industrialised economies. These countries may expect to benefit from trade, gain global market share, and be increasingly rewarded with larger private capital flows. Countries that do not adopt such polices are likely to face declining shares of world trade and private capital flows, and to find themselves behind relative terms. (IMF, 1997: 72)

Opposition to the reforms came from workers unions and civil society organizations, but the state was able to maintain the upper hand through enactment of legislations which restricted union activities and rights to strike.

Meanwhile, the reform of the public service by the post-1978 coup regime was much more direct and imposing. The first aspect of the reform included the introduction of the performance-based system in tandem with the “Fijianization” of the civil service under the 1990 Constitutional provision which prescribed that indigenous Fijians should not constitute “less than fifty per cent” of the civil service became the political mandate for large-scale ethnic discrimination in the civil service (Fiji Government, 1990). The second aspect of the reform involved the liberalization of public enterprises. This assumed a triple-phase approach. The first involved commercialization of the activities of a public enterprise to ensure that it was effective and profitable. The main feature of this was changing the culture of the organization from routine public service operation to focusing on making profit. The second phase was corporatization which involved transforming the organizational structure and aims of a government department or statutory authority into a limited company based on commercial goals, and third was privatization which involved transfer part or whole of the government shares to the private sector (Sarker and Pathak, 2003).

To facilitate the public enterprise reform process, the Public Enterprise Unit was set up in 1996 and later the Ministry of Public Enterprise and Public Sectors Reform was set up under the SVT Government. Some of the government departments and entities which were corporatized to become government commercial companies were Airports Fiji Limited, Fiji Broadcasting Corporation Limited, Fiji Hardwood Corporation Limited, Fiji Shipbuilding Corporation Limited, National Trading Corporation Limited, Ports Terminal Limited, Post Fiji Limited, Rewa Rice Limited, UTF (Management) Company Limited, Viti Corps Company Limited and Yaqara Pastoral Company Limited, PAFCO and Daily Post, a newspaper company. Other entities such as the Civil Aviation Authority of the Fiji Islands, Fiji Electricity Authority, and Housing Authority were converted to commercial statutory authorities (Sarker and Pathak, 2003).

The privatization of telecom industry led to a super monopoly by the newly created Amalgamated Telecom Holdings Limited (ATHL). Initially, the government owned 100% of Telecom Fiji, 51% of Vodafone (a mobile company), and 51% of FINTEL (a telecommunication company) plus production of telephone directories. The FNPF bought the government’s ATH shares for FJ$253 million. This sale was significant because not only was it the largest case of public asset sale in Fiji’s history at the point in time, but it was also an attempt to shore up the investment portfolio of the FNPF, which at the time was also going through a process of indigenization of its top positions. The FNPF had been a great advocate of affirmative action through loans for indigenous Fijian business.

The reforms continued under the post-2006 coup regime, which was both a strong opponent of affirmative action and an ardent advocate of neoliberal policies. As demand for development funding increased, there was increasing pressure to further privatize government assets. The 2014 budget provided a plan for the “largest public asset sales in Fiji’s history,” almost twice as much as the FJ$253 sales from ATH (Narsey, 2013). The proposed FJ$475 million worth of public asset sales are expected to include FJ$200 million from sale of government investment in economic services such as Fiji Airways, Colonial National Bank, Fijian Holdings, Fiji Sugar Corporation, and other public companies; FJ184 million from sale of government investment in infrastructure (Airports Fiji Limited (AFL), ATH, FINTEL, Fountain Set Holding Limited (FSHL), FTL, PTL, etc.), and FJ40 million from sale of fixed assets such as government quarters, vehicles, and other equipment (Fiji Government, 2013).

The corporatization and privatizations processes provided a major opportunity for indigenous affirmative action because they freed up state assets for private and quasi-private investment. The post-1987 reforms took place under the watch of the ethno-nationalist SVT government, a strong advocate of affirmative action. It was an opportunity for the government to demonstrate the capacity and potential of indigenous Fijian professionals to lead large companies in fulfillment of their affirmative action aspirations.

The commercial–political trade-off was that while corporatizations were to ensure that “government achieves higher rates of return on investment … and the benefits of privatization are spread equally among the population” (Strategic Development Plan, 2003–2005: 40), it was also an opportunity for the indigenous community to develop commercial skills. This created a system of patronage where the minister appointed party supporters, politically loyal professionals, and supporters of the 1987 and 2000 coups to CEO and other senior positions.

Some of the CEOs of the new entities were once permanent secretaries of government departments who were given retirement packages but were reemployed in the new corporate entities. They became part of the growing indigenous commercial elites whose symbolic role was to provide a visible “evidence” of increased indigenous commercial participation. Despite the lack of commercial acumen among some CEOs, some of the corporations performed reasonably well largely because of their monopoly status rather than level of efficiency. The appointment of indigenous Fijians to CEO positions was seen as compatible with the policy of ethnic commercial advancement under the government’s affirmative action policy of 50% control of the corporate sector by indigenous entrepreneurs (Fiji Government, 2001).

The corporatized enterprises lacked autonomy as indicated by the “politically-motivated executive appointments in the enterprises, interference in pricing, procurement, contracts, etc.” and the constant tension between the board of directors and the minister leading to board members being sacked and replaced was common occurrence (Sarker and Pathak, 2003: 61). The board members were appointed by the ministers and they were mostly indigenous Fijians who were once senior civil servants or employees of state corporations, business people of other ethnic groups, and others chosen from the public. In some cases, the same people sat in a number of boards raising issues of conflict of interest. A World Bank report expressed concern that there was rampant occurrence of plundering of state resources by the corporate executives and influential stakeholders (Sutherland, 1998).

The corporatized and privatized entities were symbolic of the government’s dual approach to development; the first was encouragement of free enterprise and second was maintaining a certain degree of political control to fulfill the affirmative action ideological agenda. Moreover, some of the corporatized entities were eventually fully privatized, the largest being the telecommunication industry in the 1990s. Ironically, this privatization initiative was to pay off the budget deficit caused by the collapse of the NBF as a result of the post-1987 coup affirmative action policies which saw unregulated and unscrupulous hand out of loans to indigenous Fijians, especially the coup supporters which led to the loss of about FJ$400 million mentioned earlier (Grynberg et al., 2002).

The corporatization and privatization processes were seen by supporters of affirmative action as a welcome move to enable indigenous Fijians to enter into the higher echelons of the corporate world through purchase of shares or appointment into directorship and managerial positions. This helped to expand the indigenous middle class which for some time became a stabilizing force in Fijian politics. However, after the 2006 coup, the military regime not only terminated the affirmative action programs, but it also removed most of the heads of government ministries, corporatized entities, and even private companies where the government had some interest. Many of these were beneficiaries of affirmative action and some were investigated for corruption by the Fiji Island Commission Against Corruption (FICAC), a body set up by the military regime. In effect, the coerced institutional transformation by the new military regime led to disabling the political power of the indigenous corporate class, which was associated with affirmative action and the ethno-nationalist elites.

Communal investment and neoliberalism

Communal investment was a means by which indigenous Fijians, with limited capital, could pull their resources together, under state patronage, to invest in profitable business. In an earlier work, I referred to this as “communal capitalism” or “capitalist entrepreneurship operating within the framework of neo-traditional social relations” (Ratuva, 2013). It was a very convenient way of ensuring that indigenous Fijians, who were in some ways still attached to their semi-subsistence life, were shielded from the overpowering force of neoliberal competition.

The communal investment system suited the communal and kinship-based indigenous Fijian social system where individualism was seen as socially deviant or at worse, pathological. Often communal investment had a strong psychological and cultural appeal and was seen as a long-term social security measure against potential future economic calamities. However, the reality was that very little of the profit trickled down to individuals. The group, rather than the individual, was the smallest investment unit and dividends often came back to the province, district, village, or tribal-kinship group. The money generated was usually spent on community projects for the collective good.

The major communal trust company was the FHL, set up in 1982 by the Great Council of Chiefs and modeled on the Malaysian Bumiputera (indigenous Malay) trust companies. Most of the investors in the FHL were communal institutions such as all the 14 indigenous run provincial councils, FAB (an institution responsible for indigenous Fijian administration), Native Land Trust Board (this administers native land), village companies, and tribal/kinship-based companies. While the FHL played the role of facilitator of indigenous Fijian business since it started, it was aggressively expanded after 1987 in an attempt to capture a large segment of the corporate sector for indigenous Fijians.

The FHL (1996) was to invest indigenous Fijian capital in profitable companies as stated by the original objectives at the time of incorporation:

… to increase Fijian participation in the commercial sector. The company achieves this through acquisition of equity in established, well-managed, profitable companies with excellent prospects for growth. It will: maintain a prudent and conservative approach to financial decision-making; Seek investments which have economically strategic significance; Endeavour to ensure the benefits from its investments are spread as widely as possible among the Fijian people; Promote the training of Fijian business executives, bearing in mind the need for attainment of high standards of professionalism, competitive performance and commercial skills. (p. 3)

Thus, communal shares became symbolic of two contradictory yet potentially accommodating tendencies: on the one hand was the response to the neoliberal imperative and on the other was the need to maintain communal socio-political cohesion. Nevertheless, it was assumed that through the protection provided by communal shares indigenous Fijians would then be in a position to develop their entrepreneurial skills, which over time would progressively enable them to prepare for more independent entrepreneurship and eventual competition in the market.

Questions were raised about the viability of communal investment. First was the issue of whether the communally based companies could compete against corporations, which dominated the economy. Second was whether they had the capacity to develop an indigenous bourgeois class as envisaged by indigenous elites. Third was the question of redistribution of benefits for ordinary indigenous Fijians who were not directly or actively involved in the investment.

However, at the same time, there was increasing pressure from leading indigenous Fijian bureaucrats, professionals, and entrepreneurs to open up the Fijian Holdings shares to individuals and this led to the change in status from public to private in 1992. This move had the potential to “greatly increase the number of shareholders and … cater for individual Fijian investors, Fijian-owned companies and tikina (district) councils,” so that the “benefits of Fijian Holdings’ shareholdings are spread as widely as possible” (FHL, 1993: 7–8). The ceiling for individual shares was put at FJ$10,000 and to ensure that only indigenous Fijians were to buy shares individual shareholders were confined to those registered in the VolaniKawaBula, the kinship register, which officially defined a “Fijian.” The prescribed ceiling of FJ$10,000 was too low to yield a reasonably high return, especially for the aspiring indigenous Fijian entrepreneurs. The rules were changed overnight by the Fijian Holdings board, who themselves had an interest in individual shares.

The dramatic expansion and consolidation of FHL in the 1990–1994 period was a result of the FJ$20 million interest-free loan provided by the post-coup government in 1989, under the Nine Points Plan affirmative action initiative. Paid-up capital grew from FJ$1.2 million in 1985 to FJ$27.5 million in 1994. The total assets rose from FJ$1.3 million in 1985 to FJ$36.3 million in 1994. The net value of assets increased from FJ$170,248 in 1985 to FJ$3.2 million in 1994. FHL dividend paid to shareholders was at 20% for “A Shares” and 5% for “B Shares.” The “B Shares” were held in trust and invested for indigenous Fijians by the FAB from the FJ$20 million provided by the government as mentioned above. The dividend paid on these shares was to accumulate in a sinking fund to cater for the repayment of the FJ$20 million loan by the FAB to the government. It was anticipated that over time these shares would be sold to indigenous Fijian entrepreneurs.

Fijian Holdings progressively expanded into buying whole companies and majority equity, an indication of the degree of confidence it had generated with the financial and political support of the government and leading private sector businesses. It had to slowly abandon its communal character and purchase shares from foreign and non-indigenous Fijian companies in order to survive. While the long-term beneficiaries of the Fijian Holdings were supposedly the shareholders (communal and individual), the most immediate beneficiaries were the foreign and local corporations in which Fijian Holdings invested. In fact, Fijian Holdings were injecting the badly needed capital to sustain some of those companies at a time when economic contraction had affected local investment and it is no exaggeration to state that affirmative action was directly subsidizing the operation of local and foreign companies. Some of these foreign companies, such as Carlton Brewery, Basic Industries, and Goodman Fielder, were monopolies, which enjoyed their dominance in the market through links with the indigenous Fijian elites and direct state patronage.

Through corporate reforms, Fijian Holdings over the years became a very successful company. By 2008, Fijian Holdings had assets totalling FJ$260.8 million, increasing by 13% to FJ299.9 million in 2009 (FHL, 2010). By June 2013, the total share capital issued consisted of 30,464,650 shares of $1 each with assets totalling FJ$38.2 million (FHL, 2014).

While Fijian Holdings were obviously one of the success stories, there were a number of high profile failures due to inability to compete in the neoliberal environment despite state subsidy. State subsidy was undermined further by, political patronage, mismanagement, and corruption, which were rife in affirmative action-based operations. These factors weakened the capacity of state subsidized entities to compete successfully and as a result many of them collapsed.

The 2008 global crisis did not have a very deep impact on the Fijian economy and affirmative action because of Fiji’s peripheral position in the global banking fraternity and also by this time the affirmative action programs had been dismantled by the military regime. While most of the affirmative action policies had disappeared, the FHL remained and military regime took control by sacking the CEO and changing the board members with a military officer becoming board chair.

Another important area of communal investment was the UTF, set up by the Government in 1976. In the post-1987 coup period, UTF became increasingly dominated by indigenous Fijian investors, after the affirmative action policies were put in place. The UTF accumulated capital through sale of units and equity received was invested in shares, mortgages and government securities, among others. From about 6 million units in 1992, UTF grew to about 7 million units in 1994 with indigenous Fijians representing 38% of the total unit-holdings in 1992 and increasing to 40% in 1994, a dramatic increase from 15% in 1986, before the coup. However, if we exclude the unit-holdings for the government and the FNPF, a public institution, then indigenous Fijian unit-holdings represented 60.5% of the total shareholding as at 30 September 1994 (UTF, 1996). Of the 11 major investment categories in UTF, four could be classified as indigenous Fijian communal investments. These were the Fijian Development Fund Board, Provincial Councils, FAB, and FHL. Again, the pattern of communal capitalism clearly emerged.

The communal investment concept may be culturally relevant but the real advantage was that it provided a cushion for indigenous business from the effects of neoliberal market competition. The subsidy by the state and the use of collective resources ensured that individual investors were protected. However, as we have seen, there was a limit to the protective role of communal investment as companies such as the Fijian Holdings had to respond to the dictates of the market by investing in foreign and local non-indigenous owned companies. The irony is that communal investment, as an affirmative action corporate strategy, had to rely ultimately on neoliberal entrepreneurship to sustain itself.

Conclusion

The relationship between affirmative action and neoliberalism in Fiji was quite complex and had some paradoxical characteristics. Affirmative action served a number of inter-related purposes. While it was meant to advance the socio-economic situations of indigenous Fijians, it also served as a social security mechanism to protect indigenous business from the harsh realities of neoliberal competition. Privatized and corporatized state entities provided opportunities for employment as well as equity acquisition for indigenous Fijians. The state promoted both state intervention through affirmative action and neoliberal reforms and acted as a mediating agent in maintaining a delicate balance between the contending philosophies of liberalization and preferential policies.

Neoliberal reform which started in the mid-1980s was based on a gradual but sustained approach by successive governments to deregulate the economy by making domestic prices more closely in line with world prices; restraint in the growth of government expenditure, to ensure availability of resources for growth in the private sector; reform of the system of direct and indirect taxation, to minimize market distortions and improve incentives for risk taking and effort; a wages policy that recognizes the paramount importance of maintaining international competitiveness; and the mobilization of all sectors of the community in support of economic expansion, in particular, increased indigenous Fijian participation in commerce and industry. The last point is of interest here because it shows that while there was a strong driving economic rationale for the reform, there was also an undercurrent political agenda. The desire to incorporate indigenous Fijians into the mainstream corporate establishment and culture was of paramount consideration.

The balance between the economic and political rationale of the reforms was a sensitive and fragile one which the state had to accommodate in an adaptive and utilitarian way. Economically, the state was under pressure by the Washington consensus to relinquish ownership of key assets. Politically, the reform was an opportunity to bolster a new class of indigenous entrepreneurs who had political protection as well as close links with the banking fraternity. This new class had very close links with the state bureaucracy as well as the corporate sector and their inflated salaries and perks stretched the socio-economic inequality further especially when scores of people were losing their jobs as a result of the reforms.

The corporatization and privatization process raised the level of entrepreneurial ambition of indigenous Fijians and in a situation of sudden transformation those who were directly involved were caught by surprise. Some did not have the necessary corporate skills and some were driven more by the potential for instant fame and wealth. A number of them lost their jobs after being considered incompetent or charged with corruption and in some cases, especially after the 2006 coup, expatriates were hired to fill their places. This was the case with the newly created Fiji Roads Authority (FRA), a corporatized body which emerged from the old Public Works Department (PWD). In the process of transformation, a number of senior engineers were sacked and many workers lost their jobs. Because there were no indigenous Fijian companies to purchase the government shares outright, indigenous Fijian participation was through monopolies such as ATH and FNPF which were managed by indigenous Fijian elites. The corporatization and privatization process favored state-aligned indigenous elites who were simply reclassified as CEOs and senior managers from their civil service positions. In other cases, a number of indigenous companies were set up by senior civil servants and even ministers to carry out contract work for the corporatized and privatized companies.

The biggest beneficiaries were elite indigenous Fijians who took advantage of their links to the state bureaucracy to access loans for investment as well as promotion to high positions in the newly corporatized and privatized entities. It was assumed that transfer of wealth and power to the elite indigenous Fijians would help bolster the economic power of the emerging indigenous middle class to rival the already established and vibrant Indo-Fijian entrepreneurial and professional class. Other beneficiaries of affirmative action were foreign and local non-indigenous companies where affirmative action-based companies such as Fijian Holdings invested in. In a way, affirmative action helped to subsidize those companies’ operations.

However, despite the state’s preferential protective policies, the communal investment initiatives had limited impact on the indigenous Fijians generally because the returns were mostly for communal purposes. Meanwhile poverty and inequality continued to grow (Fiji Bureau of Statistics, 2011). This strengthens the argument for a more socio-economic rather than entirely race-based affirmative action approach. Perhaps more significantly, affirmative action needs to be linked to social protection as a way of tackling the increasing cases of social vulnerabilities across different ethnic groups, resulting from the predatory impact of neoliberalism. The global fuel and food crisis of 2004/2005 and the financial crisis of 2008 led to massive inflation and loss of jobs and forced many into poverty. Social protection measures by the state were limited given the limited resources. Affirmative action should be reconceptualized to accommodate these socio-economic realities rather than focus largely on the bigger ethno-political and ideological issues.