An insightful piece by blogger, Corruption Fighter

After a comment by blogger Corruption Fighter on an article on land, we invited him/her to contribute a Think Piece on the subject.

A BARBED WIRE FENCE IS NO PLACE TO SIT
On the issue land and sugar, Bainimarama is like a man climbing over a barbed wire fence. He’s snagged himself and he’s afraid if he moves he’ll rip something he doesn’t want to lose. He can’t move forward and he can’t move back.

His problem is he can see that the future of the sugar industry and the land issue are closely related but he’s been badly misled about what the real problem is.

He’s bought the line that the problem is that leases are too short and he thinks lengthening the term of the lease to 99 years will solve the problem. He doesn’t seem to understand why landowners are not renewing 30 year leases. If they won’t renew 30 year leases, why would they sign 99 year leases?

Somebody seems to have sold Frank the idea that the non-renewal problem was caused by 30 year leases. If they hadn’t run out the problem wouldn’t have arisen.

The idea that Mara’s Alliance Party failed tenants when it changed 10 year leases into 30 year leases sounds like something that could only have come from Aiyaz Sayed-Khaiyum. It took strong leadership by Ratu Mara to get 30 years leases approved by the Great Council of Chiefs in 1976. He could never have achieved 99 years. And would he need to? Thirty years was long enough then for the FDB to use ALTA leases as loan security and it’s long enough now.

So long as Frank thinks the problem is 30 year leases, he’s not going to do anything. He’s cajoled and threatened and blamed the NLTB for slowness but he’s never going to mandate 99 year leases because he knows in the pit of his stomach that this would finish him. The reaction from the Fijian community would be instant and hostile. He’d be on the wrong side of the fence and minus a couple of vital parts.

What Frank doesn’t understand is that ALTA rent setting arrangements provide little incentive for landowners. Unless rents are indexed regularly, they drop in real value.

Would Sayed-Khaiyum or Mahendra Chaudhry give somebody a thirty year tenancy in a house they own without having the rent indexed to keep pace with inflation?

Under ALTA, indexation is made according to a formula that requires the unimproved capital value of the land to be recalculated. It’s slow and has generous appeal provisions which have allowed many tenants to escape with very low rents, at least until the NLTB did its job and reviewed them.

In 2001 Padma Lal of the Australian National University and Mahendra Reddy of the USP estimated the average rent for a hectare of land was $66.63. This was a small component of the average cost of production cost which they estimated to be $2188 per hectare. Since then, production costs have risen steeply, especially the cost of fuel and fertiliser after the devaluation last year. But have rents increased to keep pace with the costs of everything else? No, because under ALTA this cannot happen.

What the sugar industry needs to survive is large farms, with farmers who can afford to use machinery and the optimal amount of fertiliser. Such farmers with higher productivity would be able to afford to pay significantly more in rent for the the land they use.

But all this is too much for our dumb dictator to understand. All he knows about the problem is what Sayed-Khaiyum has told him.

CORRUPTION FIGHTER

One Response to “An insightful piece by blogger, Corruption Fighter”

  1. Rob Says:

    The problem of the sugar industry plain and simple is that it needs a major injection of cash in order to restructure and modernize the industry. This cash is available to Fiji the moment there is a legitimate government in place.

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