prices and poverty in fiji: a developing perspective

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Haszler, Natasiwai, Gonemaituba: Fiji Food Prices Contributed Paper Presented to 53 rd Annual Conference of the Australian Agricultural and Resource Economics Society, Cairns, Cairns International Hotel, 10 – 13 February 2009. Rising World Food Prices and Poverty in Fiji: A Developing Country MicroPerspective 1 Henry Haszler 2, Tevita Natasiwai 3 and Waisiki Gonemaituba 2 Abstract Until the world financial crisis struck, commodity and food prices seemed to be on an inexorable uptrend. The increases caused widespread concern about the effects of higher food prices on poverty. These concerns are relevant to the poor people everywhere but are especially relevant to poor people in developing countries who must spend high proportions of their incomes on food. In this analysis we use data from the Fiji Islands Household Income and Expenditure Survey of 2002 – 2003 to assess the likely effects of the increase in food prices in Fiji over 2002 to mid 2008 on the incidence of poverty in Fiji. We review and discuss the impacts of some of the Fiji Islands Government’s responses designed to alleviate the impacts on the Fiji Islands community. Key Words Food prices, development, poverty, household survey, case study, Fiji 1 We are pleased to acknowledge the financial support towards the preparation of this paper from the Australian Centre for International Agricultural Research (ACIAR). We also wish to acknowledge the assistance from the Fiji Islands Bureau of Statistics, especially from Toga Raikoti and Epeli Waqavonovono who provided the HIES and CPI data essential to this research. We accept responsibility for any errors or omissions. 2 School of Accounting, Economics and Finance, Deakin University, 221 Burwood Highway, Burwood VIC 3125 Australia. Email [email protected] 3 Ministry of Agriculture and Primary Industries, Robinson Complex, Raiwaqa Suva, Fiji Islands. Email [email protected] and [email protected]

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Page 1: Prices and Poverty in Fiji: A Developing Perspective

Haszler, Natasiwai, Gonemaituba: Fiji Food Prices      

Contributed Paper Presented to  

53rd Annual Conference of the Australian Agricultural and Resource Economics Society, 

Cairns, Cairns International Hotel, 10 – 13 February 2009. 

 

 

 

 

Rising World Food Prices and Poverty in Fiji: 

 A Developing Country Micro‐Perspective 1 

 

 

Henry Haszler2, Tevita Natasiwai3 and Waisiki Gonemaituba2 

 

 

Abstract 

 

Until  the world  financial  crisis  struck,  commodity and  food prices  seemed  to be on an  inexorable 

uptrend.  The  increases  caused  widespread  concern  about  the  effects  of  higher  food  prices  on 

poverty. These concerns are relevant to the poor people everywhere but are especially relevant to 

poor people  in developing countries who must spend high proportions of their  incomes on food. In 

this analysis we use data from the Fiji  Islands Household  Income and Expenditure Survey of 2002 – 

2003 to assess the  likely effects of the  increase  in food prices  in Fiji over 2002 to mid 2008 on the 

incidence  of  poverty  in  Fiji.  We  review  and  discuss  the  impacts  of  some  of  the  Fiji  Islands 

Government’s responses designed to alleviate the impacts on the Fiji Islands community.    

 

Key Words 

 

Food prices, development, poverty, household survey, case study, Fiji   

1 We are pleased to acknowledge the financial support towards the preparation of this paper from the Australian Centre for International Agricultural Research (ACIAR).  

We also wish to acknowledge the assistance from the Fiji Islands Bureau of Statistics, especially from Toga Raikoti and Epeli Waqavonovono who provided the HIES and CPI data essential to this research.  

We accept responsibility for any errors or omissions. 2 School of Accounting, Economics and Finance, Deakin University, 221 Burwood Highway, Burwood VIC 3125 Australia. Email [email protected] 3 Ministry of Agriculture and Primary Industries, Robinson Complex, Raiwaqa Suva, Fiji Islands. 

 Email [email protected] and [email protected]  

 

Page 2: Prices and Poverty in Fiji: A Developing Perspective

2/19/2009

1

Rising World Food Prices & Poverty in Fiji:A Developing Country Micro Perspective

(Preliminary)

Slide 1 of 21

• Henry Haszler (Deakin University, Burwood)

• Tevita Natasiwai (Ministry of Agriculture & Primary Industries, Suva)

• Waisiki Gonemaituba (Ministry of Agriculture & Primary Industries, Suva)

Research has involved:• Deakin ‐ lead agency

• MAPI – our Fiji counterpart

• SPC statistical (survey) support

Slide 2 of 21

• SPC ‐ statistical (survey) support 

• FIBoS ‐ statistics (data) support 

Our objectives

• Assess the impacts of the “world food crisis” on poverty in Fiji– Backdrop of the detailed analysis by Narsey (2008)

• Use data from the FIBoS HIES of 2002 – 2003and from the CPI to estimate the implied impacts of food price increases on household incomes

M d l ff t f id 2008 G t k

Slide 3 of 21

• Model effects of a mid 2008 Government package

• We show the impact of the food price change on the 2002 spending base with NO allowance for substitution

• A comparative static approach – no demand elasticities!

• But indicative, nevertheless

A Perspective on Fiji

• Covers a large area of ocean – 300/100 islands

• Middle income developing country

• Abundant natural resources – especially relative to its population of 837,000

Slide 4 of 21

p p

• Friendly people – support the tourist industry• But some problem areas:

– The EU sugar shock and sugar lease renewals

– High degree of poverty and possibly increasing

Selected Development Indicators: 2006

Data Item High Income

Fiji Middle Income 

Heavily Indebted Poor 

GNI per head, PPP ($) 34,579 4,370 5,391 1,057Life expectancy at birth, (years) 79 69 69 53Adolescent fertility (per 1,000 women 15‐19) 22 34 42 123

Mortality rate, under‐5 (per 1,000) 7 18 49 150Population (%) with Access to:

Slide 5 of 21

Improved water source  100 47 89 59Improved sanitation (urban) 100 87 76 41

Value Added in GDP (% of GDP)Agriculture 2 15 9 29Industry 26 26 37 26Services, etc 72 59 54 45

Capital formation (% of GDP) 21 19 28 21Time to start a business (days) 25 46 50 56Phone subscribers (per 100) 144 38 55 12Internet users (per 100 ) 59 10 132 2

Real GDP growing, but too slowly

5,000

6,000

d $F

Nominal

Real

Real 2002

Slide 6 of 21

2,000

3,000

4,000

1995 1997 1999 2001 2003 2005 2007

GDP pe

r Head

Page 3: Prices and Poverty in Fiji: A Developing Perspective

2/19/2009

2

Income Distribution is Unequal: 45 % get 80% of the income

60

80

100

ehold Income

Slide 7 of 21

0

20

40

0 10 20 30 40 50 60 70 80 90 100

Percen

tage of H

ouse

Percentage of Population

High Incidence of Poverty (2002 – 2003) – BNPL method

Group Average Annual Household Income (F$)Rural Urban All Fiji

Fijians 11,082 16,539 12,972Indo‐Fijians 9,653 13,593 11,902Others 11,066 21,877 19,105

Slide 8 of 21

, , ,Average 10,559 15,267 12,753

Population Poverty Incidence (%)Fijians 38 27 34Indo‐Fijians 43 29 36Others 41 17 24Average 40 27 34

The World Food Price Crisis• World food prices increased dramatically over first half of 2008

• Widespread concern about impacts on poverty, especially in LDCs– Many websites (AusAID, IFPRI, World Bank, etc) now feature food crisis pages

– Economist debate, slight majority for price increases “good” in the long run

– Increased aid flows to help the poor countries

d d k

Slide 9 of 21

• Mid 2008 Interim Government introduces package – Income tax threshold increased to $F15,000

– Zero VAT (12,5%) on local eggs

– Reduced duties on rice (15% to 0), canned fish and edible oils (27% to 0)

• Particularly poignant due to MDGs – poverty reduction is #1 target

• Commodity prices fallen with the GFC– but domestic consumer prices still high

World commodity prices rising from March 2003 – but agricultural prices lag

300

400

500

rch 2003

 = 100

RBA Rural

RBA Other

WTI Spot Oil

WTI 21/03/03

Slide 10 of 21

0

100

200

Inde

x: M

ar

Fiji’s domestic retail prices rising faster – but not by much

110

120

130

140

005 = 100

Food Non Food

Slide 11 of 21

80

90

100

110

Dec‐2004 Jun‐2005 Dec‐2005 Jun‐2006 Dec‐2006 Jun‐2007 Dec‐2007 Jun‐2008 Dec‐2008

Inde

x: 20

Cereals – lag oil but the real culprits 

300

400

500

ch 2003 = 100

Wheat: US # 2 HRW Rice: Thai 5%

Slide 12 of 21

0

100

200

Inde

x: M

arc

Page 4: Prices and Poverty in Fiji: A Developing Perspective

2/19/2009

3

On measuring poverty – “I’ll know it if I see it”

• Huge literature, many facets  – so even the richest countries  have their “poor”

• Various measures:– Absolute “Basic Needs” approaches reliant on various “Poverty Lines”

• Calorie levels, $US 1 per day,  food poverty line, other poverty lines

– Various relative measures based on income distributions

Slide 13 of 21

• Issue of Adult Equivalents – Food, other items, household size economies of scale

– Sometimes estimated from household surveys

• Ours is a fairly simple approach:– Basic Needs Poverty Line developed by FIBoS 

– For AEs we use UN/Narsey system of children <14 = 0.5

Basic Needs Poverty Lines: Fiji ($F per week)

FPL (4 AEs) FPL pAE Other pAE BNPL pAE

Fijian Rural 79.4 19.9 11.4 31.3Indo‐Fijian Rural 68.6 17.1 14.3 31.4Others Rural  79.4 19.9 11.4 31.3

Slide 14 of 21

Fijian Urban 80.8 20.2 15.4 35.6Indo‐Fijian Rural 71.5 17.9 18.7 36.6Others Urban 80.8 20.2 15.4 35.6

Analytical Method

• Combine individual household income and expenditure data from the HIES with price information collected for the CPI – HIES combined rural and urban sample of 5245

– 2002 – 2003 scaled to 2002

– CPI data for 2002 (average) & June 2008

Slide 15 of 21

( g )

– For the CPI‐HIES concordance we lose about half the HIES items and create some new CPI groups

• Adjust food expenditure & rural incomes to simulate income impact

The HIES – CPI concordance is the key

CPI Item CPI Code HIES Item

Bread ‐ long loaf 101.01 Long loaf

Breakfast Crackers 101.03 Biscuits ‐ crackers

Sweet Biscuit 101.04 Biscuits ‐ Other

Flour, plain 102.02 Flour; cornflour; maize flour; rice flour

Slide 16 of 21

flourAll Pasta, incl canned 103.02; 116.10 Macaroni, spaghetti, etc; noodles

BeefHi 104.01; 104.02 Beef ‐curry, roast etc; beef ‐ corned (not canned)

Pork leg 104.07 Pork: curry, roasting etc; pork ‐stewing or boiling

Goat chop ‐ imported 104.09 Goat meat; live goat

Chicken ‐ live 104.10 Live Chicken/Duck

Chicken ‐ frozen 104.11 Chicken, ducks, turkey ‐ whole, fresh/frozen

Household Income Sources (HIES) 2002Income Source Place of Residence Ethnic Group All Fiji

Urban Rural Fijian Indo‐Fijian% % % % %

Crops 1.1 19.8 8.6 9.3 8.5Livestock 0.3 1.2 0.5 0.8 0.6Fishing 0.1 2.9 2.1 0.3 1.2Wages etc 79.0 54.1 70.7 66.2 69.2

Slide 17 of 21

gBusiness etc 9.3 10.0 6.4 13.5 9.6Transfers 9.8 9.1 9.9 8.7 9.5Other Income 0.5 2.9 1.7 1.3 1.5

100.0 100.0 100.0 100.0 100.0

Total Income ($F m)  1,101 719 885 802 1,820

Note: “All Fiji” includes other ethnic groups; “Other Income” includes forestry. 

Spending Pattern: HIES 2002 – 2003Item Place of Residence Ethnic Group

Urban Rural Fijian Indo‐FijianAll Cereals 19.3 16.9 16.0 20.7Fresh Meat &  Preparations 14.8 8.8 9.6 13.9Fresh Fish, Seafood 5.8 11.3 12.2 4.3Canned Meat & Fish 4.7 4.7 5.5 3.6Fresh Vegetables 9.7 9.9 7.6 13.0Root Vegetables, incl spuds 7.2 19.1 20.8 4.2

Slide 18 of 21

g , pFruit, Fresh, Dried, etc 3.4 4.5 4.6 3.1Dairy & Eggs 9.8 5.1 6.2 8.6Other Oils & Fats, not Butter

4.0 3.2 2.3 5.4

Tea, Spices, Sugar 5.6 5.1 4.4 6.7Non‐Alcoholic Drinks 5.5 4.1 4.0 5.7Alcohol/Tobacco 5.3 3.3 3.1 5.6

Food Share (%) 24.3 42.7 36.3 27.9

Page 5: Prices and Poverty in Fiji: A Developing Perspective

2/19/2009

4

Interim Results

Post‐Tax Policy Gains$F per AE %

Total Fiji 109  3.3 Urban Residents 1 106  2.7 Fijian 1 144 3.8

Slide 19 of 21

Fijian 1 144  3.8 Indo‐Fijian 2 38  1.0 Other 3 430  6.5 Rural Residents 2 112  5.0 Fijian 1 240  10.6 Indo‐Fijian 2 ‐101  ‐4.6 Other 3 325  12.4 

Interim Conclusions• Not everyone loses from food price increases

– Rural Fijians gain from farm sales– But Indo‐Fijians lose on sugar

• Remember the Economist debate

• The tax changes may be the most important part of package d i f i

Slide 20 of 21

and issue of equity

• Raises question of tax in poverty analysis – difficult!!!– Transfers from government included in income – so why not tax 

liabilities?

• Overall, seemingly small impacts – but issue of budget capacity

Slide 21 of 21

Thank You