WORLD TRADE
ORGANIZATIONG/SCM/N/71/FJI
5 March 2002
(02-1115)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1 of the GATT 1994
and Article 25 of the Agreement on Subsidies and
Countervailing Measures
FIJI
The following communication, dated 26 February 2002,  has been received from the Ministry
of Foreign Affairs and External Trade in Suva, Fiji.
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In accordance with paragraph 10.6 of the Decision on Implementation-Related Issues and
Concerns (WT/MIN(01)/17) and with reference to document G/SCM/39 adopted by the Fourth
Ministerial Conference, held from 9 to 14 November  2001 in Doha, Qatar, and further to our earlier
notification dated 31 December 2001, the Government of the Republic of Fiji wishes to submit
hereunder detailed information about the programmes for which extension has been sought under
Article 27.4 of the Agreement on Subsidies and Countervailing Measures.
Short-Term Export Profit Deduction
The "Short-Term Export Profit Deduction" scheme was introduced as a transitional measure
to address the issue of income tax exemptions offered to exporters by progressively bringing exporters
under the standard tax regime over time.
In order to have a relatively smooth transition, exporters' profits will be tax free from 2001 to
2002.  From 2003 to 2004, 25 per cent of export profit will be subject to tax.  From 2005 to 2006, 50
per cent of export profit will be taxed.  From 2007 to 2008, 75 per cent of export profit will be taxed,
and in 2009, all export profits will be fully taxed.
In addition, the Reserve Bank of Fiji also administers two concessional facilities to assist
exporters.  These two facilities are:
(a) Export Finance Facility (EFF)
This facility was introduced by the Reserve Bank of Fiji (RBF) in 1983, to assist exporters of
"non-traditional" products to obtain credit at concessional rates of interest, to help improve
international competitiveness and to ensure the availability of credit to the export sector.  The RBF
had introduced a limit of $20 million as its total exposure under the EFF.  Traditional export
commodities such as sugar, molasses, gold, green logs and rough unprocessed timber are excluded
from this facility, while all other products qualify, provided they have at least 40 per cent of localG/SCM/N/71/FJI
Page 2
value added.  The eligibility rules of the EFF were extended in March 1966 to include the financing of
the construction of up-market hotels.  In February 1999, the use of the facility was extended to
secondary exporters.
Under this facility, commercial banks can borrow from the RBF at the Minimum Lending
Rate (MLR) and lend funds to exporters at a rate equivalent to the MLR plus a fixed margin of 4 per
cent per annum for the use of Pre-Shipment Expor t Finance Facility (pre-SEFF), Post-Shipment
Finance Facility (Post-SEFF) and the Lump Sum Facility only.  The MLR was previously set at
0.5 percentage points above the 91-day RBF notes indicator rate.
Following the monetary policy tightening on 22 May 2000, the MLR rose to 15 per cent from
2.5 per cent.  Consequently, the EFF rate rose to 15 per cent.  However, on 17 July 2000, the RBFdelinked the EFF rate from the MLR and reduced the rate to 5 per cent.  Later, on 26 October 2000,
the rate was further reduced to 3 per cent and on 30 March 2001, the rate was further trimmed to 2 per
cent.
Based on the current mechanism, commercial banks can borrow from the RBF at a rate of
2 per cent and lend funds to exporters after adding a fixed margin of 4 per cent.  Therefore, exporters
will pay approximately 6 per cent for borrowing from commercial banks.  However, if the facility was
not in place, exporters would have to borrow from commercial banks at market rates, which are in the
range of 8-10 per cent, depending on the category or sector under which the exporter falls.  Thus,
exporters, under this facility, are saving approximately 2-4 percentage points in interest payments.
(b) Export Credit Ratio (ECR)
After the May 2000 political turmoil, exporters expressed concerns regarding access to bank
credit.  As a pragmatic policy response to the special circumstances facing the economy, the RBFimplemented the Export Credit Ratio (ECR) in Au gust 2001 to improve exporters' access to credit.
Under this facility, commercial banks are required to maintain a minimum of 5 per cent of
their average deposits and similar liabilities, in outstanding loans to eligible exporters of goods and
services.  All primary exporters (producer-exporter) and secondary exporters qualify, provided they
have at least 40 per cent of local value added.  Funding for the construction and refurbishment of
hotels and specific tourist related operations and exports of certain professional services (architecture,engineering and maritime services) also qualify under this facility.  However, exports of traditional
commodities like sugar, molasses, gold, green logs  and rough unprocessed sawn timber are ineligible
under this facility.  Interest rates on these loans are determined by the commercial banks based on
their own risk assessment.
Unlike the EFF, the ECR does not provide a concessional interest rate and commercial banks
are expected to provide credit from their own sources.  The main purpose of the ECR is to provide
more access to credit for eligible exporters.
Export Processing Factories/Export Processing Zones Scheme
The Government of Fiji had given a clear indication of its intentions with regard to the Tax
Free Factories/Tax Free Zones Scheme in the 2001 Budget.  Essentially, no further approvals will be
given after 31 December 2000 to companies applying to operate under the Scheme, which grants a
company exporting 70 per cent or more of its products Fiscal Duty, Value-Added Tax and IncomeTax exemptions for a period of 13 years.  However, given that some companies were given approvals
prior to 31 December 2000, the scheme is most likely to cease in 2014 or earlier.G/SCM/N/71/FJI
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Audio-Visual Concessions
The Film Making and Audio Visual Incentives Amendment Decree 2000 was promulgated on
18 May 2001 together with the Fiji Audio Visual Commission Decree 2000, to facilitate the
establishment and development of the audio-visual industry in Fiji.
The Decree provides the fiscal incentives especially for employees of non-resident film
companies, for those investing in audio-visual pr oductions, companies operating from the studio city
zone and its residents.
The studio city zone will be the area in which activities of the audio-visual industry will
mainly be conducted.
For the purposes of Article 25.3(i), the concessions available under the Income Tax Act are:(a) taxation exemptions on production income and capital investments;
(b) personal and company income for qualifying entities.
For the purpose of Article 25.3(ii), the concession is reflected in revenue foregone exemptions
from income taxes.  Statistics are not readily available on such revenue losses.
The concessions available under the Income Tax Act are available to facilitate the
establishment and development of the audio visual industry.  The objectives of setting up the audio
visual industry are to provide employment opportunities and thereby improve rural incomes and
standards of living, earn foreign exchange, diversify Fiji's economic base, decentralize development
away from urban centres, encourage value adding of audio visual productions, and move into high-value industries.
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