WORLD TRADE  
ORGANIZATION  G/SCM/Q4/FJI/6 
25 October 2006 
 (06-5119) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
PROCEDURES FOR EXTENSIONS UNDER  
ARTICLE 27.4 OF THE AGREEMENT ON SUBSIDIES  
AND COUNTERVAILING MEASURES 
 
Replies to Questions Posed by CANADA1;  COLOMBIA2; 
JAPAN3;  PERU4 and the UNITED STATES5 
 
 
 The following communication, dated 20 October 2006, is being circulated at the request of the Delegation of Fiji. 
 
_______________ 
 
 
CANADA
 
 
 Canada refers to documents G/SCM/W/535 dated 12 April 2006, which was sponsored 
by 14 Members and co-sponsored by Guatemal a in G/SCM/W/535/add.1, and G/SCM/W/537, a 
communication from Panama dated 23 June 2006, which was co-sponsored by Costa Rica and 
Jordan in G/SCM/W/537/Add.1 and Add.2 respectively.  Canada would like to submit the 
following questions to all proponents of the aforementioned documents.  
 Q1. Recalling that the objective of G/SCM/39 was to provide an extension of the transition period for the progressive elimination of export subsidy programmes of a number of Members, as called for in Article 27.4 of the SCM Agreement, we would ask the proponents of G/SCM/W/535 and G/SCM/W/537 to inform the Committee on Subsidies and Countervailing 
Measures of the individual efforts, if any, they  have undertaken to gradually bring these export 
subsidy programmes into conformity with their WTO obligations.  
 
Reply
 
 
Document G/SCM/39 contains only a fast tr ack procedure to approve extensions under 
Article 27.4 of the ASCM.  This document neith er reduces nor does it increase the rights and 
obligations under the ASCM.  Therefore, neither  document G/SCM/39 nor Article 27.4 of the ASCM 
provide for a progressive eliminati on of export subsidy programmes.  
 
 Moreover, Article 27.4 mentions a “progressive” elimination is the first sentence which refers 
to the phase out of the export subsidies within th e eight-year period mentioned in Article 27.2(b), a 
                                                      
1 G/SCM/Q4/FJI/2 
2 G/SCM/Q4/FJI/1 
3 G/SCM/Q4/FJI/3 
4 G/SCM/Q4/FJI/4 
5 G/SCM/Q4/FJI/5/Rev.1 G/SCM/Q4/FJI/6 
Page 2  
 
  condition that is completely different to tho se regarding the subsidies programmes at issue. 
Additionally, it is our perspective that the language in Article 27.4 on “progressive elimination” is not 
mandatory.  
 
 In addition, Fiji considers that its export subs idy programmes are fully in compliance with its 
WTO obligations under Article 27.4 and under the procedures and conditions set forth in document 
G/SCM/39.  
 
 Nevertheless, Fiji has been undertaking efforts to phase out its export subsidies programmes.  
In line with the guidelines of G/SCM/39, no new licenses have been given under the Export 
Processing Zone scheme since 2001 and all current licences will expire by the time of the requested 
extension deadline.  Similarly, as notified to th e Committee, the benefits of the Export Profit 
Deduction Scheme, which is short term in nature, ar e being phased out such that the percentage of 
profits that are tax-exempt reduces progressively to 0 per cent in 2009, at which point all exporting 
companies will be fully subject to the tax regime. 
 
 The income tax benefits for the Audio vi sual industry under the Film Making and Audio 
Visual Incentive Amendment Decree 2000 does not ha ve an in-built sunset clause.  The period until 
2018, however, is considered a reasonable period fo r adjustment out of preference-dependent sectors 
of the economy and diversification into new sector s such as the Audio Visual Industry which present 
tremendous development prospects.  The developmen t of this industry is seen as vital in Fiji for 
various reasons:  it is developing a high-employm ent services oriented sector in an economically 
depressed geographical area.  Given the difficulties in maintaining our export-oriented manufacturing 
sectors such as the garment industry that is now on the decline, it is imperative that Fiji takes full 
advantage of new opportunities.  The audio visual sector shows such promise, with various big-budget 
productions having set up in Fiji as a result of these concessions.  
 
Q2. Could the proponents of both documents also explain how further extension of this 
phase-out period would ensure that these efforts a re finally successfully undertaken in order to 
avoid a similar situation at the end of any ne w extended phase-out period for certain export 
subsidy programmes?     
 Reply
 
 
In answering the question, reference is made  to the Export Processing Zone/Factory Scheme 
and the Film-Making and Audio-Visual In centives Amendment Decree 2000.  Although 49 
companies are licensed to utilise the Export Pr ocessing Zone/Factory Scheme, only 14 companies 
used the scheme in 2004 and 13 companies in 2005.  The Audio-Visual concessions, introduced 
through legislation in 2000, has on ly seen uptake in the last two years, and the productions that have 
utilised the concessions have in turn generated greater interest in international productions 
considering Fiji as a production site.  For the benefits under both the schemes  to be realised to the 
extent necessary for the industry to be well establis hed in Fiji, it is essential that the concessions are 
not terminated at this juncture, and are mainta ined long enough to instil confidence in potential 
investors, for locals to acquire skills that would en able the industry to grow not just on the basis of 
foreign expertise, but for that expertise to be localis ed to create sustainable industries.  In this regard, 
its is estimated that the requested timeline un til 2018 would provide sufficient time for successful 
implementation of the programmes.  
Q3. Recalling that the previous extension of the phase-out period for certain export subsidy 
programmes was for an additional period of 6 years, could the proponents of both documents 
explain the rationale for a proposed extension of 11 years?   
  G/SCM/Q4/FJI/6 
 Page 3 
 
 
  Reply  
  Article 27.4 of ASCM provides that “if a de veloping country Member deems it necessary to 
apply … [export] subsidies beyond the 8-year period [mentioned in article 27.2(b)], it shall not later 
than one year before the expiry of this period en ter into consultation with the Committee, which will 
determine whether an extension of this period is ju stified, after examining all the relevant economic, 
financial and development needs of the developing  country Member in question.  If the Committee 
determines that the extension is justified, the de veloping country Member c oncerned shall hold annual 
consultations with the Committee to determine th e necessity of maintaining the subsidies.”   
 
 Members that deemed it was necessary to appl y export subsidies, due to their particular 
characteristics and needs, requested extensions un der this provision as well as according to the 
outcome of the negotiations in Doha contained in document G/SCM/39.  The latest provides for fast 
track procedures for the approval of the extensions . Members interested in obtaining these benefits 
have had to meet some criteria that justified th e approval from the Committee in order to maintain 
their export subsidies.  In fact, these criteria ar e based on the economic, fi nancial and development 
needs of the beneficiary Members.   In this regard and according to the above mentioned provisions, the Committee granted to a 
group of Members the authority to maintain export subsidies during a specific period of time subject 
to two well-known conditions: transparency and standstill. 
 
 As provided in document G/SCM/39, the author ity granted to the beneficiary Members is 
valid until the end of 2007.  After this date, these  Members have either the possibility to seek a 
continuation of the extension, pursuant to Article 27.4 of the ASCM, or still have the final two years 
referred to in the last sentence of such Article. 
 
 Fiji deems it necessary to request a new ex tension based on its economical, financial and 
development needs.  Each of the subsidy progr ammes referred to in G/SCM/W/535 have served 
significant developmental strategies of Fiji. The EPZ/EPF scheme has provided incentives to the 
garment industry that has ensured the livelihoods of  a predominantly female workforce which would 
have no other opportunities in the formal economy , and has contributed to the garment sector 
becoming the largest manufacturing sector earner in Fiji.  This is a sector that has been highly 
preference-dependant, and with the erosion of pref erences and the termination of the Agreement of 
Textiles and Clothing in 2004, the EPF/EPZ scheme has played a large part in ensuring that the adverse consequences of changing globa l conditions have been mitigated. 
 
 The Audio-Visual concessions have been d esigned as part of a wider concessions package 
that ties in the concessions to residence and pr oduction in a particular  geographic economically 
depressed part of Fiji.  It is hoped that th rough the provision of these concessions, economic 
opportunities and skilled employment will raise th e standards of living and rural livelihood 
opportunities in that region.  Furthermore, the audio- visual sector is one that has been identified as 
one of export interest for Fiji. 
 
 These are all areas identified in Fiji’s Strate gic Development Plan as areas of focus for the 
socio-economic development needs of the country, and it is in view of this that Fiji is a strong 
proponent of this proposal. In a ddition, the number of beneficiary en terprises that have benefited from 
these programmes have increased over the years fro m 11 in 2001 to 40 in  2005 for the EPDS and 
from 6 in 2001 to 13 in 2005 in the case of EPZ/EPF schemes. An extension until 2018 is considered 
a reasonable timeframe for realising full bene fits from these export subsidy programmes.  
 G/SCM/Q4/FJI/6 
Page 4  
 
  COLOMBIA
 
 
Q1. In the case of each of the programmes, please provide the most up-to-date information 
available regarding the number of beneficiary en terprises classified according to industrial 
sector. 
 
Reply  
 
 Both the Export Profit Deduction Scheme a nd the Export Processing Zone schemes can be 
utilised by all sectors and products meeting the cond itions of the scheme.  The schemes were created 
such that they were not product or sector- specifi c.  The EPZ scheme has registrants from sectors as 
wide ranging as clothing manufacturers, lead pr oduct manufacturers, fish exporters and plastics 
producers.  However, experience in the last few y ears has shown that the only sectors really benefiting 
from the scheme are the garment manufacturers, a nd that other international developments have 
resulted in the closure, despite the scheme, of licensees across the sectors.  This is in large part due to 
the erosion of preferences in target markets, but al so because of uncertainty and lack of confidence on 
the part of the manufacturers in continuing operations here beyond the lifetime of the licenses.   The audio-visual concessions are self-explaining,  in that benefits can only be realised by 
those companies involved in audio-visual (film/tv) productions based in Fiji.  
 The number of beneficiary enterprises enjoying the programmes is listed below: 
 Economic Profit Deduction Scheme:   
 
Year:  Number of Enterprises 2001  –  11;  
2002  –  40;  
2003  –  25;  2004  –  49;  2005  –  40. 
 
Export Processing Zone/Export Processing Factories:  
 
Year:  Number of Enterprises 2001  –  6;  2002  –  10;  2003  –  12;  2004  –  14;  2005  –  13.  
 
Audio-visual concessions:   Year:  Number of Enterprises 2004  - 5:  
2005  –  13
. 
 
Q2. Please explain why, under the above programmes, which have been in place for 
over ten years, it is still not possible to dismantle the prohibited subsidies. 
  G/SCM/Q4/FJI/6 
 Page 5 
 
 
  Reply  
 
 G/SCM/39 provided guidelines for the extensi on of the transition period for eligible 
programmes under Article 27.4 in recognition of the economic and social contributions that such 
programmes made in the areas of  national development and employ ment strategies within liberal 
national export-oriented strategies of vulne rable developing countries such as Fiji.  
 
 The reasons why Fiji has not been able to e liminate these programmes has to do with Fiji’s 
dependence on a narrow base of preference-dependant e xport products. It has been very important for 
Fiji to find means of diversifying into new sectors that work towards the development and 
employment needs of the country.  The programme s under review are programmes that have been 
very useful in the recent past to bolster those industries that have been preference-dependent and are 
going through significant structural adjustment reforms so as to be able to operate independently of 
preferences, but that need short term assistance  to undertake the necessary reform- the garment 
manufacturing sector’s utilisation of the Export Processing Factory scheme is a case in point. Similarly, these programmes have also assisted in providing the much-needed impetus to get a new 
sector off the ground – the Audio-Visual sector and the concessions granted under Article 27.4 
subsidies are a case in point. Since the concession s were legislated in 2000, 15 companies have 
utilised the benefits – each production having contri buted significantly not only to employment during 
production, but in the skills development that allows  sustainable employment within the industries for 
Fiji’s citizenry. Yet these programmes are by no means significant as a percentage of world trade.  
The concessions for the audio visual industry have thus far only amounted to FJ$13.8M – negligible 
in global terms, but very significant for the developmental needs of the parts of Fiji where the 
productions have been located.   Without such programmes, it would be very di fficult for Fiji to attract the foreign direct 
investment and incubate new industries that woul d allow Fiji to achieve the objective of “fuller 
integration of small, vulnerable economies into th e multilateral trading system”.  Despite being a 
small, vulnerable economy, Fiji has maintained  an open economy and undertaken autonomous 
liberalisation of its tariff regime. Fiji, as one of the proponents of the proposal, is not seeking a 
permanent exemption from the obligations of the ASCM, rather it seeks the understanding of the 
Committee that full compliance with Article 3.1( a) of the ASCM by 2007 would have anti-
developmental consequences that would only cause further marginalisation of Fiji’s economy from 
the multilateral trading system.  The request for an ex tension is based on the realisation that the initial 
extension, designed as it was to assist developing countries in particular circumstances to fully 
comply with relevant obligations, was for too short a period for realistic concrete outcomes. 
 
Q3. The basis for requesting the extension is th at Fiji is a small, vulnerable economy which 
suffers from the combined effect of diseconomies of  scale caused by the small size of its economy 
and administration and by its physical isolation.  If the above distorting factors are not brought 
under control before 2018, would there be a request for a new extension for the phasing out of 
the prohibited subsidies?  Please explain why these  characteristics of Fiji's economy prevent the 
country from complying fully and satisfacto rily with WTO export subsidy disciplines. 
  The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39.  The view of the proponents is to contin ue benefiting from the extension throughout 2018.  
Therefore, the rights and obligations contained in  document G/SCM/39 and Article 27.4 of the ASCM 
would remain unchanged.  
 Small size of economy undermines trade comp etitiveness, compliance to complex trade rules 
is burdensome for small administ rations, and physical isolation prevents small economies from 
reaping benefits of economies of scale – all factor s making the characteristics of FIJI peculiar and G/SCM/Q4/FJI/6 
Page 6  
 
  worthy of specific responses.  The current request for extension has been based on identified “relevant 
economic, financial and social needs” as provided for in Article 27.4 of the ASCM, with the aim to 
arrest the increasing marginalisation of small economies in world trade that is undermining development prospects. Assuming that Colombia is  referring to “distortion factors” as meaning the 
“relevant economic, financial and social needs” provi ded for in Article 27.4 of ASCM, the answer is 
that FIJI would take a pertinent decision, based on those needs in accordan ce with the procedures and 
timelines established in the provisions mentioned above.   Furthermore, FIJI is of the view that, bei ng Article 27.4 the provision that enshrines special 
and differential treatment in the ASCM, the [num ber] programmes are fully and satisfactory in 
compliance with the relevant WTO disciplines. 
  Nevertheless, FIJI has been undertaking effo rts to phase out its export subsidies programmes. 
In line with the guidelines of G/SCM/39, no new licenses have been given under the Export 
Processing Zone scheme since 2001 and the current licences are provided for a period of 13 years .  
Similarly, as notified to the Committee, the benef its of the Export Profit Deduction Scheme are being 
phased out such that the percentage of profits th at are tax-exempt reduces progressively to 0 per cent 
in 2009, at which point all exporting compani es will be fully subject to the tax regime. 
 
Q4. Please explain why the situation giving ri se to the request for extension requires the 
granting of prohibited subsidies until the year 2018, rather than an earlier date. 
 Reply
 
  Article 27.4 of ASCM provides that “if a de veloping country Member deems it necessary to 
apply … [export] subsidies beyond the 8-year period [mentioned in article 27.2(b)], it shall not later 
than one year before the expiry of this period en ter into consultation with the Committee, which will 
determine whether an extension of this period is ju stified, after examining all the relevant economic, 
financial and development needs of the developing  country Member in question.  If the Committee 
determines that the extension is justified, the de veloping country Member c oncerned shall hold annual 
consultations with the Committee to determine th e necessity of maintaining the subsidies.”   
 
 Members that deemed it was necessary to appl y export subsidies, due to their particular 
characteristics and needs, requested extensions un der this provision as well as according to the 
outcome of the negotiations in Doha contained in document G/SCM/39.  The latest provides for fast 
track procedures for the approval of the extensions .  Members interested in obtaining these benefits 
have had to meet some criteria that justified th e approval from the Committee in order to maintain 
their export subsidies.  In fact, these criteria ar e based on the economic, fi nancial and development 
needs of the beneficiary Members.   In this regard and according to the above mentioned provisions, the Committee granted to a 
group of Members the authority to maintain export subsidies during a specific period of time subject 
to two well-known conditions: transparency and standstill. 
 
 As provided in document G/SCM/39, the author ity granted to the beneficiary Members is 
valid until the end of 2007.  After this date, these  Members have either the possibility to seek a 
continuation of the extension, pursuant to Article 27.4 of the ASCM, or still have the final two years 
referred to in the last sentence of such Article. 
 
 FIJI deems it necessary to request a new ex tension based on its economical, financial and 
development needs. In fact, all of them can prove that the conditions that existed and justified the 
extension in 2001 subsists at this point in time, ne vertheless the export subsidies have proved to have  G/SCM/Q4/FJI/6 
 Page 7 
 
 
  very positive effects in the attraction of foreign di rect investment, export base diversification and job 
creation.   The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of SCM/G/SCM/39.  At that time, the proponents of this document 
had already expressed their needs and the reasons to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years.
6 
  In this regard, FIJI is convinced that a new extension will foster the export sectors and 
contribute to lift our people out of poverty.  The th ree programmes that FIJI has notified have had a 
very positive impact in a small country with a ve ry limited export base and a miniscule participation 
in world trade.  They have been instrumental to  foster and diversify the export sector towards the 
production of manufactured goods, reducing the dependence on agricultural commodities and the 
negative impacts suffered due to the plunge of interna tional prices during the last years.  Needless to 
say, the spillover effects of job creation, transf er of technology and know-how, as well as poverty 
reduction have been remarkable. 
  In answering the question, specific referen ce is made to the Export Processing Zone/Factory 
Scheme.  Although 49 companies are licensed to utilise the scheme, only 14 companies used the 
scheme in 2004 and 13 companies in 2005.  Essentially , this has to do with a lack of confidence and 
certainty on the part of companies who rely on th e benefits of the programmes.  A sufficiently long 
timeframe is needed to provide assurances to the private  sector that the adjustment programmes 
towards greater efficiency and niche marketing that is simultaneously being encouraged by 
government will result in economic benefit.  Cu rrently, manufacturers are reluctant to take on 
efficiency adjustment and to make capital invest ments because the short timeframe of the extension 
does not give them confidence in continuing operations beyond 2007.  This is compounded by 
uncertainty caused by the likelihood of increased liber alisation of industrial pr oducts under the current 
Doha Round negotiations, where Fiji is under pressure  to increase its binding coverage from 45 per 
cent to 100 per cent with the additional requirement  to then reduce bound rates from there. With a 
sufficiently long timeframe, such as one till 2018, comp anies will be able to  undertake the necessary 
adjustments that will allow continued profitable opera tions at such time as when all production comes 
under the full purview of the ASCM.  
                                                     
 
6 See G/SCM/38 G/SCM/Q4/FJI/6 
Page 8  
 
  JAPAN
 
 
Q1. Please show the reasons why the lengthy exte nsion of 11 years is indispensable uniformly 
for all the export subsidy programmes referred to in the above documents. 
 Reply
 
  Its is noted by Fiji that all export subsidy programmes referred to in the documents in 
question share generally the same objectives, structure or design and the estimated period of adjustment of an additional 11 years is consistent w ith the time required to consolidate benefits across 
the export subsidy programmes.  
  It is well known that the peculiar economic characteristics of the small economies group 
combine to constrain their potential to benefit from the globalisation of markets under currently 
agreed trade rules.  As a matter of fact, all proponents face the same structural shortcomings, which 
justify the requirement of the extension.  The r ecent developments in the trading environment could 
hinder the fruitful insertion of Fiji and the other proponents in the global economy. 
  Fiji has applied and notified only three progra mmes.  Although 49 companies are licensed to 
utilise the Export Processing Zone/ Factory Scheme, only 14 companies used the scheme in 2004 and 
13 companies in 2005.  The Audio-Visual concessi ons, introduced through legislation in 2000, has 
only seen uptake in the last two years, and the produ ctions that have utilised the concessions have in 
turn generated greater interest in international productions considering F iji as a production site.  For 
the benefits of both these schemes to be realised to  the extent necessary for the industry to be well 
established in Fiji, it is essential that the concessions  are not terminated at this juncture, and are 
maintained long enough to instil confidence in poten tial investors, for locals to acquire skills that 
would enable the industry to grow not just on the basis of foreign expertise, but for that expertise to be 
localised to create sustainable i ndustries.  The third programme, namely The Export Profit Deduction 
Scheme, being short term in nature, is being phased out anyway, in a manner such that the percentage 
of profits that are tax-exempt reduces progressively to 0 per cent in 2009, at which point all exporting 
companies will be fully subject to the tax regime.  Q2. Please explain, one by one for each of th e export subsidy programmes referred to in the 
above documents, how each of those export subs idy programs are integrated in the development 
strategies of the relevant Me mber, why a further extension beyond 2007 is necessary for its 
economic and financial needs, and why the extens ion period has to be through to the end of 
2018. 
 
Reply
 
  The information regarding each of the progr ammes notified by Fiji, including how these 
programmes are integrated into the development strategies of the country is available in the 
documents submitted in 2001
7 to obtain the current extension.  Furthermore, this information is 
available in each of the annual notifications th at FIJI has submitted to the Committee on Subsidies 
and Countervailing Measures in compliance with th e transparency and standstill obligations.    
  Fiji would however like to reiterate that each  of the subsidy programmes referred to in 
G/SCM/W/535 have served significant developmental strategies of Fiji.  The EPZ/EPF scheme, for 
example, has provided incentives to the garment i ndustry that has ensured the livelihoods of a 
predominantly female workforce which would have  no other opportunities in the formal economy, 
and has contributed to the garment sector becoming the largest manufacturing sector earner in Fiji.  
                                                     
 
7 Add signature of specific documents.  G/SCM/Q4/FJI/6 
 Page 9 
 
 
  This is a sector that has been highly preference-de pendant, and with the erosion of preferences and the 
termination of the Agreement of Textiles and Clothing in 2004, the EPF/EPZ scheme has played a 
large part in ensuring that the adverse conse quences of changing global conditions have been 
mitigated.  
 As another example, The Audio-Visual con cessions have been designed as part of a wider 
concessions package that ties in the concessions to residence and production in a particular 
geographic economically depressed part of Fiji.  It is hoped that through the provision of these 
concessions, economic opportunities and skilled employ ment will raise the standards of living and 
rural livelihood opportunities in that region.  Furthermore, the audio-visual sector is one that has been 
identified as one of export interest for Fiji. 
  These are all areas identified in Fiji’s Strate gic Development Plan as areas of focus for the 
socio-economic development needs of the country, and it is in view of this that Fiji is a strong 
proponent of this proposal.  Hence a further ex tension beyond 2007 is necessary and an extension 
beyond 2018 is deemed necessary to reali se full benefits of these programmes.  
 G/SCM/Q4/FJI/6 
Page 10  
 
  PERU
 
 
Q1. Is the intention of the co-sponsors of the proposal G/SCM/W/535 only to extend the 
programmes notified as of today under Article 27.4 of the Agreement on Subsidies and Countervailing Measures and which are included in Annex A of their proposal, or is it to 
include any other export subsidy programme wh ich complies with the criteria laid down in 
Article 2 of Document G/SCM/39? 
 
Reply
 
 
 The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39.  Further Article 2 of G/SCM/39 states in criterion (ii) that the programmes must be those” which were in existence no later than 1 September 2 001”.  Therefore, the intention of the sponsors of 
these documents is to continue be nefiting from the extension until the end of 2018 and the conditions 
specified in G/SCM/39 would remain unchanged.  Th is clearly excludes the possibility to include any 
further programmes. 
 
Q2. Which are the laws on the implementation  of the programmes scheduled in Annex A of 
their proposal and which are the regulations under which these programmes are operationalised? 
 Reply
 
  The national regulations governing the implem entation of each of the programmes are listed 
below:   Export Processing Zone/Factory Scheme:  
 Tax Free Zone Decree 1991 
 Income Ta Act (Amendment) (No.3) Decree, 1991  Tax Free Zone (Delegated Responsibility) Regulations, 1998 
 
 Export Profit Deduction Scheme 
 Income Tax Act(Cap 201) – (Section 21B-F ifth schedule) Export Income Deduction 
 
 Audio Visual Concessions: 
 The Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 2000) 
 The Income Tax Act (Sixth Schedule – Section 16A) – Film Making and Audio-Visual 
Incentives. (2004) 
 
Q3. Which sectors and products benefit from the programmes? 
 
Reply
 
 
 Both the Export Profit Deduction Scheme a nd the Export Processing Zone schemes can be 
utilised by all sectors and products meeting the cond itions of the scheme.  The schemes were created 
such that they were not product or sector- specifi c.  The EPZ scheme has registrants from sectors as 
wide ranging as clothing manufacturers, lead pr oduct manufacturers, fish exporters and plastics 
producers.  However, experience in the last few y ears has shown that the only sectors really benefiting 
from the scheme are the garment manufacturers, a nd that other international developments have 
resulted in the closure, despite the scheme, of licensees across the sectors.  This is in large part due to 
the erosion of preferences in target markets, but al so because of uncertainty and lack of confidence on 
the part of the manufacturers in continuing operations here beyond the lifetime of the licenses.   G/SCM/Q4/FJI/6 
 Page 11 
 
 
  Q4. How much did the State disburse for the programmes mentioned in Annex A? 
 
Reply  
  The subsidies that Fiji is seeking an extension for do not take the form of direct subsidies 
through disbursement of State funds.  They take th e form of revenue forgone through the provision of 
tax exemptions in the case of the Export Processing Zone scheme, and through an exemption on tax 
on exported products under the E xport Profit Deduction Scheme.  
  As such, the amounts of revenue forgone ar e negligible from a holistic viewpoint, yet 
sufficient enough to provide the incentives for these manuf acturers to maintain their operations in Fiji, 
meeting the developmental needs of the country including industrialisation, diversification and 
boosting employment levels, particularly for those who have no other employment options in the 
formal economy.   
 An indication of the revenue forgone by y ear, as obtained from the Fiji Islands Revenue and 
Customs Authority, follows:  
 2001 2002 2003 2004 2005 (FJ$M) 
Export Profit Deduction 
Scheme  N/A 3.5 21.1 5.4 24.1 
      
TFF/TFZ:   7.7 5.2 3.7 7.2 2.7 
      
Audio Visual concessions 
(6th schedule) N NA NA 5.04 8.73 
Source: FIRCA (FJ$M)      
 
Q5. For those Members that have not co-spons ored the proposal G/SCM/W/535, but have 
requested the extension of their programmes, qu estions 1-4 will be applied, adapted to the 
programmes for which they require an extension.  
Reply
 
  N/A 
 G/SCM/Q4/FJI/6 
Page 12  
 
  UNITED STATES
 
 
Q1. Please describe what efforts Fiji has made to phase out the programmes within the 
extension period that has already been gr anted, as provided under the "Procedures for 
Extension Under Article 27.4 for Certain Deve loping  country Members".  Please further 
describe how Fiji will continue to ensure that the programmes will be phased out, if an 
additional extension were granted. 
 
$Reply  
 
 Fiji has been undertaking considerable effort s to phase out its export subsidies programmes 
within the extension period that has already been granted, as provided under the “Procedures for 
Extension Under Article 27.4 for Certain Developing country Members”.  In line with the guidelines 
of G/SCM/39, no new licenses have been given un der the Export Processing Zone scheme since 2001 
and all current licences will expire by the time of the requested extension deadline.  Similarly, as 
notified to the Committee, the benefits of the Expor t Profit Deduction Scheme, wh ich is short term in 
nature, are being phased out such that the percen tage of profits that are tax-exempt reduces 
progressively to 0 per cent in 2009, at which point al l exporting companies will be fully subject to the 
tax regime.   The income tax benefits for the Audiovisual  industry under the Film Making and Audio 
Visual Incentive Amendment Decree 2000 does not ha ve an in-built sunset clause.  The period until 
2018, however, is considered a reasonable period fo r adjustment out of preference-dependent sectors 
of the economy and diversification into new sector s such as the Audio Visual Industry which present 
tremendous development prospects.  The developmen t of this industry is seen as vital in Fiji for 
various reasons: it is developing a high-employment services oriented sector in an economically 
depressed geographical area.  Given the difficulties in maintaining our export-oriented manufacturing 
sectors such as the garment industry that is now on the decline, it is imperative that Fiji takes full 
advantage of new opportunities.  The audio visual sector shows such promise, with various big-budget 
productions having set up in Fiji as a result of these concessions.   
Q2. Please describe changes to the programm es since 2001.  Also please provide any updated 
or revised implementing legislation, and any relevant amendments, under these programmes 
and any accompanying regulations and decrees. 
 
Reply
 
 
 No changes have been made to the Export Processing Zone scheme or to the Audio Visual 
concessions.    The only change to the Export Profit Deduction Scheme was that in 2004 the legislation was amended to exclude re-exports.  Th is was done to close a loophole that allowed re-exports to benefit 
from the scheme, and it was clear that the developmental aims of the scheme were not being served by 
the inclusion of such re-exports in the scheme.  The rates at which the income tax will be phased in by 
2009 so that all companies will fall fully under the taxation regime by 2009 remain the same. 
 
Q3. How many beneficiaries of these programmes were there in 2001. How many 
beneficiaries are there currently under each of  these programmes. What types of industries 
currently benefit under the programmes?   G/SCM/Q4/FJI/6 
 Page 13 
 
 
  Reply  
  The number of beneficiary enterprises under each  of the programmes from year 2001 to 2005 
is listed below:  
EPDS:  2001 – 11; 2002 – 40; 2003 – 25; 2004 – 49; 2005 – 40. 
Types of industries:  Across the board. All compan ies exporting their product qualify for this scheme 
automatically provided they meet the conditions set out in the legislation.  EPZ/EPF:  2001 – 6; 2002 – 10; 2003 – 12; 2004 – 14; 2005 – 13. [Source: FIRCA]. 
Types of industries:  garment manufacturers, furn iture manufacturers, fish exporters, excise spirit, 
plastics, mineral water;  cosmetics manufacturers;  footwear;  fresh food (& processing);  timber; protective gear;  pharmaceuticals.    Note that the above numbers reflect the num ber of companies actually utilising the scheme. 
49 companies are currently registered under the scheme, but not all are utilising the scheme. 
 Audio visual concessions: 2004 -5; 2005 -13.  
Q4. Did Fiji undertake any commitments to provi de export subsidies to new beneficiaries 
beyond the year 2009?  If so, please indicate the number of such beneficiaries by the year in 
which those commitments extend.  
Reply
 
  Fiji has not undertaken any commitmen ts to provide these subsidies to new beneficiaries 
beyond 2009.  
  
Q5. If available, please provide the amount of the subsidy provided under these programmes 
for each year from 2001 through 2005.  
Reply
 
 
 The amount of subsidy provided under each of the programmes from year 2001 to 2005 is 
listed below:  
  EPDS:  2002 – $3.5m; 2003 – $21.1m; 2004 – $5.4m; 2005 – $24.1m. 
 
TFF/TFZ:  2001 – $7.7m; 2002 – $5.2; 2003 – $3.7m; 2004 – $7.2m; 2005 – $2.7m. [Source: FIRCA].  Audio visual concessions (6
th schedule of Income Tax Act): 2004 - $5.04M; 2005 - $8.73M. 
 
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