Dramatic turnaround in Fiji’s state-owned enterprises

The Prime Minister has said that in many ways you represent the new Fiji and a new way of doing business, with the talents of all people utilized, regardless of where they’re from, what their ethnicity is, or who they know. I’d like to flip this around and ask: What does the ‘new Fiji’ represent to you?

The new Fiji is a place of equal opportunities, where talent is recognized and hard work is rewarded. Before you build a country’s infrastructure, you need to first have good people. In order to do that you need to care for the people, build capacity and allow people to grow. That is the new Fiji.

Fiji has made remarkable economic progress in recent years, with the growth in 2015 expected to exceed 4% for the third consecutive year. What do you see as the foundations of this ongoing positive economic performance?

The growth is driven by a number of factors. The government has implemented an expansionary fiscal policy over past few years. Increased government spending on infrastructure is one key contributor. Historically, infrastructure development has been neglected or has been mediocre. A country needs sound infrastructure for long-term growth, just like a business. Government policy is driven towards value-for-money infrastructure development and this is continually evolving through experiences derived from our small-sized economy.

The other factor driving growth is the government’s taxation policies. Our corporate and personal taxes are among the lowest in the world. Corporate tax is 20% (10% if you are listed on the stock exchange). For personal taxes, a person earning $50,000 effectively pays taxes of around 10%. Personal taxes gradually increase to 20% if you earn $270,000. A person earning $500,000 pays around 31% in taxes. Prior to the changes in the tax regime, an individual was paying around 30% in taxes irrespective of how much he or she earned. Now, the more you earn, the more you pay in personal taxes. The current taxation regime is a fairer one. It is also more socio-economically balanced. The changes have resulted in greater corporate investments and more money in people’s pockets, which is driving spending on consumption.

The Prime Minister himself has said that as recently as five years ago, Fiji Pine Group was drowning in debt, corruption, outmoded practices and mismanagement. You were appointed in 2011 and, as the PM said, you have led the company towards sustainability and growth, with a $21 million profit last year. Quite simply, how did you achieve such a remarkable turnaround?

The starting point is integrity, because without integrity you cannot hold any other virtues true. It is also important to keep things simple and logical. Finally, most people talk about similar virtues but the difference lies in the ability to make decisions and promptly implement your ideas.

We had our backs against the wall with about $68 million of debt in 2011 and with no idea how to repay this sum, let alone meet the ongoing operational commitments of paying wages and salaries. We had a lot of partially completed projects at a standstill due to poor planning and lack of funds. We did not have any grand masterplan. However, we were driven by a desire to succeed – or not to fail – and we worked hard at it.

Landowners were also reluctant to renew their leases with our company. This was significant because the long-term sustainability of the industry depends on the ongoing renewal of leases by the landowners. We identified that the reason leases were not being renewed was the lost trust between the company and its landowners.

We needed to regain lost trust. The successful completion of many of our infrastructure projects rebuilt confidence in our industry. We saw immediate results with landowners renewing leases. Then we introduced a number of new incentives for landowners to earn bonuses from company profits. We aim to ensure that the returns for landowners increase even further once our 40-year-old capital infrastructure is upgraded in the next two years. These augur well for the long-term future.

Many of the day-to-day – yet important – processes such as procurement were improved; we spread market risks as best as possible; we improved our human resource policies and built team spirit. We also re-entered into business deals with a philosophy aimed at building long-term relationships of mutual benefit. We generally went about identifying many gaps and closing them as quickly as possible.

Tropik Wood recently picked up the Prime Minister’s Exporter of the Year Award for 2015. Your exports for this company are focused on China and Japan. How were you able to penetrate the Chinese market and what are the prospects for exports going into 2016?

Japan was the sole woodchip market for Tropik Wood (the processing arm subsidiary of Fiji Pine) from 1987 onwards. Japan has always been, and remains, a good and steady customer of Tropik Wood. However, in business it is always good to spread your risks.

We were very aggressive on entering the Chinese market. We visited some very remote parts of China in an effort to build relationships. We had very long dinners. We tried our best to understand and respect the Chinese culture.

Do you see the potential for diversification in your export markets at Tropik Wood?

Japan and China will remain our key markets for wood chip. This is due to global logistics challenges. Turkey is a big market but it is too far from Fiji.

However, there are numerous end-users in Japan and China. We are trying to broaden our network and build relationships with more end users in those two countries in order to spread some of the client-specific risks.

What is the outlook for the Pine Group going into 2016?

Woodchip exports are only one part of our business. We also make timber. Our strategy is to place greater importance on timber production in the future. Timber is a much higher end product compared to woodchip.

Specifically for this reason, we are currently going through a FJ$20 million upgrade of our timber processing facility. It should be commissioned by May 2016.

Will the timber business be focused solely on the domestic market, and could you expand on the sawmill upgrade?

At present there is a huge gap between local demand and supply, resulting in imports. We will fill that gap. The sawmill processing facility that we currently have is about 40 years old. We are bringing over brand new state-of-the-art equipment from Sweden. The volume of timber we supply to the market after the upgrade will at least double.

There is one more point I think is probably worth mentioning. The entire $20 million upgrade is being done without a single cent of borrowing. We planned this very important upgrade over the last three years and managed to set aside funds from operations.

This brings us to Airports Fiji Ltd because, despite the costly renovation works that you are undertaking at Fiji’s airports, you have said yourself that your cash flow and profitability positions have never been stronger. What is more, you have funded these works without government guarantees. How have you managed to undertake such significant renovations at the airports and yet become so profitable?

We had to become profitable in order to carry out such important infrastructure upgrades at our airports.

Any business needs to get its fundamentals right in order to have long-term sustainable development and growth. We carried out a significant restructuring of our revenues and costs over the last two years. This restructuring took place simultaneously to planning the major upgrades at Nadi International Airport.

In June this year we paid a record $15 million dividend to the government of Fiji, our 100% shareholder. This dividend payment was the highest single amount of dividend cheque that the government had received from any of its investments – we believe the previous highest was around $4 or $5 million. The $15 million dividend was paid at the height of the major upgrades in Nadi.

We have often done things to change mind-sets. In the past, dividends were not paid because of planned minor capital upgrades. We did not want the current major upgrades to be an excuse for not paying dividends. We believe that each responsibility or obligation is distinct and we must endeavor to treat and honor them as such.

Nadi International Airport is undergoing a major facelift that is expected to be completed next year. Some 90% of visitors to Fiji arrive by plane and the vast majority arrive in Nadi, so naturally the airport is the first and last place most visitors to Fiji will spend their time. What will be the impact of the newly renovated Nadi Airport on visitors’ overall perceptions of Fiji?

In fact, around 98% of international visitors pass through Nadi International Airport.

Since we are building at an operational airport, we are releasing the upgraded areas to the traveling public in parts. Recently we opened our international departures lounge. The reviews we have received thus far have been excellent.

The impact such a facelift will have on Fiji as a tourism destination will be phenomenal. The tourists must arrive and leave with a smile.

How are you approaching the task of promoting your newly renovated international airport in key source markets?

Word of mouth and in-flight magazines mainly. We do not have open skies so our marketing funds are limited. We in turn rely on the airlines that do fly here to market us; and that they do.

Nausori Airport is getting a runway extension and new terminal, whilst the other island airports are also being renovated. How will these improvements at Nausori and elsewhere help to enhance Fiji’s competitiveness as a trade and investment hub?

Nausori is not a significant tourism gateway for Fiji, but it is close to Suva, Fiji’s business hub. Nausori will never be Nadi in terms of passenger numbers.

However, not everything we do is driven by business considerations. Nausori and 13 other outer island airports that we operate are part of our social responsibilities to foster the government’s vision to connect the business passengers to Suva and the people of Fiji living in remote areas to each other as best as possible.

The jobs at Fiji Pines and Fiji Airports were seen as poisoned chalices by many before you arrived because of the inherent problems in both companies. Why did you decide to accept the challenges of both positions?

The greater the challenges, the greater the motivation to overcome them.

Fiji Pine’s dire financial state in 2011 was scary. We feared total collapse. We fear the current Nadi International Airport upgrades may face unforeseen challenges. Fear is an ongoing personal challenge one overcomes in their own different ways. We try to turn our fear into positive energy to motivate ourselves to hopefully succeed. We don’t know what the outcome will be when we start, but we know that if we continue to address the challenges as we go along, we can hope that the end product will be satisfactory.

One of the many things that stood out to me when I was researching you and your companies was that you are often praised for the way you engage with your employees. Can you share with us your management approach to getting the best out of your workers?

I have personally learnt a lot on these jobs and I have grown as a result. One of my greatest satisfactions is when I see others within the organization learn and grow, and reach greater heights. We do all we can to create an environment conducive to growth and then see people who have never had the opportunity to grow, in fact grow. They always had it in them.

When you have a large organization of 500 to 800 people, it is a challenge to connect everyone from the top-down and bottom-up. Wherever you go in the world, some organizations fail to achieve their true potential because they have an ‘old boys club’ type of mentality where a few privileged ones on top know it all and the others do not have a clue where the organization is headed. We make every effort to share our plans and objectives with our employees. We share the good news and the bad news. We try to connect with each and every employee as best as we can. Sometimes this is simply about chatting with the gardener for two minutes. We get to learn a lot by doing this. It’s the best part of your work because it gives happiness to both the gardener and vicariously to you.

However, I am often criticized for my management style because I have apparently not fired enough “non-productive” employees. I will challenge my critics on this. We are dealing with a work culture that was inculcated over a number of decades. Some will adapt faster to the change and grow; others will take longer. It is not the people we need to change – unless absolutely necessary – but the culture. And that will take a bit of time.

If there are people lagging behind they will catch up. The ones ahead will see to that. The spirit of the ‘team’ will always win against the individual.