TRENDS IN DEFENCE AND EDUCATION SPENDING IN FIJI AND ITS IMPLICATIONS (1981 TO 2007)

TRENDS IN DEFENCE AND EDUCATION SPENDING IN FIJI AND ITS IMPLICATIONS (1981 TO 2007) Introduction This is a comparative analysis of trends in Defence and Education spending in Fiji since 1981 and outlines some of the major implications. The comparative analysis will use descriptive statistics to basically look at: 1. Defence and Education expenditure as a percentage of Total Public ; 2. Defence and Education expenditure as a percentage of GDP; 3. The percentage annual change in Defence and Education expenditure; and 4. The cumulative percentage annual change in Defence and Education expenditure. Defence and Education expenditure as a % of Total PE The table below shows the total amount of expenditure dedicated to Defence and Education from the years 1981 2007. From the years 1981 2007 the Defence Annual rose from $8.9M to $75.9M. Compared to Education, annual expenditure grew from $52.8M in 1981 to $229.2M in 2007. Traditionally during the budget formation process, successive Governments have always focused on Education as the major functional category of public expenditure. Table 1: Defence and Education as % of Total PE 1 Years Defence % Total Education % Total 1981 8.9 5.52 52.8 32.75 1982 13.9 7.22 60.1 31.22 1983 14.2 6.51 67.4 30.92 1984 15.3 6.62 74 32.06 1985 15.2 6.54 69.6 29.97 1986 15.4 6.57 69.9 29.82 1987 26.3 11.11 68.6 28.97 1988 27.9 13.27 62.8 29.87 1989 25.2 11.26 69.6 31.09 1990 25.8 9.75 69.5 26.26 1991 31.1 10.99 82.6 29.21 1992 32.9 9.72 95 28.07 1 Data for this table is derived from ADB Key Indicators for 1999 and 2008. 1 Electronic copy available at: http://ssrn.com/abstract=1488402

Years Defence % Total Education % Total 1993 36.3 8.49 137.5 32.19 1994 45 11.29 112.2 28.16 1995 44.8 11.05 112 27.65 1996 46 10.73 114.4 26.69 1997 44.7 9.68 121.1 26.22 1998 44.9 8.66 121.4 26.29 1999 46.9 8.55 132.1 24.1 2000 68.2 12.17 151.9 27.1 2001 74.7 12.67 162.5 27.57 2002 67.6 10.67 179.6 28.34 2003 70.7 10.6 192.3 28.84 2004 81.1 11.58 192.6 27.51 2005 72.9 10.27 189.6 26.71 2006 71.6 8.97 192.4 24.01 2007 75.9 10.01 229.2 30.28 When comparing defence and education as a percentage of total public expenditure, defence has averaged at 9.65% of total Public expenditure and education has averaged 28.59% of total Public expenditure. Chart 1 2 Electronic copy available at: http://ssrn.com/abstract=1488402

Shown in the chart above are the general trends in Defence and Education expenditure in relation to the total public expenditure of Fiji from 1981 to 2007. It reflects that during this period (1981-2007) there have been many fluctuations in expenditure for the two functional allocations. It can be further seen that the overall percentage of PE dedicated to education dropped from a high of 32.19% in 1981 to 30.28% in 2007. However when compared to Defence spending, it can be seen that as a percentage of PE, it doubled from around 5% in 1981 to 10% in 2007. Defence and Education expenditure as a % of GDP Table 2: Defence and Education as % of GDP (at factor cost) 2 Years Defence Education GDP (at factor cost) Defence % of GDP Education % of GDP 1981 8.9 52.8 953.6 0.93 5.54 1982 13.9 60.1 1020.5 1.36 5.89 1983 14.2 67.4 1031.8 1.38 6.53 1984 15.3 74 1151.7 1.33 6.43 1985 15.2 69.6 1177.7 1.29 5.91 1986 15.4 69.9 1326.1 1.16 5.27 1987 26.3 68.6 1329.2 1.98 5.16 1988 27.9 62.8 1433.3 1.95 4.38 1989 25.2 69.6 1555.3 1.62 4.48 1990 25.8 69.5 1742 1.48 3.99 1991 31.1 82.6 1805.3 1.72 4.58 1992 32.9 95 2009.8 1.64 4.73 1993 36.3 137.5 2169.3 1.67 6.34 1994 45 112.2 2293.4 1.96 4.89 1995 44.8 112 2373 1.89 4.72 1996 46 114.4 2578.4 1.78 4.44 1997 44.7 121.1 2579.3 1.73 4.70 1998 44.9 121.4 2815.1 1.59 4.31 1999 46.9 132.1 3282.1 1.43 4.02 2000 68.2 151.9 3138.1 2.17 4.84 2001 74.7 162.5 3293.8 2.27 4.93 2002 67.6 179.6 3480.7 1.94 5.16 2003 70.7 192.3 3689 1.92 5.21 2004 81.1 192.6 3982.2 2.04 4.84 2005 72.9 189.6 4212 1.73 4.50 2006 71.6 192.4 4629.1 1.55 4.16 2 Data derived from ADB Key Indicators for 1999 and 2008 and National Income Statistics from the Fiji Islands Bureau of Statistics. 3

Years Defence Education GDP (at factor cost) Defence % of GDP Education % of GDP 2007 75.9 229.2 4447.3 1.71 5.15 When Defence and Education are compared to GDP it can be seen that Defence expenditure has averaged at 1.67% of GDP whereas Education expenditure averages 5% of GDP. Defence spending in Fiji is comparable with other countries such as Australia (2% of GDP in 2006-2007) 3 and New Zealand (1.1% of GDP in 2004) 4. However it should be noted that the bulk of Fiji s Defence expenditure is largely on personnel emoluments and operational costs with little going towards capital development of the army. Education spending in Fiji is comparable with New Zealand (5.8% of GDP), the United Kingdom (5.3% of GDP) and Japan (4.6% of GDP) 5. However this does not give a true picture of expenditure as GDP for these countries is vastly different. Thus although they may have similar expenditure rates in terms of GDP, the actual amount expanded on education in these countries will be much larger than in Fiji. Chart 2 As with the comparison of Defence and Education expenditure with total PE, it can be seen when we compare these two functional allocations with GDP that there are 3 Data derived from Australian Defence Force Article in Wikipedia 4 Data derived from Defence : Trends and International Comparisons (New Zealand Parliamentary Briefing Note) 5 Data derived from Education Statistics (Education as % of GDP) from Nationmaster.com 4

sometimes huge fluctuations. Since Fiji is a small economy, it is very sensitive and reliant on external markets not only in terms of exports but also for imports (factors of production) and it can be seen that when GDP decreases then it is followed by subsequent decreases in allocations and actual expenditures in the following years as Fiji tries to sustain its levels of spending at comparable levels of GDP. % Annual Changes in Defence and Education Chart 3 From the above chart, it is evident that there have been huge fluctuations in terms of changes in Defence and Education expenditures during the period from 1981 to 2007. During the period 1986 to 1989, Defence expenditure rose dramatically, however, education expenditure levels experienced negative growth. This can be explained by the fact that during that period the Government of Fiji had to put in more funds to Defence as it ran stability operations to normalize the security situation in Fiji after the 1987 coup. During the period 1989 to 1993, Defence and Education expenditure both grew followed by a sharp decline in Education expenditure levels. However education expenditure has gradually grown since then. Military expenditure again spiked in the 5

year 2000 as the Government tried to stabilize the internal security situation due to the 2000 crisis caused by George Speight s civilian coup. Chart 4 In considering the cumulative growth in levels of Defence and Education spending it can be seen that Defence Spending has had a higher percentage of growth in its annual expenditure than Education Spending. In fact defence spending grew by 260% from 1981 to 2007, whereas education spending grew by 166% for the same period. Major Implications of Trends in Defence and Education Spending 1. Some of the major implications of Defence Spending are as follows: Internal Security - From the data discussed, the trends indicate that there is a sharp increase in Defence expenditure during times of crises. This is indicative of the role that the RFMF plays in returning the country to normalcy by ensuring internal security and restoring law and order. Without stability and security, economic growth and development cannot be realized. Defence provides for the stable domestic environment that will serve as a platform for growth. Territorial Integrity the RFMF provides a deterrent against external threat and also provides a Naval Division to patrol our EEZ to secure our resources such as marine resources from unwanted exploitation without deriving the full economic benefits. Provision of Employment Military has allowed the RFMF to recruit and employ thousands of young men and women not only to serve in 6

the Regular Forces here in Fiji but also on peacekeeping missions. The economic effects of the provision of employment has allowed these soldiers to develop themselves by building/buying homes, educating their children, providing food and basic needs for their families and a sustainable livelihood. Peacekeeping Missions as a Revenue Source for Government the Government has also directly benefited from expenditure on RFMF through payments from the United Nations for peacekeeping missions. On average, a soldier s allowance in the field during a peacekeeping mission will average around USD$100 per day. Of this figure it is estimated that soldiers will only get US$25-40 with the balance reverting to the Government. Remittances the effect of remittances on the Fiji economy has been huge. The contribution of soldiers and ex-soldiers who serve overseas in private security companies and UN missions outside the ambit of joint RFMF/UN deployment cannot be denied. Without Government expenditure on the military, many of those serving and former soldiers would not have been able to become professional soldiers in demand on the global security market sending thousands of dollars home in remittances. Creation of Savings and Encouraging Investment linked to the huge amount of remittances from these professional soldiers is the creation of savings and investment. Many former soldiers serving with private security companies in Iraq have left the RFMF and their main objective is to save enough money to be able to invest in a small business. There are many former soldiers who have invested in minibuses or taxis and other small business schemes. Trade Training and Capacity Building the RFMF has an Engineers Unit and also has a Trade Training Scheme wherein young men between the ages of 17 to 23 receive basic infantry training and a rigorous apprenticeship in carpentry or mechanical engineering. Rural Development the RFMF since independence and utilizing the Engineers Unit has implemented numerous rural development projects which have included churches, community halls and evacuation centers. 2. The major implications of Education Spending in Fiji are as follows: Free Education education in Fiji from primary school to Form 6 is free. The Government basically provides funds to cover each student s tuition and stationery costs for teaching materials. Parents only cover uniforms and building fees and other levies from school outside government control. Improved literacy rates Fiji has a high literacy rate. The education spending in Fiji has created a workforce that is very capable in both written and spoken English. With ICT development and outsourcing from major markets such as USA and Australia the potential for Fiji to tap into these emerging service industries is increased due to our literacy rates. Improved facilities for schools over the years our schools have improved greatly in terms of the infrastructure available for the facilitation of education including ICT. 7

Improved enrollment rates with greater education spending, Fiji is gradually increasing the percentage of children enrolled both at primary and secondary levels of education. Development of Technical and Vocational education aside from traditional education, Government has been able to improve its education delivery by offering technical and vocational streams for students who may not be suited to pure academic studies. Development of Human Resource Base education continues to contribute and grow our Human Resource pool. Coupled with direction from industry and tertiary education providers, education spending will continue to better equip our population for the challenges ahead in trying to grow our economy and create a better environment for governance. Conclusion Defence and Education expenditure are vital for the continuing growth and development of our island nation. Education expenditure contributes to the development of our human resources from an early age providing them with literacy and numeric skills that facilitate their learning and finally becoming a productive participant of the economy. Defence provides the necessary stability and security environment that is needed to stimulate economic growth and provide the basis for true democratic governance. Government has always committed the largest chunk of its Total to Education due its social, political and technical importance. On the other hand, Defence expenditure has been driven by the need for stability and internal security due to political uncertainty. Government must continue to prioritize areas such as Education and Health and gradually minimize Defence spending as the internal political and security situation stabilizes with the introduction of electoral and socio-political reforms. 8

REFERENCES AND BIBLIOGRAPHY 1. Asian Development Bank. 1999. Key Indicators of Asian and Pacific Countries. [Internet] Oxford (Published 1999) Available at: http://www.adb.org/documents/books/key_indicators/1999/default.asp [Accessed 14 April 2009] 2. Asian Development Bank. 2008. Key Indicators 2008. [Internet] Manila (Published 2008) Available at: http://www.adb.org/documents/books/key_indicators/2008/default.asp [Accessed 14 April 2009] 3. Australian Defence. http://en.wikipedia.org/wiki/australian_defence_force [Accessed 27 April 2009] 4. Defence : Trends and International Comparisons, 2005. (New Zealand Parliamentary Library) (2005:01) Wellington 5. Education Statistics (Total as % GDP by Country). http://www.nationmaster.com/cat/edu-education [Accessed 27 April 2009] 6. Lebovic, J.H., 1999. Using Military Spending Data: The Complexity of Simple Inference. Journal of Peace Research, 36 (6), pp. 681 697. 7. National Security. http://en.wikipedia.org/wiki/national_security [Accessed 14 April 2009]. 8. Reddy, M., 2005. Public Finance in Fiji: Theory and Practice. 1 st ed. Suva: University of the South Pacific. 9. Stockholm International Peace Research Institute. 2008. Military of Fiji [Internet] (Published 2008) Available at: http://milexdata.sipri.org/result.php4 [Accessed 14 April 2009] 9