Tussle with new government tax regime ends in closure of Fiji Water plant. Photo: Fiji Water

Pacific Scoop:
Report – By Alex Perrottet of Pacific Media Watch

In an about-face, Fiji Water has declared it will reopen its operation in Yaqara, Rakiraki, tomorrow after earlier announcing a shutdown.

The decision has come after discussions with officials and the company has agreed to comply with the new 15 cents-per-litre water resource tax that triggered its “shutdown”.

The earlier decision to close the plant after a 14-year successful operation was heralded by the company’s president.

It came after the Fijian government announced it would raise the tax from .3 cent-per-litre to 15 cents-per-litre, for companies that extract more than 3.5 million litres per month at any location.

Fiji Water is the only company that extracts that amount of water.

John Cochran, president and chief executive of Fiji Water, said the company had effectively been given its marching orders.

Fiji Water's John Cochrane: Open to further negotiations. Photo: PMW

“This new tax is untenable and as a consequence, Fiji Water is left with no choice but to close our facility in Fiji, effective Monday, November 29, 2010,” he said.

“We are saddened that we have been forced to make a business decision that will result in hardship to hundreds of Fijians who will now be without work.”

Only months after Rupert Murdoch’s News Corporation was forced out of Fiji by the Media Industry Development Decree, it appears that another major corporation has been singled out for attention.

Executive deported
The action follows last week’s drama when the representative of Fiji Water in Fiji, David Roth, was deported over a stoush which also saw the resignation of Ratu Epeli Ganilau, the former Minister for Defence and Immigration and Deputy Prime Minister.

Prime Minister Voreqe Frank Bainimarama said Roth had been “acting in a manner prejudicial to good governance and public order by interfering in the domestic affairs and governance of Fiji.”

Ratu Epeli resigned over his different opinion on how to deal with Roth.

Cochran was resentful of the government’s action and warned other businesses that Fiji was too volatile.

“We consider the government’s current action as a taking of our business, and one that sends a clear and unmistakable message to businesses operating in Fiji or looking to invest there: the country is increasingly unstable, and is becoming a very risky place in which to invest,” he said.

In response, Prime Minister Bainimarama said the company simply needed to pay up.

“As usual Fiji Water has adopted tactics that demonstrate that Fiji Water does not care about Fiji or Fijians,” he said.

‘Supposed instability’
“They have made statements about supposed instability in Fiji and know it is not true, yet do so because they simply do not want to pay the new taxes.”

However, Cochrane said Fiji Water had invested extensively in Fiji and certainly was interested in its people.

“As a leading exporter, FIJI Water has contributed greatly to the Fijian economy,” he said.

“We represent more than F$130 million in export revenue for the country and employ nearly 400 Fijians at our facility.

“Our investment in Fiji has created millions of dollars in value through direct employment and with our supplier network.”

Bainimarama argued that Fiji Water has had it easy in the past, saying it has had a “corporate tax holiday” since 1996 and until only two years ago.

“It has paid less than a million dollars in total corporate tax and only in the past two years (2008 and 2009),” he said.

“It receives approximately $FJ 4-5 million in VAT refund annually given it is export-driven.”

Supports villages
But Cochrane said that Fiji Water already pays significant taxes and supports local villages.

“We currently pay millions of dollars in duties and income tax to the government,” he said.

“We also contribute over F$1.8 million annually in royalty payments to the Yaqara Pastoral Company Limited and another F$250,000 annually to a trust that supports the six local villages surrounding our facility.”

Bainimarama accused Fiji Water of transfer pricing, saying that it declared its selling price at $US4 a carton, while other less-known brands declared their selling price at $US10 a carton.

“Fiji Water sells its water to a US sister company and therefore is engaged in transfer pricing,” he said.

“These are the facts pertaining to Fiji Water.”

The Fiji Water plant at Yaqara was shut down yesterday, and its 400-odd workers were sent home. Its security firm, Homelink Security, is guarding the facility.

Conciliatory offer
The workers have reportedly been granted two weeks’ pay, but prospects of anything beyond that are thin.

Cochrane said that he was willing to conciliate with the government.

“Fiji Water remains willing to work through this issue with the Fiji government, as it would be our preference to keep operating in Fiji,” he said.

However, Bainimarama seems disinterested in negotiating.

He said the government “will call for international tenders from credible and reputable private sector companies to extract this valuable resource.”

He also disagreed that other businesses would lose faith in Fiji.

“The positive feedback from the recent Fiji-Australia, Australia-Fiji, NZ-Fiji and Fiji-NZ business councils meetings, the positive feedback on the Budget and the new investment inflows and interest is indicative of the affirmation of and confidence in Fiji and the Fijian economy by the private sector,” he said.

The incident with Fiji Water has coincided with the Pacific Australia and New Zealand Business Forum this week, at the Shangri-La’s Fijian Resort in Cuvu.

Despite the decision to hike Fiji Water’s taxes, Fiji’s Permanent Secretary for Foreign Affairs and International Cooperation Solo Mara told the Forum that Fiji was willing to support business communities and their business partners.

There have been suggestions that if Fiji Water permanently closes business in Fiji, it may operate from New Zealand.

The company boasts that it has the largest social media presence in the bottled water category, and that Fiji Water is sold in over 40 countries around the world.

It would be ironic if it was no longer operating and being sold in Fiji.

Alex Perrottet is contributing editor of the Pacific Media Centre’s Pacific Media Watch project.

PMW item: 7147