Liberalization and diversification in a small island economy: Fiji since the 1987 coups

Abstract

This paper provides a case study of liberalization and diversification in Fiji, a small island economy which embarked on a major reform program in the late 1980s. For the first 15 years of its independence, the government adopted a paternalistic and interventionist development strategy, albeit in the context of sound macroeconomic management. A major reappraisal of this strategy occurred after 1987, prompted by the country's deteriorating economic performance and, in particular, by the economic dislocation following the country's two army-backed coups of that year. The reforms have already achieved significant results. Their positive impact confirms that outward-looking and deregulatory policies are important for a small and remote island economy; it also shows that new policy directions can act quickly to change the structure and performance of such an economy. At the same time, a close examination of the policy framework also underlines the magnitude of the country's unfinished reform agenda. In assessing Fiji's experience and options, special emphasis is given to the analytical lessons from the literature on development policy in small island states.