Sunday, May 25, 2014

The cost of flying to Labasa

from w
Narsey points out in an article on monopolies in Fiji that the cost of flying to Labasa is exorbitant and this is really not helping the 'Look North' policy. I've only posted part of his article.
Costly 'monopolies'
Professor Wadan Narsey
Saturday, May 24, 2014
MOST political parties and candidates quite rightly see the high cost of living as a major issue for voters. Where higher prices are because of the exercise of monopoly power or "substantial market power", then some governments have tried to use the Commerce Commission to reduce the prices and cost of living, by law, because of the failure of the free markets.
This is what Dr Mahendra Reddy (chairman of the CC) has tried with hardware merchants, pharmacies, and even bakeries, even though there is quite a degree of competition in these areas, and price control can and does have all kinds of negative side effects (such as shortages and/or lower product quality).
This article is about two industries displaying clear abuses of "substantial market power" which harms consumer interests, with the Commerce Commission seemingly powerless.
The first example is the exorbitant air fares charged by Fiji Airways on the domestic routes, in the process seriously undermining development policies for the North.
The second example is the super profits squeezed from consumers by mobile companies through their pricing and other predatory practices.
Look North but
don't travel North
There have been many reports by the Fiji Bureau of Statistics pointing out the relatively higher rates of poverty in the Northern Division.
Many governments, including the Bainimarama Government, have correctly attempted to articulate "Look North" policies to accelerate northern development, to improve incomes and standards of living, and to reduce the tendency for migration to Viti Levu. Thus in the last budget, there have also been large investments in Northern Division roads and other infrastructure. There have also been a number of new tourism investments.
BUT, undermining all these efforts by government and private investors are the incredibly high air fares to and from the Northern Division (and Rotuma and the outer islands), because of the exercise of monopoly power by Fiji Airways.
The Commerce Commission well knows that when there was competition on the domestic routes, the fares were considerably lower than they currently are, which at times can be as much as the return air fare to Auckland or Brisbane.
Effectively, the monopoly domestic fares have acted like an unfair "tax" on all air travellers who travel to and from the north, thereby reducing not just their personal welfare, but also constraining economic growth of businesses, including the discouragement of tourism.
Of course, Fiji Airways profits have been boosted and as a side effect, their loans from FNPF are repaid more easily. But good economics will advise that the air travellers to the North and outer islands should NOT be cross-subsidising Fiji Airways (or FNPF).
Despite many public protests, the Commerce Commission has not been able to control the domestic air fares, but knowing Dr Mahendra Reddy, he has probably tried.
Can Dr Reddy explain to the public if there has been any government pressure on him about regulating domestic air fares?
For the forthcoming elections, all voters associated with the Northern Division, Rotuma and outer islands, can ask all political parties and candidates what would be their recommendation to the Commerce Commission for the regulation of domestic air fares.
Note that the voters in the North and outer islands could easily decide the election of eight members of parliament, and even more, if their numerous relatives on Viti Levu vote with them (the Nabua to Nausori corridor is virtually a colony of Vanua Levu).
etc etc.

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