Section 1 - The Principles Underlying Government's Mineral Policy
The Government of Fiji believes that well-managed mineral sector developments contribute positively to national growth and social welfare improvements for all of Fiji's citizens; hence, the Fiji Government actively supports mineral sector developments.
State ownership of Fiji's unextracted mineral resources forms the foundation of Fiji's mineral policy. However, the Government views Fiji's mineral endowment as part of the birthright of every Fiji citizen; and it sees itself as a steward of this birthright. As the steward, the Government has put in place the regulatory mechanisms to ensure that Fiji's mineral resources will be developed in an environmentally sensitive and socially acceptable manner, and that there is an equitable sharing of the financial and developmental benefits and costs of mining between all stakeholders.
Government recognises that the private sector is the most able developer of Fiji's mineral resources, and so, confers mineral exploration and development rights on private sector developers. When conferring such rights, Government requires that mineral developers take into account all the social, environmental, and economic costs and benefits of the development at the project planning stage, and throughout the life of the project.
History clearly shows that mineral sector developments offer unique benefits as well as pose special problems for communities adjacent to mineral deposits, and Government views the direct participation of residents as an integral part of a successful long term relationship. Direct participation can take the form of special small business opportunities, and direct involvement by the local community with socially important aspects of mine planning, such as social infrastructural development. This participation should begin early in the exploration phase and continue through to mine closure. Essentially, mineral sector developers are encouraged to develop a participatory and collaborative approach to mine planning and development.
As well as steward of Fiji's mineral resources, Government sees itself as a facilitator of investment, and acknowledges that the best way returns to investors can be maximised, is through the creation of a favourable investment environment. In this regard the Government has implemented a number of macro-economic policies to encourage investors, such as the signing of the Multilateral Investment Guarantee Agency (MIGA), the creation of an Investment Policy Statement, and the development of numerous non-tax incentives. Government treats all economically viable investment projects equally.
Government also accepts that mining is an unusually high risk industry and private investment tends to be attracted to those areas with good geological potential, transparent fiscal policies, and political stability. Hence Government is in the process of introducing a low-rate, competitive, transparent fiscal policy that should enable investors to achieve returns commensurate with the risks that they face.
Section 2 - Fiscal Policy
Fiji takes the position that the major inducement to attract mineral sector investors is the opportunity to obtain a return on investment commensurate with the risks faced. In developing the fiscal framework, the Fiji Government has sought to create an internationally competitive package of interrelated measures, which achieves the dual goals of investment promotion and equitable returns to the people of Fiji under a variety of market circumstances. This fiscal framework reflects an attempt to reconcile the national taxation policy with the special needs and characteristics of the mining sector.
The Fiji Government's approach to taxation of mining projects is that the total package of fiscal arrangements enable enterprises to operate in a commercially sustainable manner. The established fiscal framework is considered to provide an environment in which Fiji's mineral resources can be commercially exploited, without major derogations. Minor variations in the timing and incidence of forms of tax may be negotiated to fit the individual commercial characteristics of a particular mineral deposit and associated market conditions.
Foreign mining investors often bring a variety of home-country tax liabilities to their Fiji operations, however, the Fiji Government is reluctant to forego fiscal revenues which will subsequently be taxed by authorities in the investor's home country.
Beyond the basic standard fiscal package, the Fiji Government is only willing to discuss the need for incentives for particular projects after the project sponsor has demonstrated that the project has the potential to be economically viable. Requests for such assistance should be submitted at the conclusion of a comprehensive feasibility study. In offering incentives, Government's general approach will be to assist development through interim or transitional relief in the early stages of project development/operation, rather than granting life-of-mine concessions.
Mineral tax policy does not exist independently from the general tax system applied to other sectors of the economy. Nevertheless, there are special features of mineral development which must be specifically addressed, namely: the capital (and debt) intensiveness of mining ventures; the cyclical nature of metal markets; and the long and costly period of pre-operational expenditures on exploration and feasibility studies. These issues have been considered in framing the tax package, and so, this package has been conceived as a whole and should not be seen as a collection of separable parts.
Section 3 - Exploration and Mining Policy
In Fiji, all unextracted minerals belong to the State. Nonetheless, Government recognises that the private sector is the most able developer of Fiji's mineral resources, and hence, allows the private sector complete and open access to develop Fiji's mineral resources. Government does not require equity participation, or any other form of direct involvement in mineral development projects.
Fiji's exploration and mining administration system is open and unbiased. The guiding principle is that exploration and mining rights are given to any candidate, who by merit, can show Government that they have the capability to carry out an agreed upon work programme. In the case of multiple applicants for a tenement, rights are allocated to the first qualified applicant. This system supports and protects the rights of all investors, both local and foreign, to prospect, explore and mine their mineral discoveries. Investors rights to mineral tenements, and their security of title are enshrined in Fiji's Mining Act and Regulations (Cap. 146). Mineral Resources Department (MRD) is the Government agency responsible for administering this statute.
Licence holders who exercise due diligence in carrying out, and comply with the proposed activities detailed in their Prospecting Licence, including maintaining a vigorous exploration programme, and accurate, timely comprehensive reporting in accordance with the Mining Act, are guaranteed continuity of title, implying a right to proceed to project development. Over time, Licence holders are expected to relinquish a portion of their prospecting area.
While the Fiji Government is very keen to encourage legitimate prospectors and mineral explorers in Fiji, it does not want to see prospective land tied up by companies that are only interested in speculative ventures. MRD will actively discourage any company attempting to engage in such speculative ventures.
Prospecting Licence holders have a right to progress from prospecting to mining if they have complied with the licence conditions and they have proven that a minable resource exists. Permits to Mine can be issued for a maximum of 2 years, and are renewable annually. Mining Leases and Special Mining Leases can be issued for 5 to 21 years. All leases are renewable at the end of the initial licence period. The period of the renewal depends on the size of the proven resource.
Section 4 - Sustainable Development Policy
Government's main aim for the mineral sector is to ensure that developments proceed in a sustainable manner. Sustainable mineral sector projects are those that effectively incorporate community participation during the corporate decision-making process, that ensure an equitable distribution of the benefits arising from mine developments, and that, having carefully assessed the socio-environmental impacts, minimise these impacts.
Government sets environmental policies at two levels; the Department of the Environment coordinates the formulation and implementation of national policies, while MRD, as the main regulating agency for the mineral sector, sets complementary mineral sector policies.
For the purposes of the on-going monitoring/compliance programs, Fiji adopts a pragmatic policy towards compliance with acceptable socio-environmental standards and pollution abatement technology. Government places more emphasis on mining companies complying with agreed emission levels, than with the methods of abatement to achieve compliance. This then provides investors the flexibility to choose measures which will reduce pollution levels in the most cost effective manner, subject to Government approval.
Government promotes a self-regulatory approach to environmental monitoring. While the Government formulates and sets socio-environmental standards, it undertakes to work with the mining industry to develop codes of practice that will enable the mining industry to meet or exceed such standards.
Government recognises and enforces the polluter-pays-principle. The developer will be liable to pay compensation to any person or community whose lifestyle or income is adversely affected by the socio-environmental impacts of the mine. In addition, the developer is responsible for all costs associated with mitigation and rehabilitation activities as required, from initial exploration to post-closure of mining activity.
Government requires that mining companies take precautionary measures to prevent or minimise negative socio-environmental impacts of mining. In instances where there is a significant risk of serious or irreversible damage, or an element of scientific or technical uncertainty exists regarding elements of mine development, Government then expects that precautionary abatement/mitigation measures be taken. Where such measures are required they will be expected to address the worst case scenario.
Section 5 - Land-Use Policies and Security of Tenure
In addition to the Mining Lease, developers are required to obtain a Land Lease to gain legal title to the land (land in Fiji is divided into 3 types, Native Land: 83% of all land in Fiji, Crown Land: 9%, and Freehold Land: 8%) on which they intend to mine. The Mining Lease and Land Lease (or Titles) confer on the developer the right to undertake specified activities in a defined area as stated in the leases.
Government acknowledges that security of land tenure is a critical issue for mineral sector investors. Hence Government is totally committed to enforcing investors land rights which are enshrined in both the 1990 Constitution and the Land Transfer Act (Cap. 131). The Land Lease itself is a legally binding document that guarantees security of land tenure.
However, developers should be aware that in the long run, good communications with landowners are most likely to minimise land disputes during exploration and mining operations. In island communities where land is in short supply, land problems are often associated with landowner dissatisfaction over the terms of compensation payments for land acquisition, surface land disturbance, and the loss of traditional land use. Without special compensatory policies, landowner grievances can become a significant impediment to harmonious long term mine operations. Prior to mine construction, mining companies must obtain formal agreement with the area residents, through the appropriate channels, regarding compensation payable for loss of tenure and damage to surface improvements.
All compensation negotiations must be channelled through the appropriate official agencies in consultation with MRD. The agencies (Native Lands Trust Board and the Government's Lands Department) which assist mining companies with land compensation negotiations have as their main aim promoting projects which maximise benefits to the current and future land owners of the proposed development area without jeopardizing project viability.
Unextracted minerals belong to the State, however, mining Royalty payments are paid to Government but then distributed to landowners. Developers must recognise that the Royalty payment, for the right to extract minerals, and the compensation payments, for landowner loss of tenure and damage to land and improvements thereon are separate. Clear guidelines on how to assess each are provided in the Mining Act, the Native Land Trust Act (Cap. 134) and the Crown Acquisition of Lands Act (Cap. 135).
Where land is required for a mine, and cannot be acquired through a voluntary agreement with land owners, an established procedure for compulsory acquisition exists.
Section 6 - Policies on Housing, Social and Regional Impacts
In many developing countries medium and large scale mineral developments are often accompanied by significant social and cultural impacts. Government sees the creation of a workable social adjustment strategy as arising from a partnership in which investors, government and local groups participate. The terms of this partnership need to be clearly defined from the outset, and should be designed to minimize social/cultural impacts, and ensure that dislocations occur in a gradual and well-planned manner.
Government believes that addressing the social impacts of a major mining project is the joint responsibility of the government and the project sponsor. Mining companies are encouraged to take a direct interest in community relations and to undertake social initiatives in their own interests. While Government will undertake aggressive social adjustment programs, it also believes that direct participation and input by the mining company must be forthcoming to ensure the success of such programmes.
Section 7 - Labour and Employment Policy
Even though the number of jobs created by mining is likely to be modest, labour and employment policies in the mining sector are very important to the Fiji Government. On the positive side, Government sees the mining sector as attracting relatively well paid, high-skill positions which can be directly transferable to other sectors of the economy. On the negative side, if mines use their ability to pay high wages to attract skilled workers away from other sectors, inflationary wage pressures can quickly emerge. In Government's view the key to maximizing benefits and minimizing wage pressures is for mining companies to pursue an aggressive program of skill training designed to maximise the participation of local citizens. These complementary programs of skill training and job localisation form the core of Government's labour policy for the mining sector.
While Fiji has a free collective bargaining system, mining companies are expected to adhere closely to national wage policy and to practice wage restraint. An effective dispute settlement procedure is established in Fiji and is incorporated into comprehensive labour legislation. Fiji's labour laws are found in the following Acts: Employment Act (Cap. 92), Workmen's Compensation Act (Cap. 94) Trade Unions Act (Cap. 96), the Trade Unions (Recognition) Act (Cap. 96A), the Trade Disputes Act (Cap. 97), and the Wages Councils Act (Cap. 98). All are administered by the Department of Labour.
Section 8 - Infrastructure Policy
Government understands that a major mining project requires substantial infrastructural investment. This investment may, in many cases, be critical to the financial viability of the project. While Government does not normally finance specialized infrastructure, Fiji is willing to participate in multi-use infrastructure projects where major benefits accrue to the public-at-large. The conditions of such assistance will be judged on a case-by-case basis.
All mineral project infrastructure is expected to comply with existing technical specifications, of similar infrastructure already in use in Fiji, as determined by the relevant Regulations. Regulations governing the various areas of infrastructure include: Electricity Act (Cap. 180), Housing Act (Cap. 267), Ports Authority of Fiji Act (Cap. 181), Roads Act (Cap. 175), Sewerage Act (Cap. 111), Telecommunications Act (Cap. 173), Water Supply Act (Cap. 89). Each Act is administered by the relevant authority. Wherever possible, mine infrastructure should be compatible with existing infrastructure and should be maintainable through normal supplier networks within Fiji. Where project infrastructure transits areas outside the immediate mining lease area, access should be available to the general public on the basis of national policy.
All infrastructure planning should take place in full consultation with the appropriate technical authorities within the Fiji Government. Government believes that close liaison between Government and the mining company for infrastructure developments will ensure compatibility with existing infrastructure and provide the mine developer with a realistic appraisal of local conditions.