The military government in Fiji led by Prime Minister Commodore Voreqe Bainimarama announced a tax hike for Fiji Water at the tune of 15 percent, which caused Fiji Water to announce that it will shut down its operation on the island. Currently, Fiji Water pays one third of a cent for a liter of water.
The new tax—labeled by the Fijian government as a “Water Resource Tax”—singles out any company that extracts more than 3.5 million liters of natural water in a month with a 15 percent tax per liter. Coincidentally, the only company that falls into that category is Fiji Water.
"This new tax is untenable and as a consequence, Fiji Water is left with no choice but to close our facility in Fiji," the company, which sells its bottled water in more than 40 countries, said.
So is it time to start hoarding the last remaining Fiji water bottles?
Maybe. Bainimarama seems set on the new tax and his authoritarian mindset that Fiji Water as an organization does nothing to support Fiji or any of its people doesn't help the situation.
Is it likely that Fiji Water has bottled its last bottle?
Probably not. A similar event occurred in 2008 when the Fiji government demanded a tax hike of 20 percent for the bottler, and Fiji Water responded that it would shut down its operations. The government quickly yanked the tax, and Fiji Water remained.
Will Bainimarama back down this time? If he does, then this standoff is no different than 2008 and Fiji Water will have successfully demonstrated that it has more pull than the Fiji government. It seems like he would have to back down at some point simply because of the economic contributions that Fiji Water makes to the island. Long-term economic problems in Fiji include low investment, uncertain land ownership rights, and the government's inability to manage its budget. The “Water Resource Tax” is certainly a responding measure to combat its out-of-control budget.
But if/when Fiji Water ever leaves the island, it would take with it important business and jobs along the supply chain. For example, Golden Manufacturers is a cardboard box manufacturer that services the South Pacific and it would lose a significant portion of its revenue seeing as Fiji Water orders millions of the company’s high-end cartons printed with color and custom graphics. Other ramifications for a Fiji Water departure along the supply chain include deep cuts for the China bottlers that make Fiji Water’s square, hard-plastic bottle, and the ocean freight companies that deliver the bottles to Fiji.
Fiji Water said in a statement that the measure “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.”
Fiji Water will either mortgage the future of its company by agreeing to pay the tax and remain in an unstable country with the junta government, or Bainimarama will come down off of his mountain and realize that ramifications of the company leaving are far greater than anything he could have imagined.
I’d bet on the latter, but just in case, I’m going to pick up a case of Fiji Water anyways.