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In God we trust

Moss Beach,California, USA


For better or worse, for richer or poorer, in sickness and in health, forsaking all other. . . . That pretty much sums up the commitment government is taking to build an economic relation with China. The two countries are still working out the conditions and most importantly, the beneficiary of the loan.

In the last ten years or so, foreign aid has become reverse foreign aid; poor countries are now subsidizing rich countries. Globalization has reversed the flow of capital from poorer nations to wealthier ones. With this loan from China, Tonga may soon be subsidizing China by sending more of its (meager) wealth in the direction of China. According to the United Nations, the net transfer of capital from poorer countries to richer ones has grown from $229 billion in 2002 to $784 billion in 2006. Is this a trend Tonga wishes to join? We might be optimistic that the loan will be utilized in the best interest of the country and not spent wildly, running up a huge deficit without penalty while fueling China's piping-hot economy. I hope such optimism is justified.

When Prime Minister, Dr. Feleti Sevele said that the 112 million dollar loan from China was for water, sewage, power and roads, he was serious but perhaps misleading. News release on May 22, 2007 in the Matangi Tonga on the soft loan from China stated, . . . "With regards to a $112 million pa'anga soft loan that the Chinese government agreed to during his visit to China, Dr Feleti Sevele said that the bulk of the loan will be spent on the reconstruction of the infrastructure. Vuna Wharf will also be reconstructed, as well as the Nuku'alofa waterfront area. He said that if there is a surplus of funds they will be applied to rebuilding the whole of the greater Nuku'alofa area." In this very statement, Dr. Sevele may be close to perfecting the art of unaccountability. Chasing wealth at any cost seems to make it impossible for government and pro-democracy leaders to admit their mistakes in the riot of 16/11. This is not the best way to clean things up. They should accept the consequences and make every effort necessary to work together in establishing a legitimate government that will benefit the people. Then perhaps the people can bring legitimacy to any such deals.

In my previous articles, I noted that blame for the mess the country is experiencing belongs in many quarters. The King and Dr. Sevele have been isolated, ineffective and shown poor judgment long before 16/11. Pro-democracy leaders have been responsible for a good deal of useless vitriol emanating from their impatience for political reform. It is sad that so many in government value their jobs more than meaningful political and economic reform. They spend too much time tweaking the system rather than undertaking the necessary fundamental changes. Reconciliation and establishing a legitimate government with democratic values may be a lofty ambition but it is what Tonga needs before any economic dreams can become a reality.

Eventually, the economic and political catastrophe and consequences of their actions will enforce its own accountability but at what cost will it be to the people? Up to now, Sevele has not been forthright (transparent) on disclosing the expenditure of the loan from China. But details are slowly disseminating to the public such as the proposed reconstruction of Vuna Wharf as well as the waterfront. For all we know, the loan may well be earmarked for waterfront development, buying back Shoreline and other activities that will benefit few. The commercial development at the waterfront has sparked my usual curiosity. Therefore, it compels me to give this waterfront development the attention it deserves. The challenge we have is illuminating and elevating the discussions and asking meaningful questions of the leaders and representatives in government, their abilities, their motives and not over or under estimating the stakes and consequences of their actions for Tonga in the short and long term.

My understanding of this waterfront reconstruction is to in-fill the area from the rock wall to the end of the coral reef; in front of the Treasury building (Vuna Wharf) through to the Dateline Hotel (America Wharf). All that land from the high water mark to the sea is owned by the Crown. This is according to the Land Act. The proposed commercial development plan seems to be infilling it and then selling it off as free-hold land to foreign interests. The project is to be funded with loan money from China. The benefit to Tonga remains a mystery.

As I understand it, this waterfront development scheme was submitted to the Privy Council prior to 16/11 and therefore cannot be viewed as related. Could this be the reason why Noble Fielakepa was removed as Minister of Lands? Perhaps he refused to process this submission in Cabinet knowing that it would attract a lot of public criticism. With this waterfront project and sale of important land titles to foreign interests, I cannot help but wonder who benefits. Indeed, once again the devil is in the details.

I am not sure we fully understand the impact of having to pay back $112 million over a period of 20 to 40 years. This $112 million comes in addition to other government loans of somewhere close to $200 million both domestic and external. The loan from China alone will cost every woman, man and child in Tonga more than $1,000 for the principal alone and with interest can cost much more. Normal government revenue excluding grants is estimated at about $145 million and expenditure is estimated to same level (a balanced budget). This does not take into account servicing and repaying a large loan. In other words, for the next 20 to 40 years, Tonga may not have much money to spend on health, education, roads, etc. assuming much of the $112 million loan is earmarked for the King's pet projects and buying back Shoreline at tens of millions of dollars. Is there a real need for such development when the money can be earning far better returns invested elsewhere? Could some of the money be used to pay teachers and medical staff, build roads, provide assistance to farmers, or towards a resolution for the mounting unemployment or business development or all of these activities that bring returns of a different type?

If businesses do not recover from the damage of 16/11, how is government proposing to pay back the loan? The Minister of Finance has advised all Head of Departments (HOD) that they must cut their budgets due to a loss of revenue from 16/11. Which government departments will lose their budgets in paying off this loan? Does government plan to lay off more public servants jobs to pay off the loan? Will government be seeking unpaid revenues from TongaSat and other government assets to assist in paying off the loan?

We can assume from Dr, Sevele's gentle treatment of this loan from China that he still has the confidence of the King and some of the people. While it may be comforting to have the King's confidence, is Dr. Sevele's action in implementing this waterfront scheme misguided? The lack of transparency on this loan raises suspicions on how Dr. Sevele and the King plan to use the money and who the real beneficiaries are. The nation as it exists today is quite divided. As long as there is public unrest, Dr. Sevele and the King are putting both the public and China at great risk with this scheme. They must establish a legitimate, clean and representative government before going forward with any commercial development, without regard to the riot.

There is also a risk to China if Tonga does not resolve its political turmoil. I hope that the officials in China are slow in working out the loan details because government is slow with their reconciliation effort. The emergency power needs to be lifted and government cannot continue to instill fear amongst its people. This only thwarts business development for those that were affected by 16/11, potential business interests and investors. All smart investors will take the necessary measure to protect their interest. With the current state of affairs in Tonga, China should be concerned with such a loan because neither Dr. Sevele nor the King have the full support of the people nor does it appear that they have the interest of the people at heart.

The more I think about the waterfront project, it could be perfect because all the services (power, water, sewage) are easily extended since the existing services are running parallel to Vuna Road. This will help reduce the cost to implement the project and hopefully the surpluses will be allocated to rectify the real damage that was caused by 16/11. The real price of such a project as I see it would be the cost to the people in repaying the loan on development that does not benefit them as well as the cost of the environmental damage from the landfill. With infilling the water with landfill comes the killing of the reef. When it rains, the ocean turns white with landfill silt. We have seen the Tongan soil poisoned from commercial squash farming. Now the Tongan water will be destroyed by commercial development. The stakes are too high. The world is responding to global warming by being more responsible for what they do, eat, wear, buy, drive, design and build. Developed and tropical coastal nations will be the first victims of global warming. Bangladesh is already experiencing more powerful monsoon downpours and fiercer cyclones and many other nations are seeing indicators of worse things ahead. Tonga may someday be completely under water before it appears on the global balance sheets. Shouldn't the government be planning and thinking longer term and utilize the loan money on sustainable development that will create a harmonious society?

So what must be done? If they cannot install a respected and effective leader, then the King and Dr. Sevele have no choice but to take the lead in regaining the people's confidence and respect by honoring the people. Giving priority to commercial development and ignoring the people will put both China and Tonga at great risk. But if the King and Dr. Sevele are reluctant to take the lead, the people must not shrink from forcing the issue.

The loan from China may seem like a gift and it could be but it might also become a Trojan horse. More than anything, the people living in Tonga must make sure they are not losers in this deal with China.

Mele Payne Lynch

Mlpayne222 [at] aol [dot] com