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Tonga loan deferment “not related” to signing of Belt and Road Initiative

Nuku'alofa, Tonga

Chinese Ambassador to Tonga HE Wang Baodong. 31 August 2018.

Tonga’s repayment of its  $119 million pa'anga loan from the EXIM Bank of China for the reconstruction of the Nuku‘alofa Central Business District has been deferred for another five years.

However, the Chinese Embassy told Matangi Tonga yesterday that the EXIM Bank of China's deferring of Tonga’s $119m loan repayment had no connection whatsoever to the signing by Tonga’s Prime Minister, Hon. ‘Akilisi Pohiva and the Chinese Ambassador to Tonga HE Wang Baodong of the Belt and Road Initiative Memorandum of Understanding in Nuku’alofa on 12 November this year.

Benjamin Yu, the second Secretary on Economic and Commerce at the Chinese Embassy in Nuku’alofa told Matangi Tonga that he noticed that some western media had rumored that there is “causality” between the Belt and Road Initiative MOU and the loan deferring agreement, but the truth is that: “these two agreements were not related at all. Chinese Government has never set the signature of Belt and Road Initiative MOU as a pre-condition for the signature of a loan deferring agreement for the Tongan Government and would never do such things.”


The deferring of Tonga’s loan repayment was signed by Tonga’s Minister of Finance, Hon. Pohiva Tu‘i‘onetoa and EXIM Bank of China official in Port Moresby, during the Asia Pacific Economic Cooperation APEC 2018 Annual Meeting from 17-18 November.

It was the second time that Tonga’s repayment of its Concessional Loan from the EXIM Bank has been deferred, the first five years’ deferment was in 2013.

Significant this time, was that only the repayment of the $119m pa'anga loan from the EXIM Bank of China for the reconstruction of the Nuku’alofa Central Business District was deferred for another five years and not other loans from EXIM.

There are also loans for roads.


Tonga appears to be under siege. On nearly all Tongan islands retail businesses are increasingly dominated by Chinese. Chinese entrepreneurs are constructing buildings at an ever-increasing rate. Tongans are becoming more and more dependent on Chinese goods, often of suspect quality. The Chinese embassy on Vuna Road is a massive complex worthy of a country of millions. The Tonga government is greatly indebted to Chinese. And the Chinese have not integrated into Tongan culture very effectively, if at all.
Every Tongan has experienced Chinese shop attendants scowl, grab the money, and then throw back change as if they were doing you a favor. They sometimes scribble something down in a receipt book in a manner that no auditor can decipher. There is no way to tell if many Chinese businesses are paying requisite taxes.
Tongans have been on these good islands over a thousand years. Tongan culture is one of the most sophisticated in the world. The land tenure system ensures that the land stays with Tongans. However, fifty-year leases are, for all practical purposes, a lifetime.
Further, Tongans are Christians. Christian heritage was key to its historical independence and Tongan Christian heritage is key to holding Tonga society together. This is even more so today than at its beginning when decreed by King George the 1st in 1839.
Why are the Chinese in Tonga? Could it be that Tonga owns a large part of the Pacific Ocean and a big satellite slot in the sky? Chinese are expanding at a similar rate into other parts of the Western Pacific, and indeed the world. Their increasing presence appears to be simply Chinese expansionism; a form of economic colonization.
Then the recent Belt and Road Project came to Tonga. Tonga, along with seven Pacific countries including some greatly indebted to China signed on. They have no way of paying the Chinese back in any short period of time. In addition, Tonga has signed on for short-term debt relief; in the case of Tonga 5-years. In my opinion, both this debt relief program and the Belt to Road Project are a traps to secure Chinese expansionism in the Pacific, partly by holding the hammer of debt over indebted countries.
And it does indeed appear that a few Tongans greatly profiting from this. But most Tongans are not. In my opinion Tongans need wake up, raise up, and take back Tonga from the Chinese. Remember the Tonga motto: “Koe ‘Otua moe Tonga Ko Hoku Tofia”, not Chinese Tofia as it seems to be becoming.
I have been cooperating with Tonga in various ways for 40-years. I married here in Tonga in 1980. I see the changes and am very concerned.
Richard Stoll

Re: “no way of paying the Chinese back in any short period of time”. This is possibly true, but it doesn't have to be. The Australian govenment recently announced a $2 billion infrastructure fund for activities throughout the Pacific islands. I can already imagine it being used alternatively to restructure some unsustainable loans, ie debt consolidation on more favourable terms, allowing the struggling poorer nations some breathing space to get their financial acts together.
This story of constant poverty from the world's smaller and less diversified economies does seem to be all too constant.. there needs to be a fairly radical change in culture and thinking to put this debt curse in the past, but top of the to-do list is staving off the most burdensome debt as soon as is practicable. No nation can truly call itself 'independent' with a straight face if it is constantly dependent on other nations for money or oil or anything else that is essential. Personally, I could not be proud of receiving handouts from others on a regular basis with no end in sight. There is no greater feeling than being truly free, especially from unwanted obligations.
Incidentally, I know of at least one heavily indebted European government which was trying to sell some of it's many islands to get rid of their debts.. progress on that I don't know about, but something to ponder upon. Even the US federal government with it's trillions of dollars of debt could wipe it all out in short order depending on just how far they wanted to stoop (not far I'm sure). There are plenty of US federal lands and assets that are considered to be financially valuable and worthy of selling but obviously also considered to be national treasures, but the government is sovereign and can do a lot of unconventional unpopular things if it is desperate enough. There are always ways to get things done.

Paul Black