Government creates jobs by not reducing the size of the Civil Service
Wednesday, January 11, 2012 - 22:27
It appears that government believes that it is creating job opportunities by not reducing the size of the civil service. But surely this will lead to a situation where fees and taxes might have to be even further increased to keep them all at work, while every step in that direction reduces the private sector's capacity to grow their businesses and to create jobs. Editor's Comment, by Pesi Fonua
Government's interest versus
Government's interest versus Tongan economy - Concerned Tongan:
It would be very unfortunate for Tonga if the Prime Minister and Cabinet have the interests of Government in front of those of the economic situation currently befalling our small island nation.
It may not take much deducing to feel as though some politicians still have the old mentality of prioritizing Government wants over everyone else. A good example of this is the controversial and unsustainable increase of fees across the board, from transport, immigration to business fees. It can only be seen as an act of desperation by the Cabinet to raise revenue. If Cabinet had the economy at heart when reviewing these fees they may have been able to see that this move would be a huge disincentive for current businesses operating in Tonga and for more businesses to be created. Those hurt the most by the disincentives and whom are also regarded as the backbone of just about all economies are small businesses.
A large percentage of our economy would be small businesses. The creation of businesses in Tonga is difficult and expensive compared to other nations around us. One example may be the large difference of accumulated fees imposed on Tonga’s fisheries sector compared to those of other island nations around us. It is important to compare to other nations because if we are to attract foreign investment or stimulate growth in businesses currently operating in Tonga costs of operating in Tonga must be competitive.
To avoid further long-term problems we must firstly look at having a cap on our borrowing for the Government, or if there is already one we need clear investment plans, proper risk management analysis and accountability for any more projects. I added accountability because if an investment fails, tax payers need to know who is responsible and see appropriate action is taken so that this person is no longer wasting any more tax payers money and assets.
With most of the budget going to wages and less to critical projects that may stimulate economic development, it adds on to the risk of Government not being able to pay back these loans. If each of those projects in which were funded by the Chinese loan e.g the Palace or Vuna Wharf do not achieve the returns on investment projected by those who orchestrated or authorized we need to know who is accountable, and what do we do about it.
Lets take a quick look at one of the investments, the $30 million pa’anga Vuna Wharf. Two huge assumptions seem to have been made, that the total increase of cruise ships projected by those who were for this decision will come to Tonga, and that a large number of those tourists in each cruise ship touching down in Tonga will come out and buy goods and services. Depending on the terms of borrowing this money, revenue collected from those purchases may need to exceed millions each year to have made this investment worth it. I think it is a long shot and a very risky and bad investment, where if the investment can’t pay itself money must be raised from other sources.
It doesn’t need to be all doom and gloom in the future. Its a time to be innovative or creative to figure ways to move forward.
Economic growth would usually mean Government revenue growth. But to have economic growth in our current situation Government must refrain from borrowing more and reform and lower these fees and taxes so as to increase incentive to start businesses in Tonga and also attract foreign investment. There will be other important measures needed from other places such as the Reserve Bank to handle the current credit difficulties, but it can’t work without the support of policy makers first.
At the moment I don’t think Government is in much of a position to lower fees and targets at the moment, but in order for them to do so, they would need to make further cuts to Government spending. Downsizing and streamlining the Government departments. If Government continues down the path it is on at the moment and does not change, there will be more fees and taxes and less businesses. - Concerned Tongan