From Matangi Tonga Magazine Vol. 13, no. 4, December 1998.

Buying locally-made goods creates jobs and keeps the pa‘anga in Tonga.

“The Private Sector has to initiate things,” says Tutoatasi Fakafanua, Tonga’s Minister of Finance, “and that is what the Private Sector should do, or else we in government will just roll along because that is what bureaucracy does.”

He was speaking at a promotion to “Keep the Pa‘anga in Tonga” hosted by K. and J. Footwear at the Small Industries Centre.

Tongans should buy locally made sandals, stressed Jim Beaton, the manager, as well as keeping the Pa‘anga in Tonga, “a local manufacturer provides employment opportunities,” he said.

Tutoatasi supported the idea for the manufacturer to work closely together with the schools, “through the schools, the uniform material can be imported duty free.” But he warned Jim and the other manufacturers who attended the function that at the end of the day, “I am a tax man.”

Tonga’s move to establish manufacturing industries during the late 1970s and the early 1980s resulted in the building of the Small Industries Centre at Ma‘ufanga.

The concept for a centre with a number of enterprises, manufacturing products for export overseas was well supported by a number of regional organizations, including the Asian Development Bank, which financed the construction of the centre.

Incentives such as tax exemption from government, and capital funds from banks attracted companies to establish manufacturing and industrial operation at the Centre. New Zealand and Australia gave preference to products that were made at the centre.

Some of the companies that set up operation at the centre included Scan Tonga Engineering, the South Pacific Leather Co. Limited, the South Pacific Manufacturing Company Ltd, the Saddle Factory, Asian Paints, Tonga Wire, and others.

Most of these companies have closed down, except for Asian Paints, Tonga Wire and the former Saddle Factory, now called K. and J. Footwear.

Dr Masaso Paunga, the Minister of Labour Commerce and Industries reminded local manufacturers, “that they must improve the quality of their products in order to remain competitive with imported goods, despite our disadvantaged situation due to economy of scale.”

He told teachers and educators that they should include in their studying program, the studying of local manufacturing industry, “because of the limited opportunities for students to study overseas, they should realize that there are opportunities for jobs locally.”

Gary Ayre, the General Manager of the ANZ Bank, Tonga, explained that the restrictions on loans enforced by the Reserve Bank to slow imports did not apply to loans for the manufacturing sector.

Gary also pointed to the big disadvantage faced by local manufacturers, “because imported goods are usually cheaper and some times better.” He suggested for government to offer tariff protection for local manufacturers to counter the advantages of overseas manufacturers.

No tariff protection

The possibility for government to offer tariff protection to local manufacturers was no longer possible in today’s global economic climate. Maliepo Toma, the officer in charge of the Manufacturing Division of the Ministry of Labour Commerce and Industries pointed out that Tonga had no other option but to join the World Trade Organisation, “and the objective of the WTO is to remove all tariffs.”

Toma said that the only incentive left for local manufacturers is Tonga’s exemption from Income Tax during the first five years, and an exemption from duty on capital goods.

With regards to SPARTECA, a special trading agreement between Forum Island Countries and New Zealand and Australia, Toma said, “it no longer has any meaning.”

Local manufacturing endeavours, unless they are well targeted to meet a niche market either overseas or locally, will continue to be an up-hill battle in Tonga.