Tonga's government, civil service and the public, "should know that we are now at rock bottom, we can't go any further, we have to rebuild ourselves and move on from there," says Tonga's Minister of Labour, Commerce and Industries, Hon. Dr Feleti Sevele.

"As a country, as a nation, we have to look at where we can cut our expenditure, we just have to be lean and mean. And secondly, we have to identify the sector of the economy where we have comparative advantage and that we can develop, and let's focus on those," he said, commenting on the current state of an economy he described as "grim...bad...things are not good, and government is spending more than it is earning."

Dr Feleti Sevele is one of Tonga's first two elected members of parliament to be appointed by the king as a member of the Cabinet, following the March Parliamentary Election last year.

Since becoming the Minister for Labour, Commerce and Industries, he became a prominent as Acting Prime Minister a month later, in April, and during the national strike of the Public Servants during August-September he was appointed as member of the government's negotiating team that ended the strike. In early December 2005 he signed Tonga's accession to the World Trade Organisation (WTO).

The following are excerpts from an interview with Dr Sevele on January 4, 2006.

By Pesi Fonua

Basically, where are we now with the WTO?

We have signed the Protocol and that is the formal accession to be a member of the WTO. In the Protocol there is a provision, giving us a seven months period, and we have got until the 31st July 2006 to formally ratify the Treaty, and become a full member.

That is where we are at the moment, we are the 150th member. There are about 29 or 30 countries that are in the pipe-line to join, and when they join they will increase the membership to 179, leaving only 15 countries in the world that have not joined. So, in a sense, by the sheer nature of the organization, and the fact that it has taken in a great majority of the world, we've got no choice but to join. Secondly, the benefits of this organization, despite the cries by some people here, are such that most of the world are joining it.

Specifically what do we do to ratify the treaty?

This is something that we have asked for, this Ministry and government have asked for that period for us to look over some of the details, and it is normal standard for some countries, and others of course have decided to sign and then formally ratify, but because a few concerns have been expressed we thought six to seven months would be the time to do it. It is normal procedure.

As you had explained during a WTO meeting last year that during this rectification period if we decide not to proceed, and then later decide that we want to join, we will have to start all over again.

Yes, we will have to start all over again, and we will not have the goodwill of the countries that have assisted us in getting through. In my view there will be more demands on us, in terms of concessions, and that has been the case to date. We have a lot of goodwill on this, at least a dozen countries congratulated Tonga, the United States, Australia, New Zealand and our friends in the Pacific, even as far as Saudi Arabia and India. So it would be an act that it would not be in our interest not to join. Vanuatu did that and Vanuatu is now among the 29, and they want to get back but, a number of countries have said, take your place on the queue, so it would not be in our interest to not access and not to ratify the agreement.

I know there was a response by your ministry to the claim that was made by Oxfam about the unfair concessions that were demanded of Tonga. Would you like to make a comment on their claim?

It is statement that was made by Oxfam on what I called, ignorance of the local situation. For example, they said that in terms of duty, tariffs, we went too low by binding ourselves to a 15-20% tariff, but that is part and parcel of an on going economic reform that the government has been under-taking during the past six and seven years. With lower duties you are making it cheaper for the consumers, cheaper for the people - in particular the lower income earners of our community - and that has always been part of the government policy. The world throughout has had their tariffs coming down over the years. If we look at Tonga, we have a very open economy, I mean, anyone can come in and be a lawyer here, so long as they comply with local legislation, and regulations. You have seen Palangi lawyers here over the years, doctors over the years. So we are not doing anything new.

Oxfam, I think because of some incorrect information from some of their counterparts here, have gone overboard. For example, in one of their communications that I have seen said that by joining WTO we could have the Sunday law changed. No, that is absolutely false. Because in the agreement that we have signed, there is a section which said that where WTO provisions conflict with our domestic legislation and regulation ours will prevail. Our sovereignty to make laws is not being taken away, we are bound by what we committed to but we were careful, my predecessors, the staff, the ministry and the government to ensure that if there is a conflict between WTO provisions and our laws, that ours will always apply.

That is a major claim by Oxfam, because what they are saying is that if Tonga will come up against a WTO decision, it means we have to abide by the WTO decision.

No, it is only if we have committed ourselves, and we have not committed ourselves on those, and it is clearly stated there that the working party, which is part of our agreement documentation. One of the thing that is bad about it is that they were here for about two or three days, and they claimed to know all, but their counterparts here have also been feeding them with the wrong information.

You mentioned that there are areas where Tonga has made some commitment to. What are those areas?

What we have committed to, provided that they comply with the local laws, I guess in some ways what we did was to formalize, what has been on going. And, of course, if we want investment, like in fisheries, we don't have the money to do it, like tourism, for hotels to be built here we don't have the money to do that, but by joining WTO there are sets of rules under which we will operate. That gives investors from overseas confidence that we are part of a world-wide organization and that there are rules by which we will play, so that will give them confidence to come and do business here.

They mention that Education and health are areas that Tonga has opened up for overseas investors?

Oh, yes. We don't have to worry about the money, but they have to comply with our Education Act. But if they come and set it up with their own funds, and if it would be cheaper for us than to send people overseas, why not?

But these people are saying they should not. It is simply small mindedness, petty thinking and ignorant of the wider picture. The whole thing, OXFAM and some of our people here, they are looking at this issue on a very narrow basis, they are forgetting that Tonga since the early 70s, when our people went on a work scheme to New Zealand, we have become an open country, Tupou High I think has a link with an institute in Wellington. It goes both ways. If someone comes along and says that he wants to build a hospital here and provided that he can comply with the law, eh, it is a choice. Patients go to Auckland only for operation that cannot be done here.

What Oxfam raised was that the WTO requirement could be against our normal ways of life, and our ways of doing things.

Even if you look at Sunday Laws, it has changed over the years, last 20 years, we can go down and buy bread on Sundays, we can watch movies, rugby on Sundays. Now, things have changed, and by joining WTO has nothing to do with those changes. What we have done is joining an organization that is responsible for the setting up of rules for international trade that is what we have done. We want to be part of that and if there are rules formulated that appear to us to be in conflict with our interest, we are there, and therefore have a say in it, rather than sitting from outside, they make the rules and we are not part of it and where do we complain.

Competition for local business

One of the concerns is that once you open it up to foreign investors, local businesses would not be able to compete.

We have reserved businesses for local people, retailing, wholesaling, farming, off-shore fishing, taxing and others, which are restricted for local people. We also have a foreign Investment Act, they are also under regulations, which are now being finalized that there are specific areas which are reserved for Tongans. To me it is not an area of major concern.

Oxfam said that Wall Mart would come in here and set up a franchise here. We have immigration laws, we have land laws, if those people are allowed in they have to comply with those. It is a little bit like Tongans are saying that Chinese should not be allowed in at all. Alright, maybe it was wrong to allow them in in the first place, but with a lot of the Chinese shops here, the land has been leased to them by Tongans. So it is up to us to ensure that we protect ourselves, by joining WTO we have not given those rights away. World-wide it is accepted that WTO is the best multilateral world trade treaty that we have.

My advise to people who are so negative is that, if you really want to know about the pros and cons we have got staff here, it is on the internet, they ought to know about the WTO and its implications properly before they start criticizing government and telling the world that we should not join.

You know looking at where we are now, our WTO membership and free trade. Do you think we are ready to participate in the race. When Taiwan became a member of the WTO their Minister for Trade said that by joining the WTO, it was like saying that they were ready to wake up every morning and compete. Are we ready to compete?

What are we going to compete with people in New Zealand and Australia with? Nothing, because we don't have the basic infrastructure, we don't have the economy of scale. If you look at it, we have the Small Industries Center, which seemed to be successful at the start but they all went out because other places were producing goods more cheaply. That is the reality of life, but don't forget that much of what we consume is imported. The foreign exchange, we get from our exports is something we need to try and increase and those exports will come under the rules of the WTO, of which New Zealand, Japan and others are members. So it is within our interest to be part of it, it is also because of Labour mobility, people mobility, and social mobility. Now part of the move, particularly in the region, is to allow labour mobility. This is also part of the WTO agenda, to aim at moving the distortion of goods, the movement of people as well, and we as a people will benefit from that. If we were not allowed to move our people to Australia, New Zealand and to the United States we will become over populated. So we gain from that, global open economy, and open society.

People, Tonga's main export

So basically what you are saying that if we look at local industries, there is nothing there, but we should look at people as our source of foreign earnings.

There is no doubt that our people have been our main export during the past 20 years, and I think that will continue. We should also look at what we have locally, with comparative advantage. I still believe there is still a lot we can do in agriculture, marine resources, in terms of deep sea fishing, fish farming, and aquaculture in general. We still do a bit in providing our own foodstuff, particularly in meat products. There is also the area of tourism, we have got beaches, several islands, which we really haven't developed. Fiji is really taking off, they have the infrastructure and the momentum, I think this is the right time to tap into that, get a package, sit down and get into focus on what sector we are going to concentrate on, agriculture, the sea, and tourism, and put our focus, and our resources into that, because I believe there is still a lot of room to move there. Tourism is one area I believe that has the best potential for us.

Now that you are in Cabinet perhaps you can tell us what is happening in Cabinet, because you know for years we have heard government saying exactly the same thing, about agriculture, fisheries and tourism, but in the end people in these industries say that government was only paying lip-service, and they were not serious or willing to put money into it. What really is happening?

I can't say anything about the past but you know that in the last session of parliament we have passed an Act to establish the Tonga Trade and Investment Board.

In the meantime, we should really get ourselves targeting and really looking at what can we improve on. We have got to focus on those three areas. We have talked about it but we really have not done much about it. Tourism, for example, we really have to sell it to investors, also we have got to sell it to individuals overseas, Tongans and non-Tongans.

We have to get our ministry of tourism moving like Fiji, so that when people come here they feel that they are wanted, and there are things for them to do.

Going back to trade, with regards to PICTA and PACER as regional trade agreements. Now that we are a member of the WTO, how would it work?

PICTA and PACER are regional trade agreements but at the same time they are mirror images in the region of what WTO is trying to do with international trade, to remove the barrier so that it is easier to trade, easier to move, services and goods to move from one country to another.

PICTA, we have signed, we have agreed, it will come into effect as far as Tonga is concerned in a year or two. PACER, it is the same thing. Both of those two agreements, are WTO complied. Similarly there is a negotiation between the European Union, and the ACP countries on what they call the Economic Partnership Agreement (EPA). These trade agreements have to be WTO compatible. So in a sense they may be regional trade agreements, but overall they aim at increasing trade, and for the whole world to become more prosperous.

Is there still a need to have PICTA and PACER since they have to comply with WTO?

Well, you see WTO, PICTA and PACER are still not free trade, free tariffs, there are still products there that are sensitive with regards to the local industries, and it will take time, but the whole aim is to ease up the barrier. For example, Fiji, we try to ease up with regards to Tongan tomatoes, it was not tariff barriers that they put up, it was a quarantine barrier. New Zealand, for example, we used to be able to export capsicums and watermelon, now it is quarantine rather than tariffs, but that is something that we have got to really look at this year. Is it really a fruit-fly problem commodity or is it just to protect the domestic industries? But it is best for us to be in, so that we can say hey, you are not taking our products because you are trying to protect your local farmers.

So when we are talking about Labour Mobility, does that come under PICTA and PACER?

Well, you see in the PACER, the whole thing there is for Pacific Islanders moving in to try to fill the employment needs in Australia and New Zealand. No, but they are still getting people in, skilled people. What we are saying that there is still room there for unskilled people. New Zealand is on with the idea and it is already happening, where you have an employer in New Zealand is keen on say workers from Tonga, they can and that is part of the Pacific Plan, so it is all part of this wider regional grouping, and for us to attempt to stay out of a body is not in our interest. This, the WTO and the way the world is moving now, it has to look at globally not in a small narrow minded Tongan way of looking at things. We can't isolate ourselves. So the other thing is, they have got what they call the least developed countries, Samoa is lucky to be in it, and some of the other Pacific island countries. We are not, but by joining the WTO we become one of what they called the G90, the developing countries, and it enabled us to push our particular concerns and needs. We also joined the group of small vulnerable economies, so we have got some strength from that.

I have only been in for less than a year and I looked at what previous ministers have done, Tasi Fakafanua started, then Masaso Paunga, then I looked at it, and I think they have done the right thing.

I suppose the concept of Free Trade, and looking at the situation that we are in, it is a bit scary, because we will continue to import more and export less.

That is the reality, we can and should do more to produce more here. But the reality now is that we import more.

So from your perspective, there is nothing for the local producers to worry about because they still have the local market.

There are provision in GATT, which the WTO took over, that there are measures that if there are activities which are taken by other countries to dump stuff here to the detriment of whatever interest we have, we have the right to take measures to safe guard those things.

There have been efforts made to export local produce, such as talo. Would our WTO membership hamper those efforts?

No, it won't. With the WTO we have an avenue to lodge a complaint if they try and do that, but there will never be a big market for our talo and local produce. What we have to do there, and that is what my staff are trying to do this year, is to try and formalize a mechanism whereby that is done properly, so that when our goods leave here we are assured of at least of a minimum price, that is what we did with the Commodities Board.

You mentioned Squash, I suppose that will open up the market for Squash.

That will take some of the pressure from the Japanese, because we have been relying heavily on the Japanese and there are good years and bad years. This past year is a bad year, is really bad. It is a bad year, and if we can open up another market, it will be an avenue to ease the pressure. The Squash Council has come to that reality now that there are just too many inefficient farmers and may be too many inefficient exporters. It is a tough game and we have got to survive and this year exporters should be very careful in picking their farmers.

You know the concept of establishing markets for Tongan produce in Pago Pago, and I think New Zealand, and Hawaii. Under the WTO can we still continue with that?

I can't see why not but some will say that that is a form of subsidy that we should do away with it. For me, I think it is wrong for us to set up depots like that. In New Zealand and Australia we should go to importers, sell straight to importers. We are just creating another interim, which may be costly. Go straight to importers and this is where government should put in some assistance for a start, let's say for the first year to get things moving, this is where the Private Sector should come in, but they should work together with government, but there are those who want to go on their own, let them be.

We have got Global Farming, and they have exported four containers of Butternut (pumpkin) to UK and one of sweet potatoes, that is the sort of enterprise initiative that should be assisted, let's hope that they will succeed, and we will give any assistance that we can. Agriculture will never be big but they will create employment opportunities, but not in the level of say squash, which is a big market, but no such market for talo.

There was an issue that was raised in the House about packaging manioke for export, an attempt to emulate Fiji?

Yes, there was some suggestion, but that is the kind of thing that our Trade and Investment Board should get into to. We were going to go to New Zealand last year just to look at the size of the market and talk to some importers and I did talk to a couple of Indians who imported cassava from Fiji, but unfortunately the strike came on and that put a stop to it. I am going to send one of my people here and a couple of exporters to New Zealand shortly, just to size up the market and move that way. There is a market but it has to be handled in an orderly way, and if the result of such a visit says, yes, it is there, and this is the kind of assistance that is needed to get things off the ground, similarly with Australia.

It has been suggested that in order for free trade in the region to become a reality there is a need for further regional integration, but it will, of course, have an impact on sovereignty. The idea is to follow what is happening in Europe and the Caribbean, even with one currency for the region. What is your view on that issue?

It is an interesting concept to look at. With the one currency issue, let's start with Australia and New Zealand, they are bigger and if it is easier for them. One currency in the Pacific, I am not so sure. Practically I am not so sure if it will work, it may work. Secondly, the sovereignty side of things. A bit like Europe at the moment with the Euro. Britain is hanging on to its Pound, but if it is something that is worth talking about then it is worth exploring. If it is one way to go and it is better for everybody then why not? On the sovereignty side of things, as you know, we are worse than the Australians and the Kiwis.

The other thing too with the Caribbean in the early days they were a more homogeneous population, but with us we have the Melanesians, Micronesians and the Polynesians and as you know it is a very difficult mix. The indigenous issue is something that will come up in the not too distant future, and it is something that we should be concerned about. I think PICTA will be a test when we allow it to happen, but the main benefactor will be Fiji, and Papua New Guinea, the bigger countries.

Room to reduce imports

We seems to have started off 2006 with good weather and a high hopes for a good year, despite the depressed state of the economy. What is your assessment of the situation?

Basically things are not good, and government is spending more than it is earning. Tonga is just like a business entity if it is spending more than it is earning it will get into trouble and that is what is happening. We are not exporting enough and we are not producing enough locally to reduce our imports, we have room to reduce imports particularly food stuffs. I am not so sure about remittances, and how it is going in recent months, but basically that is what is happening and everybody has to tighten up, government, civil servants and the rest of the community.

How long do you think we will remain in this depressed situation?

I always believe that where there is a dark cloud there will always be a silver lining, maybe this is what we had to have so that we can sit down. I have said it before that we have a Civil Service that it is far too large. While in many ways the increase in salary for the bottom half of the civil servants was a good thing, the sheer size of that increase throughout was far too much.

I talked to two banks last month, and the liquidity they have - this is all they have to lend - was something like two to three million dollars, and that is bad. So as a country, as a nation, we have to look at where we can cut our expenditure, we just have to be lean and mean. And, secondly, we have to identify the sector of the economy where we have comparative advantage and that we can develop, and let's focus on those. Thirdly, we should become again one nation, we cannot afford to have another year like last year, where there was confrontation and things were burned. The government, civil service and the public as a whole should know that we are now rock bottom, we can't go any further, we have to rebuild ourselves and move on from there.

The ADB report clearly stated the state of the economy, and even suggested that we revisited the MOU. I think everybody that receives pay from public fund will have to take hit. Are we as a nation prepared to do that?

Following the revelation by the ADB of the negative impact of the salary rise on the economy, civil servants argued that the 60, 70, and 80% was supposed to be only for a certain level of the civil service, excluding the king, and the nobles. Since you were in the government negotiating team what is your understanding of that claim?

That is their argument, but overall there was a need for a salary increase, and there is no doubt about that, but what we have to look at is the whole pay from government fund. I think it will be counterproductive if we concentrate on specifics. What we have to look at is this is our national cake, this much is for services, this much is for salaries, this much is for the future. That is all that we can afford, if it means a reduction in salaries, everybody. I would rather have a reduction in salary than laying people off. Laying people off should be the last thing to do. There are also redundancies, if people want to become redundant, fine, but we have got some hard decisions to make.

Grim situation

Would you describe the situation as a recession?

It is grim. Call it a recession or what, but it is bad. The Minister of Finance was telling us before the strike that the monthly salary for public servants was $1.2 million, after the strike it became $2.5 million, while the revenue remains the same.

Going back to the decision to end the strike, do you think that was the right thing to do, the giving in to the demands by the Civil Servants?

The options of allowing it to continue and facing further burning or ending it. What has now happened is that government has been vindicated. Government said this too much, can't afford it, but they say no. Even if you take away the salary rise for the king and the nobles. Heads of departments are on $40,000 and level two are on $34-35,000. I am on $30,000. Stability and peace was more important, but we are now in a state we know what is the truth, we know where we are. Civil servants were saying that there was money, but some of those who were saying that have gone overseas.

You know at the time political reform and the salary rise were packaged together.

We now have the National Committee.

The salary rise remains to be the main objective, but the political mind came later and pushed for the political reform. One thing that I stood firm on in the last night of the negotiation was their push to drop the charge on students who damaged Tonga College. I pointed out that the matter was with the police, and if they were pushing for justice then we should leave the matter with the police. It was a pity, but justice has to take its course. Government could have held on longer but we said no, let's end it. There were some people who wanted the strike to continue because they wanted to topple government.

With regards to rumours that you could become the next Prime Minister?

My comment on that is that we have a Prime Minister.

With regards to the safe-guarding of retailing for the Tongans, some people are saying that Feleti is only safe guarding that because he is in the retailing business himself?

If that is the case we are the ones that will get hit first because any outsiders who would like to get in will first look at the bigger shops. All this was done before my time, I have to check them again but the work has already been done. Retailing is tough business.