By Pesi Fonua

Tonga is unable to fund the reconstruction of its central business district and while it is out looking for international donors to provide finance, the recovery of businesses and the restoration of Law and Order are in slow-motion.

According to the Minister of Labour, Commerce and Industries Hon. Lisiate 'Akolo, the total amount of "new money" that Tonga needs for a complete reconstruction program is about $400 million pa'anga. This an estimate of the cost of rebuilding the central business district, as well as business recovery costs.

Government has to find $400 million from donors in order to flow financial assistance to banks or implementation agencies so that businesses can have access to commercial refinancing or to other forms of assistance.

It is clear that there are not going to be any handouts for businesses that were destroyed or hurt in the attacks of November 16, or who have been ruined by the rolling economic impact, although government is helping by funding the demolition work and looking at town planning issues.

Few businesses will be able to claim insurance handouts.

The irony of the situation is that while the Chinese community were the hardest hit in the malicious attacks of November 16, it is only the Chinese government that appears to be a possible financier of the kind of capital that Tonga is looking for.

Demolition

Nearly two months after the destruction of the central business district on November 16, the demolition of burnt out buildings both in the restricted and outside of the restricted areas is nearing completion.

Lisiate said that Manukau City town planners are expected to be in Nuku'alofa in the third week of January, "to make a presentation on the town plan. Drainage in the CBD area has always been a problem, but government thinks that this is an opportunity to get it fixed."

He said that the CBD proper has been identified as the area starting from the intersection of Hala Fatafehi and Hala Vuna, followed along Hala Fatafehi southward to Hala Laifone and running westward until it meets Hala Vaha'akolo, north along Hala Vaha'akolo to the sea by the Palace.

Government has agreed in principal that all government leases within the CBD proper will be given 99 years leases. "The detail to be finalised in that lease agreement is whether all government leases in the CBD will be renewed and given 99-years lease, or they will be topped-up from their current lease to make them 99-years leases," said Lisiate.

No direct grants

He said that the financing of the demolition and the clearing of burnt-out buildings had so far has been financed by government at a cost of, "about $600,000."

Other work has not been decided on.

"The financing of the physical reconstruction of the CBD and the recovery of businesses that were affected is still very much in the conceptual stage," he said.

Meanwhile, Lisiate said that some business people appeared to be sitting back and speculating on what they may get from their insurance claims, "and those who have raised loans from banks are not too sure whether to reinvest or to do something else; and some have the false expectation that government will give them direct financial grants. Government will never do such a thing.

"What government would like to do is to set up facilities through which it can help businesses that were affected."

Loans

He explained that the flow of financial assistance would come from donors to banks or implementation agencies and then to four facilities:

1. a facility to assist affected businesses. It was recommended by a mission team from donor agencies, including the World Bank, ADB and from New Zealand and Australia for New Zealand and Australia to come up with AUD$4-6 million to improve the affordability of finance for businesses affected. "This is only a proposal, but there are areas of uncertainties on how it might be distributed";

2. a facility to assist businesses that were not affected but they will be affected because of our poor economic status;

3. a facility to look at softening terms of loans, implement interest subsidy and deferred loans repayment;

4. a facility to offer technical assistance.

Lisiate admitted that quite apart from all these set-ups and facilities the real issue remained the need for a huge injection of new capital, which can only be done by government.

"We are looking at the World Bank, IFC, EU and ADB, but the amount that these institutions can give us is very limited. I think we will have a better chance with China who has already promised last April in Fiji to make available billions for development in the Pacific."

Lisiate was optimistic that the Minister of Finance, Hon. Siosiua 'Utoikamanu would return soon from overseas with a combination of grants and soft loan facilities.

Foreign Reserves

In the meantime the reconstruction of Nuku'alofa CBD will have to wait, and the economic decline will continue.

Right now our foreign reserves facility is four months but they estimate that by the end of the year it will be enough for imports for only two months.