The Minister of Finance said that 2007 is a very difficult year because on November 16 about 20% of Tonga's GDP was destroyed in one day and it was difficult to establish the real state of the economy because they have not been able to value all that was lost during 16/11. PR Samiu Vaipulu expressed his concern that it would take many generations to repay government loans.

From the House, an English translation summary from the Tongan vernacular, by Pesi Fonua. Tonga Legislative Assembly, Minute No. 9, June 25, 2007 (evening session).

- The Minister of Finance answered questions by 'Isileli Pulu with regards to Gross Domestic Product.

- the Minister for Public Enterprises was trying to put together a financial report of Sea Star so that they could sell their assets to pay their debts.

- The Minister of Finance said the $1.9 million to pay Shoreline's debts was in addition to a 11 seniti per unit subsidy on the price of electricity to consumers, which government further extended after November 16.

- The Minister said that Shoreline executives said that all company reports were destroyed in the fire of 16/11.

- Regarding the $7.9 million loan of the Squash Council from the Tonga Development Bank that was guaranteed by government, he said that if the loan is not repaid government may have to take the Council to court.

Monday June 25, 2007, (evening session):

FOLLOWING the Roll Call, the Legislature dissolved into Committee and the Chairman, Noble Tu'ilakepa took his Chair.

The Minister of Finance wanted to answer some of the questions presented by 'Isileli Pulu with regards to Gross Domestic Product. He pointed out that Tonga's GDP for 05/06 was $473 million, but their estimated GDP for 07/08 was $500 million. He said that the other important figure to watch was the ratio of government loan to its GDP. In Samoa their ratio is 100%, but the ratio is not very important what is most important is what the loan money is used for.

With regards to concern over Sea Star, he said the Minister for Public Enterprises was trying to put together a thorough financial report of the company so that they could sell their assets to pay their debts.

'Akilisi said that the Minister had been telling the House the same thing for the past three years.

Shoreline debt

The Minister said he would go on to the other concern of 'Isileli Pulu, which was the $1.9 million advance to Shoreline after 16/11. He said that the decision was legal under the Public Finance Act, and the money was not paid to Shoreline, but straight to British Petroleum. He said the $1.9 million was in addition to a 11 seniti per unit subsidy on the price of electricity to consumers, which government further extended after November 16.

'Akilisi wanted to know if there was an audited report from Shoreline where government based their decision.

The Minister said that company reports were destroyed in the fire of 16/11. He said that company executives had been queried if there was a back-up report, and the reply was no, all were destroyed.

Samiu Vaipulu said that if the Minister could easily advance $1.9 million, he could easily exempt the growers and the fishermen from paying tax.

'Isileli Pulu expressed his concern over government advancing a huge amount of money, which had not been repaid. He reported that there was $27 million from the National Trust Fund which had not been repaid, in addition was the loan to the Squash Council guaranteed by government which also had not been repaid.

The Minister of Works told the member that from the government perspective the best thing to do following 16/11 was to advance the $1.9 million in order to keep the power running.

'Akilisi reminded the Minister that there was also a $27 million advance that had not repaid.

The Minister asked the member to stay with the relevant issue they were discussing.

The Chairman told 'Akilisi to sit down.

The Minister for Public Enterprises told the House that the two advances that had been raised, from the Treasury and from the National Trust Fund were for different purposes and were governed by different legislations.

'Isileli Pulu returned to the Sea Star and pointed out that the Sea Star's unpaid loan had been on hold for 15 years next year.

The Minister for Public Enterprises told the member that the Minister of Finance is working hard to solve the problem, but it is difficult to secure the relevant information.

Janfull International Dateline Hotel

'Isileli Pulu queried the loan by Janfull International Dateline Hotel of $9.7 million in 2001, then another $2 million loan last year. He said that the total loan now was $11.7 million.

The Minister of Finance said that the $9.7 million loan in 2001 was by the government from the Export Import Bank of China, then they relent it to Janfull International. Janfull had been paying the interest on the loan up to September last year. They have financial problem because they were reconstructing of the hotel. "We requested to reschedule the repayment of the loan to China and it was granted so the repayment of principal and interest by Janfull will restart next year."

State of the economy

Sunia Filli made a general comment of the rise and fall of GDP since 05/06, but he asked the Minister of Finance to clarify the current state of the Tongan economy.

The Minister of Finance said that 2007 is a very difficult year because of the events of 16/11. The value of properties destroyed, including stock and profit has been estimated at $120 million, and if that was the case then about 20% of Tonga's GDP was destroyed in one day. He said that it was difficult to establish the real state of the economy since they have not been able to value all that was lost during 16/11. He requested for more time.

Sunia supported the suggestion by 'Akilisi for a Progressive Taxing System to be applied to Private Business, but not the flat 25% rate that was proposed.

Samiu Vaipulu, wanted to know what was preferable: more tax from companies or to allow them to create more employment opportunities.

Sunia said that there are five pillars of the economy and one of them was the Fair Distribution of Wealth, and a Progressive Taxing System is a way of ascertaining that there is a Fair Distribution of Wealth.

Clive Edwards on a separate issue wanted to know if the three or four advisers of the Prime Minister are paid from the vote of the Treasury.

The Minister of Finance said that there are three advisers for the PM, and the salary of one is paid by the Commonwealth Secretariat, which is Aid in Kind.

Government loans

'Uliti Uata said that the Minister has allocated $18.9 million annually for loan repayment, and at the moment the total government loan stood at over $200 million and $12.7 million has been allocated for the repayment of loans. He suggested that if we stop borrowing an instead use the $18 millions that we annually spend on loan repayment for our development program we would be better off. On a separate issue he asked the minister how the $1.9 million that was advanced to Shoreline was going to be paid back.

Minister of Finance said that initially he wanted the Advance to be Repayable on Demand, and that was why he did not establish an interest rate. But he said it did not turn out like that and at the moment they were still negotiating to confirm terms and conditions for the Advance.

'Uliti expressed his disappointment with the working practice of advancing tax-payers money without confirming how it was going to be repaid.

Squash Council

On the $7.9 million loan of the Squash Council from the Tonga Development Bank that was guaranteed by government, is government going to repay the loan?

The Minister said that if the loan is not repaid government may have no other alternative but to take the Council to court.

The Minister for Public Enterprises, a former General Manager of the Tonga Development Bank said that the first loan by the Council was in 2003, and there was an agreement for the growers to pay a levy. In 2004/05 the levy was paid, but it was not paid last year. He said that last year the loan was also extended.

'Isileli Pulu wanted to know who authorised the shipment of squash to leave port without the payment of the Levy.

The Minister for Public Enterprises said that the Tonga Development Bank had informed government that the Squash Council has breached their contract.

'Akilisi said he has known of four government contracts that have been breached, including one by Tongasat. He wanted to know what the Attorney General was doing about it.

Samiu Vaipulu expressed his concern that it would take many generations to repay government loans.