By Pesi Fonua

Tonga's Prime Minister Hon. Dr Feleti Sevele says he is a positive thinker and he believes there is growth in the Tongan economy and that it can bounce back from its poor state.

"I am an optimist," he said in an interview on January 18. "If you look at how well the two major commercial banks have been doing during the last financial year, it shows that something is happening in the economy," referring the Westpac Bank of Tonga's record net profit of $7 million during the last financial year, "and Westpac is targeting an increase in net profit of 15% during the current financial year."

"Those who are willing to work make money and get on with their lives.

"We still have acres of uncultivated land out there, and we can export tropical fruits to New Zealand. There is also a new market for maize," he said, adding that government will be embarking on a coconut-replanting scheme.

At the same time he expects the Customs Department to collect $20 million more in revenues in the current financial year compared to last year.

Reforms

The Economic and Political Reform programs that were introduced by government in 2002 and 2004 are still on going he confirmed.

"They are both running, and just today we passed all the new regulations for the new Income Tax Act, new Customs Duty Rates and Regulations, Excise Duty rates and regulations, and they are all gazetted today. These are the major components of the Economic Reform," he said.

"The tax free income for the lower income people used to be $2,500. Now the minimum is $7,400 a year. So a lot of people will not have to pay any tax.

"The higher incomes will pay more, those above $30,000 per annum will pay 20% whereas it is currently 10%. So it is a more graduated fairer tax system," he said.

"On duties, we now have excise duty paid on the cc capacity of a vehicle. Before we had 45% duty on overseas invoice, now it is based on the litre capacity of a vehicle. In that way people will pay less and it will also encourage people to buy newer vehicles."

"It is the way to go, less cheating, better compliance, and people will be paying the right duty."

Foreign aid dependent

Despite the optimism of the Prime Minister, the poor state of the economy that caused government to introduce the Economic and Public Sector Reform Program in 2002 still remains visible today.

Over 50% of government revenue goes on salaries, leaving very little amount left for government to improve public utilities and the public service. Meanwhile the economy is getting more dependent on foreign aid and remittances, and inflation is high because of a drop in the value of the pa'anga against the currencies of its major trading partners, New Zealand, Australia, the USA and Japan.

Nuku'alofa reconstruction

With regards to the reconstruction of Nuku'alofa the Prime Minister explained that there are currently two sources of funding available, specifically for the reconstruction of buildings that were destroyed during the 16/11 riots.

One is the $118 million pa'anga soft loan from China and the other is a grant from Australia and New Zealand.

With the Chinese loan the money remains in China. For a Tongan borrower to access this money offered at a 5% interest rate he has to work through with the Ministry of Finance, and then to negotiate with the Chinese main contractor. Once a loan is approved, the borrower then will work with the main contractor on the architectural design of the building, before construction starts.

A spokesperson from the Chinese embassy said that a design for the whole of the Nuku'alofa Central Business district had been completed. Meanwhile, Sione Taumoepeau, the Director of the Ministry of Tonga who liaises between Tongan borrowers and the Chinese contractor said last month that construction will start in March.

Grant

With regards to the grant from New Zealand and Australia for the reconstruction of Nuku'alofa, the Prime Minister said that loans are being processed through commercial banks while the capital fund is deposited with the National Reserve Bank.

The Prime Minister believes that there is ample capital funding available now for the reconstruction of Nuku'alofa, but he did not think that the reconstruction work will be completed before the coronation in August.

"But we will tidy up the capital and the town and villages for the coronation," he said.

Political reform

With regards to aim of political reform by 2010, Dr Sevele said that government proposed and it was approved by parliament, "for the nobles to elect nine representatives, and the people 17 representatives. These 26 elected members will elect a Prime Minister, and then the Prime Minister picks his Cabinet to be formally appointed by the king. The king may also pick four Cabinet Ministers either from the elected members or from outside. The four Cabinet Ministers will include the two governors. I think it is fair for the King to appoint his representatives in the outer islands."

Dr Sevele also said that part of this political reform is the introducing of Constituency Voting, "so that a member of parliament know the needs and represent the interest of his constituency." Dr Sevele believes it is a positive move "and it will help ministers with their decision making, if they are closely associate with their constituencies."

Concern over one-party system

But is it politically healthy to have a new parliament where the great majority of seats are held by Cabinet Ministers and government, even if they were elected?

The Prime Minister said that it is common for government to have the majority in the House, and that 26 members were elected by the people and nobles.

He said that the reform of 2010 will not introduce party-politics but he was thankful that political parties had been established.

He did not deal with the concern that we are going to end up with a one-party system of government, because the non-government elected members will feel powerless, and it will be no longer a Fale Alea, a house of debate, but merely a house of compliance.

During the next two years the Tonga Constitution will be amended along with other legislation to comply with a new parliamentary composition that will be introduced in 2010.

"We still need to get His Majesty involved in the decision making. And we still need our nobles," the Prime Minister said.

Dr Sevele will remain as Prime Minister until 2010. "I was asked to come in and do a job, and I would like to finish it before I move on and do something else," he said.