From the House, Minute No. 68, Wednesday 27 October 2004

- Deputy Prime Minister said he led the advance party to prepare for the arrival of the King in Hong Kong and he welcomed the King when he arrived at the airport. He said that the King did not stop at the VIP lounge but went straight to his hotel in a vehicle of the CEO of a Chinese company who invited the King on this private visit to China.

- Discussion over employees of the Reserve Bank who did not burn old Tongan pa'anga notes.

- Concern over the Minister of Finance being one of the governors of the Reserve Bank, and how the Reserve Bank underwrites government bonds.

- Concern over the delay of the implementation of the economic reform program for another year.

- Proposal for the removal of Trading Licence for traders who cheat on Customs Duties.

- Privy Council is authority over the Reserve Bank, and the law allows Reserve Bank to lend money to Government without anyone knowing about it.

- The Tongan political system "paralysed". 'Akilisi called on the Deputy Prime Minister to resign.

Speaker - told the House that there would be a briefing by the Minister of Finance and consultants on the National Retirement Scheme for Public Servants at mid-day at the conference room.

Deputy Prime Minister, Cecil - He said he wanted to correct (what was said in the House) and he heard that His Majesty was not welcomed according to protocol extended to a visiting Head of State in Hong Kong. He said that he led an advance party of three people to ascertain that everything would be in order when the King arrived. He said that the King was welcomed by an official of the Hong Kong authority. He said he was there together with the aide-de-camp, and the person who invited the King. He said that they were standing at the airport and welcomed the King. He said that a vehicle of the CEO was used to transfer the King, and drove straight to the Hotel, but did not rest at the VIP. He said that the Hong Kong authority gave the treatment that they normally extended to a head of state, and there were police and police escort.

He extended his graditude to the Chinese Embassy in Tonga and also to the Tongan company in Hong Kong and their Chinese business affiliation in Hong Kong who invited the King.

The Speaker dissolved the Legislature and the Chairman of the whole House Committee, Prince Tu'ipelehake took his Chair.

Prince Tu'ipelehake - called for the House to proceed with the Annual Report of the National Reserve Bank. He said that there were two reports the 2002-03 and the 2003-04.

'Etuate Lavulavu - raised a point that some squash growers had not been paid the five seniti per kilo that they were entitled to. He said that the issue concerned directly one of the Tongatapu People's Representatives who was a squash exporter.

Dr Feleti Sevele - asked the member not to bring rubbish into the House, because the issue he raised had been paid out and settled as it was agreed to by the squash exporters, government and the Tonga Development Bank.

'Etuate Lavulavu - said that the squash growers were not happy because exporters were supposed to pay them five seniti per kilo but not to be paid to the Bank.

Sunia Fili - a squash grower, said that the growers' loan from the Bank was guaranteed by government, and so the grant from government went straight to the bank to repay for the loan.

'Isileli Pulu - said that there were some problems with the destruction of old currency notes. He wanted to know if the Reserve Bank had settled that problem.

Minister of Finance - said that that problem was sorted out in 2001, and an audited report had been presented and new cameras had been installed, security had been tightened and some workers had been dismissed.

'Akilisi Pohiva - said that it was a serious criminal offence for employees at the Bank not to burn the old currency notes they were supposed to burn, he wanted to know if these people were taken to court.

Minister of Finance - said that these employees were dismissed from their job and their files were handed over to the Police to take further action.

'Isileli Pulu - queried the composition of the Board of Governors of the Reserve Bank, he felt that the five-year term was too long.

Deputy Prime Minister - expressed his disappointment with how the House was debating issues. He said that debates in the House should be at a higher level of understanding, he said that the House was supposed to be debating on the direction of government Policy rather than nit-picking on trivia. He said that they should be talking about things like Fiscal Policy, Monetary Policy, and talking about things that would enable to people to have something on their tables.

Dr Feleti Sevele - expressed his concern over the fact that the Minister of Finance is a member of the Board of Governors of the Reserve Bank. He did not think it was right because one of the major roles of the Reserve Bank was to advise the Minister of Finance on Monetary Policy matters, therefore he should not be on the Board.

He also expressed his concern over government bonds, which were underwritten by the Reserve Bank, he did not think it was right for the Minister of Finance to be one of the governors of the Reserve Bank, and for the Reserve Bank to underwrite government bonds. He said that the Reserve Bank should be independent from government.

Despite these few things that the Member wanted government to correct, with regards to the operation of the Reserve Bank, he thanked government for their guaranteeing of their loan from the Tonga Development Bank last year to ease the burden of loan repayment by squash growers, because of a very low price that was paid by Japanese importers for Tongan squash last year.

On a separate issue the member asked the Minister to clarify the government's Economic Policy, because he was very unhappy with the current Economic Reform Program. He said that the two fundamental legislations that would move the Reform Program forward, a Taxation Bill and a Bill on Custom Duties were supposed to have been through the House this session in preparation for a change over that has been set for April 1 2005. But they had not been through the House, and he was very saddened by it because if they thought it was very important for the country then it should have been passed this year.

He asked if it was possible for a quarterly meeting between the Minister of Finance, Labour and Commerce, the Private Sector and the people, for a concerted effort to try and move the economy forward.

Finally, he expressed his concern with the state of corruption within the Customs Department, and false invoicing, which resulted in government losing millions in revenue. He suggested for an amendment in the law, and an offender should automatically lose his or her Trading Licence.

Prime Minister - with regards to the member's concern about the advice given the Board of Governors of the Reserve Bank to the Minister of Finance, he said that the Minister did not have to take the advice, he emphasised that an advice was just an advice. He said it was just the same with Pension legislation that have been passed by the House, the Princess Regent still had to make the final decision whether to accept the advice of the House or not.

Dr Feleti Sevele - he said that if the Board was to advise the Minister then the Minister should not be in the Board, the board should be independent.

Prime Minister - thanked the member for the advice, and that they would take it into consideration.

Minister of Finance - said that he agreed with the view of some that he should not be a member in the Board of Governors of the Reserve Bank. He said he remained a member of the Board because he wanted two legislations to be passed, one was the new Financial Institution Bill, and another was an amendment to the existing Reserve Bank Act. He said that once was that done he would resign from the Board.

He said that under the existing Act the Reserve Bank can lend money to government and that can be done without any one knowing any thing about it, and there was no transparency there. He said that in other countries it was not allowed for government to borrow from the Reserve Bank, they have to go and borrow from commercial banks.

After Lunch the Speaker raised an issue with regards to the medical bill of the Chairman of the Whole House Committee for his treatment in New Zealand.

Dr Feleti Sevele - supported a motion by the Governor of Ha'apai for the matter to be given to the Law Committee for their deliberation and a recommendation.

Speaker - approved for the matter to be passed on to the Law Committee. He dissolved the Legislature and the Chairman of the Whole House Committee Prince Tu'ipelehake took his chair.

'Akilisi Pohiva - expressed an opinion that government does not have an economic policy. With regards to the Economic Reform program there was no definite program and timetable. He said that the country was just floating in the middle of the ocean, looking for somewhere to go to.

Deputy Prime Minister - reminded the House of his earlier request for the debate of the House to be at the policy level. He said that the member obviously did not read the report where the twin objectives of the work of the Reserve Bank was stated, to conserve Foreign Reserve and to try and bring down inflation.

'Akilisi Pohiva - said that the performance of the government should be measured with the rate of exports and the services of the country. He said remittances should not be included in the calculation.

Deputy Prime Minister - he referred to the time when he was the Minister of Finance, when remittances were very high, and it was directed toward investment and not on consumption. He said that at the time the drive was to electrify the whole of Tonga and to take telephones to every home, not on consumption and imports. He said that remittances were directed toward construction of houses and home appliances.

'Akilisi Pohiva - said that the Minister and government had failed to establish any export production facilities or export products. He said that there was not one export market that government had established.

'Etuate Lavlavu - said that the member had been in the House for 18 years what had he done?

'Akilisi Pohiva - he said that it was for other people to tell him what has he done, and not for him to tell him. He said for the member to ask that question to people whom they have given the authority and the country's financial resources.

He said that he had called a meeting with three Chinese businessmen, and asked for closer working relations. He said he told the Chinese that they were better business people and harder workers than Tongans. He said that it was probably a good idea to bring in foreigners to develop the country because government could get the people to work.

Deputy Prime Minister - that was what we have been begging for, not to let us down. He was astounded that the member surrendered to the Chinese.

'Akilisi Pohiva - asked who was responsible for the providing of technical training and to change the attitude of the people to work and commerce.

Prime Minister - said that the member had thrashed this issued when they debated the budget allocation of the Ministry of Education. It was an attempt to pass dictatorial decisions, telling people exactly what they should do, and disregarding their right to choose. He said that this kind of dictatorial thinking, trying to change the attitude of people from Christian attitude of loving and caring to think only of monetary gain, he disagreed with.

He said that the member expressed a concern about people with no job, no money and no land. He said that all those issues must be taken into consideration, because if the idea was to change the attitude of the people to think about only making money and making profit then the future would not be good for some people. He said that for the future that was what could happen only the people with money, and the know-how would reap the riches of the country.

'Akilisi Pohiva - said that the situation was that we have no option, we have to go where the rest of the world goes. He said that the problem was because of the government policy to bring in these people to kick us out of our land, and that was what the upheaval was about.

Prime Minister - said that we have no option but to follow the rest of the world. He said that the problem was because we have been dragged along by forces, which were beyond our power to counter. He said that what government was trying to do was to try at least to control the rate of change.

'Akilisi Pohiva - he said that the reason why the economy declined was because the people were not participating in the running of the country and the management of the resources of the country.

Prime Minister - reminded the House that the country they hailed as the biggest democratic country in the world, America was run by big businesses, politics was secondary. He said that the USA was moved forward by its fiscal and monetary policies.

'Akilisi Pohiva - said that things could run the way the Prime Minister wanted if the system was democratic as in the USA, but it would not work in Tonga under our current system of government.

Prime Minister - said that he was on the opposite side of the road to the Member who put politics first, but he put finance first because finance can control politics. He reminded the House that the only way to attract good politicians into the House was to increase the salaries of members. He said that approach worked in the USA, New Zealand and Australia. He was sure that if the salary was not good in 1987 then 'Akilisi would not have entered politics.

'Akilisi Pohiva - said that Cabinet Minister lacked the ability, the sharpness and the strength to develop the country, and it was all because of our system of government.

Deputy Prime Minister - said that if the member was referring to academic qualifications, the best people were in the Cabinet's table.

'Akilisi Pohiva - said he did not believe it was possible for any economic recovery because the system has become paralysed and it could not function properly, for any recovery he suggested for the Deputy Prime Minister to resign.

Trevor Guttenbeil - said he wanted to comment on the three top levels of management of the bank. He said that at the top was the Governor, then two Deputy Governors, and the Managers. He said that the posts should be only one deputy governor, and with the managers, there were supposed to be three, there was only one. So he said that the Reserve Bank was run by only three people.

On a different issue he pointed out the importance for government to restore the confidence of the Private Sector on the economy by clarifying the government economic policy and the direction that the economy was heading so that they could redirect their operation.

He also commented on the declining value of the Pa'anga and the high inflation.

Minister of Finance - said it was decided that the bank needed only one Deputy Governor. On the managers level he said that the post for a Research Manager, they were looking for an expert from overseas to come and train the staff, and then appoint some one for the post. The post of Manager for the Corporate Services had been advertised, but very few had applied for the position, and he suspected that maybe the salary was too low.

With regards to the value of the Pa'anga, he said that the exchange rate in relation to the New Zealand and the Australian dollars, it was dictated by the market and there was nothing that the Reserve Bank could do about it. He said that it was unexpected for the New Zealand and the Australian dollars to be so strong, but the bank was trying to monitor trends, but one thing for certain that the value of the pa'anga would continue to fluctuate.

He said that there was a thinking to link the working contract of the Governor of the Reserve Bank to a responsibility to control the rate of inflation, but to do that, then the Reserve Bank Act must be amended. He said that at the moment to question the role of the Governor in bringing down inflation was not fair because he was not given the authority.

He said that the authority over the operation of the Reserve Bank rested with the Privy Council and not with the Governor.