From the House, Minute No. 69, Thursday 28 October 2004

- Annual Report of the Reserve Bank passed

- Concern over high interest rate charged by commercial banks.

- Praise of the Crown Prince for his decision to get into business and to experience the difficulties of trying to run a business in Tonga.

- Deputy Prime Minister said that during 2003 Tonga's total imports was $200 million compared to our exports of $35 million, which left a deficit of $165 million.

- Minister of Finance said that the Reserve Bank had two working objectives, and at the moment these two objectives were in conflict with each other.

- Questions asked over what the Minister of Finance spent the Contingency Fund of $7.2 million in 2003-04 and more in 2004-05.

Speaker - dissolved the legislature, and the Chairman of the Whole House Committee Prince Tu'ipelehake took his chair, and debate continued with the Annual Report of the Reserve Bank.

'Uliti Uata - moved for the Reserve Bank to have a radio programme and a television programme and explain to the people the consequences if they borrow now from the banks. People borrow but a few months later the interest would go up, and the bank should explain the difficulties they would face. He said that a lot of people were facing financial difficulties because of loans. He gave an example of a couple who borrowed to build a house. They repaid their loan up to a stage where they have only $30,000 left to be repaid, then the interest rate went up to 13%, and their monthly repayment was $300. He said that at the end of every year only $600 went toward repaying their loan principal. He said that in a situation like that these people would be repaying the bank for the rest of their lives. He emphasised the importance for the Reserve Bank to set good Monetary Policies.

On a different issue he praised the decision by the Crown Prince to leave government and got involved in private business, and taste the difficulties that the ordinary people faced daily in their dealing with government and the banks. He likened the Crown Prince's involvement in private businesses for him going into the battle field. He said that his experience would be very useful for him when he returned to government to make good policy decisions.

'Akilisi Pohiva - pointed out to the Member, with regards to the Crown Prince going into the battle field, the danger there was because the weapon that he was using was too destructive and it wounded innocent bystanders.

Deputy Prime Minister - pointed out the benefit of the Crown Prince's decision to get into business that the rate for international telephone calls was cheaper than it was in Australia and New Zealand.

'Uliti Uata - went on to praise the decision by government to introduce the one operator policy for the domestic air services. He said that even the sole operator was using an aircraft that had been criticised for being very old, but the point was that a decisive policy was in place and a better aircraft could be introduced later. He hoped that government would continue to make firm and decisive policy decisions like that despite the criticism that it had faced.

Fineasi Funaki - expressed his concern with the one operator policy for the domestic service, because there was no competition the sole operator had a free hand on how much and when to raise the airfares.

Prime Minister - corrected the member that Peau Vava'u had a free hand on the airfares. He said that the Ministry of Civil Aviation has guidelines for Peau Vava'u to follow if they want to increase the price. With regards to the cheap telephone rate that was offered by Tonfon he said that it was possible only with the new technology, voice over internet protocol. He said that the combination of two or three factors made it possible for Tonfon to come up with a cheaper rate, the technology, investment and the competition. He said that the member lied in the number of things that he has just said.

'Uliti Uata - he said that in businesses where there was no competition, only one company monopolised, then government should establish a Price Control Policy. He said that the price of electricity was another example, and that any price hike should be approved first by the Tonga Electric Power Board, but unfortunately the TEPB was paralysed and he did not know the kind of working relation that TEPB has with Shoreline.

Prime Minister - reminded the member that the price of oil has gone up and it has reached US$56 a barrel. He wondered if there was a price control over the fares for ferries. (The member owned a number of ferries, which run between the islands).

'Uliti Uata - said that ferry's fares were set by competition by ferry operators.

He expressed his concern over how the price of electricity was set. He wanted a number of questions to be answered by the Prime Minister and the Chairman of the Tonga Electric Power Board.

1 ...– Where was the annual report of the TEPB?

2 ...– Does the TEPB still exist?

3 ...– Who are members of the TEPB?

4 ...– Who elected these memberes?

Fineasi Funaki - wanted to know if government could control imports and restrict the importation of certain products, which may be not so valuable to Tonga but it was using up our valuable Foreign Reserve.

Deputy Prime Minister - said that during 2003 Tonga's total import was $200 million compared to our exports of $35 million, which left a deficit of $165 million. He said that what we had to do was to increase exports and we had to wake up the Productive Sector and to build new industries.

Minister of Finance - said that the Reserve Bank had two working objectives, and at the moment these two objectives were in conflict with each other. He said that an instrument that the Reserve Bank used to maintain a high level of Foreign Reserve would on the other hand increase inflation. He said that the Exchange Rate was the instrument that the Reserve Bank used to maintain a high level of Foreign Reserve. He said that the difficulty that the Reserve Bank faced was because it was not independent from government, as was the case in Australia and New Zealand. He said that they were looking at amending the act to give the Reserve Bank more authority so that it could carry out its responsibility.

He said that the options were either to run the Foreign Reserve down and for the country to go bankrupt or to allow inflation to float at a certain level while we tried to introduce some structural adjustment in order to bring it down.

He said that he planned to eliminate Port and Service Tax in April next year, which would automatically reduce inflation by 5%, at the same time he said he must make sure that there was no deficit.

Dr Feleti Sevele - expressed his concern over the issue of transferring money overseas, which he thought government should look at carefully. He favoured a system was used in Fiji, where before a transfer is made, a payment for import, the importer must present to the bank the invoice and the shipping documents which have already been stamped by the Customs Department. He said that some importers were getting away presenting a false invoice to the Customs Department, where they pay little duty then they transferred overseas the real amount that was stated in their invoice.

With regards to foreign earnings, he said that government should invest more in the training of a skilled work force to meet the demand overseas then these Tongans would send back millions in remittances.

After lunch it was Question Time.

'Isileli Pulu - he wanted to know on what the Minister of Finance spent the Contingency Fund of $5.4 million in 2003-04 and $5.4 million in 2004-05.

Minister of Finance - said that the total amount that was spent under the Contingency Fund last year 2003-04 was increased by $1.6 million to $7.2 million. He then gave the name of ministries and their allocations in round figures ...–

1. Civil Aviation $100,000

2. Tonga Defence Services $194,500

3. Environment $30,000

4. Fisheries $10,000

5. Foreign Affairs $608,000

6. Health $450,000

7. Justice $188,000

8. Finance $3,000,000

9. Ministry of Works $25,000

10. Palace Office $89,000

11. Prime Minister's Office $299,000

12. Ministry of Police $230,000

13. Post Office $400,000

14. Printing Department $408,000

15. Prison $170,000

Total $7,209,613.

He said that with the current year the amount that has been allocated included ...–

1. Prime Minister's office $150,000

2. Ministry of Work $380,000

3. Ministry of Land $70,000

4. Ministry of Education $110,000

5. Governor of Ha'apai $50,000

Total $819,000

'Isileli Pulu - said that these allocations were additional allocations that were approved by the House for each ministry and he wanted to know if this practice will continue without the House knowing anything about it.

Minister of Finance - said that during the preparation of the annual budget they tried their best to provide for all the essential needs of each ministry but, under the law, extra funds could be provided if a ministry needed funds in order to remain in operation.

'Isileli Pulu - he said that two prisoners ran away from the security prison at Hu'atolitoli on October 23 because they were unhappy with the way they were kept at the Protective Wing of the prison. He wanted to know

1. what was the name and the purpose for this cell?

2. who has the authority to put a prisoner in this cell?

3. What was the maximum time a prisoner may be kept in this cell?

4. Were you aware that some of the warders were working in collaboration with prisoners to commit crimes?

Minister of Police - said that the cell was called a Security Prison, and it was to protect a prisoner from the rest of the prisoners. He said that the decision to put a prisoner in the Security Prison was for the Superidendant and a committee of four other jailers. The duration a prisoner was to be kept in the Security Prison depended on the offence committed. He said he was told that in earlier times some prisoners were kept there for six or seven years.

'Isileli Pulu - he said that on October 20 truck loads of coral with about 26,000 pieces were taken to a home at Patangata. He said that the coral was taken illegally from a restricted conservation area. He that the people involved in this illegal action were the Deputy Secretary for Fisheries, a noble's representative to the House, a foreigner and a fisherman from Patangata. He said that the coral was for export on Monday October 25, and that the Minister of Fisheries was informed.

He wanted to know if the Minister did any thing about it.

Minister of Fisheries - he said that Acting Secretary for Fisheries had written to the Pantangata fisherman and told him to stop what he was doing and for him to reply in writing. The fisherman personally delivered his letter to the office and the Compliance Committee of the Ministry was studying his letter and would make a decision on what to do next week.

He said that the Coral has been transferred to the fisheries compound at Sopu to be destroyed. He said that the allegation the deputy secretary of fisheries was involved was denied.

Noble Nuku - said that he was the Noble's Representative concerned, but he said that questions which were brought into the House should be complete and accurate. He said his involvement was because some people sought his advice on how to export the coral overseas. He said that the member used his parliamentary privilege to raise a question, which would damage other people's reputation, and he thought that such a question should have been properly checked before it was raised in the House.

'Isileli Pulu - said that he received a letter from prison, written on the hard-core of a toilet paper. The letter was addressed to the Editor of the Taimi 'o Tonga. He said it appeared that prisoners were not happy with how they were treated in the Security Prison but there was no one for them to complain to.

He wanted to know ...–

1. How would a prisoner lodge a complaint if he or she was not happy with how she or he was treated?

2. Can you inform the Chief Superintendent, the warders and the prisoners so that they know how to lodge a complaint.

Speaker - said that the member would find the answer to his question on Gazette No. 10 of 2001, Clause 12 and Sub-clause 1, 2, and 3.

'Akilisi Pohiva - questions ...–

1. Is it true that the Shore Line Company has to apply for an additional exemption of $7 million in addition to the $20 million that has been granted to them under a Development Licence exemption?

2. If it is true what is the $7 million exemption for?

3. Please detail the products imported by Shoreline under the $20 million exemption up to last month?

4. How much is left over from their $20 million exemption?

5. Does the Ministry keep a close check on how the $20 million exemption has been utilised to make sure that the products imported were what the Development Licence was intended for?

Deputy Prime Minister - replied to the member's questions ...–

1. He said that the exemption granted under the original Development Licence amounted to $25 million and not $20 million, and the additional exemption that has been requested by Shoreline was $501,000 and not $7 million.

2. The additional exemption requested was to improve their power supply and for part to go on a small boat that carries around their employees.

3. The details of products that were imported were with the Custom Department.

4. The answer to (4 ) can also be had from the Customs.

5. He said that there was an annual survey of what the products that were allowed in under exemption were used for.

'Akilisi Pohiva - disputed the figures that were given by the Minister he said that the amount was $20 million and not $25 million and the additional exemption requested was $7 million and not $501,000. He said that he has the document and would present them to the House later. He expressed his disappointment with the Deputy Prime Minister and how he would not trust him.

Deputy Prime Minister - said that he was giving an official answer which he received from the Head of Department.

'Akilisi Pohiva - said he would bring the document to the House.

With regards to the small boat, he wanted to know which boat was it.

Deputy Prime Minister - said that it was the little boat that has wings.

'Akilisi Pohiva - said that Custom was trying to reclaim duty on a boat that was import under Shoreline. He said that the Deputy Prime Minister should bring correct information to the House because if matters end up in court what he incorrect information he had just given was recorded in the minute.

Speaker - dissolved legislature into the whole House Committee and the Acting Chairman of the House Noble Tu'I'afitu took his chair. The proceeding continue with the Annual Report of the Reserve Bank.

Dr Feleti Sevele - expressed an opinion that if government could pay more attention into technical training so that people could get good paid jobs when they went overseas, with better paid jobs he said that overseas Tongans would then be able to send back more remittances. He said that technical skills were needed locally and overseas.

Noble Nuku - expressed his concern over foreign owned company, 100% owned by foreigners which for example operate fishing in Tonga. He did not believe that government could control the flow of foreign currency earning that such company transferred or kept overseas.

Chairman - called for votes and the Annual Report of the Reserve Bank was carried 20-0.