Tongan opposition leader Akilisi Pohiva told a Tongan audience in Auckland on Monday that Tonga been lost to China.
He said the Island kingdom was faced with debts it could never repay and warned that China might demand tough terms – including opening a naval base– if the Tongan government tried to have the debt written off.
Pohiva was in Auckland on his way to Columbia University in the United States where he is to be presented with the Defender of Democracy award for 2013.
“Our hands and feet have already been tied,” he told members of Auckland’s Tongan community in Onehunga.
“We need a government by the people that can work this out with the Chinese government in a way Tongans now and in the future will not suffer catastrophic consequences,” Pohiva told his audience.
He said the Tongan government owed China 119 million Tongan Pa’anga (NZ$72 million). The initial repayment of TOP$13 million (NZ$8.5 million) was due on September 21 this year.
The government has asked China to defer the repayment for 10 years, but the Chinese authorities said the request was still under consideration.
When asked whether the Tonga government could negotiate with China to have the loan written off, the veteran politician said:
“We need an accountable government that could effectively deal with China on that.”
“China can write off the loans, but they may demand strict terms and conditions in return?.”
“China might say well we can write off your loan, but Tonga must agree to have a Chinese naval base.”
Responding to a question about who was going to pay back the loan, Pohiva said business destroyed in the 2006 riots had been able to borrow from the Chinese loan.
Business rebuilt with Chinese money included the Fakava’inga /Taumopeau Building, O G Sanft and sons, the Tungi Argade and City Asset- Molisi Tonga.
The Nuku’alofa Royal Palace and the Vuna wharf were not damaged during the riots, but were rebuilt with fund from the loan.
The Paliamentary Report known as NDC report 2012 states, work on the palace cost TOP23 million (NZ$15 million) and TOP38 million (NZ$25 million) was spent on the wharf.
“As the government acted as a guarantor of the loan, tax payers must pay back that part of the loan,” Pohiva said.
The Defender of Democracy awardee, who maintained that Chinese-Tongans dominate the local markets, expressed his concern at the poor quality of services and construction Chinese companies conducted in Tonga.
In 2011 about 130 km of roads throughout Tongatapu, Vava’u, Ha’apai, and ‘Eua were reconstructed through a T$80 million loan from China.
The road reconstruction main contractor was the China Civil Engineering Construction Corporation.
Pohiva told his audience that most of the roads are now really in bad conditions but Tonga has yet to repay the loan.
Tonga’s debt crisis
Prime Minister Tu’ivakano told Tonga Parliament the re-construction was completed in early 2012 and the loan money had been spent, but none of these businesses had signed a loan agreement with government.
Pohiva said there was nothing in place that could oblige these businesses to pay back the loan.
The opposition leader told the meeting the affected businesses did not plan the re-construction well. Many had multi-storey buildings with many rooms for rent, but there were not many businesses in Tonga to rent them.
“They should have built just enough sized building and make sure they could manage to rent them out to get some money to pay for the loan,” Pohiva said.
He claimed the Tungi Arcade had been rebuilt with a TOP16 million (NZ$10.5 million) loan, but only 40% of the building was occupied.
The NDC Report 2012 has described what it says is the failure to present a transparent, accountable and comprehensive report on the destruction and the reconstruction of the Nuku’alofa CBD as the most controversial issue facing the government.
Pohiva told the meeting the Tongan government depended mostly on international aid.
He said a total of 54 percent of the budget for 2013/14 comes from overseas donor aid.
Both the World Bank and the Asian Development Bank have for years described Tonga as experiencing a debt crisis.
In 2011 the ADB said Tonga could not afford to borrow any more money.
The ADB has predicted low economic growth in Tonga next year and said even this will be outstripped by inflation. Nearly a quarter of Tonga’s population live below the poverty line.
China in the Pacific
China has been increasingly active in the Pacific in the past 20 years.
As western attention has been focussed on the war in Iraq and Afghanistan. China has moved into the Pacific and Africa, building roads, taking over businesses and making loans.
China has also been competing with Taiwan for recognition by Pacific island states and both countries have tried to woo island nations with offers of aid and easy loans.
According to a report last month by the Sydney-based Lowy Institute of International Policy, China has released details of a new aid package for Island countries that could be worth more than US$2 billion.
The report quoted Vice Premier of State Wang Yang as telling Pacific Island leaders and ministers meeting in Guangzhou that China was a reliable and sincere friend.
The Vice Premier described co-operation with Pacific island nations as part of China’s long term diplomatic strategy.
“The package is actually made up of two loan facilities for use in infrastructure development, of up to US$1 billion each,’ The Lowy Institute report said.
“One is concessional (which is counted as ‘foreign aid’) and the other is a more commercial loan facility administered through the Chinese Development Bank (CDB). This is the first time a large CDB facility has been included in a regional cooperation package for the Pacific Islands region.”
Reaction to China’s expansion into the Pacific has been mixed.
Some Pacific governments have looked favourably on Chinese aid.
Fiji has signed several agreements with China for projects that range from road building to dredging. In Samoa, the government has praised China’s involvement.
Not everybody is impressed, however.
Samoan opposition leader Va’aelua Eti Alesana told Australian Network News earlier this year that the benefits of Chinese projects in the Pacific were minimal and that all the money went back to China.
The riots which swept the Tongan capital of Nuku’alofa in 2006 had a strong anti-Chinese element driven by resentment at the apparent wealth of some businesses.
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