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NUKUALOFA, Tonga (Matangi Tonga, Jan. 23) – Representatives of two aid donor agencies, AusAID and NZAID, announced in Nuku'alofa that Australia and New Zealand have allocated about 8 million pa'anga [US$4 million] to subsidise interest rates on loans for businesses that were affected by the November 16 destruction in Nuku'alofa.

Peter Vandiermen from AusAID said that the subsidies will be for two years, and they are proposing an 8 percent subsidy for the first year then 4 percent for the second year, "but it could be 6 percent for the first year, then 6 percent again for the second year."

The purpose of the meeting this morning, according to Peter was to hear the view of the Nuku'alofa business community on such a proposal.

The US$4 million for loan interest subsidy was far short of the need by some business that will have to borrow about US$5 million to US$6 million to rebuild, but the delegations stressed that they wanted their tax payers' aid money to be spread out evenly on all the 150 or so business who were affected by the riots.

[PIR editor’s note: Business losses in the Nov. 16, 2006 riot have been estimated at about 200 million pa’anga (US$98 million).]

The project will be managed by commercial banks and their lending policy will be applied.

Dominic Walden-France from NZAID told the gathering that the intention of the assistance was to, "help with the cash-flow and to get businesses back in operation."

The issues of whether the loan interest subsidy would be applied to old loans, and also the problems faced by some businesses now because of their lack of collateral in order to raise a loan, were a concern to the gathering.

Peter responded that it would be acceptable for old loans to be included, and that a business that wanted to borrow but had no collateral, "they may be able to offer 50 percent of the security", but such a move would of course reduce the amount of money available for loan interest subsidy."

On the question of the maximum amount of a new loan that would qualify for a loan interest subsidy, Peter was reluctant to give a figure, but he said that for the 8 million pa'anga to be distributed evenly amoung the 150 affected businesses then we are looking at about $300,000.

Peter said they wanted to submit their final proposal to government before the end of the week and therefore he and his team would like to have further individual discussions with the business owners.

The aid agencies team included: Dr Kylie Coulson (AusAID) Policy adviser, Dan Coup (NZAID) Revenue Specialist, Dominic Walden-France (NZAID) Representative, Peter Vandiermen (AusAID) Representative, Sharon Menzies (AusAID) Banking Specialist.

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