News Release

Tonga Now Government of Tonga Nukualofa, Tonga August 16, 2007

Australia and Tonga today signed a Performance Partnership to assist the Government of Tonga in implementing its program of essential economic and public sector reforms.

The Australian High Commissioner to Tonga, His Excellency Bruce Hunt represented the government of Australia and the Hon. Prime Minister Fred Sevele on behalf of the people and the government of Tonga signed the Performance Partnership.

The partnership is the first in a series of new Performance Incentives arrangements announced in the 2007-08 overseas aid budget.

"In my Sir Arthur Tange Lecture on August 8, I outlined the various ways in which Australia currently supports leaders in the Pacific who are committed to real reform. I explained that Australia will provide additional aid funding to countries that meet agreed performance criteria. The Tonga Australia Performance Partnership is an example of this new approach", Minister for Foreign Affairs Alexander Downer stated in a press release from the Australian High Commission Office in Nuku’alofa.

In 2007-08, the Australian Government will provide up to AU$1.57 million [US$1.3 million] of additional aid to the Kingdom of Tonga as it meets agreed milestones fro economic policy and governance reform.

In its first of operation, the Partnership will focus on improvements in budget processes and tax administration, including implementing a new compliance regime to support recent tax reforms.

Downer’s Press Release also stated that these changes will help to ensure Tonga’s budgetary stability and to direct government expenditure towards national development priorities, including health, education, infrastructure and private sector development.

While addressing the media after the signing ceremony at the Prime Minister's Office, the Australian High Commissioner in Nuku’alofa His Excellency Bruce Hunt said Australia and the Kingdom of Tonga share commitment to implement the Strategic Development Plan Eight 2006-07 to 2008-09 (SDP8) and achieve the development outcomes set out in it.

"A Performance Partnership will be built into our Development Cooperation Program to facilitate assessment of progress towards those actions and outcomes and have a structured dialogue around development issues and performance. The Partnership will provide for additional assistance, made available in part or in full based on periodic joint assessment of performance. The partners intend the arrangement to continue for as long as there is mutual commitment to improved performance in areas of development significance to Tonga", said Hunt.

Hunt also reiterated that the document signed, sets out understandings reached between the governments on the elements of a Performance Partnership supporting economic growth and poverty reduction in Tonga, from the financial year commencing July, 2007.

"An Annex is attached to the document signed which provides, for the first year of operation, further background on the development context as well as information about agreed performance milestones, critical dates and possible use of additional Australian assistance. These items will be agreed between the governments each year or more frequently as required, and the Annex updated accordingly", stated Hunt ( picture left).

Background given by the Australian High Commissioner

Domestic security and political and constitutional reform are high priorities in Tonga at the present time. However, there is a need for parallel effort on economic reform, as better prospects for economic and employment growth and poverty reduction will themselves contribute to enhanced security and a successful political transition.

The government of Tonga (the Government) has reiterated its commitment to SDP8 actions delivering sustainable private sector led growth. Alongside the Asian Development Bank (ADB), New Zealand and the Pacific Financial Technical Assistance Centre, Australia is assisting in the implementation of Tonga’s Economic and Public Sector Reform Program (EPSRP). An ADB-led SDP8 design mission is scheduled to commence in September 2007, which will devise a future roadmap for economic and public sector reforms, including of public expenditure and revenue management, public enterprises and the civil service.

Talking on Partnership objectives

The Performance Partnership aims to promote faster, better and more sustainable implementation of SDP8 reforms and achievement of other performance improvements. Further detail and background is given in the Annex.

As well as improving, Tonga’s development prospects, the SDP8 reforms also promise enhanced aid effectiveness, as aid works better when policy and institutional conditions are fundamentally sound. Improved performance information will also be useful in guiding the direction and mix of development activities.

Over time, the arrangement will grow to embrace a broader suite of priorities set out in SDP8 or a successor national development plan.

Annual Operation

The two governments will jointly develop details for implementation each year. Prior to the beginning of the cycle, partners will agree on the areas of improved performance to be achieved under the Partnership. ‘Performance’ may encompass Government policy settings, reforms, service delivery standards or development outcomes.

Discussions can then move on to settling detail including:

- how to measure targeted areas of performance

- appropriate ‘milestone’ levels of performance to aim for, and a timeframe for reaching them;

- critical steps towards, and risk treatment of, achievement of milestones;

- how Australia and other donors can support action by the Government towards achieving performance milestones; and

- arrangements for monitoring, reporting and review.

Milestones and timeframes will be set so as to be achievable, within the Government’s control and straightforward to measure and verify.

At this initial stage or subsequently, the partners may discuss and agree on the timing and use of the additional assistance, and on performance to be targeted in later years.

Monitoring and review

Key to success will be building and maintaining a comprehensive and trustful performance dialogue between partners that covers both the Government’s performance and Australia’s effectiveness as a donor in support of SDP8.

The office of the Prime Minister will be the lead Tongan agency and will be supported by the Ministry of Finance and Economic Planning, the Public Service Commission, and other Government agencies as necessary.

Initially, performance information generated by the Government will be considered at specially convened bilateral meetings – the timing of these meetings is provided in the Annex. In later operations, performance discussions may take place during quarterly meetings convened in support of EPSRP.

The involvement of other development partners in the performance dialogue or other aspects of the arrangement is encouraged.

Additional Australian assistance

The additional assistance will be provided as soon as practicable following mutual agreement of milestones having been met, or at a later time nominated by the Government.

Where an agreed assessment of performance cannot be reached, Australia will have the discretion to vary the amount and timing of the additional assistance.

The additional assistance will go towards meeting SDP8 spending priorities agreed with Australia. Options for the use of funding in the first year are outlined in the Annex. Both the quantum and intended use of the additional assistance will be agreed between the governments before it is provided.

The normal expectations of Australian assistance would apply, including accountability for the funds, demonstrable impact and additionally to Tonga’s own expenditure on development priorities. To ensure that any expenditure meets Tonga’s own procedures for setting budget priorities, it would be entered into the Government’s budget.

Medium term sequencing

In 2007-08, there will be an initial focus on a small number of indicators of performance. Further detail on these indicators, the additional assistance on offer and critical dates is provided in the Annex.

In later years, performance against other priorities in economic governance, including public enterprise reform, may be included, as could the use of the additional assistance provided in previous operations of the Partnership. The value of the additional Australian assistance may exceed or fall below 10% of Australia’s aid allocation to Tonga, depending on the development value and difficulty of the performance being targeted.

Operation and Amendment

The partnership will come into operation upon signature and may be terminated by either government on giving 6-months notice. The partnership may be amended at anytime with the mutual written consent of both governments.

The foregoing partnership agreement represents the understandings reached between the Kingdom of Tonga and the Australian Government upon the matters referred to therein.

Tonga Now, formerly operated by the Government of Tonga’s Reform Information Office, is currently operated by Kalia Media Serivces, which provides media responses and information about Tonga from the Government.

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