FRAUD, INCOMPETENCE STYMIE TONGA STATE

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ENTERPRISES
Cabinet minister calls situation ‘unbelievable’

By Tevita Motulalo NUKU‘ALOFA, Tonga (Taimi Media Network, March. 9, 2011) – In Tonga, severe losses and asset depreciation because of fraud and mismanagement is "unbelievable" in government’s 13 State-Owned Enterprises, according to Minister for Public Enterprises and Revenue Hon. Clive Edwards.

Hon. Edwards identified Waste Authority Ltd and Tonga Timber Ltd as landing the two highest operational losses of more than a million pa’anga for the previous fiscal year.

He said 8 of the 13 businesses operated at a loss.

"The full extent of losses cannot be properly determined through lack of proper records. There is high suspicion of fraudulent mismanagement and possible collusion amongst the staff," the Minister stated.

He also said that Directors of Tonga Timber are not involved in the mismanagement allegations.

"The Directors may have been misled by the reports put before them," he said.

He also touched on the issue of the national hotel, Janful International Dateline, which the Tongan government owns 49 percent of the shares: "As a minority shareholder we are not responsible for its management and operation and it is of considerable concern how that enterprise is managed in Tonga. Appropriate action is being taken to rectify the problem it is facing with the hotel."

Edwards compiled a compliance list of government businesses, recording business plans, half-yearly plans, annual reports, and audited reports.

"Out of the 13 Public Enterprises that we have, 7 have a nil complying record. The others comply but not fully," he said.

Meanwhile, total government investment in its commercial entities amounted to more than 272 million- paꞌanga [US$147.4 million] in 2010, compared to 264 million- paꞌanga [US$143 million] in 2009, but shareholders equity recorded only 204 million- paꞌanga [US$110.5 million].

The return on investment is only at a surprising 0.3 percent.

"It represents the depreciated value of the assets in these enterprises," the Minister stated.

The Minister made the revelations at the opening of the Public Enterprises Directors’ Workshop yesterday morning at the Moulton Hall at the FWC Headquarters in Nuku’alofa.

The workshop is targeted at updating and familiarizing the heads of companies with the recent amendments to the Public Enterprises Act, as well as addressing core governance issues the commercial entities are facing.

Directors’ failure to uphold the requirements related to its roles in the law will result in prosecution for negligence.

Reiterating that Government is committed to improving the performance of its enterprises, he commissioned "a return on our investments of not less than 10 percent."

"This will assist the country and will alleviate the problem of high taxation.

And if they fail to improve, it may result in some strong actions being taken by Government as it will have no other option but to do so," he said.

The Minister also proposed a rethink of the core moral duties of public enterprises and its directors.

He said traditionally it was a service to "fellow citizens and to your country."

But in light of more than 753,000 paꞌanga [US$408,000] paid out to Directors and Board members in the last year alone: "With that amount of money, the concept of community service may no longer be valid," he said.

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