Tonga’s Bid To Write-Off Chinese Loan Yet Unsuccessful

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Tonga’s Bid To Write-Off Chinese Loan Yet Unsuccessful Country borrowed $119 million for reconstruction of Nuku‘alofa

By Pesi Fonua.

NUKU‘ALOFA, Tonga (Matangi Tonga, Sept. 5, 2014) – Tonga’s quest for its multi-million loans from the Exim Bank of China for the reconstruction of Nuku’alofa to be written off, so far had been unsuccessful, the former Minister of Finance Lisiate ‘Akolo told parliament before it closed on 28 August.

Lisiate told the House that a proposal for government to plead with the Chinese government to have its $119 million (USD) loan to be turned into a grant assistance had been done at the highest level but to no avail.

He said that he had been to China twice last year, first with the Prime Minister, Lord Tu’ivakano in July, when the loan/grant proposal was raised with the Prime Minister of China.

In November last year Lisiate said he went back to China and met with the Management of the Exim Bank of China and again raised the loan/grant proposal, but the most that the Chinese could offer was to extend the repayment of the loan principal for another five years.

Allegations

The Tonga government’s loan from China for the reconstruction of Nuku’alofa became an issue for debate in House when a report was presented by a parliamentary select committee that was tasked with clarifying claims of inappropriate transfers of a large amount of the loan money overseas and other alleged irregularities.

The debate in legislature, became loud after Sunia Fili, the People’s Representative for ‘Eua, pointed out that the report was incomplete. However, he proposed for the House to bring an end to this rolling investigation into how the loan from China was spent, by simply adding on a paragraph, declaring that the investigation ended here. "Let’s move on forward from here," he said.

‘Isileli and ‘Akilisi

The report was by the second Parliamentary Select Committee of the House, chaired by ‘Isileli Pulu, to clarify the report of another Parliamentary Select Committee that was chaired by ‘Akilisi Pohiva.

‘Akilisi supported one of the recommendations stated in the report, for government to try and get two of the property owners, the City Assets Ltd. and the Tungi Colonnade to sign their loan agreements with government.

Unusual as it may sound, but millions were lent by government to these two properties, but loan agreements were not signed.

The Minister of Finance, Hon. Dr ‘Aisake Eke told the House the loan agreements had been referred to their legal counsel and that the Tungi Colonnade was willing to sign the loan agreement.

Prisoner of work

‘Akilisi then went on to say that looking into the future, he did not think that government could repay the loan. He said he felt like a prisoner, dressing up in a prisoner’s uniform and going to work every day. He suggested for government to be declared "bankrupt, and dead."

The Acting Prime Minister, Hon. Samiu Vaipulu refuted the claim that government was going bankrupt.

"I swear, that this government will never go bankrupt," declared the Hon. Samiu Vaipulu. He then went on to remind the House that if Nuku’alofa was not burnt to the ground they would not have borrowed from China.

‘Akilisi took offence with the mention of the burning of Nuku’alofa. He and other members of parliament were taken to court on charges relating to the riots and the burning of Nuku’alofa, but he reminded the House that the court had made its decision and they were let off.

Lord Nuku, however, rubbed salt into the wound by raising the issue that if the properties were set on fire, then the reconstruction of those properties should be paid for by those who burnt the town - not by the property owners.

Sevele government

He also pointed out that the report did not clarify if the loan was approved by parliament. He said that although the former government of Lord Dr Feleti Sevele had pointed out that the House approved for government to go ahead with the loan from China, the first Parliamentary Select Committee said no, and the report did not clarify that important issue.

At the end of what had became a vociferous debate, the Speaker called for votes on two motions. One motion was by Sunia Fili to add on a new paragraph declaring that the investigation into how the loan money was spent ended here, and then let’s move on forward and look to the future. It was rejected 7-4.

He then called for vote on the report. It was carried 14-1. Against was Lord Nuku.

Concessional loans

Tonga was to start repaying back its concessional loans from China; interest plus principal on 21 September 2013, but with the five years extension the government will start repaying its loan in 2018.

Meanwhile, Tonga will continue to pay the 2% interest which amounts to $11 million annually. By 2018, loan repayments and interest with principal will be $24 million annually.

The Tonga Government borrowed 440m RMB from Exim bank of China in 2007 for the reconstruction of Nuku’alofa after it was burned to the ground by protesters on 16 November 2006.

Investigation

When the new government of Lord Tu’ivakano came into power in 2010, under a new system of government, it made it one of its priorities to investigate how the Nuku’alofa Development Corporation (NDC) managed and spent the loan. It became a costly exercise that required the services of four different committees, and an Australian accountancy firm, and cost government more than $3 million.

Firstly there was a Cabinet selected committee, then an independent committee chaired by ‘Akilisi Pohiva, which later turned into a parliamentary select committee. The House spent weeks debating their report, but it finally ended after the former Prime Minister Lord Dr Feleti Sevele applied to the Supreme Court for a judicial review of the report.

The decision of the Supreme Court was that it could not interfere with the proceeding of parliament. The Tongan Parliament then formed another Select Committee chaired by ‘Isileli Pulu to clarify some of the claims that were made in the report of the first select committee.

The Parliament has not released the final report to the public. The Parliament’s Office said on September 3 that the report was currently being translated into English to be kept in the Parliamentary Library for reference.

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