TNEWS TALANOA

Will WTO deal make a difference in Tonga?

The Government of Tonga seeks to be welcoming to business and investors. Many Tongans have experience with the United States and some American products are readily recognized.

In 2004, the Government passed a Foreign Investment Act and a Business License Act, which simplify conditions for foreign investment and streamlined business registration procedures. In 2005, the main focus of taxes was shifted from import duties to a broad-based consumption tax. WTO members approved Tonga's accession to the WTO in late 2005. Ratification of WTO membership is expected in 2006.

The Government of Tonga agreed to massive pay raises (up to 80% in some cases) for civil servants after a seven-week strike in 2005. There is continuing controversy regarding whether the government can afford these raises and the effect the increased money supply will have on inflation.

The Ministry of Labour, Commerce and Industries (MLCI) administers policy on foreign investment. This ministry also deals with company registration and the administration of incentives. A Standing Advisory Committee (SAC) screens applications for Development Licenses and makes recommendations for approval to the Minister for Commerce, Labour and Industries. Once the ministry has consulted with other ministries and departments, the application is returned to the SAC for action. Approved proposals are issued a development license, which sets out the incentives and concessions granted for the project. The approval process takes approximately five to six weeks but varies depending on the nature of the proposal.

A company incorporated outside the Kingdom that establishes a place of business within the Kingdom must, within three months of establishment of that place of business, file three signed copies of its memorandum and articles of association with the Registrar of Companies, who is the Minister of Labour, Commerce and Industries. Registration fees range from US$14.50 to US$695, depending on the share capital amount.

Partnerships and sole proprietors do not need to be registered but must have a trading license. Applications for trading licenses must be submitted to the Minister for Finance through the Deputy Commissioner of Inland Revenue. Trading license costs vary from US$3.60 to US$36.00 per quarter.

Foreign investors cannot buy land in Tonga, but the government provides areas designated for small industry development and will help foreign investors negotiate leases of private land from Tongans. Foreign investors are restricted from a few sectors, including road infrastructure projects.

CONVERSION AND TRANSFER POLICIES

In order to conserve foreign exchange, the National Reserve Bank of Tonga exercises some control on foreign receipts and payments. Repatriation of funds, including dividends, profits, capital gains, interest on capital and loan repayment and salaries, is permitted according to the provisions of the Foreign-Exchange Control Act except:

--When an industrial enterprise is partly financed by locally raised capital (including working capital), in which case the repatriation of funds will be related to the extent of foreign financing; that is, repatriation will be regulated on a pro-rata basis;

--In respect of capital gains, the amount eligible for repatriation will be restricted to the amount transferred inward through the banking system or by other approved methods; and

--Expatriate employees will be allowed to remit overseas wages and salaries received in Tonga up to the amount on which income tax has been paid.

Obtaining foreign exchange is not difficult.

EXPROPRIATION AND COMPENSATION

Expropriation has not recently been an issue in Tonga.

DISPUTE SETTLEMENT

Tonga has a robust judicial system, staffed by expatriate judges at the highest level. The country's legal system is generally capable of enforcing contractual rights. Tonga does not have a formal bankruptcy law yet, and there have been no high profile investment disputes over the last five years.

PERFORMANCE REQUIREMENTS/INCENTIVES

A company must export 90 percent of its products to be considered an export-oriented industry. Once designated an export-oriented industry, a company is entitled to import capital equipment and raw materials duty-free, with exemptions from port and services taxes.

Under current tax laws, tax incentives extended to foreign investors include tax holidays, exemptions from customs duty, adjusted rates of port and service tax, and generous fund repatriations, granted on a case-by-case basis.

For approved industrial and prime tourist enterprises, a range of incentives are offered, including:

--Tax holidays. Income tax holidays are offered for five years and may be extended up to 15 years); additional tax holidays may be granted for expansion of an enterprise; dividends received by shareholders during a tax holiday period are tax exempt.

--Exemption from customs duties. Capital goods imported by an approved enterprise are exempt from customs duties for a period of two years from when the enterprise commenced operating, or was expanded, provided the imported goods are for the sole purposes of manufacturing, processing, or the assembling of an approved product, or for the servicing industry, or creating a prime facility. Semi-finished products and raw materials imported and used for further processing, manufacturing, or assembling are exempt from customs duties if the finished product is exported.

--Protection from competition for specified periods.

Other incentives include:

--Guaranteed long-term space and land leasing in the Small Industries Center, a 12-acre industrial estate one kilometer from the center of Nuku'alofa;

--Residential and work visas for foreign investors and their families for as long as the enterprise is in operation;

--Exemption from customs duties for investors and families' personal effects;

--Priority for electricity, telephone, and water connections.

Technical and promotional assistance from the Ministry of Labor, Commerce and Industries is available to help prospective investors identify, evaluate and set up industries. Companies and foreign investors can apply for the aforementioned business incentives as soon as they are granted business licenses.

The government allows full ownership by a foreign investor in cases where manufacturing activities are using imported raw materials for export, or where the investments are too large for local investors. While each project is considered individually, the government generally encourages joint ventures.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

Under the Companies Act 1995, both foreigners and domestic investors have equal rights for incorporating/establishing entities. There is also the "Foreign Investment Act 2002," although not yet implemented, which categorizes business activities for investment purposes. Certain business activities are to be reserved for local investors, some are restricted for joint-venture arrangements, and some are open for anyone. These lists are still under consideration.

PROTECTION OF PROPERTY RIGHTS

Copyrights can be registered in Tonga under the Industrial Property Act of 1994. Counterfeit products are widely available in the local market. A Bill on Enforcement and Border Measures has been endorsed by Cabinet and is currently with the Law Reform Committee. This Bill contains specific protections regarding counterfeit products. In its terms of accession to the WTO, Tonga has been granted a transition period until June 1, 2008 to comply with WTO TRIPS requirements.

TRANSPARENCY OF THE REGULATORY SYSTEM

Although there are some difficulties with setting up a business, the Government has instituted reforms to make the procedures and processes much easier and quicker for investors. The World Bank lists Tonga as the 36th easiest country to do business in worldwide.

Publishing of draft bills for public comments is not practiced in Tonga.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT

Foreign investors are able to get credit on the local market. The estimated total assets of the country’s largest bank - the Tonga Development Bank – where business and investors can apply for loans for 2004 is T$58,688,399.

POLITICAL VIOLENCE

There has been no political violence in Tonga in recent times. However, many Tongans are now involved in a push for a more democratic government, and some fear that violence could result if the Government does not address these demands.

CORRUPTION

Corruption has not been specifically identified as an obstacle to foreign investment. Corruption and bribery are criminalized. In a high-profile case in 2006, the Speaker of the Tongan Parliament was convicted and fined for bribery relating to the import of alcohol. Such measures appear to be impartially applied.

There are no international nongovernmental "watchdog" organizations, and the country is not included on Transparency International's Corruption Perceptions Index.

BILATERAL INVESTMENT AGREEMENTS

Tonga is party to a bilateral investment treaty with the United Kingdom.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS

Overseas Private Investment Corporation (OPIC) insurance is available to investors in Tonga and provides political risk insurance, finance, direct loans and loan guarantees.

LABOR

Although unemployment was officially placed at 3.3 percent in 2003, this does not account for the significant number of people underemployed. More than half of the men, and 38 percent of all people employed, work in the agricultural, forestry and fishing sectors. Only 59 percent of households include one or more wage earner. Women are playing an increasing role in the formal wage sector and make up about one-third of the workforce.

Wages and salaries are comparatively low. Wages, salaries and other conditions of work in the private sector are a matter of direct negotiation between employers and workers. There are currently no trade unions in Tonga, although a 1964 Act of Parliament provided for their establishment. The Public Servants Association operates as a de facto trade union for civil servants.

Local skilled labor is available in sufficient quantities to undertake most types of building work, except for some specialized skills and supervisory-level manpower, which is generally recruited from abroad.

FOREIGN TRADE ZONES/FREE PORTS

Tonga does not operate any foreign trade zones or free port facilities.

FOREIGN DIRECT INVESTMENT STATISTICS

In its 2005 World Investment Report, the UN Conference on Trade and Development (UNCTAD) estimated FDI stocks in Tonga sourced from transnational corporations as 35 million USD and 39 million USD in 2003 and 2004, respectively. FDI stocks were the equivalent of 20.6 percent of GDP in 2003 and 18.7 percent in 2004. UNCTAD measured FDI flows into Tonga as 12 million USD for 2003 and four million USD for 2004. From 1985 until 1995, the average annual inward FDI flow was two million USD.

The U.S. Commerce Department's Bureau of Economic Analysis records no U.S.-sourced FDI stocks or outflows for Tonga.

According to the Ministry of Labour, Commerce, and Industry, 24 foreign companies were registered in Tonga since 2000. Foreign businesses are largely in the retail sector and many are owned ethnic Chinese, Indians, or Fijians.

A senior New Zealand government figure - Minister Jim Anderton has encouraged Pacific states to embrace trade liberalisation and consider joining the World Trade Organisation. Anderton, has told a Pacific trade meeting in Wellington the region can't afford to ignore global trade challenges that lie ahead. So far, only four Pacific Island states have joined the WTO, the international organisation dealing with the rules of trade between states. And the latest country to join, Tonga, has been criticised for ACCEPTING TOUGH DEMANDS TO THROW OPEN ITS MARKETS, as a condition for WTO accession. But Mr Anderton, who is very much from the left of New Zealand politics, says the time has come for all Pacific economies to face up to the brave new world of international trade.

I don't think so, but time will tell!

Malo koe ola kovi eni e hoko meihe kau kihe WTO!! Koe sii faahinga koeni oku nau fea i Maketi Talamahu, mo Tofoa tenau teuteu kihe fktau niumata moe meafkmeaa, ihe kahau vave ni mai pe, aia koe koloa peia e mau mo ngaahi i Tonga. Koe hu mai a China, USA, NZ, Aust, tenau omai enau koloa vala, su, hardware, mea kotoa pe oku teeki i Tonga ni. Kuo fuoloa ae oatu e Savali ae koloa a e Bunning mei Australia pea kuo tau ene fkkaukau, kohai ha vale e toe alu kihe fea o fktau hamala, pe hele etc. ne osi palani pe a Savali ia ke tuu Bunning i Tonga. koe oatu pe kemou sio kihe mea e hoko, kapau teeki temou sio ihe Bunning, kau tangata koe fkvalevale atu ene maamaa pea toe good quality. Ko eku talanoa atu pe eni ihe hardware toki talamai ekoe ng koloa kehe e hu atu ki Tonga. koe poini oku pehe ni maamaa pea sai koloa kae fefe kakai Tonga enau feinga kihe famili moe kainga, ikai toe pisinisi kae tafoki o nisipisi, aia koe tatato pe tofoohifo ia ae Koloaia moe mafai ihe masiva moe tukuhausia malie Tonga e alu fkholomui.

Malo e Lelei !

Malo mu'a fai 'etau ngaue pea mo e ngaue lahi. 'Oku ou tui ko ha lelei 'eni ki he ngaahi taki taha pea 'oku 'i ai 'a e fakamalo lahi mo e tetu'a ki ha ngaahi lelei mo e 'ola 'o e ngaahi ngaue 'oku fakahoko.

Tuku ke 'ataa pea 'omai pe ha ki'i tuliki ke fai pe ha toli na'e foa ha maka 'i he makafetoli'aki ko 'eni 'oku hoko.Tanaki atu pe ha ngaahi lelei na'a ata atu ki ha taha 'i he loto 'o e fietokoni. Tuku mai pe ha faingamalie ke u kau pe tala ka 'oku ou faka'apa'apa lahi ki he kau mu'aki 'iate au. Tanaki atu pe ki he toutai 'oku fai ka e tuku pe ke 'ataa.

Ko e kaveinga kuo talaki kae fai pe ha tuiaki.Taha ha kaveinga ma'olunga mo mahuinga ke talanga'i. He 'oku 'ikai ko ha kaveinga ke 'ilo ki ai ha tokosi'i ka 'oku viviliange ke 'ilo kanokato ki'i 'a e Tu'ukimu'a moe Tu'ukimui pe Lahitaha ki he Si'itaha.Kae fefe ha Toulekaleka mo e 'etau fanau ko e Hakau ia hotau pongipongi.Tuku ke ata ke vahevahe 'a e ngaahi fakamatala 'i he lea Faka-Pilitania ke mou vakai mo vahevahe mai pea he'ikai ha'aku fakatonulea he kuo ho'ataa 'a e 'ilo mo e maama hotau fonua ni.

I firmly believe and agree that reasons list below to oppose WTO ( World Trade Organisation).

1. The WTO Is Fundamentally Undemocratic

The policies of the WTO impact all aspects of society and the planet, but it is not a democratic, transparent institution. The WTO rules are written by and for corporations with inside access to the negotiations. For example, the US Trade Representative gets heavy input for negotiations from 17 "Industry Sector Advisory Committees." Citizen input by consumer, environmental, human rights and labor organizations is consistently ignored. Even simple requests for information are denied, and the proceedings are held in secret. Who elected this secret global government?

2. The WTO Will Not Make Us Safer

The WTO would like you to believe that creating a world of "free trade" will promote global understanding and peace. On the contrary, the domination of international trade by rich countries for the benefit of their individual interests fuels anger and resentment that make us less safe. To build real global security, we need international agreements that respect people's rights to democracy and trade systems that promote global justice.

3. The WTO Tramples Labor and Human Rights

WTO rules put the "rights" of corporations to profit over human and labor rights. The WTO encourages a 'race to the bottom' in wages by pitting workers against each other rather than promoting internationally recognized labor standards. The WTO has ruled that it is illegal for a government to ban a product based on the way it is produced, such as with child labor. It has also ruled that governments cannot take into account "non commercial values" such as human rights, or the behavior of companies that do business with vicious dictatorships such as Burma when making purchasing decisions.

4. The WTO Would Privatize Essential Services

The WTO is seeking to privatize essential public services such as education, health care, energy and water. Privatization means the selling off of public assets - such as radio airwaves or schools - to private (usually foreign) corporations, to run for profit rather than the public good. The WTO's General Agreement on Trade in Services, or GATS, includes a list of about 160 threatened services including elder and child care, sewage, garbage, park maintenance, telecommunications, construction, banking, insurance, transportation, shipping, postal services, and tourism. In some countries, privatization is already occurring. Those least able to pay for vital services - working class communities and communities of color - are the ones who suffer the most.

5. The WTO Is Destroying the Environment

The WTO is being used by corporations to dismantle hard-won local and national environmental protections, which are attacked as "barriers to trade." The very first WTO panel ruled that a provision of the US Clean Air Act, requiring both domestic and foreign producers alike to produce cleaner gasoline, was illegal. The WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device allowing endangered sea turtles to escape. The WTO is attempting to deregulate industries including logging, fishing, water utilities, and energy distribution, which will lead to further exploitation of these natural resources.

6. The WTO is Killing People

The WTO's fierce defense of 'Trade Related Intellectual Property' rights (TRIPs)—patents, copyrights and trademarks—comes at the expense of health and human lives. The WTO has protected for pharmaceutical companies' 'right to profit' against governments seeking to protect their people's health by providing lifesaving medicines in countries in areas like sub-saharan Africa, where thousands die every day from HIV/AIDS. Developing countries won an important victory in 2001 when they affirmed the right to produce generic drugs (or import them if they lacked production capacity), so that they could provide essential lifesaving medicines to their populations less expensively. Unfortunately, in September 2003, many new conditions were agreed to that will make it more difficult for countries to produce those drugs. Once again, the WTO demonstrates that it favors corporate profit over saving human lives.

7. The WTO is Increasing Inequality

Free trade is not working for the majority of the world. During the most recent period of rapid growth in global trade and investment (1960 to 1998) inequality worsened both internationally and within countries. The UN Development Program reports that the richest 20 percent of the world's population consume 86 percent of the world's resources while the poorest 80 percent consume just 14 percent. WTO rules have hastened these trends by opening up countries to foreign investment and thereby making it easier for production to go where the labor is cheapest and most easily exploited and environmental costs are low.

8. The WTO is Increasing Hunger

Farmers produce enough food in the world to feed everyone -- yet because of corporate control of food distribution, as many as 800 million people worldwide suffer from chronic malnutrition. According to the Universal Declaration of Human Rights, food is a human right. In developing countries, as many as four out of every five people make their living from the land. But the leading principle in the WTO's Agreement on Agriculture is that market forces should control agricultural policies-rather than a national commitment to guarantee food security and maintain decent family farmer incomes. WTO policies have allowed dumping of heavily subsidized industrially produced food into poor countries, undermining local production and increasing hunger.

9. The WTO Hurts Poor, Small Countries in Favor of Rich Powerful Nations

The WTO supposedly operates on a consensus basis, with equal decision-making power for all. In reality, many important decisions get made in a process whereby poor countries' negotiators are not even invited to closed door meetings -- and then 'agreements' are announced that poor countries didn't even know were being discussed. Many countries do not even have enough trade personnel to participate in all the negotiations or to even have a permanent representative at the WTO. This severely disadvantages poor countries from representing their interests. Likewise, many countries are too poor to defend themselves from WTO challenges from the rich countries, and change their laws rather than pay for their own defense.

10. The WTO Undermines Local Level Decision-Making and National Sovereignty

The WTO's "most favored nation" provision requires all WTO member countries to treat each other equally and to treat all corporations from these countries equally regardless of their track record. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal under the WTO. Developing countries are prohibited from creating local laws that developed countries once pursued, such as protecting new, domestic industries until they can be internationally competitive. California Governor Gray Davis vetoed a "Buy California" bill that would have granted a small preference to local businesses because it was WTO-illegal. Conforming with the WTO required entire sections of US laws to be rewritten. Many countries are even changing their laws and constitutions in anticipation of potential future WTO rulings and negotiations.

11. There are Alternatives to the WTO

Citizen organizations have developed alternatives to the corporate-dominated system of international economic governance. Together we can build the political space that nurtures a democratic global economy that promotes jobs, ensures that every person is guaranteed their human rights to food, water, education, and health care, promotes freedom and security, and preserves our shared environment for future generations.

12. The Tide is Turning Against Free Trade and the WTO !

International opposition to the WTO is growing. Massive protests in Seattle of 1999 brought over 50,000 people together to oppose the WTO—and succeeded in shutting the meeting down. When the WTO met in 2001, the Trade negotiators were unable meet their goals of expanding the WTO's reach. The WTO met in Cancún, Mexico this past September 10--14, and met thousands of activists in protest and scoring a major victory for democracy. Developing countries refused to give in to the rich countries' agenda of WTO expansion - and caused the talks to collapse !

Mooni 'a e 'oku lea ha'a tufunga lea ko e me'alelei ko 'etau "Kau he Lau pe Lau he Kau". Ka mahino ko e 'uhinga tangata tufunga lea ke tau ngaue fakataha ka 'oku 'ikai kau pe to ki loto 'o sio noa he ngali faka'ofaange ia.

Mole ke mama'o ngali 'i ai ha fakafiepoto atu.Fakamolemole au ko anga e si'i loto ke tanaki atu pe ki he ngaahi kuo 'osi mu'aki tala.'I he loto mo e fakakaukau 'a e motu'a ni ko e fe'inasi'aki.'Oku faka'apa'apa ia moutolu hono katoa na'a hoko tanaki atu ke mamahi ha mole ke mama'o.

'Ofa lahi mo e Faka'apa'apa Lahi

Malo

Lancelot, I believe 'oku 'ikai ke 'iai ha taha 'e mamahi 'iha'o 'omai ha'o fakakaukau ke tau ako kotoa ai he forum ko 'eni.
Malo e 'omi tokoni pea malo e fakamaama mai e kaveinga.

Kau memipa mou vakai ki he post #6 pea mou sio ki he epsode 18 pe temou fakatokanga'i ai ha similarity.Malie e?

We have been an official member of the WTO since July 27, 2007 and I think we are one step forward towards democracy. The WTO derives its values from transparency, non-discrimination, and rule-based dispute resolution - amongst other things and these are the core values that our country needs.
However, I do feel for our producers because now they have a lot of competition not only locally but also for those who export. for those who export goods, there are higher standards to adhere to and it might be expensive for them to conform. Not only that, but they are now on the same platform as everybody else selling the same thing. The local producers will now face competition from imported goods and over time I fear that they may lose motivation and abandon what they had been doing for a long time. For us in Tonga, we do a lot of things by hand, whereas other countries have the infrastructure to mass produce in a lower cost and therefore can price their products competitively. Nevertheless, it is still early for us to see how being a member of the WTO manifests itself.
I wish we could hear from the local business owners and their views or anybody who is being directly affected by being a member of the WTO.

mahinakatoa, for many years my family have been running chicken farm at Kolomotu'a. As I grew up, I used to see my parents selling eggs to local shops and supermarket to pay for my school fees and many other undertakings both family and church kavenga.
Now, our local business is been taking over by importing eggs. Last months sales dropped by 22.95%. I am saddened by it. How can the govt favours foreign eggs over local production. We need to preserve and protect Tonga's small range of local production inorder to encourage and strengthen local farmers and business owners.
Mahinakatoa, I'm sure you'll understand where I'm coming from....if youre in my shoes.
Hope my personal dilemma helps answer your question.

I wish to throw in my one cent on this one. Here it is.
"Of course we (Tonga) can gain from the WTO". I would like to list what we will gain from the WTO.

1. We will 'gain' fast knowledge of what it feels like when a bigger-stronger-well funded-experienced-skillful-older-overseas-corporation kicks our local and no matched companies and ventures in the ass.

That is my one cent on that. And if you want to know more of how these big corporations will 'kick our ass', I can elaborate. But I already see alot of good points in the comments above of how our ass is going to be kicked.

As if prison life was already hard enough? They had to go make us WTO.

Kehekehe Wrote:mahinakatoa, for many years my family have been running chicken farm at Kolomotu'a. As I grew up, I used to see my parents selling eggs to local shops and supermarket to pay for my school fees and many other undertakings both family and church kavenga.
Now, our local business is been taking over by importing eggs. Last months sales dropped by 22.95%. I am saddened by it. How can the govt favours foreign eggs over local production. We need to preserve and protect Tonga's small range of local production inorder to encourage and strengthen local farmers and business owners.
Mahinakatoa, I'm sure you'll understand where I'm coming from....if youre in my shoes.
Hope my personal dilemma helps answer your question.

Kehekehe,
Thank you for your input. A 23% decrease in sales can be nerve-wrecking for anyone who runs any business, let alone a poultry farm in Tonga. I am not sure how many families in Tonga run a poultry farm but maybe you could join together and talk to our economists to figure out a way to sustain your industry. Unfortunately Tonga can't really make decisions on its own alone because now it has other partners whom we would have to take into consideration when setting import/export policies. We are sort of like - in a chess game, except every move we make, we are going to be bashed no matter what. If we set a quota on egg importation, our other trade partners being affected might retaliate with a hefty tariff on one of our other goods being exported. Not good for a tiny little export base of only $34 million (2004 est.) The other option might be to set a non-restrictive tariff on imported eggs and use that money to subsidize the local egg producers/farmers. But Tonga is such a small country and it does not take a lot of eggs to simply flood the market if we import more eggs to make money in order that the local producers can produce more eggs. Bashed again.
Unfortunately, some businesses may have to evolve. (Not necessarily the egg business, although it could.) And, it may not be a bad thing after all. As of now, the industries that stand to gain from Tonga joining the WTO is the service industry and retail. They can get their supplies at lower prices since there is a lot of competition. So, it may not be a bad idea to evolve an existing business that can't thrive due to the changes brought about by the WTO, towards these two sectors, retail and service industries.
Ultimately, the business owners in our tiny little country will have to perform just like the big corporations in the big open market economy. They would have to stay innovative to be competitive. Wow, I can't believe we put ourselves there. wow again.
Fellas, I may have missed out on reading our tongan papers regarding the reasons why we needed to join the WTO. This was back in the late 90's because we initially applied in 1997. Why did we have to join? Just curious?