" Good morning and welcome to all of you who have made a particular effort to attend this morning's workshop. The workshop is designed as a familiarisation course for better understanding and performance of your responsibilities and duties under both the Public Enterprise Act 2002 (Amendments 2010) and the Companies Act 1995.
As Directors of Public Enterprises you are required to know and understand your core functions as Director. In connection with that responsibility you are required to know and understand the Public Enterprise Act and its amendments as well as the Companies Act.
Both these legislations deal specifically and generally with the requirements relating to your role as a Director. Failure to understand these basic requirements will cause problem in the governance of our Public Enterprises and may render you liable for negligence etc.
Traditionally the role which you are performing was regarded as a community service. It was a duty to your fellow citizens and to your country. It did not perhaps involve the high degree of expertise and specialisation which are now attached to that role.
In respect of the Public Enterprises I should say that we paid out to Directors and members who served on the Board of these Enterprises the sum of approximately $753,000 last year. With the amount of money that we pay out to Directors the concept of community service may no longer be valid.
The total assets that government has invested in Public Enterprises in 2010 amount to $272,192,531.00 (compared with $264million in 2009). The shareholders funds or equity as recorded in these enterprises is $204,281,702.00. It represents the depreciated value of the assets invested in these enterprises. The return on government's investment is .3%.
The Enterprises which recorded losses in its present operation include the Waste Authority Ltd a loss of $646,000.00. The second highest loss goes to Tonga Timber Ltd at $355,382.00. The full extend of its losses cannot be properly determined through lack of proper records etc. There is a high suspicion of fraudulent mismanagement and possible collusion amongst the staff.
It is a bad example of mismanagement of a Public Company and I would hasten to add that the Directors of Tonga Timber Ltd are not involved in the mismanagement allegations. The Directors may have being misled by the reports placed before them. The third highest loss is Tonga Post Ltd. There were 8 Public Enterprises out of 13 which operated at a loss.
I have attached to this speech note details for each of our Public Enterprises showing the profits and losses sustained by each entity and their compliance record. It is often misunderstood that the Janful Dateline International Hotel is not a Public Enterprise. The Tongan government has 49% shareholding interest in that company.
As a minority shareholder we are not responsible for its management and operation and it is of considerable concerned to Government how that enterprise is managed in Tonga. Appropriate action is been taken by Government to rectify the problem it is facing with the hotel.
The purpose of today's workshop is to ensure that our Directors are more aware of the need to comply with the law. Because we are government owned it does not mean that we can default with our legal obligations under the Law. It is of some concerned how our Public Enterprises are failing to comply with the law and hence the need for the ongoing programs of familiarisation.
I will give you some instances of non-compliance with the requirements for business plans, half yearly plan, annual report and audit report. Out of the 13 Public Enterprises that we have, 7 have a nil complying records. The others comply but not fully. Attached to these speech notes is a compliance table.
In addition to this, I am informed and I believe a number of Public Enterprises have not recorded under the Companies Act the appointment of Directors and Secretaries and their resignations. I have painted a dismal picture of the state of our Public Enterprises but regrettable it is a true state of affairs.
The problem that we face today in Tonga with our Public Enterprises is not dissimilar to the situation of Public Enterprises in our neighbouring Pacific countries.
However a consoling picture may be obtained from a quote from the ADB study Finding Balance making State-Owned Enterprises Work in Fiji, Samoa and Tonga published in 2009 viz:
"Tonga, in contrast, currently enjoys strong political commitment to SOE reform at the highest levels, resulting in an ambitious SOE rationalization program and the adoption of governance practices that go beyond the minimum standards prescribed by law".
It would be fair for me to say that the reform carried out to date has resulted in Tonga been rated very highly. However the return on our investments is still extremely and unbelievably low.
Government is determined to improve the performance of our public enterprises and to ensure a minimum return on our investments of not less than 10%. This will assist the country and it will alleviate the problem of high taxation.
If the Public Enterprises fail to respond to the call of improvement it may result in some strong actions being taken by Government as it will have no other option but to do so.
It is hope that today's workshop will be of benefit to all of us and may I wish you all a good day.
Issued by the: Ministry of Information and Communications, 2011