I am very honored to open the Economic Dialogue which has been facilitated and organized by the National Reserve Bank of Tonga. I congratulate the Board of Directors and the Governor of the National Reserve Bank of Tonga for their foresight in arranging the Economic Dialogue at a very important turning point of the development of the Tongan economy. I extend a special acknowledgement to all representatives of the Private Sector, your attendance and participation will contribute significantly to making the next 2 days of dialogue a success.
In the recent past, Tonga has had successive Governments challenged with achieving real economic development. We cannot expect different results if we follow the same path. So, after its first year in office, our Government is setting the scene for new initiatives that will deliver the development outcomes contained in the Tonga Strategic Development Framework (TSDF), towards the Government's vision.
"To develop and promote a just, equitable and progressive society in which the people of Tonga enjoy good health, peace, harmony and prosperity, in meeting their aspirations in life".
Much work has gone into addressing many of the challenges inherited by this government which has not been easy and has often distracted the government from pushing ahead with much needed initiatives. One of these challenges is the large debt overhang the government faces, which has yet to make its impact felt on the budget and the economy as a whole but it is something that we will have to address very soon.
The economy has been affected by many challenges since the onset of the Global Economic Crisis in 2008. The decline of the level of remittances from overseas has been a key factor which has affected the rate of economic growth over the past three years. This key event has contributed to the stagnation if not decline in the standard of living of many families and households across the Kingdom. At the same time our earnings from tourism agriculture and fisheries have not grown as much as we had expected. Furthermore the contraction in domestic banks credit has not helped the situation.
These events have multiplier effects, they affect the ability of individuals, families and businesses to meet their financial obligations. The inability of some borrowers to repay their loans resulted in the commercial banks taking legal action to secure their interests. At the same time, the imposition of more selective lending criteria by the banks has resulted in many would-be borrowers being unable to access bank financing. These factors have contributed to a more difficult operating environment for the private sector. The vulnerability of a small island country like Tonga to external shocks has been brought to the forefront by the impact of the Global Financial Crisis which the Kingdom has no control over. This brings out the need to reduce our dependency on the rest of the world and the need to strengthen our economy to be more resilient to these shocks. No one owes us a living except ourselves. These shocks are becoming more regular and widespread in its impact. Therefore, the focus of the dialogue on agriculture, fisheries and tourism is appropriate given the resource structure of our small open economy. This will augur well with one of the Government's objectives to promote a Dynamic public and private sector partnership as the engine of growth by promoting better collaboration between government and business, appropriate incentives and streamlining of rules and regulations.
In addition, surveys by the Department of Statistics indicate that growing numbers of households are falling into poverty, despite our high social development indicators, which probably reflect past performances. This is a worrying trend. While inflation has shown a declining trend in recent months, there is a need for continued vigilance as the poverty estimates indicate that even a small increase in the prices of basic commodities is likely to have a major impact on the living standards of a large number of households throughout the Kingdom. The recent increase in the price of crude oil in the international markets provides a worrying pointer towards future price movements.
This has a direct effect on our Energy Sector and our Energy Security as a whole and through the Tonga Energy Road Map otherwise known as the TERM the Government is looking at ways of moving our reliance on fossil fuel to renewable energy sources. The New Zealand Government is supporting this initiative through a 1 Mega Watt Solar station in Tongatpau completely Grant Funded that should be commissioned by mid-year. The Government of the United Arab Emirates is providing for a 500 Kilo Watt Soalr Station for Vava'u again completely Grant Funded and should be commissioned before years end. Tha Asian Development Bank with the kind financial support of the Japanese Government is looking at providing for mini grids systems utilising renewable energy sources for off grid island communitie, including the two Niua's. The Government is looking at how best to provide for the poorer communities with Tonga Power, by undertaking a tarriff review. A high level Government Delegation led by one of my Minister's met with the World Bank last week to look at how the Petroleum Sector can be better managed to dampen the effects of the global colatile price rise. This includes looking at the transportation to and within the Kingdom, including storage. Not only is the Government addressing all these issues it is also looking at how best energy can be managed through policy and technical advances in aplicances and this week has seen the launch of a national energy efficiency initiative led by a committee encompassing private sector, church groups and also civil society through our women's groups.
This Dialogue is a time of cooperation, of listening andlearning from each other. Successes of TERM point to the importance of this and the benefit that can be found in a whole of sector, multilateral approaches. It is through a trilateral realtionship between the Government, the private sector and our development partners that challenges in the energy sector are being met. This similar model can be applied to collaboration surrounding the agriculture, fishing and tourism sectors which will lead to results for the people of Tonga.
In addition to the trilateral relationship, Tonga has an active civil society which must be taken more seriously. When the civil society is uspported by Government and private sector it is also a powerful tool in meeting the challenges Tonga faces.
Tonga may be resource poor but in this trilateral relationship and our civil society we have our best resource, which can be utilised to achieve the clear goals and objectives, and implement the programmes that we hope will come out of this dialogue.
We must not be complacent, but dynamic and results oreinted. If we do not see results within a year, we must be flexible and willing to change our tactics upon sound analysis of the situation.
The management of the government's budget has been challenging and this year the budget approved by parliament is a deficit of T$28 million before the receipt of budget support from our development partners. This is a situation that is not sustainable over the medium term and the government is initiating new budget policies aimed at regaining fiscal stability. Despite this, our budget performance for the first 6 months of the fiscal year has been better than expected with revenues exceeding expenditure, which has been encouraging. Nevertheless this will still require careful management in the event of unexpected external shocks such as natural disasters.
As you all know, the government had released last year the final revised version of the Tonga Strategic Development Framework (TSDF) which outlined the government's key vision and development outcomes with the associated enabling themes for delivering these outcomes. The TSDF provides the guiding principles and directions to guide the work of the present administration over its four year term. The government is working to ensure that all government ministries and departments have programmed the TSDF activities into their corporate plans as well as their annual budget commitments. This is a clear attempt to lock in the government's priorities into the activities of all ministries and departments.
Having done that, there is still a need to develop a cohesive framework whereby the government and the entire community can work together towards the common goals outlined in the TSDF. The goals are not in question. Mapping a roadmap on getting there is the more immediate issue.
In that sense, I see the Economic Dialogue as a key approach to developing a consensus in the way forward.
The Dialogue is an important initiative because it provides an avenue for all key stakeholders to become engaged in discussing the critical economic and financial issues which the Kingdom faces. I see the Dialogue as a way forward to bring greater understanding of the issues to all key stakeholders and I am pleased to hear that the dialogue is homegrown and domestically driven. Tongans know best what is good for Tonga. While we thank our development partners in their assistance and advice, it is up to Tongans to decide what we want to do. So I encourage everyone here to participate fully in this dialogue.
The Dialogue calls for a collective effort by all parties in order to improve the economic performance of our country and reduce the number of families falling into poverty. Lets all rise to the challenge and work together to raise the standard of living of our people.
I wish to thank speakers and participants particularly those who have come from abroad for your support and willingness to contribute to this important dialogue.
As a nation we face many challenges, but I leave you with only one for the next 2 days. Thorugh your deliberations, dialogue and considerations - provide me and your Government a clear message on the proposed strategies to address our key challenges. The Government stands ready to listen and implement these strategies within our capacity but the Government cannot do this alone. It needs the help of everyone including our development partners, whom we thank for their continued assistance.
I look forward to the discussions over the next two days being conducted in a frank and constructive manner. We need to make this Economic Dialogue a turning point for development and continue the momentum. Collectively , we can find the solutions that work best for Tonga. Solutions that are derived from a common purpose to address the challenges we face and a collective effort to achieve relevant , meaningful and realistic economic policy action.
Ladies and Gentlemen, I have much pleasure in declaring the Economic Dialogue open.
>>> View Photo Album of the Economic Dialogue HERE
Issued by the: Ministry of Information and Communications, Nuku'alofa.