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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

Tonga Parliament Debates Legality Of Tongasat Payout
One-third of $75 million grant ‘transferred’ to private company

By Pesi Fonua

NUKUALOFA, Tonga (Matangi Tonga, Nov. 29, 2012) – Claims in Tonga's parliament that there was an illegal transference of government money to Tongasat have been denied by two Prime Ministers, in a row over how a US$75 million grant from China to Tonga was used.

A payment of US$25.45 million that was given by government to Tongasat in 2011 was approved by the former Prime Minister Lord Dr. Feleti Sevele and came from a grant given by the Chinese government to Tonga in 2008.

Lord Sevele confirmed on November 20 that the money paid to Tongasat came from the US$75.35 million grant and explained how his government rationalized the payments to Tongasat. "It was all above board… and it was all legal", he told Matangi Tonga.

Lord Sevele was responding to a statement by Tonga's current Prime Minister, Lord Tu'ivakano early this month denying any responsibility of his government to the payment of US$25.45 million that was made by the former Minister of Finance Sunia Fili to Tongasat in 2011.

In a statement, Lord Tu'ivakano said that the decision to pay Tongasat US$25.45 million was made by the previous government of Lord Dr. Feleti Sevele, but the actual hand over of the money did not take place until 2011, when it was paid by the former Minister of Finance, Sunia Fili.

Sunia was the first Minister of Finance of Lord Tu'ivakano's new government, but he resigned in July this year, to support a motion for a Vote of No Confidence in the Prime Minister, Lord Tu'ivakano.

The claim that there was an illegal transference of government money to Tongasat was raised in Parliament during a debate by the House in October of the Motion for a Vote of No Confidence.

Chinese approach

Lord Sevele told Matangi Tonga last week that the US$75.35 million Chinese grant to the Tongan government in 2008 was "not like other Chinese grants," and there were reasons for that, which he asserted that he did not want to get into.

"If there was no Tongasat there would not have been any such grants. The grant [was] made because Tongasat was leasing orbital slots to the Chinese."

But as to why the Chinese Government did not pay their dues straight to Tongasat, instead of giving the Tongan government a grant, then for the government to pay Tongasat, was not made clear.

Dr. Feleti Sevele said only that the Chinese approach of paying for the leasing of orbital slot to Tongasat by giving Tonga a grant, was "the Chinese way of doing business, because some of the big corporations in China are public enterprises."

Lord Sevele said that when he was made Prime Minister in 2008, he became aware of the agreement that Tongasat had with government over the income from the leasing of Tonga's orbital slots.

"Government was getting 60% and Tongasat 40%", he said.

Tongasat is a private company, headed by Princess Pilolevu, and since its inception in the early 1990s it has the exclusive right to acquire orbital slots in space for Tonga, and market them for the Tongan government.

"It was an unfair agreement, because Tongasat used their knowledge, technology, contacts and their money, and million of dollars to secure those slots and then put satellites in them.

"I mean, government did not own those slots, and they were available only to be leased over a limited amount of time, about nine years, and if you don't use those slots, you will lose them."

He said that when he was Prime Minister, the Privy Council was the decision maker. "I looked at it, we discussed it in Cabinet, then I took it to Privy Council. It was clear that it was an unfair agreement.

"We then agreed that if and when the two grants from China came, the first grant of US$49.9 million, it would go 50% to Tongasat and 50% to government.

"That would clear all outstanding debts that Tongasat owed government," said Lord Sevele.

He said that when the second Chinese grant of US$25.45 million came, the decision then was that if there was income tax to be paid then that should be paid.

Give it

"The rest was Tongasat's money, give it to them. Give to Caesar what belongs to Caesar, and to Tongasat what belongs to Tongasat."

Lord Sevele said that since the early 1990s Tongasat had paid the Tonga government over US$30 million, in a profit sharing arrangement that they had negotiated and agreed to over the years.

The latest agreement that Tongasat and the government made in 2008 was for a 50-50% share of the net profit and that Tongasat no longer had the exclusive right to acquire and lease orbital slots for the Tonga government.

Lord Sevele said that after the decision was made he told members of parliament, "you guys, if you want to go for it (make use of Tonga's tax allotments in space), it is there." But he said that since 2008, no one else had taken up the challenge to try and claim orbital slots in space and lease them in order to bring some income for Tonga.

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