ADB has
been particularly active in supporting public sector reforms, including the
rationalization and privatization of state-owned or public enterprises.
Harmful impacts of the reforms, as documented by PSI union Tonga Public Service
Association (TPSA), include the following:
·
Over 4,000 public servants and their families suffered loss of income during
the strike in 2005 initiated by the ADB project;
·
The country also lost a lot of revenues during the strike;
·
The public service suffered severely and its efficiency declined due to a
poorly implemented Voluntary Redundancy (VR) programme in June 2006 as
Government response to the public servants' strike action;
·
The education of the children in Tonga was also affected as a result of this
ADB project when more than 300 teachers were made redundant.
ADB’s
Support to Public Sector Reform. Since 2001, ADB has
supported Tonga’s public sector reforms through comprehensive public enterprise
reform (rationalization) with its loans and Technical Assistance (TAs)
projects. ADB financing helped to address “deteriorating economic prospects, a
large and inefficient public enterprise sector, and deteriorating public
services.”
1. Economic and Public Sector
Reform Program (EPSRP) – In 2002, ADB approved the $10.0M loan
which focused on fiscal and public sector reforms. The release of second tranche of
the loan was tied to the implementation of some 40 policy conditionalities
(‘policy matrix’) that included freeze hiring, endorsing corporatization/
privatization framework, passage of Public Enterprises Act.
[STATUS: CLOSED]
2. Rationalization of Public
Enterprises – In 2003, ADB provided a total $ 1.065M
TA (3 phases) to implement the Public Enterprise Act 2002, including the
establishment of a performance monitoring regime for public enterprises, and
the privatization of an initial 4 public enterprises (PEs), the proceeds of
which would be earmarked for further privatization or financial
restructuring. Phase III of the rationalization process, completed in
late 2008, focused on 5 PEs – Leiola Duty Free Ltd; Tongatapu Machinery
Pool, International Dateline Hotel; Shipping Corporation of Polynesia; Tonga
Timber. The first privatization of a Tongan PE was executed with the sale
of Government’s majority shareholding in Leiola duty free stores; another
enterprise was liquidated through an asset sales process, and 3 additional
enterprises are at various stages of approved rationalization process. By
2006, the Prime Minister made public enterprise reform a central tenet of his
economic growth plan, and created the Ministry of Public Enterprises and
Information (MPEI) as a specialist public enterprise monitoring agency to
accelerate reform. [STATUS: CLOSED]
3. Reforming Public Enterprises – In
2009, ADB approved $0.5M TA to ensure that rationalization strategies are
formulated for at least 8 PEs and that these strategies are implemented for at
least 5 PEs. [STATUS: CLOSED]
4.
Moreover, ADB’s Country
Partnership Strategy (CPS) 2007-2012, approved
in Nov 2007, has a total portfolio of $21.3M that focuses on private sector
development and fiscal management, including rationalization of PEs,
outsourcing road maintenance activities, strengthening legal business
environment, and enhancing access to finance. [NOTE: Total assistance to
Tonga from 2007 is nearly twice the allotted $21.3M.]
ADB’s
Support to Integrated Urban Development. Projects include
roads/drainage infrastructure, water supply and solid waste improvement for the
capital Nuku'alofa.
5. Integrated Urban Development Sector
Project ─ $11.3M Grant
approved in May 2008 Aims to improve environmental quality and public health in
Nuku'alofa through improved urban infrastructure. Expected outputs include
improved roads and drains, a major new drain to serve a low-lying inundated
part, capacity building, and establishment of a new urban planning and
management unit. [STATUS: ACTIVE]
6. Nuku'alofa Urban Development Sector
Project ─ $6.06M grant
approved in Oct 2011, with Australia providing additional $6.44M
grant. Two subprojects: water supply, solid waste improvement.
[STATUS: ACTIVE)
Others
7. Economic Support Program ─ 10.0M grant approved in Nov 2009,
which aims to provide “quick-disbursing” budget support to allow Government to
respond to economic, fiscal and social impacts of Global Economic Crisis
(GEC). ADB rationalizes thus: “Economy (already severely) affected by
domestic shocks as result of civil service strike in 2005, civil disturbances
in 2006 and impact of global economic developments (e.g., high oil and food
prices in 2008).” [STATUS: CLOSED, but no PCR yet released]
8. Tonga-Fiji Submarine Cable Project ─ $9.7M grant approved in Aug 2011,
with additional $16.5M financing from World Bank, to construct a submarine
fiber optic cable system linking Tonga to Fiji where an existing international
submarine cable system will provide onward cost-effective access to rest of the
world. [STATUS: ACTIVE}
9. Outer Island Renewable Energy
Project ─ PROPOSED 2.0M grant
to construct grid-connected Solar Photovoltaic power plants on outer islands of
of 'Eua, Ha'apai, and Vava'u.
Regards,
Bobet
Corral
