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INSTITUTIONAL BASIS FOR TRADE AND ECONOMIC RELATIONS WITH THIRD WORLD COUNTRIES 32 ANNEXES ANNEX I Main Economic Indicators 33 SCHEDULE 1: Selected Production and Price Statistics
SCHEDULE 2: Selected Employment Statistics 34
35 ANNEX II Laws and Legal Acts Relating to Trade 36 ANNEX III Import Licensing Procedures 37 ANNEX IV International Trade Agreements 40 TABLES Table 1 Budget 42 Table 2 Estimated Recurrent Expenditure by Vote (1996/97) 43 Table 3 Gross International Reserves 44 Table 4 Trade Balance 44 Table 5 Imports by Country of Origin 44 Table 6 Exports by Country of Destination 45 Table 7 Imports by Main Product Group 45 Table 8 Exports by Main Product Group 46 Table 9 Balance-of-payments 47 Table 10 Weighted Average Level of Custom Duties of Main Customs Tariff Groupings (1995) 48 I.
The policies of the Government of the Tonga are aimed at developing and sustaining rapid economic growth and increasing investment, employment and incomes, through a number of measures which accord with the principles and objectives of the WTO:
- support for the development of the private sector in Tonga, by providing the necessary physical, financial and institutional infrastructure facilities;
- the maintenance of an open and competitive economy, broadening and diversifying Tonga’s export base;
- facilitating the export of products to existing new markets;
- encouraging tourism;
- promoting competition in business through the deregulation of financial and business activities;
- maintaining stable exchange rates and interest rates.
To this end, Tonga intends, if admitted to the WTO, to play an active role in the WTO’s workings and deliberations and to contribute where possible to meeting the WTO’s long term objectives.
The population is estimated at around 100,000 and the current population growth remains low at less than 1 per cent per annum, of which the majority lives in the four islands of Tongatapu, Vava’u, Ha’apai and the two Niuas.
Given Tonga’s small land area compared to its 700,000 square kilometre maritime Exclusive Economic Zone, it is not surprising that the sea and fisheries play an important role in Tonga’s economy.
Private remittances from the substantial Tongan community living overseas, from churches and charitable organisations, and from official bilateral and multilateral grants and loans, fund nearly all of Tonga’s development budget.
A number of exportoriented manufacturing enterprises, most notably in the leather and woollen garments sectors, which were set up to export to New Zealand and Australia under the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), closed as trade preferences in those markets were eroded.
The objectives for the three year plan are:
- efficient and wellstructured government sector, with the qualities of good governance and accountability;
- efficient, well structured Stateowned enterprises;
- wellmaintained physical infrastructure;
- sound and encouraging environment for the development and increased involvement of the private sector in the economic activity;
- development benefits being distributed equitably;
- welleducated and skilled labour force, and healthy population;
- low crime and guaranteed national security;
- stable macroeconomic environment with reduced reliance on official foreign assistance.
Strategies and policies for the manufacturing sector include:
- encouraging the development of the private sector to enable the government to withdraw from direct involvement in manufacturing and marketing;
- improving efficiency through skills training;
- the promotion of exportoriented manufacturing activities;
- assisting the development of traditional and nontraditional agricultural products which have potential for added value through processing, notably cassava, kava, vanilla and pumpkins;
- the establishment of TongaTrade as a centralised agricultural and commodity export promotion wing of the Ministry of Labour, Commerce and Industries.
Major development projects for 1996/97 relevant to the development of foreign trade include the following:
- improvements to financial and economic management systems within government;
- education and training programmes in overseas institutions;
- agricultural diversification trial programmes;
- the purchase of a multipurpose fisheries vessel;
- small business assistance programmes;
- upgrading of airport facilities.
The functions of this committee are as follows:
- monitor and control prices of goods and services or minimum wage rates where it consider expedient in order to secure their availability at fair prices;
- has authority to order or fix minimum or maximum prices of any goods, services or prices incurred;
- require the trader to supply orally or written information regarding to goods and services in his possession as well as the wages and hours worked;
- at any reasonable time require the trader to provide or furnish copies of documents of any kind relating to the sale of goods and services in his business;
- enter the trader’s place of business or premises during business hours for the purpose of searching or inspecting documents or goods.
The main objects of Tonga’s monetary policy are to sustain the growth in foreign exchange reserves; to ensure foreign exchange is sufficient to meet the import requirements, and to maintain the value of the Tongan currency, the pa’anga (abbreviated T$).
In practice, however, no exchange control mechanisms currently exist, other than a requirement for commercial banks to report to the National Reserve Bank of Tonga on any transaction over T$ 50,000 in value.
The benefits granted from a Development Licence include the following:
- exemption from income tax relating to the enterprise for up to five years;
- in the case of a nonresident company or shareholder, exemption form withholding tax for the same period;
- accelerated depreciation of assets;
- exemptions from customs duties for up to two years on imported capital goods;
- duty drawbacks on imported raw materials and components;
- a 50 per cent exemption from Port and Services Tax;
- in the case of nonresident company or shareholder, the right to repatriate profits and capital gains.
The island character, limited range of natural resources and small size of Tonga has a critical effect on the nature and structure of trade, making Tonga highly dependent on imports for the bulk of its requirements of manufactured and processed products to the small domestic manufacturing base.
The Government Departments are as follows:
- Prime Minister’s Office;
- Ministry of Agriculture and Forestry;
- Ministry of Civil Aviation;
- Ministry of Education;
- Ministry of Finance (responsible for: Customs, Inland Revenue, Sales Tax, Post Office);
- Ministry of Fisheries;
- Ministry of Foreign Affairs and Defence;
- Ministry of Health;
- Ministry of Justice and Attorney General’s Office;
- Ministry of Labour, Commerce and Industries (responsible for Cooperatives and Tourism);
- Ministry of Lands, Survey and Natural Resources;
- Ministry of Marine and Ports;
- Ministry of Police, Fire Services and Prisons;
- Ministry of Works.
Details of the current levels of customs duties are as follows (following the sections is the current tariff):

Section Category Range of duties Comment/examples I Animal and products 0-25% Meat products 15-20%
Fish products 25%
Daily produce 15% II Vegetable products 0-25% Edible fruits/vegetables 15-25%
Coffee and tea 15% III Animal and vegetable fats 15% IV Prepared foodstuffs,
10/litre
Spirit 300% or T$ 35/litre
Cigarettes 330% or T$ 60/1000
Tobacco 150% or T$ 25/kilos V Mineral products 0-35 Petroleum 35%
Kerosene free VI Chemical products 0-30 Fertilizers free
Paints 15-30%
Cosmetics 25% VII Artificial resins and plastics 0-20 Motor tyres 20% VIII Hides, skins and articles thereof 0-20 Leather articles 20% IX Wood, cork and articles thereof 0-15 Fuel wood 15%
Sawn wood 15% X Paper and articles thereof 0-30 Paper 15%
Books free
Toilet paper 30% XI Textile and clothing 0-20 Fishing nets free
Textile 15-20%
Clothing 15-20% XII Footwear and headgear 20 XII Stone, cement, glass articles 0-15 Mostly 15% XIV Precious stones and metals 0-25 Jewellery 25% XV Base metals and articles thereof 0-20 Mostly 15% XVI Machinery and electrical equipment 0-20 Agricultural machinery free
Timber milling machinery free
Water pumps free
Refrigerator free
Domestic electrical equipment 15% XVII Vehicles and aircraft 0-45 Agricultural tractors free
Cars, vans and trucks 45%
Motor cycles 30%
Bicycles 15%
Ships and boats 15% XVIII Optical, photographic and medical equipment 0-25 Medical equipment free
Cameras 25%
Watches 25% XIX Arms and ammunition 25 XX Miscellaneous manufactures 0-25 Furniture 25%
Fishing hooks, lines, etc.
the King or the Government of Tonga;
- goods for diplomatic representatives;
- goods required under official technical assistance agreements;
- passenger’s personal effects (subject to limits);
- airport ground equipment;
- fuel and lubricants for international air services;
- educational, scientific or cultural articles;
- charitable gifts;
- marine lifesaving equipment;
- patterns and samples;
- religious goods;
- trophies, medals and photographs.
scientific and cultural books, documents and materials;
- containers for export of local produce;
- church bells and gravestones;
- coins and government notes;
- fertilisers;
- goods for charitable purposes or as Red Cross donations;
- cinematographic films for hire;
- goods for diplomatic representatives;
- goods for the use of the Government of Tonga;
- goods required under official technical assistance agreements;
- goods being transhipped through Tonga;
- household effects;
- motor vehicles (for persons taking up official technical assistance appointments);
- insecticides, pesticides and fungicides for agricultural use;
- agricultural machinery, implements and tools;
- timber milling machinery;
- stock feed and seeds.
There is no provision for import licences covering a range of imports, nor for periodic import of the same category of good over a period of time.
Exemptions from Sales Tax on imports are as follows:
- sales of goods and services to His Majesty the King;
- sales of goods and services to or by government;
- sales of goods from one vendor or business to another vendor or business for the purpose of further retailing or manufacturing and processing for sales to customers (excluding small retail stores and fuel bowsers that purchases goods for resale from vendor or import such goods for resale form vendors or imports such goods for resale unless registered by the Inland Revenue Department);
- sales of local agriculture, livestock and fisheries products in government markets by individual sellers around the market s or at farm gates throughout the Kingdom;
- sales of goods by street vendors e.
clothing and peanuts;
- sales of tickets to patients approved by the Minister of Health for international travel on production of a certificate of exemption from the Minister;
- sales of materials to be used for the building of residential homes on production of a certificate from the Minister;
- sales of export goods to foreign markets;
- sales of bread and flour throughout the Kingdom.
The Tonga Development Bank also offers facilities to exporters as follows:
- Venture Capital Fund: to provide equity capital support for the development of viable private sector projects, priority is given to projects which promote exports or import substitution;
- export guarantee scheme: provides bridging finance for the export of agricultural produce;
- export diversification fund: provided by TDB but administered jointly with the Ministry of Agriculture and Forestry.
It operates a marketing support fund which is directed towards exportoriented industries;
- the Commonwealth Secretariat’s export and industrial development division has funded participation by Tongan companies in trade fairs and exhibitions, in addition to providing technical assistance to exportoriented industries in Tonga;
- the ACPEU Centre for Development of Industry finances marketing studies and seed capital for joint ventures between European Communities' and Tongan enterprises, especially those with an export orientation;
- the European Commission, through the European Development Fund, has funded market studies for exportoriented industries in Tonga and has also assisted with the production of promotional and marketing materials.
In particular to put in place standards in relation to food or any class of food adulterated if any prescribed substance or class of substance is present or has been added, extracted or omitted therefrom.
0
Utility Activity Tonga Water Board Water supply Tonga Electric Power Board Electricity generation and supply Tonga Broadcasting Commission Radio broadcasting Tonga Telecommunication Commission Domestic telecommunications The Tonga Water Board was established under the Water Board Act,
(f) Free zones
There are no designated free zones or free economic zones in Tonga
(h) Traderelated environmental policies
General responsibilities for environmental matters rests with the environmental planning section of the Ministry of Lands,
The only international trade agreement which has the effect of giving Tonga countryspecific quotas is the Regional LongTerm Sugar Agreement, under which countries in the Pacific including Tonga has the right to apply for quota of sugar from Fiji.
Government’s policies are geared towards diversifying the agricultural sector through strengthening and developing infrastructural and support mechanisms such as the introduction of new crop variety, market development, new quarantine and new methods of treatment for produce and to provide continuous assistance to farmers.
Acquired rights
Tonga’s Copyright Act needs to be amended to include the following provisions:
- protection of computer programs as literary works under the Berne Convention 1971;
- protection of databases by copyright;
- protection of the rental right for the owners of rights in films, sound recordings, phonograms and computer programs;
- protection of performers from unauthorized recording and broadcasting of live performances; and
- to give protection to broadcasting organization control over the use of the broadcast signals for a minimum of 20 years.
There are a small number of professional and business associations in Tonga:
- Tonga Chamber of Commerce;
- Tonga Small Business Association;
- Tonga Society of Accountants;
- Tonga Law Society;
- Tonga Business and Professional Women’s Federation;
- Tonga Tourist Association.
Specific regulations apply to the provisions of certain services:
- shipping services; the licence issued under the Licences Act must be endorsed by the Ministry of Marine and Ports;
- telecommunications: applicants for a licence under the Licences Act are also subjected to the approval of the Tonga Telecommunications Authority as regards to technical aspects of their proposed operations,
Furthermore, the approval of the Cabinet is required before a licence can be issued;
- electrical services: approval must be obtained from the Tonga Electric Power Boards as to the qualifications and services to be provided;
- banking: A licence must be obtained from the Ministry of Finance under the Financial Institutions Act, 1991.
Other statistical data
GNP: US$158 million
GNP per capita: US$1,610 (World Bank, 1995)
Budgets: See Tables 1 and 2
Production and price statistics: See Schedule 1
Employment: See Schedule 2
Balance of payments: See Table 9
Foreign exchange: See Table 3
SCHEDULE 1
Selected Production and Price Statistics
1993/94 1994/95

Real GDP +2.
180;
Law Practitioners Act, 1989;
Financial Institutions Act, 1991;
Industrial Property Act, 1994;
Public Health Act, Cap 29, 1992.
The fees for issue of import licences are on a consignment basis, the fee level depending on the nature of the goods to be imported (technically, according to the business of the importer)
Current fee rates are as follows:

Nature of import Fee Importer of meat, fish or poultry 10.
Each application is considered by a trading licences screening committee comprising the following:
- the Secretary for Labour, Commerce and Industries;
- the Deputy Secretary for Industries;
- the Deputy Secretary for Commerce;
- the Director for Tourism;
- the President of the Tonga Chamber of Commerce;
- the Deputy Commissioner for Inland Revenue;
- the Chief Inspector (Immigration).
If the refusal is due to the application’s failure to follow the correct procedures or to provide the necessary information to support the application, the applicant may resubmit.
Regional LongTerm Sugar Agreement
The Regional Sugar Agreement whereby Fiji agrees to supply sugar to all member countries for a period of 3 years at an agreed price for an agreed amount.
f)
(T$ thousands)
Product Group 1993 1994 1995 Food and live animals 19,640 22,422 22,323 Beverages and tobacco 3,813 4,039 4,521 Crude materials, inedible 3,801 4,975 4,760 Fuels and lubricants 11,590 10,972 12,135 Oils and fats 263 358 359 Chemicals 5,993 7,574 6,833 Manufactured goods 16,649 18,027 19,026 Machinery and equipment 16,039 15,424 20,311 Miscellaneous manufactures 7,171 6,779 7,442 Goods not elsewhere specified 276 375 337 Total 85,235 90,965 98,047 Source: Statistics Department
Table 8: Exports by Main Product Group (f.
5 Source: Statistics Department
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