Lease Issues Reported Holding Up Chinese Loan for Tonga

Text of report by Tongan government website Tonga Review on 7 March

The China loan agreement has hit a snag. No official word has been released except from the Chinese, who insist that they are waiting for the finalization of the land ownership issue before the reconstruction can proceed.

This argument does have merit because the land parcels in the heart of Nuku’alofa are held by three different parties: royal estate; government; private landowners

Any reconstruction project must be tied to a long-term land lease or ownership arrangement to ensure it can be used as collateral for the China loans. This is a complicated matter because many of the buildings destroyed on 16 November 2006 were on private leasehold land or government leasehold land.

Most of the land in the central business district is private owned land and this means that land owners are the key people behind the loan. Businesses wishing to rebuild must have a long-term lease and this will only be possible if landowners agree to a long term lease.

This seems to be where the hold-up is. Government seems to be the facilitator and will work with landowners to secure long term leases for businesses in order to get a loan approved by the Chinese. They cannot force the landowners and given the money at stake, landowners may demand a much higher lease payment. This is only natural given the potential revenues generated after the reconstruction of the central district.

If landowners drag their feet, this could force government to offer other incentives such as land swaps or monetary incentives, but ultimately it is the landowners that hold the power now.

Alternatively, if businesses see that it will cost them more to renew their leases then they may look at forgoing the reconstruction and find other areas to rebuild outside of the main centre. Or they could stop altogether and decline the reconstruction offer.

There is no denying the fact that the land issue is now playing a main role in determining the outcome of the China loan and the longer it drags on, the less likelihood it will proceed.

Some landowners could be having cold feet, especially if they are being asked to sign over 99 or even 999 year leases as suggested during the reconstruction discussions. This is the snag that government must overcome if they are to access the China loan monies needed for the reconstruction efforts. The Chinese are likely to ask for collateral and the land is part of that.

Originally published by Tonga Review website, Nuku’alofa, in English 7 Mar 08.

(c) 2008 BBC Monitoring Asia Pacific. Provided by ProQuest Information and Learning. All rights Reserved.