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Office Of The Deputy Prime Minister

Office Of The Deputy Prime Minister

23 March 2009

Deputy Prime Minister Sir Terepai Maoate says he’s disappointed that the Chamber of Commerce didn’t meet with government first to work out a united position to present to NZ Minister of Foreign Affairs Murray McCully during his recent visit to Rarotonga.

“Undermining the efforts of the government to deliver on critical infrastructure projects like the Rarotonga water network and upgrading of Rarotonga roads doesn’t paint a positive picture of the development aspirations of our nation,” says Sir Terepai.

“People have complained about the quality of water supplies and our roads, now that we have taken the best option available to our country to fix these problems, which is the lowest available concessional loan obtained from China, the Chamber goes on attack.”

Sir Terepai has been asked to respond to the Chamber’s recent comments on obtaining a China loan to fund much needed infrastructure upgrading by the Minister for Infrastructure and Planning Tangata Vavia. He says members would have been better informed had they consulted with him before meeting with McCully.

“They would have been told that China offered the cheapest interest rate of 2% spread over 20 years, with a grace period of five years.

He says with prudent management of our finances, the country can afford that repayment term.
“However, we have only negotiated that we would like to utilise $50 million for two projects being the road and water upgrades on Rarotonga.” Sir Terepai confirmed the Chinese loan has not been signed yet.

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“There is still a thorough process that needs to be followed before anything is finalised. One of these is that MOIP has been charged with identifying options to repay back the loans for the two projects. Cabinet is awaiting this information.”

“We can’t sit back and do nothing about Rarotonga’s deteriorating water supply and roads, if we do nothing now, the overall cost will increase every year.”

The Finance minister says government explored other options to obtain funding for the Rarotonga infrastructure project.

He explained that the Cook Islands’ improved credit rating with the Asian Development Bank means the country no longer qualifies for concessional loans.

European Union funding has also been considered too expensive at five percent interest and in Euro dollars – “that means we would be paying about 10% for any loan from the EU and that’s not cheap, so we had to look elsewhere.”

In 2007, Sir Terepai led a delegation to New Zealand for discussions with the former government on funding and priority infrastructure projects.

“We presented the case that NZAid funding that is drip fed to us is very complicated to access, so we requested that the process be made less cumbersome so that urgent infrastructure projects could proceed and be finished within given time lines, rather than taking years to get off the ground,” says Sir Terepai.

He added that following advice from ADB, the delegation presented the previous NZ government with a loan buy back proposal. This involves ADB providing a loan to the Cook Islands for a project, while the Government of New Zealand, through its international Aid agency NZAID will provide grant/financial resources under a “loan buy down mechanism” in support of agreed conditions/criteria to be met. As the Cook Islands adopts these conditions/criteria, the NZAID grant/fund will be used to ‘buy down’ part of the identified project debt.

Sir Terepai says the Cook Islands never received any feedback from the previous NZ government regarding the proposals.

“But I am heartened by the positive comments that Minister McCully has said with respect to NZAID funding, especially that the new government aims to increase assistance to the Cook Islands. The new government will also examine the loan buy down scheme we proposed. Although there have been no specifics mentioned, Minister McCully’s comments are pleasing.” The Australian government has implemented this scheme with the Government of Samoa for a project in their power sector.

Sir Terepai says if New Zealand offered a two percent concessional loan, “that would be ideal and we would pursue this instead of negotiating with the Chinese.”

“I am disappointed that the Chamber have been so critical with government’s attempts to improve infrastructure, not just on Rarotonga, but in the outer islands as well. I accept constructive criticism, but in this instance, I think their statements to Minister McCully have been like a points scoring exercise.

“I would have been more than happy to hear what alternatives they propose to the country to improve our infrastructure at the least possible cost – but there was only criticism and nothing constructive offered. The Chamber of Commerce in my view should be looking at themselves too and where there are problems they can address rather than just focusing on micro lobbying Government. They could be addressing the issue of high food prices in the Cook Islands and what alternatives do they have to minimize these.”

Last week the Finance minister issued a media release stating that prioritizing projects for up to $20 million in accumulated China grant funds has also been agreed upon – a portion of which is earmarked for outer islands projects and initiatives including development of agriculture, pearl industry, Penrhyn and Manihiki harbours and cyclone centres in Mitiaro and Mauke. Sir Terepai says government is planning to negotiate for at least 50% of the work being contracted locally.

Fifty percent of work that will need to be carried on a proposed civic building to be constructed using grant funds will also be negotiated for local contractors. Construction of the sports complex funded through a China concessional loan was not a decision made easily by Cabinet, explains Sir Terepai. “But in the long term, Cabinet is of the view that this will become an important venue for regional and national sporting events.” He says the Chamber should remember that all local facilities needed for the World Youth Netball Tournament and Pacific Mini Games are being built by local contractors. “We were able to successfully negotiate this with the Chinese and we re probably the only country which has been able to have a 50-50 sharing of the workforce.”

“In the mean time, says Sir Terepai, I am certain the Cabinet would also like to hear what sound solutions the Chamber has to the issues they have raised.”

ENDS

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