Submission on Foreign Investment Bill 2019

On behalf of the Tonga Chamber of Commerce & Industry (TCCI) and businesses in Tonga I would like to acknowledge the very kind assistance of the House in allowing TCCI and businesses the opportunity to be consulted and make input into the Foreign Investment Bill 2019. We deeply appreciate this opportunity.

The Chambers usual consultation practice is to forward the Bill to members and businesses for comment. We then collate those comments and forward to the appropriate Ministry as the TCCI and private sector submission.

Given the urgent need for the House to pass the Bill, Chamber sent out the Foreign Investment Bill (FIB) 2019 on Wednesday 20 February 2019 for comment with a deadline of Friday 22 February 2019, 10am for receipt of comments.

We would like to take this opportunity to make some comments on the consultation process between government Ministries in general with Chamber and the private sector. Generally, we think the current process is good, but like all processes, improvements should always be sought and made. Chamber proposes the following to improve the current consultation process for consideration.

Comments on the Consultation Process and How It Could be Improved
 

1. Chamber has sought to sign a formal PPD (or Public Private Dialogue) MoU with the MCCTIL to formalise regular consultation with the government on pressing issues affecting businesses in Tonga. We think an effective and regular PPD process will go a long way in smoothing the key processes holding back the growth of business in Tonga. TCCI would welcome the opportunity to restart discussions with MCCTIL regarding the signing of a formal PPD MoU. In addition, it may be worthwhile to consider if the PPD process should be widened and/or adapted to also include the House in the PPD process.

 
 2. Consultation on business related legislations must be timely.
     (a) Businesses must be given sufficient time to consider & prepare
     written submissions on pending legislation. Frequently in Tonga the person that should write, comment is also the manager of the
     business and has limited time to prepare submission as well as running the business.
 
    (b) In addition, consultations must be recent. For example,consultation conducted in say 2016 for legislation to be passed in 2019,
    may well be dated and need to undergo a fresh round of consultation in 2019 as business conditions & environment may have
    changed markedly from when the consultation took place.

Specific Comments:

1. Part 3 – Administration of Foreign Investment Regime in Tonga

      Propose that a Committee consisting of Government and Private Sector members including the Chamber of Commerce should make
      the final decision in what constitutes a Reserved and Restricted List and in granting the Foreign Business Certificate and not the CEO
      and Minister. The current proposed law may lead to favouritism if only two (2) people make all the decisions where a lot of money
      will be involved
 
  2. Section 19Again, regarding this Committee, it is proposed this same Committee should handle Appeals from dissatisfied
     customers/clients and not the Minister alone. The process will be improved if the Committee is allowed to evaluate the worthiness of
      the appeals.
 
  3. Clause 15 (1) of the Bill states:“The Registrar shall determine an application for the issue of a certificate within 5 working days after
     receiving the application.”
      Surely 5 days is far too short to make a proper assessment and proper checking of most applications…Suggest that at the very
     minimum a month would be a more reasonable time frame
 
  4. Clause 6: Meaning of an overseas person  
     In this Act, “overseas person” means
     (b)a body corporate that is incorporated outside Tonga 
      Does this mean that a Tongan subject (irrespective of where he lives)? who has a company incorporated overseas will have to go
      through the process of applying for a certificate?  Clarification is needed on this please.
 
  5. In Part 3, perhaps make reference to the following:
      Reserved list mainly to assist with local and small business enterprises and in some areas where large scale investment are not              necessary to start a business investment.
     However, there is scope for foreign investment, especially in areas beyond local financial capabilities, advanced technology and in           areas of major tourism resorts etc. where investment capital of more than ToP5 million would be required as minimum investment         level. Foreign investment in these areas would significantly boost Tonga's economy, create new markets and new local jobs and as a       catalyst for other related small local businesses to thrive.

  
General Comments:
 
  6. TCCI understand that the passing of the FIB will lead to the release of $35 Million in Budget Support by aid donors. Chamber                proposes that government consider using part of these funds to support import substituting business that have operated
     successfully in Tonga for more than 2 years eg in the manufacturing sector
 
  7. A fair and credible system for vetting and approving foreign investment applications is needed. 

  8. On the whole the Bill is good; Its main drawback is that there is no mechanism in the Bill to ensure that there is ongoing and regular
      consultation with the Tonga Business Community, most/many of whom are represented by the Tonga Chamber of Commerce &
      Industry, and on whom the effects of foreign investment will be most felt.
 
  9. This Bill when it becomes law will have significant impact on the Tongan-owned businesses. The disappearance or death of the
      ‘village falekoloa’ is a direct result of the Govt – over the past 20 years – not taking appropriate measures to assist and to protect
     the Tongan falekoloa. Ko e kolo pe ko e ‘oku ‘ikai ke ‘iai ha fale koloa muli (eg Kolonga) ko e kolo ia ‘oku kei mo’ui pe e ngaahi
     falekoloa ‘a e Tonga. 

  10. A “rethink” of our licensing system, immigration and employment laws and regulations is imperative. 

  11. To include in the Bill provision for the establishment of an oversight committee to oversee the administration of this Act and its
     regulations, membership of which will include the CEO/Registrar, as Chairman, plus a Representative of the Chamber and a Business
    person, and others as the Min sees fit. This will ensure constant/ongoing consultation and oversight…..NZ has the OIO – Overseas
    Investment Office – which oversees overseas investment in NZ – to encourage but at the same time protect those business and assets
     which NZ determine to reserve for New Zealanders. 

  12. This Committee will also consider and make recommendations on all applications for F/Inv certificates/approvals; also, be the
    Committee to consider/review and make recommendations to the Minister for any changes to the Reserve, Restricted and Prohibited
     Lists, and any other relevant issues to be included in the Regulations. 

  13. The consultation on Prohibited, Reserved and Restricted Lists is a must, and should be ongoing and regular.  The only way that this
     can be done is by establishing a Standing Committee written in to the Bill, as suggested above. 

  14. My concern with the Foreign Investment Bill 2019 is the risk that current local businesses face when they have spent considerable
     time and money into developing not just their business, but the sector in which they operate as well.  Some existing businesses have
    over the years build up their business or sector from scratch ie identified a new export market oversea and build that market over
    the years, taking a lot of risks along the way. Then government or aid donors, fund competing operations to operate in the same
    market that was first developed by existing local business who took the early risks. Also, these first local investors may have build-up
    supporting local industries involved in their sector value chain. Such local business that took the early risks & survived should no
    to compete against govt or donor funded/subsidised companies - this is not fair competition. Let other local business compete with
    them, but without govt or donor assistance just like the first businesses did - that is fair competition. 

  15.In addition, if foreign investment in the form of aid is used to start-up businesses in Tonga, once the donor leaves or funds
     provided is finished Tonga may not have the capacity to sustain the business and it becomes a short-term handout rather than a
     long-term business investment, not to mention undermining effect they would have on our local businesses. Government and donors
    should ensure they do their homework and work only with Tongan partners who are capable & experienced to continue on with the
     business once the subsidies or donor funds is finished. 

  16. Establishment of an advisory investment board, consisting of a good mix of representatives (public and private sector) from the key
    sectors such as energy, Chamber of Commerce, Tourism Association, energy, environment and planning. This Board to give advice
    from time to time in decision on major foreign investment and to help the Minister in making key decisions. 

  17. I thought somewhere in the beginning and Introduction, the overall position of Tonga in terms of foreign investment be
     summarised and viewed. Perhaps something like this:
    Tonga is committed to creating an attractive investment climate for both local and foreign investors. Tonga is politically stable with a
   growing economy, offer skilled, well-trained but relatively low labour costs, a favourable exchange rate, conducive environment for
​    investment with political and economic stability. Tonga provides a highly favourable investment environment.