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China's gift causes big trouble for tiny Tonga

By Nick Perry

Associated Press

POSTED:
LAST UPDATED: 10:58 a.m. HST, Jun 24, 2014


NUKU'ALOFA, Tonga >> It's almost 10 a.m., but the barista at this tiny Pacific kingdom's domestic air terminal has yet to make a single cup of coffee.

Molly Fatai says her wages at the cafe have been cut by a third since last year. Flights leaving for Tonga's outer islands have been halved to two or three per day, except for Sundays, when there are no flights at all.

The absent coffee-drinkers are mainly New Zealanders, the most common visitors to these remote, poor and beautiful islands. The New Zealand airline that transported many of them has packed up and left, and New Zealand's government is warning its citizens not to use the local carrier.

"The economy of Tonga has suffered quite dramatically as a result," said Stuart Perry, the general manager of Tourism Tonga.

What set off this reaction from Tonga's wealthy neighbor and longtime friend? A newer, more distant and even wealthier friend -- China -- and its gift of a plane.

It's a tiny skirmish in a battle for global influence with unintended consequences for this nation of just over 100,000 people.

At Tonga's main airport, built by U.S. Army contractors during World War II, maintenance crews work on the troublesome freebie: a 60-seater turboprop Xian MA-60. Chickens poke about in coarse tropical grass as Sau Tongi picks up his young son and looks through the fence onto the runway.

"I don't know what they are fixing. It's a new plane," he says. "I don't think I'm going to fly on that plane. Better to be safe."

When Tonga took delivery of the plane, worth perhaps $20 million including spare parts and training, it prompted New Zealand company Air Chathams to leave after five years rather than face what it considered to be subsidized competition. That left Real Tonga, which operates the MA-60, as the sole domestic operator.

"It was very sad for us. We put our heart and soul into it," said Air Chathams owner and chief executive Craig Emeny.

The New Zealand government posted a travel advisory on its website, warning that MA-60 planes had been involved in several recent crashes in other countries and didn't have recognized certification. New Zealand also withheld about $5 million in tourism aid.

"We can't just sit back and say, 'That's OK,'" New Zealand's Prime Minister John Key says of the plane's certification.

Tourists often come to Tonga seeking a more authentic experience than on more developed islands like Fiji and Tahiti. The industry is small yet makes an important contribution to the national income. Perry says those who rely on it are wondering if their businesses will survive.

Tonga has accused New Zealand of acting like a bully. It pointed out that New Zealand had not posted similar warnings for other countries operating MA-60s -- something New Zealand says it will investigate. Tonga said the plane was properly certified by China and it planned to soon accept a second Chinese plane, a Harbin Y-12.

"We need all the planes we can get," said Vili Cocker, Tonga's civil aviation director. He said he didn't know of anything China wants in return.

"All I know is they are generous enough to offer these as gifts."

China's Ministry of Foreign Affairs said China had provided the plane at the request of the Tongan government "as a matter of bilateral economic and technical cooperation."

"China always supports providing assistance, without political conditions, to island nations," the ministry wrote in response to questions from The Associated Press.

China said it wanted to help "accelerate economic and social development" and improve people's lives in the Pacific, none of which was directed at forming political or military alliances.

New Zealand has long provided aid to Tonga, about $26 million a year. Australia and the U.S. also contribute. Tonga, in turn, has maintained close ties with its Western allies, sending troops to both Iraq and Afghanistan.

But while the U.S. has talked about its renewed focus on this region, its so-called Pacific pivot, China appears to have a pivot of its own.

Over recent years, China has financed and built hospitals, schools, offices and roads across Fiji, Samoa, Vanuatu and other Pacific islands. It has offered Mandarin lessons and scholarships to thousands of students, and has hosted and trained hundreds of government officials in Beijing.

Is it about altruism, or influence? In 2011, then-U.S. Secretary of State Hillary Clinton made her view clear:

"Let's put aside the humanitarian, do-good side of what we believe in. Let's just talk straight realpolitik. We are in competition with China," she told the U.S. Senate Foreign Relations Committee. "They have brought all of the leaders of these small Pacific nations to Beijing, wined them and dined them."

Since then, senior officials from both China and the U.S. have downplayed the notion they are competing in the Pacific, instead emphasizing the need to cooperate.

"There are always some people in China and the U.S. that tend to regard the other side as a chief rival or an enemy," said Wang Shaopu, director of the Center for Pan-Pacific Studies at Shanghai's Jiaotong University. "But the strategy, and the decision-makers, of both countries are trying to avoid that situation from happening."

Tonga's deeper ties with China began after 2006 when rioters sacked the capital, Nuku'alofa. Beijing offered loans with fabulous terms: 2 percent interest and deferred repayments.

Budget records show Tonga borrowed $118 million -- one quarter of its annual economy -- from China's Export-Import Bank, a commercially run bank whose interest rates are sometimes subsidized by the Chinese government as a form of international aid.

Tonga used the money to construct downtown office buildings, pave roads and even add an extension to the king's palace.

Tongan Prime Minister Lord Tu'ivakano said the loans were too good to turn down.

But not everyone was happy with the conditions. Crews from China completed much of the work, to the chagrin of Tongan tradespeople.

And now, the time to start paying back China is fast approaching. Tonga has tried and failed to have the debt forgiven. Instead, it has managed to defer principal payments until 2018, when it faces a brutal repayment schedule.

The World Bank says the repayments will have the effect of "substantially draining the government's cash balance," placing Tonga at "moderate" risk of debt distress.

There are other signs that many Tongans have mixed feelings about China's impact, such as the iron bars that fortify about a dozen small stores selling bread, canned meat and soda in the township of Vaini.

Many of the businesses are owned by Chinese immigrants from Fujian province. The bars are there to protect them and their wares from attacks, which police say are sometimes racially motivated.

"There's a very substantial and recent population that has arrived from China and is having a major impact," says Graeme Smith, a research fellow at Australian National University's College of Asia & the Pacific. "It's frontier capitalism."

Smith says he's not convinced China has any grand designs for the Pacific region, such as securing access to tuna fisheries or minerals, as some have suggested. And he says that while China has historically used its largesse in the Pacific to compete with Taiwan for U.N. votes, relations between the two rivals have improved.

As for the plane, Tonga has asked the World Bank to take an independent look. And Perry, the tourism manager, says Tonga has also ordered some British-built BAE Jetstream-32 turboprop planes that may pick up some routes and reduce tensions.

"It's a big world," Perry says. "Hopefully we can all work together."

___

Associated Press researcher Yu Bing in Beijing contributed to this report.






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