Aug 19, 2017 Last Updated 2:11 PM, Jun 12, 2017

A challenging situation

The level of Marshall Islands’ offshore loan debt is impressive—over US$120 million— for a country that had revenue of only US$107 million for the fiscal year 2011. The 13 loans the country obtained from the Asian Development Bank have left it owing over US$73 million, while state-owned enterprises (SOE) owed another US$50 million, mostly to a U.S. government lending agency. The annual loan payment due to ADB is increasing each year and will peak at US$3,548,289 in FY2016. Coupled with the SOE debt, the government is shelling out around US$7.5 million annually for debt servicing on top of subsidizing nearly all of its SOEs.

Barring any new loans, ADB debt is due to be cleared by FY2037. Soaring fuel prices in the late 2000s pushed the government’s power utility company into near bankruptcy, forcing it to secure a high-interest loan to pay for fuel. The loan nearly crippled the SOE. The power utility gained support of the ADB as the company launched a recovery plan in 2010. ADB lent funds to the government to pay off the higher interest commercial bank loan to give the Marshalls Energy Company financial breathing room.

While some of the country’s long-term debts to ADB are from loans that were poorly planned or should not have been issued in the first place, the power utility loan has been a key factor in the company’s resurrection as a functioning entity. In part because the utility company is pursuing an aggressive improvement plan, it was able to negotiate a two-year loan payment deferment with the U.S. Rural Utilities Services, relieving it of having to pay US$2.2 million and gained a US$2.3 million grant from the same U.S. agency to rebuild one of its large power plant engines, which will, when completed, reduce costs by cutting the amount of diesel consumed and further stabilize power service.

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Tax haven tsunami

US$32 trillion hidden in havens, offshore banks

Two months ago, sitting over a bottle of toddy, an offshore source sums up industry insider forecasts: “They know the writing is on the wall.” Overhead, coconut tree fronds rustle above us in brief summer breezes. One month ago, that breeze turned into a global gale force wind, history’s biggest expose sweeping like a hurricane through tax havens around the planet. That expose triggered off rule changes of earthquake proportions for tax havens. “Seismic”, reported the Guardian, an English daily. “Gigantesque” exclaimed La Libre, a French weekly. “A game changer”, commented the Tax Justice Network. “...a virtual [Mount] Everest of data ...” said Die Spiegel, a German daily These were just a few of the tsunami of headlines from the news media around the world, delving into 2.5 million leaked files uncovering the hidden world of more than 100,000 people and companies.

Files came in the form of a hard drive posted to an Irish journalist working long-term in Australia, Gerard Ryle, who a few weeks later went on to head the ICIJ, the International Consortium of Investigative Journalists. Immediate comparisons were made with Wikileaks, famed for publishing a quarter of a million diplomatic cables leaked from the US State Department. More recently, Wikileaks published thousands more files in what it called the Kissinger files. Wikileaks’ cables show government secrets, including behind-the-scenes deals. ICIJ offshore files exposed people and companies behind corruption of those governments.

Those named as using the havens include powerful politicians, US dentists, Wall Street traders, Russian executives and international arms dealers. Estimates of offshore wealth hidden in tax havens and offshore banks go as high as US$32 trillion.

Many news headlines featured coconut tree logos, a visual signpost pointing towards what the French media describe as “fiscal paradises”. Focus fell heavily on the role of the Cook Islands’ offshore finance centre as the origins of a global network, Portcullis Trustnet.

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ANZ Bank’s Pacific Outlook for 2015 projects Pacific Island economies to achieve a positive growth this year with Papua New Guinea’s economy forecast to soar to a record 20% growth driven by exports of liquefied natural gas (LNG).

The Australia and New Zealand Banking Group’s (ANZ) Pacific outlook for 2015 is forecasting PNG’s growth at 20 per cent while the Asian Development Bank’s (ADB) estimations are 21 per cent.
Either way PNG’s economy will thrive this year on LNG production which started in 2014 but this year will be the first full year of production.
Fiji’s economic growth will be strong following last year’s elections with a forecast of a 4 per cent growth this year.
Both Samoa and the Solomon Islands economies will improve following last year’s natural disasters. Samoa’s Gross Domestic Product (GDP) is at an optimistic 2.4 per cent while the Solomon’s will significantly improve from its 0.3 per cent in 2014 to 3.3 per cent this year.
Timor Leste’s economy is estimated to perform close to 7 per cent, Vanuatu below 4 per cent and Tonga is expected to remain sluggish and below 2 per cent.

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By Samisoni Pareti

WITH Asia projected to grow by 5.6 per cent per year for the next 20 years and expected to account for nearly 40 per cent of global output by 2030, it makes good business sense for small islands of the Pacific to look to Asia as their next big trading and business partner.

That’s the assessment of a recent study done jointly by the Manila-based Asian Development Bank and the ADB Institute on ‘Leveraging the Benefits of Asia’s Integration and Growth for Pacific Economies.’
Although the full report is due for publication early this year, the bank’s quarterly Pacific Economic Monitor published snippets of the study outcome last December.
Statistics showed that trade – both in imports as well as exports -- between the Pacific and Asia had increased nine times from 2000 to 2012.
Trading in 2000 amounted to US$2 billion, but this reached $19 billion in 2012.

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FOR almost 30 years, Kina has always provided convenient and affordable avenues for working class parents to assist them in providing their children a decent quality of education and a brighter future. We provide loans for school fees and education through our EsiLoan product, available to staff of pre-approved employer groups or a personal loan through Kina Finance. Access to finance for all Papua New Guineans remains a key priority for Kina and its continuous endeavour to provide innovative products and services that will aid wealth creation for all Papua New Guinean’s.

We have also been helping every day Papua New Guinean’s with their every day financial needs. Aside from providing loans for education we also provide loans to customers who may want to buy a motor vehicle or their first home, help with investing in their financial future with competitive term deposit rates, assist with buying shares on POMSoX and overseas markets and of course we must not forget superannuation. The Kina Group manages funds and administration services to Nambawan Super and CTSL. We consider ourselves to be market leaders who provide innovative and competitive products and this has been demonstrated through our EsiLoan Cash Card, which continues to gives our EsiLoan customers instant access (within 2 hours of approval) anywhere, anytime. We have also just recently launched our EsiLoan Android Calculator App which is now available on the Google play store, developed in-house by our very own IT team.

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By Syd Yates

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