Letter to Prime Minister Tuilaepa Sa’ilele Malielegoi

By Stupid Palagi* ,

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                      CHINESE HELP FOR SAMOA: One of many projects funded by the Chinese govermment for Samoa.

CHINESE HELP FOR SAMOA: One of many projects funded by the Chinese govermment for Samoa.

Dear Minister Prime Minster, 

This letter is about those Chinese loans. 

Now Mr Prime Minister, please don’t get excited about the little bit of Chinese aid you’re receiving in the form of donated computers, and so forth, since their overall aid to Samoa is only a shadow of that given by small economies like Australia and New Zealand, year in and year out. Chinese generosity, as you are well aware, is primarily mistaken for their provision of loans to Samoa for Chinese built infrastructure.  

The facility behind this is the Chinese government owned EXIMBANK, who provide funding for such projects in developing countries.  

Now these loans are for 20 years at 3%, with no payments for the first 5 years, which makes it easy for governments without the funds to take on these projects and enjoy the benefits within the election cycle before having to dip into the public coffers and start paying them off.  

EXMIBANK loans have a requirement that at least 50% of the project goes to approved Chinese contractors, leaving the possibility for local suppliers and labour to benefit from the development.  Great in theory, however most of the Samoan EXIMBANK funded projects have seen upwards of 90% of the projects go to the Chinese contractors, missing the opportunity of millions of Tala (WST$500m) to be injected into the local economy.

Looking back through published government records shows almost US$500m of these EXIMBANK funded projects since FY 2008/09.  When all of these current loans are at 5 years, the Samoan government will have to find WST$30,000,000 every quarter to service these; now that's WST$120,000,000 per year out of a collected revenue of only about WST$578,106,890 (Est. 2016/17), or 20.9%.  

Now if you went back a couple of years, you should find that reports of Tonga being in trouble circulated when their repayments were at 16% of their budget revenue, so it is obvious that Samoa has not learned from other countries bad examples.  

With annual repayments of the current Chinese EXIMBANK debt peaking at $120,000,000 per year and the 2016/17 estimate of foreign debt repayment of only $58,282,355, of which I estimate between WST$57-65,000,000 is due on those EXIMBANK loans into the 6th year or later, we are either currently defaulting on these or the other international loans.  

Maybe this explains the seemingly preferential treatment that Chinese businesses are receiving in Samoa.

All of these numbers are based on documented facts, published by the Samoan Government and assume that there will no further debt incurred in the future to the Chinese EXIMBANK. 

This is unrealistic, Mister Prime Minister, as there are future stages in the Airport development to think about, and no doubt there are also other projects we’ve yet to commit to publicly.

So how can the Samoan Government hope to pay for these loans?  

The way I see it Mister Prime Minister, defaulting is unlikely, forgiveness of these loans has never happened in the history of the Chinese EXIMBANK anywhere else in the world anyway, so that this is unlikely to change for Samoa. 

And that will leave us here in Samoa with the only options of increasing tax and other revenue collection by about 20-25% on current efforts, or to reduce Government Services to the Samoan people.

And even that is unlikely as they are at fairly low levels currently anyway, unless AID from other generous countries make up the shortfall in Services while revenue is funneled off to pay off the Chinese debt.  

Either way, Mister Prime Minister, it looks as if it’s a tough financial future for Samoa up ahead, if you asked my opinion. 

Anyway, the data I’ve collected that I feel you’d like to look at, if you haven’t seen it already, is as follows:

And now that you’ve seen the data I’m talking about Mister Prime Minister, do you have any idea about why the land between the airport terminal and the golf course, is being cleared?  

Well, according to one taxi driver who did not want to be named, it’s for a 500 room Chinese hotel.

Naturally Mister Prime Minister, I cannot prove that, but then perhaps you can.

Now Mister Prime Minister, please just think of me as someone who truly cares, 

Kind regards,

 

Stupid Palagi 

*The stupid palagi is a taxpayer of Samoa.

© Samoa Observer 2016

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