Finance Minister clarifies S.N.P.F. loans criteria
The Minister of Finance, Sili Epa Tuioti says that foreign investors should bring their own capital when they come to Samoa because that’s one of the benefits of encouraging foreign investment.
“They’ll should also bring the expertise, and whatever knowledge to our people,” Sili told the Samoa Observer.
“Yes we do expect investors to come in and bring the capital with them. And as the government, we provide incentives like tax holidays, we give them duty concessions on building materials, construction materials and some of consumers costs for a limited period.
“But you would expect investors to bring in the bulk of the capital needed so they don’t have to borrow from our banking sector.
“Once they are doing well, and they need further working capital, short term working capital and once they’ve proven themselves, that would be an opportunity for our banking and financial institutions to be able to lend to them.
“So if they’re not bringing the money in, then obviously they should not be called investors.”
His comments were made when he was asked his opinion about the criticisms of the Samoa National Provident Fund’s (S.N.P.F.) decision to loan “millions” to foreign-owned companies.
The story surfaced last month when a Chinese businessman who owns the Coin Save businesses was appointed to turn the costly and unprofitable Vaitele market, into a profitable venture.
He was said to have received more than five million tala in a loan from the S.N.P.F.
However, Sili warned that discrimination should not be part of the loan process.
“Let’s not be discriminatory in terms of our lending, because really, when the S. N.P.F. lends out its money, it gets interest.
“And that interest on investments by the Fund averages about 30 million tala a year; that’s the interest they get from all the investments, when they lend out.
“That money will go back into our account and some of that money will be allocated to increase our contributions.
“So I think lending is an essential part of S.N.P.F’s operations, because it’s through interest, that we are able to add on to the value of our contributions.
“But I take the point when foreign investors come here, whether they are Asian, European, Australian or New Zealanders, our expectation is that they will bring in the capital themselves.
However Sili said that shouldn’t stop us from helping them if we see that after several years, they’re doing well and they’re credible.
“Then of course there are opportunities for the Fund to loan.
“As I’ve mentioned earlier, this should be lent on the basis that there’s a strong business case, they have the assets to cover the loan in an event where they aren’t able to pay it back.
“So it’s important to have that due diligence done.
To that end, he made it clear that the S. N.P.F. has its own guidelines and policies.
“They are there for us to follow to make sure that first of all, it’s not a high risk loan.
“We need to be certain that there’s a sufficient asset as a guarantee in the event that they’re not able to repay the loan.
“Because the S. N.P.F. Act clearly states that it’s in the interests of all the contributors, you and me and everyone else who is contributing.
“So whatever investments they make it’s important that they take into account how this is going to impact on the very people that they’re supposed to be making allowances for.
Sili said he believes that S.N.P.F. is doing a great job for the people of Samoa.
“They are doing a good job, obviously in terms of investments and making loans to foreign-owned companies.
“Also, the same sort of principles apply to loans to our own people.
“Many of our Samoan companies are borrowing from S.N.P.F. including the churches and individuals.
“So whether we lend to foreign people or locals, S.N.P.F. needs to make sure as part of their due diligence process, that it’s a credible business - that it has a business license and has met all the other requirements. That includes paying the S.N.P.F. contributions for their employees, and ensuring they also have the cash flow to be able to service the loan.”
He pointed out that foreign investors are given a license by the Ministry of Commerce, Industry and Labour.
“Obviously my expectation is that those people who come in with the resources, should fund the project themselves and later on, S. N.P.F. may contribute to funding.
“You know the S.N.P.F. has invested in Aggies Resort at Mulifanua and has also invested and lent to the Taumeasina Island Resort project, obviously they see the future potential in tourism to create jobs, and businesses.
“So that will obviously help the Fund in terms of getting profits.
He said that we shouldn’t expect miracles to happen overnight.
“I think sometimes we expect everything to be profitable in year one or year two; I think that’s the ideal.
“But we also need to take a longer term view, and then again, as long as we do our homework to ensure we know the tourism industry is going to grow because as you know, this is one of the key drivers of our economic growth.
“And that reflects on where the government is putting priority.”