Baseline Assessment Report Strengthening diaspora engagement and remittances in the Kingdom of Tonga TA/039/2016 1
The contents of this report are the sole responsibility of the author and cannot be taken to reflect the views of the ACP Secretariat and its Member States governments, the European Commission or the International Organization for Migration. Prepared by Matthew Gibbs Date: 17 October 2016 2
Table of Contents List of acronyms... 3 Executive summary... 5 1. Introduction and background... 6 2. Baseline assessment methodology... 8 3. Assessment results... 8 3.1 State of affairs... 8 3.2 Key baseline indicators... 12 3.3 Stakeholders mapping and analysis... 18 3.4 Feedback regarding the Technical Assistance Fiche... 20 ANNEXES... 22 Annex 1 List of literature reviewed... 22 Annex 2 Questionnaires... 23 Annex 3 List of key informants... 24 Annex 4 Data on key Non-State Actors... 27 3
List of acronyms ANZ Australia New Zealand Banking Group AUD Australian Dollar BA Baseline Assessment BSP Bank South Pacific CSO Civil Society Organization IOM International Organization for Migration MTO Money Transfer Operator MCCTIL Ministry of Commerce, Consumer, Trade, Innovation and Labour MORDI Mainstreaming of Rural Development Innovation NRBT National Reserve Bank of Tonga NSA Non-State Actor NZD New Zealand Dollar PFIP Pacific Financial Inclusion Programme RSE Recognised Seasonal Employer SWP Seasonal Worker Programme TDB Tonga Development Bank TSDF II Tonga Strategic Development Framework (II) 2015-2025 TOP Tongan Pa anga UNDP United Nations Development Programme USD United States Dollar 4
Executive summary This Baseline Assessment report outlines observations from a desk based review of available research, reports and stakeholder meetings undertaken during a five-day visit to the Kingdom of Tonga between 03 rd and 07 th October 2016. The report begins with an introduction of the proposed intervention: Strengthening diaspora engagement and remittances in the Kingdom of Tonga (Section 1). Following this, the report outlines the Baseline Assessment methodology (Section 2); the current state of affairs with regard to Tonga s diaspora, remittances, and investment (Section 3); possible baseline indicators that can be used (Section 3.2); mapping of relevant stakeholders (Section 3.3); and specific feedback on the Technical Assistance Fiche (Section 3.4) In terms of the current state of affairs, according to available data, including census reports and immigration arrivals records, the largest emigrant Tongan populations are found in New Zealand, the United States of America (US) and Australia. In addition to Tonga s emigrant diaspora, there is a relatively large group of temporary migrants travelling overseas for seasonal work or to undertake studies. Tonga s emigrant diaspora together with the seasonal workers and international students are making a substantial contribution to Tonga s economic and social development through remittances, knowledge and skills transfers. The National Reserve Bank of Tonga reports that personal remittances from New Zealand, the US and Australia accounted for more than 90 percent of the total remittance receipts between June 2015 and June 2016. Approximately 88 percent of remittance transactions are completed through Money Transfer Operators (MTOs) in Tonga, however, the introduction of stringent anti-money laundering rules has resulted in the closure of several MTOs. Since November 2015, there has been a noticeable rise in the total overall cost of sending money to Tonga. The report notes that it would be important to have more detailed information about Tongans living and working outside of Tonga. This is particularly important with regard to understanding the rationale and intended goals underpinning the formulation of a diaspora engagement strategy, which is a specific objective of the Technical Assistance intervention. There is also an unanswered question about who the strategy should be targeted towards. For example, should the focus of the strategy be on Tongans living overseas that maintain direct links to Tonga, or should it extend to include second and subsequent generations that may have no direct ties to Tonga? There are also other groups to be considered such as business, knowledge and cultural diaspora. To promote sustainability, it is also important to ensure there is a broad base of support for the strategy among church leaders, village associations, civil society organizations, the private sector and other government stakeholders. The strategy must also be structured in a way that supports a genuine two-way partnership allowing for the economic, social and cultural development of Tonga and Tonga s diaspora. If possible, it would help if a representative survey among Tonga s diaspora could be incorporated into the design of the intervention to help answer some of these questions, and gain a perspective from within the diaspora. This report proposes the following baseline indicators: (i) the number of returning residents visiting Tonga each year; (ii) the number of returning resident visas issued to non-tongan citizens each year; (iii) the number of people taking up Tongan citizenship each year; (iv) the total annual volume of remittances, by country, value of average remittance transaction and MTO/Bank; (v) the average total cost of sending money to Tonga from Australia, New Zealand, and the US; and (vi) the total annual volume and average transaction value for Compensation of Employees category of remittances. The report also proposes that a central registry of planned celebrations, church conferences, fundraising efforts to support local projects and events is developed to help identify who the diaspora groups are; what their priorities are; and contact points for communication. This registry might also include information about Tongans studying abroad and scholarships, e.g. the numbers of Tongans overseas, their locations, and what courses they are studying. 5
1. Introduction and background 1 It is currently estimated that there are more Tongans living overseas than in Tonga. According to the World Bank estimates of 2014, Tonga has one of the highest remittances to GDP ratio in the world (23.8%). The World Bank estimates that 80% of remittances are being used for immediate consumption. It is important to acknowledge that Tongan citizens and families have a right to decide on their own what to do with money received from abroad. The remittances also provide what donors have termed an important social safety net that helps families respond to immediate, emergency needs, as well as important social and cultural obligations. However, there may be opportunities to identify and provide a range of alternative options to Tongans both abroad and in Tonga. This could potentially help increase the share of remittances being used for mid to long-term investments in housing, small scale infrastructure, education and small business investment. As the Tonga Strategic Development Framework 2015-25 (TSDF II) notes: Emigration has been a key characteristic of Tongan development for the last four decades [ ] This relationship between Tongans in the Kingdom and those in the diaspora is a major asset that will be further supported and encouraged in TSDF II. Our diaspora increases opportunities for trade and exchange, access to education and remittances. These all support the quality of life in Tonga, and act as an important buffer to increase resilience in the event of disasters [ ] More will have to be done to help integrate and encourage both new immigrants and overseas Tongans to support the Vision of TSDF II. Considering the importance of remittances to Tonga s economy, and the significant potential of Tonga s diaspora to further assist in Tonga s socio-economic development, there is a need to strengthen the relationship and engagement with the diaspora. This could include identifying attractive and sustainable options for the use of remittances, and the formulation of policies that would lead to reducing the costs of sending remittances to Tonga. In addition, potential activities in the areas of remittances could include: ensuring that the costs of sending remittances is as low as possible; identifying areas for the diaspora to use their remittances in local development projects, for example to help finance small scale infrastructure projects in their communities; investment in housing; retirement funds; or education and small business ventures, etc. For remittances to become an important source of development finance, it is necessary to ensure the sustainability and predictability of such flows. The intervention should help the Government of Tonga to enhance and sustain remittance flows with the overall objective of helping achieve Tonga s national development goals. In this context, the intervention should explore both the sender and the recipient of remittances. Anecdotal and empirical evidence indicates that the costs of sending remittances to Tonga can be reduced. There is therefore a need to undertake an assessment of the sector in order to determine potential ways to reduce overall costs. This assessment could also include potential regulatory 1 The introduction and background section is based on the Technical Assistance Fiche, prepared by the Ministry of Foreign Affairs & Trade, and the Baseline Assessment Terms of Reference, unless otherwise stated. 6
barriers, for example the extent to which the introduction of more stringent regulations against money laundering and terrorism has exacerbated this problem in Tonga. The proposed intervention could help assist the Government of Tonga in providing its citizens access to different options that could lead to increased investments and improved access to resources for housing, education, small businesses etc. The potential exists to harness remittances as a source of development finance but this will depend on investment choices available. Such choices could include but not be limited to: diaspora bonds; a local stock exchange as an alternative source for Tongan businesses to raise finance; village level and outer islands small scale infrastructure development funds; and multi-purpose cooperative societies etc. It will be important to identify a range of appropriate options and develop effective policies to target specific sources. In summary, the requested TA intervention aims to assist Tonga strengthen links and engagement with its diaspora, increase remittances, improve the predictability and sustainability of remittance flows, and increase the proportion of remittances that is used for medium to long term investments as opposed to direct consumption. The specific objectives of the intervention are: Formulate a Diaspora engagement strategy which builds on and complements existing initiatives (formal and informal) Identify ways to reduce the costs of sending remittances to Tonga Identify and address regulatory obstacles to ensure the predictability and sustainability of remittances Strengthen the enabling policy framework to encourage increased, productive diaspora engagement in Tonga. Rationale for the baseline assessment The general objective of the Baseline Assessment is to contribute to the strengthening of diaspora engagement and remittances in the Kingdom of Tonga. The specific objectives of the present baseline assessment are to: 1. Provide an overview of the state of affairs on the specific subject of the TA request of the Kingdom of Tonga prior to the actual implementation of the TA intervention, to be used as a reference against which to compare the results achieved through the TA intervention and with the objective of evaluating its impact and contribution to the improvement of the initial situation. Specifically, this should also include a short assessment of the sustainability of the proposed TA intervention; 2. Offering inputs and guidance useful to fine-tune TA intervention. Hence, the baseline assessment will help further define the work plan for the TA intervention; and 3. Identifying the major stakeholders and Non-State Actors (NSAs) working in the thematic area of the request (remittances); this will result in the identification and mapping of potential NSAs in Tonga that might be asked to submit target project proposals through a dedicated facility of the Action. 7
2. Baseline assessment methodology Due to a limited amount of time to undertake the baseline assessment and preparation of this report, primary research methods were restricted to semi-structured, in-depth interviews with key informants (See Annex 2 for the questionnaire). Desk-based research was undertaken in the days leading up to the country visit to establish qualitative and quantitative baseline indicators about the current state of affairs in Tonga (see Annex 1 for a list of resource materials). During a five-day field mission in Nuku alofa, Tonga (03-07 October 2016) the BA consultant held 16 key informant interviews with 20 respondents. Respondents included Government of Tonga Ministry Officials, representatives from the financial sector, other private sector actors, and civil society organizations (see Annex 3 for an overview of key informant interviews). 3. Assessment results 3.1 State of affairs Tonga s diaspora In 2011 the Tonga Department of Statistics reported that the total population in Tonga was 105,000 including 2,542 people who consider themselves as non-tongan. 2 The government does not currently hold information about the size and profile of the Tongan diaspora but acknowledges an overseas "Tongan-related" population of similar size to that actually resident in the Tonga. 3 Census reports in Australia, New Zealand and the United States show that the total number of people identifying themselves as Tongan or of Tongan decent living in those countries to be approximately 126,540 as shown in the table below. Country United States New Zealand Australia Tongan Population 57,000 4 (2010) 60,333 5 (2013) 9,208 6 (2014) In the United States, much of Tonga s diaspora is concentrated in California and Utah with smaller populations also recorded in Texas, Hawaii, Nevada and Alaska. In New Zealand a majority of the Tongan population is concentrated in Auckland and Hamilton but like the US there are smaller communities spread throughout the country. In Australia, the Tongan population is concentrated mostly in New South Wales, with smaller populations in Queensland and Victoria. There are small communities in the other states and territories, but according to reports, they number in the hundreds only. 7 Seasonal employment programmes In addition to emigrant populations, there are a steadily increasing number of temporary migrant workers taking up seasonal employment opportunities. Although they are not considered to be diaspora in the traditional sense, stakeholders view their contribution to Tonga s continuing economic development as important. In New Zealand, Tongan workers can spend up to six months working in the horticulture and viticulture sectors under the Recognised Seasonal Employer (RSE) work policy. Currently, there is an 2 http://tonga.prism.spc.int/#population-statistics-including-administrative-information-and-statistical-tabulation-of-the-2011 3 TSDFII, (2015), Pg. 37. 4 http://www.census.gov/prod/cen2010/briefs/c2010br-12.pdf 5 http://www.stats.govt.nz/census/2013-census/profile-and-summary-reports/quickstats-culture-identity/pacific-peoples.aspx 6 https://www.dss.gov.au/sites/default/files/documents/02_2014/tonga.pdf 7 Ibid. 8
annual cap of 9,500 workers recruited mostly from Pacific Island countries under the RSE. In the period between April 2007, when RSE was introduced, and June 2015, approximately 55,400 RSE visas have been issued of which 10,785 were granted to Tongan RSE workers. 8 In Australia, Tongan workers can also spend up to six months working in the agriculture industry under the Seasonal Worker Programme (SWP). Originally introduced as a pilot, the SWP became permanent in 2012 and in June 2015 the annual cap on visas was removed. Since 2012, approximately 8,600 visas have been issued under the SWP. 9 The Tongan Ministry of Internal Affairs (MIA), which is responsible for both RSE and SWP, reported that as of September this year there were 2,179 Tongan workers had been approved entry to Australia under the SWP. 10 Tongan alumni The Tonga Study Award programme, a joint initiative between the Australian and New Zealand governments, offers undergraduate and postgraduate scholarships to Tongan students. There is also a growing number of Tongan students travelling to China to study the Chinese language. In the 2016-2017 year, the Chinese government is offering up to 19 scholarships to Tongan students. Other scholarships are open to Tongan nationals through independent organisations and countries with continuing ties to Tonga. Although these students eventually return to Tonga and, like seasonal migrants, may not be considered diaspora in the traditional sense. Stakeholders saw the growing number of alumni as an important channel for future cooperation and strengthening economic ties between Tonga and the countries in which Tonga s diaspora live. Data about Tongans studying abroad and scholarships e.g. the numbers of Tongan students overseas, their locations, what they are studying, would be a useful baseline indicator. For example, if the numbers of Tongan students to the US increases, this could potentially indicate stronger connections with the Tongan diaspora in the US. Policy process The government recognises the potential and valuable contribution of its diaspora to the development of the country. The Tonga Strategic Development Framework (II) 2015-2025, provides guidance on engagement with the Tongan diaspora and is aligned to Tonga s Sustainable Development Goals (2015-2030). The TSDF II is arranged under seven National Outcomes with three Institutional Pillars and two Input Pillars. An objective of the framework is to mainstream the Tongan diaspora into Tonga s development agenda as referred to in Pillar Two, Social Institutions - Organisational Outcome 2.8, which seeks: Improved collaboration between Tongans in the Kingdom, and the Tongan diaspora to help develop the social and economic quality of life of both groups. 11 The Tongan diaspora is implicitly referenced in the Framework at Pillar 1, Organisational Outcome 1.5: Better access to overseas trade, employment and foreign investment, where it is noted that Tonga is fortunate to already have a large Tongan diaspora providing important connections which facilitates wider engagement. 12 Responsibility for diaspora engagement within government sits across several ministries. The Ministry of Internal Affairs (MIA) has responsibility for the District and Town Officers, among many other responsibilities, and is viewed by some stakeholders as a natural lead on diaspora 8 New Zealand Ministry of Business, Innovation & Employment 9 http://foreignminister.gov.au/releases/pages/2015/jb_mr_150625.aspx 10 http://www.abc.net.au/news/2016-09-05/tongan-government-hopes-to-increase-seasonal-worker-numbers/7816276 11 TSDF, (2015), Pg. 2. 12 Ibid, Pg. 64. 9
engagement. The Ministry of Foreign Affairs and the Ministry of Finance and Planning (Treasury) are considered important ministries for stakeholder engagement, corporate planning and leadership. Issues/ challenges A common concern raised during stakeholder discussions was the increasing cost of living in Australia, New Zealand and the US. Some stakeholders felt those living in Tonga, including the government, must do more to support the social, cultural and economic quality of life of the diaspora living in those countries. To be sustainable, the engagement strategy must address these concerns by creating a genuine partnership between those in Tonga and the diaspora. Benefits from the strategy, both tangible and intangible, must flow in both directions. Other challenges discussed included: Level of coordination between, among and within the various government ministries, private and non-state sector groups to engage Tonga s diaspora Availability and access to a registry of information about diaspora groups, locations and points of contact Development and implementation of policies that empower the Tongan diaspora to engage in the development of Tonga, or facilitate investment in the Tongan economy e.g. investment support for rural development, infrastructure, or tourism projects Need for a coordinated communication strategy to disseminate information about new initiatives, community plans, or development projects Understanding the intellectual resources within the Tongan diaspora and leveraging off the skills/ knowledge of expatriate Tongans to support development projects in Tonga. Diaspora remittances and investment The National Reserve Bank of Tonga (NRBT) collects information each month about remittance transaction volumes from banks and Money Transfer Operators (MTOs) operating in Tonga. In June 2016, remittance receipts were 26 percent (TOP$53.2 million) higher than at the same time last year reaching a record high of TOP$256.3 million (approximately USD$116.4 million). According to NRBT, remittance inflows from Australia, New Zealand and the United States accounted for 96 percent of total remittance receipts for the year ending June 2016. The link between Tonga and its diaspora are often evident in the reporting of when cultural and social events in Tonga lead to spikes in monthly remittances receipts. For example, in June 2016 the NRBT reported a 25.7 percent increase in remittance receipts on the same period in 2015. The NRBT attributed the increase to celebrations for Tupou College s 150 th anniversary, ongoing celebrations for the Queen Mother, and the Free Wesleyan Church conference. It is unknown how much of the remittances received in Tonga during this period were used for direct consumption or invested to support productive development. The NRBT reports that MTOs remain the preferred channel for receipting remittances with approximately 88 percent of transactions recorded through MTOs operating in Tonga. The average total cost of sending NZD$200 using an MTO to Tonga in June 2016 was 12.64 percent, and sending AUD$200 was 15.96 percent of the average total cost. For the US, the other main remittance corridor to Tonga, the total average cost of sending USD$200 was 10.81 percent in June 2016. 13 Tonga s economy is largely dependent on migration, remittances, foreign aid, and government bureaucracy as its major sources of revenue. Remittances are primarily used to contribute to household income and to pay for food, health, education and other daily expenses. Remittances are 13 Send Money Pacific 10
also used for larger investments, such as construction fees, and channelled into productive activities such as farming, fishing and tourism. Tonga s export sector consists mostly of agricultural commodities including squash, fish, root crops, vanilla, kava, and a developing tourist industry. 14 The tourist industry itself is now bolstered substantially by overseas Tongans visiting "home" for holidays and special events. Of the reported 546,756 total arrivals to Tonga between 2010 and 2015 (see Table 1), about 30 percent were returning residents. The Ministry of Commerce, Consumers, Trade, Innovation and Labour provides quarterly updates on business license registrations, company registrations, foreign investment registrations and regulatory enforcement activities. The 2013 quarterly report shows in the first quarter of 2013, 219 new business licenses were issued increasing the total number of business registered in Tonga to 1,757. 15 More than half of the business operating in Tonga were in the service sector, a third in the trade sector with the remainder split between tourism and manufacturing. During this period ten foreign investment certificates were issued bringing the total number of registered foreign investments to 32 in 2013. The quarterly updates provide useful baseline figures on foreign investment and could be used to assess the level of investment in Tonga during the implementation of the Technical Assistance programme. The quarterly report for 2016 is currently in draft awaiting approval for publication. Impact from global anti-money laundering legislation Since the introduction of stringent anti-money laundering and countering of terrorism financing laws, Banks have become increasingly concerned about the perceived money laundering and terrorism financing risk posed by MTOs. Many MTOs are being de-banked as a result, regardless of whether or not they have contravened any regulatory controls. In June 2015, Melie Mei Langi, one of the most popular MTOs for remitting money from Australia and New Zealand to Tonga, was forced to close. Since then, the average cost of sending money to Tonga from both countries has steadily increased. Western Union, one of the most recognisable MTO brands, was required to relocate its accounts from ANZ to Bank South Pacific so that it could continue to offer services in Tonga. To counter the negative impact and offset any further MTO closures in the future, Tonga Development Bank (TDB) will partner with Kiwibank (NZ) to launch a new remittance service from New Zealand to Tonga. The new service will offer a flat fee of 6 percent. ANZ Bank is also offering a new product that will allow people to send money between their New Zealand and Tonga ANZ accounts for a flat fee of $7. Issues/ challenges During consultations, stakeholders raised a number of issues for consideration as part of the proposed technical assistance intervention to strengthen remittance flows, reduce costs, and support investment. Some of the issues included: De-risking has created uncertainty among MTOs with migrant communities facing greater constraints on their remittance options A low level of financial literacy and capacity among remittance-receiving communities, particularly in the outer islands, leads to higher levels of consumption and poor spending choices 14 WTTC (2015) Travel and Tourism Economic Impact 2015 Tonga 15 http://www.mcctil.gov.to/ 11
Continued reliance amongst seasonal workers on informal remittance channels, especially with the closure of the popular MTO Melie Mei Langi and the de-banking of other MTOs, which has increased costs and creates greater risk for individuals carrying large amounts of money home Awareness with employers about the issues of de-risking and encouraging support for new initiatives such as those introduced by TDB and ANZ to help reduce the cost and increase security Limited understanding about investment rules and opportunities in Tonga and concerns about the safety of investments. Awareness of Customs & Revenue rules relating to importing material and equipment and tax implications for investors in Tonga. Related programmes, projects and other donor activity The Pacific Financial Inclusion Programme (PFIP) is a Pacific-wide programme helping low-income households gain access to financial services and financial education. It is jointly administered by the UN Capital Development Fund and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government. 16 PFIP works across several focus areas including digital financial services and supports initiatives including mobile banking and money, branchless banking, mobile-enabled insurance and digitizing government-to-person (G2P) payments. PFIP is partnering with banks and mobile network operators, including Digicel, ANZ and the Bank of South Pacific (BSP) who operate in Tonga to provide support for branchless banking and mobile money. Send Money Pacific is a joint initiative led by the governments of Australian and New Zealand to Reducing the Cost of Remittances to the Pacific. The project has been developed and managed by the project partner, Developing Markets Associates Ltd. The website provides price comparisons between MTOs and banks for sending money from Australia, New Zealand and the United States to Pacific Island countries, including Tonga. Finally, several of the larger MTOs in Tonga along with the Tonga Chamber of Commerce & Industry regularly provide pre-departure training sessions for seasonal workers and their families. The training aims to raise awareness about remittances, costs associated with sending money home, and the differences between traditional banks/mtos and newer digital options now available. 3.2 Key baseline indicators This section provides quantitative details about the relevant sectors and discusses which data could serve as potential baseline indicators. Tonga s diaspora As reported earlier, the size of the Tongan diaspora population is estimated to exceed 126,000 located mostly in New Zealand, the US, and Australia. Tonga s Department of Statistics reports that between 2002 and 2011, arrivals from The United States, Australia and New Zealand made up the majority of visitors to Tonga. Another significant group were Tongan nationals returning home. 17 A possible baseline indicator may be the number of returning residents visiting Tonga each year. The Ministry of Foreign Affairs (Immigration) define a returning resident as a person that holds a 16 http://www.pfip.org/ 17 www.employnz.net.nz/ 12
permanent address in Tonga and resides there for at least six months of the year. Table 1 below shows annual arrivals of visitors and returning residents to Tonga by air and sea (includes arrivals by yacht and cruise ship). In 2015, returning residents accounted for 30.3 percent of total arrivals into Tonga. The Department of Statistics produces a monthly bulletin showing a breakdown of arrivals by country and purpose of visit, among other things. Of the 6,736 visitor arrivals by air in June this year, 43 percent came from New Zealand, 25 percent from Australia and 20 percent from the US. More than 40 percent stated the purpose of travel was to visit relatives and friends, and more than 10 percent said they were travelling for business/conferences. Although this only provides a snapshot, the Department of Statistics compiles an annual breakdown of arrivals to Tonga and will provide useful baseline figures to support the Technical Assistance intervention. This report will be available on the Department of Statistics website once finalised. Table 1: Returning resident and visitor arrivals (air and sea) Year 2010 2011 2012 2013 2014 2015 Returning Residents 24,501 26,587 25,170 25,808 26,128 31,517 Visitors 65,005 68,373 57,230 59,665 64,219 72,553 Total arrivals 89,506 94,960 82,400 85,473 90,347 104,070 Source: Tonga Department of Statistics Another possible baseline figure is the number of returning resident visas issued to non-tongan citizens wishing to remain in Tonga for a longer period. Table 2 shows the number of returning resident visas issued by the Department of Immigration. Table 2: Residency visas issued Year 2011 2012 2013 2014 2015 Residency Visas 1,259 1,073 891 923 907 Source: Ministry of Foreign Affairs (Department of Immigration) Since 2007, people of Tongan descent can apply for a Tongan passport after the government amended its rules to allow dual citizenship. The number of individuals taking up Tongan citizenship may be a useful baseline indicator for the level of diaspora interest in maintaining direct links to Tonga. Table 3 shows that between 2007 and June 2015, a total of 145 people claiming Tongan descent have taken up Tongan citizenship. Table 3: Citizenship granted Year 2011 2012 2013 2014 2015 Citizenship 12 23 16 16 28 Source: Ministry of Foreign Affairs (Department of Immigration) Volume and source of diaspora remittances The calculation for total remittance receipts has changed following Tonga s transition into Balance of Payments and International Investment Position Manual 6 (BPM6), endorsed by the International Monetary Fund (IMF). This new coding system for overseas exchange transactions defines Remittances as the household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Under BPM6 total remittances are calculated as the sum of Personal transfers; Employee Compensation; Private Capital Transfers; and Social Benefits. 18 Table 4 below shows the total volume of diaspora remittances receipts to Tonga between 2015 and 2016 based on reporting by the National Reserve Bank of Tonga. In 2015 the total annual volume of 18 www.reservebank.to 13
remittances was TOP$202.4 million compared with TOP$256.3 million (USD$116.4) in 2016. The actual volume is likely to be higher, but due to the prevalence of informal remittance channels, it is difficult to capture all remittances flows. Table 4: Total remittance receipts 2015-2016 (TOP$ millions) Category Year Ended June 2015 % share June 2016 % share Private transfers 186.33 92.1 235.2 91.8 Compensation of employees 14.79 7.3 17.51 6.8 Private capital transfers 0.85 0.4 1.6 0.6 Social benefits 0.41 0.2 1.91 0.7 Total 202.4 100 256.3 100 Source: National Reserve Bank of Tonga While the total volume of remittances provides an important baseline figure, alone it cannot serve to evaluate the impact of the proposed Technical Assistance intervention. Instead, understanding which MTOs/Banks are the most popular and what the average value of remittance transactions is may provide a better baseline indicator. This indictor can show whether Tongans are mostly sending small amounts meant for daily expenses, or whether they are increasingly sending larger amounts, which might be targeted towards productive activities. Although NRBT does not publish this information on their website, it may be possible to collect this data given all MTOs and Banks operating in Tonga are required to provide a record of transactions to NRBT each month. Another useful baseline indicator could be the average value and volume of remittance transactions under the category Compensation of Employees. This category includes RSE workers and other expatriates serving foreign organizations (it is not stated if this category also includes SWP workers). 19 In June this year, NRBT reported remittances from RSE workers amounted to TOP$7.5 million. Anecdotally this figure is probably much higher, but because many RSE workers carry large sums of money home at the end of the season, it goes unreported. By encouraging seasonal workers away from informal channels, and supporting them to use new technologies, particularly digital remittance platforms, any changes in volume and average value would be a relevant baseline indicator. Requirements under AML rules for MTOs/Banks to know your customer means that it may be possible to report RSE/SWP remittance volumes more accurately if these workers are encouraged to use formal channels for their remittances. As noted, the largest diaspora communities are in Australia, New Zealand and the US. Table 5 below shows the total volume of remittance receipts from all three countries has increased between June 2015 and June 2016. As of June 2016, remittance inflows from Australia accounted for 33.7 percent of total receipts, compared to 36.5 for the same period in 2015. Remittance receipts from the United States accounted for 39 percent in June this year compared to 33.6 percent in 2015, and remittance receipts from New Zealand accounted for 22.1 percent in 2016 and 23.5 percent of total receipts in 2015. The total volume of remittances by country may be a useful baseline indicator to demonstrate the impact of diaspora engagement activities. Each month the NRBT reports include notes about any celebrations, projects or activities planned or underway in Tonga that impacts the volume of remittances for that month. 19 www.reservebank.to 14
Table 5: Remittance Receipts by Currency (TOP$ millions) Country Year Ended June 2015 June 2016 Australian 74.04 86.54 United States 67.99 99.74 New Zealand 47.60 56.54 Tonga 6.30 7.01 Other 6.46 6.45 Total 202.39 256.28 Source: National Reserve Bank of Tonga Diaspora remittances and investment A major objective of the proposed intervention is to harness diaspora remittances for development, including investments. The Household Income and Expenditure Survey (HIES) is an economic survey that describes the economic situation of the households within a country (financial situation regarding the income and expenditure). Section 13 of the Household Questionnaire covers remittances (cash and in-kind) both those given and received by Tongan Households and whether it was sent to or received from overseas or from within Tonga. 20 This is especially useful as it indicates whether remittances are primarily a one-way flow (i.e. mainly received from overseas) or if there is a reciprocal flow of remittances out of Tonga to those living overseas. It also provides data on in-kind remittances which are difficult to capture. Section 10 of the Questionnaire covers overseas travel 21 and asks if any member of the household had travel expenses for trips to other countries taken in the last 12 months received as gifts or paid for by others outside the household. While it does not ask who the gift came from, it could potentially cover travel expenses paid for by family members living overseas another form of assistance by members of the diaspora. Chart 1 below is an excerpt from the 2009 HIES. Chart 1: Distribution of household expenditure in Tonga, 2009 Source: Tonga Department of Statistics Although this data is from 2009, together with the third HIES report, due in 2017, the figures provide a useful baseline for the proposed Technical Assistance intervention. 20 http://pdl.spc.int/index.php/catalog/1 (see p. 19 of the questionnaire) 21 Ibid, Pg. 15 15
Average cost of remittances to Tonga The costs of sending money to Tonga remains stubbornly high compared to the global average of 7.42 percent. 22 The average costs of sending $200 to Tonga using an MTO in August 2016 was between 12.16 percent from Australia and 9.05 percent from New Zealand. As noted earlier, stakeholders consider the high costs of sending money to Tonga the biggest challenge for Tongans in the diaspora. The charts below track the average cost of sending $200 and $500 amounts to Tonga since 2009. AUD 200 % Average Total Cost Tonga AUD 500 % Average Total Cost to Tonga NZD 200 % Average Total Cost Tonga NZD 500 % Average Total Cost Tonga 22 https://remittanceprices.worldbank.org/ 16
USD 200 % Average Total Cost Tonga USD 500 % Average Total Cost Tonga Source: Send Money Pacific As can be seen from the charts above, the average total transaction cost of Australian and New Zealand remittance corridors has risen sharply since November 2015. This is most likely due to the banks de-risking in response to AML rules, which has forced the closure of some MTOs. In response, commercial operators such as Digicel, KlickEx, among others, are encouraging the diaspora to move to digital platforms which offer cheaper overall rates to send money to Tonga. As noted earlier, ANZ Bank the Tonga Development Bank both have new remittance products in response to MTO closures. Taking into account one of the objectives of the proposed Technical Assistance intervention is to identify ways to reduce the costs of sending money to Tonga, the average costs of sending remittances to Tonga is an important indicator. The costs of MTOs can be tracked over time, and if it can be seen that transfer costs are declining, this might be an indication that people are increasingly using other less expensive channels, and/or that increased competition is driving the prices down. Proposed baseline indicators which will also be used to monitor and evaluate progress of the Technical Assistance intervention Number of returning residents visiting Tonga each year The number of returning resident visas issued to non-tonga citizens each year The number of people taking up Tongan citizenship each year Develop a central registry of planned celebrations, church conferences, fundraising events to support local projects and event. This registry might also include information about Tongans studying abroad and scholarships the numbers of Tongans overseas, their locations, what they re studying. Total annual volume of remittances, by country, value of average remittance transaction, and MTO/Bank Total annual volume and average transaction value for Compensation of Employees category of remittances Average total cost of sending money to Tonga from A/NZ/US 17
3.3 Stakeholders mapping and analysis This section provides a short summary highlighting some of the major stakeholders with an interest in engagement with the diaspora, remittances and investment. There has been considerable research conducted on the Tongan diaspora by tertiary institutions, but given the limited time available for the Baseline Assessment, it has not been possible to determine its potential relevance and strengths related to Technical Assistance intervention. An overview of stakeholders with whom the BA made direct contact is included in Annex 3. A separate list of NSAs is provided in Annex 4. Government and Public Stakeholders The Ministry of Internal Affairs is the key stakeholder in the area of diaspora engagement. MIA is responsible for the District and Town Officers throughout the country and much of the engagement with diaspora will be coordinated through these posts, particularly in the outer islands. The District and Town Officers are also responsible for coordinating the Community Development Plans for their areas. These are currently listed on MIA s website and will help technical experts to align the engagement strategy with community priorities. MIA also oversees Tonga s seasonal labour programme and reports on its progress. The Ministry of Foreign Affairs will be another important stakeholder ministry. Respondents identified the opportunity for engaging the Tongan diaspora directly through Tonga s overseas missions. The Ministry of Commerce, Consumer, Trade, Innovation and Labour oversees foreign investment activities, issuance of business licenses, both of which will be important indicators for measuring the investment activities against the progress of the proposed Technical Assistance intervention. The Ministry of Finance and National Planning (Treasury) provides policy advice, particularly concerning expenditure, financial management, and the operations of government. MFNP has a substantial role within the TSDF II and will be a major influencer of other stakeholders to ensure that diaspora planning, and associated expenditures, is incorporated into the strategic plans of other ministries. The National Reserve Bank of Tonga s role is to maintain internal and external monetary stability while promoting economic growth. The NBRT provides monthly update reports on remittance receipts and currency flows, which will be important baseline indicators. In addition to providing capital to support rural development, the Tonga Development Bank is helping seasonal workers by offering a new remittance service to fill the gap left by the recent closures of some MTOs in Tonga. Private Sector Stakeholders The main commercial banks in Tonga are the ANZ Bank, Bank of South Pacific, and MBf. As noted earlier, due to the impact of AML legislation some MTOs operating in Tonga have closed. As a result, the cost of remitting money to Tonga from Australia, New Zealand and, to a lesser extent, the US has increased. ANZ and TDB have recently released new remittance products targeting the diaspora and seasonal workers, which could have a positive impact on the cost and flow of remittances. The main MTOs operating in Tonga are Western Union, MoneyGram, and DigiCel/KlickEx, although there are other smaller operators. MTOs tend to offer cheaper rates than the commercial banks but are currently experiencing a period of adjustment in Tonga due to AML rules. MTOs will continue to play a vital role in maintaining downward pressure on the cost of remittances. Given that there are few, if any, CSO/ NSAs active in the field of remittances, engaging with MTOs (and Banks) will be essential for the Technical Assistance initiative. 18
Tonga s National Private Sector Organisation is the Tonga Chamber of Commerce & Industry. TCCI provides a range of advisory, advocacy and training services to its members, which is comprised mostly of SMEs. TCCI has also been engaged to provide pre-departure training to Tongan workers heading to Australia under the SWP and could be a valuable support partner for the Technical Assistance initiative. Civil Society Organisations Mainstreaming of Rural Development Innovation works towards aiding the rural isolated communities of Tonga fight poverty and has a focus on working with women and youth on development projects. Importantly, MORDI works with the local District and Town Officers to implement projects and drive development, particularly in the outer islands. MORDI is also working informally with the Tongan diaspora to raise awareness about its projects and encouraging diaspora support. Research Organisations and Academia are an important group of stakeholders with a great deal to contribute to this proposed Technical Assistance initiative. There is already a considerable amount of published research available about the Tongan diaspora, however, due to the very limited amount of time allocated for the BA, it has not been possible to review all of the available research and assess its relevance as part of this BA. Contact with research organisations such as the University of South Pacific, and Universities in Australia and New Zealand was not established due to time constraints. Tonga s Churches The importance of ties between Tonga s churches and the diaspora cannot be overstated. Pillar 2 of the TSDF II recognises that churches play a central role in our society, complementing the service delivery of government in many areas, including education, health, community development and social protection. A smaller group of non-religious CSOs and NGOs are also active. Churches are also drivers of remittances. Earlier this year, money sent from overseas to support the Free Wesleyan Church, among other activities, added to a 25.7 percent increase in remittance receipts for the same time in the previous year. Stakeholders consulted during the BA recommended early engagement with church leaders and a collaborative approach to the development of the Technical Assistance initiative. It would be helpful to know how much money the churches receive as remittances from the Tongan diaspora. Potential recipients of direct assistance It is anticipated that there will be a restricted call for proposals for non-profit, NSAs that could serve as recipients of direct support under Component 2. This non-profit requirement excludes private sector entities like MTOs, commercial banks, investment agencies and telecom providers. In Tonga, however, there are not many NGOs or CSOs with a physical presence actively working in the field of diaspora engagement and remittances. That mainly leaves private sector agencies, such as the banks and MTOs, who already provide basic financial literacy and remittance awareness training to seasonal workers before departure. Another possibility is the Tonga Chamber of Commerce & Industry, which has been engaged to provide predeparture training at their offices in Tonga to workers departing for Australia under the Seasonal Worker Programme. Finally, Mainstreaming of Rural Development and Innovation is an NGO currently helping rurally remote communities live sustainable lives through development projects and skills training. MORDI s activities include projects to support poor communities in the outer islands of Eua, Ha apai, the Niuas and outlying islands of Vava u. With well-established networks, particularly in the more remote communities, MORDI could be considered as a partner for the proposed intervention. 19
3.4 Feedback regarding the Technical Assistance Fiche This section provides specific feedback about the proposed Technical Assistance intervention to the assessed state of affairs. The issues discussed below illustrate the overall conclusions concerning these objectives and provide preliminary recommendations for fine-tuning the Technical Assistance Fiche. Based on this Baseline Assessment and consultation with stakeholders, it is recommended that the Technical Assistance intervention is developed. There is support among stakeholders across the public and private sectors, NSAs and CSOs for the development of a diaspora engagement strategy, but the rationale and aims of the strategy would firstly need to be clearly defined. Secondly, while remittance receipts, arrivals, and census data seem to confirm that the largest groups of Tongan diaspora are in New Zealand, US and Australia, there was still uncertainty among stakeholders as to who the engagement strategy should target in those countries. Some felt the focus should be on Tongans living overseas that maintain direct links to Tonga e.g. family ties or access to land, whereas others thought efforts to engage the diaspora should extend to second and subsequent generations that may have no direct ties to Tonga. Other diaspora groups to consider might be business diaspora, individuals whose primary engagement with Tonga would be through their employment or business decisions; knowledge diaspora, academics, innovators and other creators of knowledge and technology (and responsible for the generation and transfer of knowledge between countries); and cultural diaspora: individuals with cultural links to Tonga art, music, sport, history etc. 23 Most agreed that knowledge and skills transfer should be a focus of the strategy by identifying Tongans with particular skills and experience that can be leveraged to promote Tonga to the world. The example of Pita Taufatofua, Tongan flag bearer at the 2016 Rio Olympics, was often cited as an opportunity (missed perhaps) to promote Tonga as a tourist destination. Given his social media profile, including more than 150,000 followers (July 2016), a person with this level of global appeal may be able to reach further and more effectively than other traditional methods of communication. Thirdly, the engagement between Tonga and the diaspora must be a genuine partnership and twoway exchange. The strategy should also aim to help support the social, cultural and economic quality of life of the diaspora. To do this, Tonga will need more info on who and where their Tongan diaspora is, and what kind of support they might need. The next question is how the strategy should be led? This question generated considerable discussion among stakeholders. Some saw the government as having a central role, while others thought the government should be a facilitator and engagement with the diaspora lead by community organisations. For example, some stakeholders felt that if the government s role were too overt, it would raise issues of trust among some diaspora groups. On the other hand, some felt that without the government taking a lead role in coordinating engagement, the strategy could end up collecting dust in a pile with other well-intended projects. In the end, the question came down to who had the mandate in Tonga to lead engagement. It will be important that proper consultation is undertaken with diaspora groups to determine how the Tongans living overseas view this question. One possible governance structure discussed was the establishment of a National Committee for Diaspora Engagement and Economic Development. A National Committee may help coordinate efforts between government ministries, CSOs/NSAs and the private sector. A National Committee may also help to mainstream diaspora engagement into the corporate planning process, which will be imperative if budget support, including human resources, is to be allocated to this initiative. 23 Rutherford, A. (2009). Engaging the Scottish Diaspora: Rationale, Benefits & Challenges. The Scottish Government. 20