Our Growing Debt Burden

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How much more debt do we succumb to before we have the courage to say ‘No to Debt’ or ‘Wait’? Will the world end tomorrow if we did not get all the infrastructure and ‘big debt’ projects up and running now?

How much more ‘trust’ does Beijing need from Vanuatu to prove to it that we are dead serious about the ‘One-China’ policy? Vanuatu has 99.9% times honoured the 37 yearold China-Vanuatu diplomatic ties initially signed on 26th March, 1982.

Indeed the Vanuatu Government had requested all the projects donated to it by its Chinese counterpart, and undoubtedly Vanuatu and its people are enjoying the social and economic benefits of all these projects.

But a certain level of prudence might need to be considered now especially

with the likely debt-burden that has escalated over the past few years vis-à-vis Vanuatu’s financial ability to service the loan components of all these aid projects, especially those ‘special concession loans’.

A loan is a loan and has to be repaid. The more concessional loans we sign up to, the more we have to pay. Question is, are we able to pay or not?

If yes, what’s the repayment period?

At a Development of Officials (DCO) meeting sometime in early 2015 former Finance DG Manuri (now ASG ACP Secretariat in Brussels) warned about our growing debt burden based on facts he was monitoring through MFEM.

Nobody in higher leadership listened to the key national policy adviser on financial matters within MFEM. Instead we ploughed ahead full steam with more and more loans.

Today, that debt burden would be far greater because of all the latest projects that Vanuatu has acquired via various concessional loans, a big bulk of it from Vanuatu’s very own ‘trustworthy friend’ – China.

On Tuesday 18th June (this week) the Vanuatu Daily Post (DP) carried an article entitled ‘IMF warns Vanuatu over passport sales, infrastructure loans’.

The IMF basically issued a warning to Vanuatu over its over-reliance on unsustainable revenues from passport sales and the very risky business of infrastructural loans it has signed up to so far, and that ‘‘Vanuatu should prioritise infrastructure investment, introduce income taxes and reduce reliance on pasport sales to make debt more sustainable’.

Of the three different recommendations, the introduction of income tax is the most politically sensitive one which ‘Inside Viewpoint’ has already commented on in the DP on Wednesday this week.

A very difficult one to push right now, certainly not on LPV (Leaders Party of Vanuatu)’s watch. They have already made their point crystal clear – ‘No To Income Tax’, period.

In an article carried in the DP on Thursday 13th June, the writer refers to ‘the China-Vanuatu relationship’ as being ‘at its best in history and has been a model for relations between China and Pacific island countries’ and that ‘No country has become trapped in a debt crisis since its participation in the BRI’.

This view is bluntly refuted by other recipient countries.

The Centre for Strategic and International Studies, for instance, has prepared a very interesting analysis of this ‘Debt Trap’ issue (refer article here: https://www.csis.org/ npfp/its-debt-trap-managingchina- imf cooperation-acrossbelt- and-road) where it calls on China and the IMF to work together in addressing the debt-trap challenge.

A particular example has been quoted in the abovementioned article in a recent Malaysian case where the Malaysian Government pulled the plug on ‘three billion-dollar Beijing-backed projects’ and Beijing responded by launching a major publicity blitz (refer link here: https:// www.scmp.com/news/ china/diplomacy-defence/ article/216141 /chinaembarks- belt-and-roadpublicity- blitz-after) to extoll the virtures of the BRI, pretty much like the rhetorical article that appeared in the DP last week.

Sri Lanka also faced difficulties struggling with debt and eventually handed over its US$1.5 billion deepsea port to a state-owned Chinese firm (https://www. nytimes.com/2017/12/12/ world/asia/sri-lanka-chinaport. html) on a 99-year lease in December 2017.

To make the debate even more lively and interesting, in early 2018 ‘Twentyseven of the 28 national EU ambassadors to Beijing… compiled a report that sharply criticizes China’s “Silk Road” project, denouncing it as designed to hamper free trade and put Chinese companies at an advantage’, warning that ‘Chinese firms must not receive preferential treatment in the awarding of public contracts’.

I think the above cases suffice the rebuttal against last week’s very interesting article. Put into Vanuatu’s own context, this is what the current scenario boils down to: while these big financially stronger Asian countries and more so the EU are greatly concerned, poor, helpless, frail, disaster-prone Vanuatu keeps merrily dancing along to the very musical tunes from the Great Wall.

If that is what this ‘friendship’ is all about, then some leaders, if not all, must be held accountable and responsible for the deepened financial dilemma that all these debts are likely to bring on the people of Vanuatu.

It may be true that ‘mutual political trust is increasingly deepening’, BUT if this is being carried out at the expense of the children and people of Vanuatu then one has to question the real underlying motives and the genuineness of this ‘trust’. In addition, the ‘design failures’ addressed by Inside Viewpoint recently have not been mentioned at all in last week’s aforementioned article. Will anything be done about this or not?

Vanuatu has promulgated a ‘Right To Information’ policy.

This article, in all fairness, is written within the spirit of this very important national policy.

The whole of Government needs to know. The people need to know. We all need to know as we continue working on and improving upon the diplomatic relations that we have with other countries, especially those who have resources to support our development needs.

The borrower is slave to the lender (Proverbs 22:7, NIV). This age-old reminder we must never forget, lest we get too submissive and comfortable beside our foreign friends.

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