Cooks situation likely to worsen in 1998

Economy

By Florence Syme-Buchanan

The Cook Islands govern ment is having to learn the hard way on how to function under a new set of rules, after lurching from crisis to crisis in the last four years.

But that rough ride is not over - as the country bade farewell to 1997 it also wel comed a new load of financial woes and

political squabbling.

Financial advisers are hoping that the lessons learnt this time around by govern ment will mean an end to years of extrava gance and indifference to cash flow prob lems. For the second time in two years, the government has had to impose belt tight ening that’s leaving ministries gasping for survival and many public servants out of

jobs.

Former Finance Minister and now Prime Minister Sir Geoffrey Henry was forced to reign in the government’s 24 ministries and agencies and demand a 10 percent across the board cutback in spend ing.

Savings of NZ$3.5 million (US$l.B million) have to be made or the govern ment will plunge into a crisis of extraordi nary proportions with borrowing to bail it out no longer a viable option. The country is already up to its neck in debt owing NZ$2O3 million (US$lO7 million).

Government has a NZ$l.3 million (U 55690,000) deficit and some ministries and offices have run out of money. It’s also partially the result of government failing to earn what it expected to from income and company taxes.

The Ministry of Finance was over opti mistic - estimating there would be earnings of NZ$42 million (US$22 million) from income and company taxes this fiscal year.

With eight months till the end of the 1997/98 financial year the NZ539.9 mil lion (US$2O.6 million) budget has proven inadequate for many government entities.

One of the biggest ministries, Works, Environment and Physical Planning

(MOWEPP) was suspended indefinitely

just before Christmas. Fifty-eight workers lost their jobs.

MOWEPP Minister Tom Marsters resigned in disgust over what he claims

was Sir Geoffrey’s failure to keep his word and channel more funds to the ministry whose budget and staff had already been slashed by more than three-quarters.

The Ministry of Health, already trying

to maintain services with skeleton staff and an anorexic budget could not afford to make the compulsory 10 percent cuts.

Instead it will try to make a contribu tion by way of revenue earned from charg ing 16 year olds and old age pensioners under the user pays health care system.

That move has been hugely unpojslilar, but health secretary Roro Daniel has said there are no other options.

Others in big trouble are Ministry of Agriculture, Parliamentary Services and the Head of State Office. More job losses are expected. Sir Geoffrey has reasoned that cutbacks are more attractive than increased taxes. He said raising revenue is an attractive option, but not if it means increasing taxes as this will backfire.

He said government will also be look ing at selling more assets and re-adjusting budgetary allocations. To date, the govern ment’s asset sales programme has been dis astrous.

Little cash has been obtained from what was expected to be the Cook Islands sale of the century and a way of helping the country clamber out of its massive debt.

The former state-owned Rarotongan Hotel went to Cook Islander Tata Crocombe - but because of the nature of the deal it entered into, government has yet to receive the NZ$3.5 million (US$l.B million) sale price for the property.

The new owner also owes government NZ$2 million (US$l.l million) spent on refurbishing the hotel for last year’s South Pacific Forum.

A cash upfront offer of NZ$5 million (US$2.6 million) for the Rarotongan Hotel by an Asian businessman was apparently turned down by the prime minister in favour of the deal with Crocombe.

A report into the handling of the sale by the powerful Public Expenditure and Review Committee has been completed.

Its findings are expected to cause a major upheaval when tabled in parliament.

Sir Geoffrey said while the sale of more assets is part of the

government’s agenda, arguably any

monies raised should be to retire debt rather than to fund recurrent expenditure In other words, says Sir Geoffrey, don’t sell the family jewels to buy the groceries.

A senior government official says govern ment had two options, either to trim the fat that still exists or tell international credi tors that no debts would be paid this year.

This would have damaged govern ment’s credibility. The official says there are still inefficiencies within gbvemment which can be fixed - saving money.

Cabinet is understood to be questioning some of Sir Geoffrey’s 1997 priorities which have included expanding the prime minister’s office and foreign affairs, host ing the Forum during an economic depres sion and allocating NZ$9 million (US$4.7 million) to the new Ministry of Outer Islands Development. This ministry has spent only a third of its budget. Some gov ernment officials are expecting a frantic spending spree to justify its lion’s share allocation as the financial year draws to a close. Cabinet has been publicly accused of being fiscally irresponsible and failing to prioritise by the Chamber of Commerce and National Development Council. Cost saving recommendations made by the two groups have been repeatedly rejected by cabinet. And while the government is try ing to overcome its seemingly endless financial woes, the resignation of Marsters’ bodes ill for the governing Cook Islands Party (CIP).

Marsters, a foundation member of the party, has been CIP secretary for decades and commands a big following within its ranks. The former minister has ruled out accepting another ministerial position under Sir Geoffrey saying he and his cur rent administration have lost the plot.

Other than to say he’ll always remain a CIP, Marsters is not commenting on his political future. Political observers say its unlikely he’ll join either faction of the divided Opposition Democratic Alliance Party. The speculation is that Marsters may join with former politician and Coole Islands High Commissioner to New Zealand laveta Short and form a new party.

Should that happen, the union will be formidable. ■