Will China rebuild Solomon Is' riot wrecked capital?
Tonga is still paying for Chinese aid to rebuild Nuku'alofa
After two previous riots in the Solomon Islands, the business of rebuilding was left up to the local businesses affected. In the mysterious world of its mainly subsistence economy, the Solomon Islands’ government had little involvement.
It may not be the same this time.
Perhaps the most significant difference is the relationship with China.
During the ethnic tension destruction and the first China Town riots, Honiara diplomatically recognised Taiwan.
Taipei does not do reconstruction aid, and Beijing wasn’t willing.
That may have changed, so it is instructive to look at the Kingdom of Tonga and its experience in the wake of the 2006 Nuku’alofa riots.
Tonga is still paying China for the “aid” it received. And Beijing is strongly exploiting the situation, to Tonga’s disadvantage.
Riot costs
In global terms, the latest Honiara riots are more symbolic than financially ruinous, even for a country as poor as the Solomons.
The Central Bank of Solomon Islands says ‘adverse impact on the economy is extensive and estimated to have reached S$534 million’. That is just NZ$98m in Aotearoa. Sixty three buildings were burned and looted, destroying S$228m (NZ$41m) worth of goods and damaging S$306m (NZ$56m).
The point is not to minimize what happened in the Solomons, but rather to note that China is not the only nation that could easily help out here.
The Nuku’alofa riots were more severe, hitting 143 businesses, including 33 identified as owned by Chinese or naturalized Chinese-Tongans. The financial cost was guessed at; some had the damage worth T$400m (NZ$258m).
A week after the riots, the new King, George V, formally closed parliament for the year with a speech saying he estimated T$500 million was needed to reconstruct and redevelop Nuku'alofa.
Tonga’s biggest problem following the Nuku’alofa riot was its lack of money for rebuilding, just as is the case in the Solomon Islands today.
Seventy five percent of businesses were not covered by insurance and only eight percent of businesses had civil unrest cover. Foreign cash aid was not going to cover most of the hoped for rebuild.
Tonga, which had never given its sovereignty away, was now going to seek Chinese help. The question that would dominate for the next decade or more was what Beijing would demand in exchange for the help.
George V offered a degree of fantasy to it all, as the US Ambassador Larry Dinger spelt out in secret cables later leaked.
‘The King has been working closely with Chinese architects on blueprints which include three-story, flat-roofed buildings extending three blocks along the main street.’
‘Reportedly, the flat roofs are intended to facilitate security-force sniper fire if a future riot occurs.’
Dinger held talks with Foreign Minister Tu'a Taumopeau Tupou and Tonga Defence Service Commander Tau'aika Uta'atu learning this: ‘The King has also instructed the ... (TDS) to make plans for a horse-cavalry unit. The obvious aim, beyond the King's love of British-style ceremony, is crowd-control in future emergencies.’
China gallops in
Tonga’s call on China was not random; in April 2006 Chinese President Wen Jiabao had hosted a summit in Nadi, Fiji, for Pacific nations, promising US$375 million in preferential loans over the following three years. Tongan Finance Minister Siosiua 'Utoikamanu, talking to a US Department of State official, Glyn Davies, said they faced severe economic problems and a stable, reformed environment was needed to recover. They wanted a T$100 million soft loan for post-riot reconstruction efforts.
‘The donor Tonga is really looking to is China,’ Dinger reported. They wanted $100 million and Prime Minister Feleti Sevele was hoping China would allow some of the aid to be non-tied.’
China turned on its full treatment for Sevele, and on 27 April 2007 he met President Hu Jintao in the Great Hall of the People in Beijing. Sevele said his government was actively implementing ‘Look East’ and was anxious to ‘deepen pragmatic cooperation in all areas’ Tonga signed an ‘Agreement on Economic and Technical Cooperation’ with China on 21 May 2007 under which China granted RMB ¥20 million or T$5 million.
Negotiations were to continue on a soft loan of T$112 million to fund Nuku’alofa rebuilding. 'Utoikamanu said the loan is likely to be repaid over a 20 year period. The terms meant a Chinese company has been selected to conduct all the reconstruction work. No exchange of funds would be made between the Government of Tonga and China. ‘Utoikamanu said the businesses who benefited from the Chinese loan would have to pay it back, not taxpayers. It was not free money: ‘Only those businesses who want to borrow to rebuild will pay for the loan and that is only if they choose to borrow.’
Sevele responded to public anxiety by saying China's agreement to provide millions of dollars in aid would not give Beijing any extra political influence. He said Beijing was sympathetic to Tonga and the money would come under the fund announced by President Wen in Nadi: ‘So it was good for them to agree to that…’ People should be positive about China and he dismissed critics: ‘Unfortunately those guys don't understand the intricacies and the necessity of such funds for Tonga. They have no idea if that's what they've been saying. Some of the western countries avoided China only 15, 20 years ago, now they are all trotting the path to Beijing. Now they're there, they want to assist, why not? And we're not selling Tonga at all.’
China Civil Engineering Construction Company became the prime contractor. The buildings were designed in China. Dinger said a potentially huge issue was foreign-exchange risk: ‘'Utoikamanu, briefed by the International Monetary Fund, flagged the danger to Cabinet; but "they weren't interested in hearing it." Sevele and others who desperately need reconstruction money just wanted to plunge ahead.’
The consequences of Sevele doing the Chinese deal would be profound for Tonga, but it would be for successor Prime Minister ‘Akilisi Pōhiva to pick up over the years ahead.
Privately Sevele was disappointed with the Chinese deal but forced it through parliament, despite strong attacks from the people’s representatives. Dinger talked with Lord Chamberlain who told him that Tonga’s ambassador to China, Emeline 'Uheina Tuita, had been ‘unexpectedly recalled, even though most people perceived she had been doing a fine job. Reportedly the King was in "a foul mood" all week.’ He would not meet the Americans. Later it would be speculated that Tupou V was personally deeply in hock to Chinese investors and had hoped to get out of it. 'Utoikamanu told the Americans that the China money was ‘all tied aid in Chinese currency’, with Chinese construction companies and Chinese workers. The king and Sevele had wanted cash. Dinger: ‘'Utoikamanu was reluctant to sign the loan papers, worried in particular about the debt burden on future generations; but he did sign under PM pressure. 'Utoikamanu said he deeply regrets it and wishes he could revoke his signature. Many loan details remain to be negotiated.’
Pōhiva’s China worries
‘Akilisi Pōhiva's time as prime minister was dominated by Tonga’s US$115m debt to China. In a speech in Canberra in 2007 Pōhiva said the presence of Chinese in Tonga was a big issue to most people. Much of the anger arose from the royal sale of passports to Chinese: ‘The involvement, the presence of the Chinese in Tonga and now they are dominating some of the businesses.’
In 2017 Pōhiva produced headlines after telling a press conference: ‘The Chinese will take over the running of the country in a few years' time.’ In August 2018 Pōhiva was part of talks with other Pacific nations to try to get China to forgive mounting debts in the region amid concerns Beijing may start seizing strategic assets. It came in the wake of China took possession of a port complex in Sri Lanka after it failed to pay debts.
‘If it happens in Sri Lanka, it can happen in the Pacific - so it is entirely an option for China to consider,’ said Pōhiva. ‘If we fail to meet the requirements and conditions set out in the agreement ... we have to pay the cost for our failure to meet the conditions. It is no longer an issue for individual countries because there are small countries who borrowed from China and we have problems with that and the option is to collectively work together to find a way out.’
As is testified by the unexpectedly large Chinese Embassy in Nuku’alofa, the issue of China and its financial hooks into Tonga remain, 15 years on from the riots.
The Solomon Islands might yet learn, China’s gifts come with terms and conditions.