Development Planning in Tonga; A Preliminary Study

Abstract

Planning for economic growth and development is a phenomenon which has spread throughout most of the Third World since the Second World War. This thesis will focus on the advent of development planning in Tonga but to place the Tongan experience in perspective there is first a review of the spread of development planning throughout most of the Third World. Secondly the structural characteristics which differentiate the development problems of small underdeveloped nations (such as Tonga) from those of larger ones are identified and discussed. It is concluded that owing to the characteristics of trade dependence, diseconomies of small scale and export concentration, small nations face additional problems with regrad to economic development in the areas of trade, foreign aid, monetary policy and foreign investment. As a prelude, the general background of the Kingdom is outlined and the development of the economy since the Second World War is reviewed. The decline in the importance of exports as a source of foreign exchange is noted, as is the importance of out-migration through the effects of remittances on imports, the balance of payments and economic growth. The pattern of Government recurrent expenditure and the main sources of Government revenue since the Second World War are described and the implications of the characteristic of diseconomies of small scale for the provision of public goods are noted. The First, Second and Third Development Plans of the Kingdom are outlined and analysed and it is concluded that the first two plans were no more than lists of public sector investment projects. The third Development Plan is considered to conform to the general notion of a conventional plan but it contains some serious anomalies in attaching limited importance to the subsistence sector and in its overambitiousness with regard to capital development. The pattern of the Government's development expenditure is analysed and it is concluded that actual expenditure tended very much to correlate to the targets set in the First and Second Development Plans. However there is a marked divergence of actual expenditure from the targets set in the Third Development Plan and it is shown that this is due partly to the ambitiousness of the plan. It is shown that the Government has tended to concentrate on prestige infrastructure-based projects to the detriment of projects which would have expanded the production possibility frontier of the economy. It is concluded that the large influx of foreign aid has resulted in the Government forsaking planned development for ad hoc development which is very much dependent on the whims of aid donors. The problems of implementing the three development plans are discussed and the important bottleneck of the lack of skilled manpower is identified. Note is taken of the increasing dependence of the Government on foreign aid and also of its inability to mobilise domestic resources for the purposes of funding development projects. The thesis concludes that there has been a tendency in Tonga to view a development plan as a document for attracting foreign aid.