RESTRICTED  
  
WT/TPR/S/409  
10 March 2021  
(21-1982) Page: 1/99 
Trade Policy Review Body   
 
 
TRADE POLICY REVIEW  
REPORT BY THE SECRETARIAT  
TONGA 
This report, prepared for the  second Trade Policy Review of Tonga, has been drawn up by the WTO 
Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing 
the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World 
Trade Organization), sought clarification from Tonga on its trade policies and practices.  
 
Any technical questions arising from this report may be addressed to Mr Sergios Stamnas 
(phone:  022 739 5382); Mr Rosen Marinov (phone: 022 739 6391); and Ms Ana Cristina Molina 
(phone: 022 739 6060).  
 
Document WT/TPR/G/ 409 contains the policy statement submitted by Tonga.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Tonga. This report was drafted in 
English.  
  WT/TPR/S/409 • Tonga  
 
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  CONTENTS  
SUMMARY  ................................ ................................ ................................ ........................  7 
1   ECONOMIC ENVIRONMENT  ................................ ................................ ........................  11 
1.1   Main Features of the Economy  ................................ ................................ ..................... 11 
1.2   Recent Economic Developments  ................................ ................................ ................... 13 
1.2.1    Overview  ................................ ................................ ................................ ................ 13 
1.2.2    Monetary and exchange rate policy  ................................ ................................ ............ 15 
1.2.3    Fiscal policy  ................................ ................................ ................................ ............ 15 
1.2.4    Balance of payments  ................................ ................................ ................................ 16 
1.3   Developments in Trade and Investment  ................................ ................................ ........ 17 
1.3.1    Trends and patterns in merchandise and services trade  ................................ ................ 17 
1.3.2    Trends and patterns in FDI  ................................ ................................ ....................... 20 
2   TRADE AND INVESTMENT REGIMES ................................ ................................ ...........  21 
2.1   General Framework  ................................ ................................ ................................ ....21 
2.2   Trade Policy Formulation and Objectives  ................................ ................................ ........ 22 
2.2.1    Trade policy formulation  ................................ ................................ ........................... 22 
2.2.1.1    Executive branches of government  ................................ ................................ .......... 22 
2.2.1.2    Advisory bodies  ................................ ................................ ................................ ....23 
2.2.2    Trade and related policy objectives  ................................ ................................ ............ 23 
2.2.3    Trade laws and regulations  ................................ ................................ ....................... 24 
2.2.4    Transparency  ................................ ................................ ................................ .......... 24 
2.3   Trade Agreements and Arrangements  ................................ ................................ ........... 25 
2.3.1    WTO ................................ ................................ ................................ ...................... 25 
2.3.1.1    Features  ................................ ................................ ................................ .............. 25 
2.3.1.2    Trade-related technical assistance  ................................ ................................ ........... 26 
2.3.1.3    Notifications  ................................ ................................ ................................ ......... 26 
2.3.2    Regional and preferential agreements  ................................ ................................ ........ 26 
2.3.3    Other agreements and arrangements  ................................ ................................ ......... 30 
2.4   Investment Regime  ................................ ................................ ................................ ....30 
2.4.1   Regulatory and institutional framework  ................................ ................................ ......31 
2.4.2   Restricted activities  ................................ ................................ ................................ ..31 
2.4.3   Registration and approval  ................................ ................................ ......................... 33 
2.4.4   Investment promotion  ................................ ................................ .............................. 34 
2.4.5   Dispute settlement  ................................ ................................ ................................ ...35 
2.4.6   Investment treaty developments  ................................ ................................ ............... 35 
3   TRADE POLICIES AND PRACTICES BY MEASURE  ................................ ........................  36 
3.1   Measures Directly Affecting Imports  ................................ ................................ .............. 36 
3.1.1    Customs procedures, valuation, and requirements  ................................ ....................... 36 
3.1.2    Rules of origin  ................................ ................................ ................................ ......... 37 
3.1.3    Tariffs  ................................ ................................ ................................ .................... 37 WT/TPR/S/409 • Tonga  
 
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  3.1.4    Other charges affecting imports  ................................ ................................ ................. 41 
3.1.5    Duty and tax concessions  ................................ ................................ ......................... 41 
3.1.6    Import prohibitions, restrictions, and licensing  ................................ ............................ 42 
3.1.7    Anti-dumping, countervailing, and safeguard measures  ................................ ................ 42 
3.1.8    Other measures affecting imports  ................................ ................................ .............. 42 
3.2   Measures Directly Affecting Exports  ................................ ................................ .............. 42 
3.2.1    Customs procedures and requirements  ................................ ................................ .......42 
3.2.2    Taxes, charges, and levies  ................................ ................................ ........................ 43 
3.2.3    Export prohibitions, restrictions, and licensing  ................................ ............................. 43 
3.2.4    Export support and promotion  ................................ ................................ ................... 43 
3.2.5    Export finance, insurance, and guarantees  ................................ ................................ ..43 
3.3   Measures Affecting Production and Trade  ................................ ................................ .......43 
3.3.1    Incentives  ................................ ................................ ................................ ............... 43 
3.3.1.1    Taxation and fiscal incentives  ................................ ................................ ................. 44 
3.3.1.2    Support programmes ................................ ................................ ............................. 49 
3.3.2    Standards and other technical requirements  ................................ ............................... 51 
3.3.3    Sanitary and phytosanitary requirements  ................................ ................................ ....51 
3.3.4    Competition policy  ................................ ................................ ................................ ...54 
3.3.5    Price controls  ................................ ................................ ................................ .......... 54 
3.3.6   State trading, state -owned enterprises, and privatization  ................................ ............. 55 
3.3.7    Government procurement  ................................ ................................ ......................... 58 
3.3.7.1    Legal and institutional framework  ................................ ................................ ........... 59 
3.3.7.2    Procurement procedures  ................................ ................................ ........................ 60 
3.3.8    Intellectual property rights  ................................ ................................ ........................ 61 
4   TRADE POLICIES BY SECTOR  ................................ ................................ .....................  65 
4.1   Agriculture, Forestry, and Fisheries  ................................ ................................ ............... 65 
4.1.1    Agriculture  ................................ ................................ ................................ .............. 65 
4.1.1.1    Features  ................................ ................................ ................................ .............. 65 
4.1.1.2    Policy and institutional framework  ................................ ................................ ........... 66 
4.1.1.3    Regulatory framework  ................................ ................................ ........................... 67 
4.1.1.4    Border measures  ................................ ................................ ................................ ..68 
4.1.1.5    Domestic support  ................................ ................................ ................................ ..69 
4.1.2    Fisheries  ................................ ................................ ................................ ................. 70 
4.1.2.1    Features  ................................ ................................ ................................ .............. 70 
4.1.2.2    Policy and institutional framework  ................................ ................................ ........... 70 
4.1.2.3    Regulatory and operational framework  ................................ ................................ ....71 
4.1.2.4    Border measures  ................................ ................................ ................................ ..72 
4.1.2.5    Domestic support  ................................ ................................ ................................ ..73 
4.1.2. 6   Illegal, unreported, and unregulated (IUU) fishing  ................................ ..................... 73 
4.2   Mining and Energy  ................................ ................................ ................................ ......74 WT/TPR/S/409 • Tonga  
 
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  4.2.1    Minerals  ................................ ................................ ................................ ................. 74 
4.2.2    Energy  ................................ ................................ ................................ ................... 75 
4.2.2.1    Hydrocarbons  ................................ ................................ ................................ .......75 
4.2.2.1.1    Upstream  ................................ ................................ ................................ .......... 75 
4.2.2.1.2    Downstream  ................................ ................................ ................................ ......76 
4.2.2.2    Electricity  ................................ ................................ ................................ ............. 76 
4.2.2.3    Renewable energy  ................................ ................................ ................................ .77 
4.3   Manufacturing  ................................ ................................ ................................ ............ 78 
4.3.1    Features  ................................ ................................ ................................ ................. 78 
4.3.2    Policy, institutional, and regulatory framework  ................................ ............................ 78 
4.3.3    Border and domestic support measures  ................................ ................................ ......78 
4.4   Services  ................................ ................................ ................................ .................... 79 
4.4.1    Features  ................................ ................................ ................................ ................. 79 
4.4.2    GATS and  RTAs commitments  ................................ ................................ ................... 79 
4.4.3    Financial services  ................................ ................................ ................................ .....80 
4.4.3.1    Banking services  ................................ ................................ ................................ ...80 
4.4.3. 1.1   Features  ................................ ................................ ................................ ........... 80 
4.4.3.1.2    Regulatory framework  ................................ ................................ ........................ 81 
4.4.3.1.3    Institutional and prudential developments  ................................ ............................. 81 
4.4.3.2    Insurance  ................................ ................................ ................................ ............ 83 
4.4.4    Telecommunication services  ................................ ................................ ...................... 83 
4.4.4.1    Features  ................................ ................................ ................................ .............. 83 
4.4.4.2    Policy and institutional framework  ................................ ................................ ........... 84 
4.4.4.3    Regulatory framework  ................................ ................................ ........................... 84 
4.4.5    Transport services  ................................ ................................ ................................ ...85 
4.4.5.1    Air transport  ................................ ................................ ................................ ......... 87 
4.4.5.1.1    Air services  ................................ ................................ ................................ .......87 
4.4.5.1.2    Airport management and ground -handling services  ................................ ................ 88 
4.4.5.2    Maritime transport  ................................ ................................ ................................ 89 
4.4.5.2.1    Shipping services  ................................ ................................ ............................... 89 
4.4.5.2.2    Port management and port services  ................................ ................................ .....90 
4.4.6    Tourism  ................................ ................................ ................................ .................. 90 
4.4.7    Distribution services including e -commerce  ................................ ................................ .92 
4.4.8    Professional services  ................................ ................................ ................................ 93 
5   APPENDIX TABLES  ................................ ................................ ................................ .... 94 
 
CHARTS  
 
Chart 1.1 Product composition of merchandise trade, 2014 and 2019  ................................ .......18 
Chart 1.2 Direction of merchandise trade, 2014 and 2019  ................................ ....................... 19 
Chart 1.3 Foreign direct investment, 2014 -19 ................................ ................................ ........ 20 WT/TPR/S/409 • Tonga  
 
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  Chart 3.1 Frequency distribution of MFN tariff rates, 2013 and 2020  ................................ ........ 39 
Chart 3.2 Average applied and bound tariff rates, by HS section, 2013 and 2020  ....................... 40 
Chart 4.1 Interest rate spread, FY 2012/13 -FY 2019/20  ................................ .......................... 82 
Chart 4.2 International passengers arrivals and type of maritime freight, 2012 -19 ..................... 86 
 
TABLES  
 
Table 1.1 Basic economic and employment indicators, FY 2013 -19 ................................ ........... 11 
Table 1.2 Selected macroeconomic indicators, FY 2013 -19 ................................ ...................... 14 
Table 1.3 Balance of payments, FY 2013 -19 ................................ ................................ .......... 16 
Table 1.4 Trade in services, FY 2013 -19 ................................ ................................ ............... 19 
Table 2.1 Restricted activities  ................................ ................................ .............................. 32 
Table 2.2 Business activities reserved for Tongan investors  ................................ ..................... 32 
Table 2.3 Business activities requiring the fulfilment of additional conditions  ............................. 33 
Table 3.1 Structure of MFN tariff, 2013 and 2020  ................................ ................................ ...38 
Table 3.2 Summary analysis of MFN tariff, 2020  ................................ ................................ ....39 
Table 3.3 Summary analysis of preferential tariff, 2020  ................................ .......................... 41 
Table 3.4 Customs -related fees and charges, 2020  ................................ ................................ 41 
Table 3.5 Forgone revenue from imports, FY 2014 -20 ................................ ............................ 42 
Table 3.6 Export promotion disbursements, 2014 -19 ................................ .............................. 43 
Table 3.7 Revenue from taxation, FY 2013 -20 ................................ ................................ .......44 
Table 3.8 Products subject to a different excise tax rate based on their origin in 2020  ................ 45 
Table 3.9 Ca tegories of sector -specific GDLs granted by the Tonga Development  
Bank, 2020  ................................ ................................ ................................ ....................... 50 
Table 3.10 SPS legislation, as at December 2020  ................................ ................................ ...52 
Table 3.11 Products and services subject to price control under the Price and Wage  
Control Act, 2020  ................................ ................................ ................................ ............... 55 
Table 3.12 SOEs: capital, ownership, and market participation, 2020  ................................ .......57 
Table 3.13 Main changes in entities' responsibilities by procurement thresholds  ......................... 59 
Table 3.14 Type of contract and main changes in procurement thresholds  ................................ 61 
Table 3.15 U se of competitive methods in public procurement, 2016 -19 ................................ ...61 
Table 3.16 Trademark registrations, 2014 -19 ................................ ................................ ........ 62 
Table 3.17 Terms of protection, 2020  ................................ ................................ ................... 63 
Table 4.1 Total allowable and actual catch, 2014 -20 ................................ ............................... 71 
Table 4.2 Telecommunications market, 2013 an d 2018  ................................ ........................... 84 
Table 4.3 Air Transport Agreements, 2020  ................................ ................................ ............ 88 
 
BOXES  
 
Box 3.1 Consumption tax exemptions and zero rates, 2014 -20 ................................ ................ 48 
Box 3.2 SOEs: activities and legislation, 2020  ................................ ................................ .......56 
Box 3.3 IP laws and regulations, 2020  ................................ ................................ .................. 62 WT/TPR/S/409 • Tonga  
 
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  APPENDIX TABLES  
 
Table A1.1 Merchandise exports and re -exports by HS section, 2014 -19 ................................ ...94 
Table A1.2 Merchandise imports by HS section, 2014 -19 ................................ ........................ 95 
Table A1.3 Merchandise exports, by destination, 2014 -19 ................................ ....................... 96 
Table A1.4 Merchandise imports, by origin, 2014 -19 ................................ .............................. 97 
Table A3.1 Forgone revenue from imports, sectoral breakdown , FY 2014/15 -FY 2018/19  ............ 98 
Table A3.2 List of excisable goods, by product heading (HS 4 -digit level), as of  
November  2020 ................................ ................................ ................................ ................. 99 
  WT/TPR/S/409 • Tonga  
 
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  SUMMARY  
1. Since its previous Trade Policy Review in 2014 and until 2017, Tonga's economy grew at a 
strong pace, supported by construction and remittances -fuelled private consumption, as well as by 
an accommodative monetary policy stance. Real GDP grew on average by 2.35% 
(FY 2013/14 -FY 2018/19) annually, compared with 1.27% (FY  2006/07 -FY 2011/12) at the last 
period. A succession of natural disasters, namely the extensive damage caused by Tropical Cyclones 
Gita (2018), Tino (2020), and Harold (2020), and the large COVID -19-pandemic -induced contraction 
in global economic activity brought about a significant economic downturn. Apart from some 
temporary spikes in 2017 -18, inflation remained low, reflecting favourable development s in 
international food and fuel prices. An Economic and Social Stimulus Package worth TOP 60 million 
was put in place to fund the National Action Plan for combatting the COVID -19 pandemic.  
2. Tonga launched a comprehensive tax reform aimed at increasing rev enue, addressing 
inequality, and discouraging consumption of various products deemed unhealthy. Changes were 
made, inter alia , to the pay -as-you-earn income tax, the consumption tax, excise taxes, and import 
duties. In their pursuit of fiscal consolidation, the authorities also took steps to improve public 
finance management and avoid non -concessional borrowing. However, Tonga's  public debt remained 
above 41% of GDP during the review period, and the overall risk of public and external debt distress 
remains high. Various initiatives aimed at modernizing the monetary policy and macroprudential 
frameworks were undertaken as well. De spite the progress made, the toolbox of the National 
Reserve Bank of Tonga remains limited, comprising minimum reserve requirements for banks, the 
remuneration rate on required reserves, and foreign exchange controls.  
3. Tonga's national currency remains in a  pegged exchange rate arrangement, which may have 
an impact the economy's resilience to external shocks. In 2018, the legislation on capital controls 
was consolidated in a new Foreign Exchange Control Act and an Exchange Control Directive. Having 
reached 1 5% of GDP in FY  2014/15, the current account deficit narrowed to some 1.5% of GDP in 
FY 2018/19, reflecting steady improvements in the primary and secondary income balances that 
compensated somewhat for the widening merchandise trade deficit. The reserves coverage was in 
the range of seven to eight months of prospective imports during the review period. However, 
Tonga's foreign exchange reserves remain prone to rapid declines, given the country's high 
vulnerability to external shocks and significant externa l debt.  
4. The relatively high exposure of Tonga's economy to international trade and its degree of 
openness continued to be reflected in a relatively high ratio of its total trade (exports plus imports) 
in goods and services to GDP. This ratio increased from  75% in FY  2013/14 to 87.2% in FY  2018/19. 
Cross -border trade trends reflect the challenges posed by Tonga's remoteness from international 
markets. New Zealand and Australia accounted for some 40% of Tongan exports in 2019, up from 
32% in 2014. New Zealand  also remained the principal origin of goods imported into Tonga, followed 
by Singapore and the United States. Main exports continue to be vegetable products (mainly squash, 
root crops, and coconuts) and live animals (mostly seafood).  
5. According to the auth orities, between 2014 and 2019 the bulk of foreign direct investment 
(FDI) into Tonga originated from China. FDI inflows were primarily channelled into services, notably 
professional services and tourism, followed by manufacturing/processing activities. Du ring the 
review period, Tonga made efforts to ameliorate the legal framework governing its investment 
regime and undertook a landmark improvement in dispute settlement by acceding to the 1958 United 
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Its lists of 
activities prohibited, restricted for foreign investors, and reserved for Tongan investors remained 
unchanged. Implementation of the new Foreign Investment Act 2020 and the review of its Foreign 
Investment Regulations,  aimed at reducing the number of reserved activities and expanding the list 
of restricted ones, are under way. So far, no investment promotion via income tax incentives has 
been in place. Tonga's limited network of international investment agreements remai ned unchanged.  
6. Since 2014, Tonga has implemented certain institutional changes and updated some of its 
trade -related policies in line with its broader strategic development framework. Its constitutional 
framework remained unchanged. Laws were consolidated,  e-government initiatives were 
undertaken, and Tonga acceded to the 2003 United Nations Convention Against Corruption.  WT/TPR/S/409 • Tonga  
 
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  7. Tonga remains committed to the multilateral trading system, but its participation in WTO 
activities was relatively limited due to, inter alia, its lack of permanent representation in Geneva. It 
maintained its WTO commitments unchanged, and it is making efforts towards ratifying the Trade 
Facilitation Agreement (TFA) in 2021. During the review period, Tonga continued to follow a regional 
and international integration policy mainly focused on the Pacific region; the sole substantive 
development was its accession to the Pacific Agreement on Closer Economic Relations Plus (PACER 
Plus), whose tariff commitments are to be implemented within a 25 -year timeframe. A few WTO 
notifications indicating the absence of relevant legislation (safeguards, subsidies and countervailing 
measures, and preshipment inspections), contact points (TFA, Agreement on Trade -Related Aspects 
of Intellectual Property Rights (TRIPS Agreement), and trade in services), and dates of definitive 
implementation of TFA Categories B and  C commitments were submitted during the review period; 
the authorities intend to have all outstanding notifications submitted by February 2021. Tonga was 
a recipient of Aid for Trade support.  
8. The general thrust of trade and trade -related policies was revised in several areas. The simple 
average applied MFN tariff decreased from 11.5% in 2013 to 10.4% in 2020, reflecting mainly an 
increase in the share of duty -free tariff lines. Most import duti es eliminated over that period 
concerned agricultural products. The simple average rate on dutiable lines remained virtually 
unchanged. All tariff lines remain ad valorem  and therefore transparent; the tariff structure involving 
four non -zero rates (one fe wer than in 2013) remains simple. Overall tariff dispersion remains 
relatively significant, with rates ranging from zero to 20%. Tonga has bound all tariff lines at 
ad valorem  rates of either 15% or 20%. In 2020, the simple average bound tariff rate was 17 .6%, 
some 7.2 percentage points higher than the average applied MFN rate. Applied MFN rates on 
four tariff lines partially exceeded their bound level.  
9. A business licence remains the only prerequisite for engaging in cross -border trade. Importers 
have the c hoice to fulfil customs formalities themselves or to engage the services of professional 
customs brokers. According to the authorities, Tonga applies the WTO Customs Valuation Agreement 
and uses the transaction value of goods as the primary method. The cus toms legislation does not 
contain any provisions on non -preferential rules of origin. Having ratified PACER Plus, Tonga enacted 
regulations on the corresponding preferential rules of origin in December 2020.  
10. Import licensing requirements continue to be use d mainly for national security, public safety, 
health, and environmental reasons. Non -automatic licensing requirements apply on a number of 
imports (e.g. medicines, alcoholic beverages, tobacco, and cigarettes). The legal instruments 
governing restricted i mports are not consolidated, and the granting of licences is administered by 
several line ministries and government agencies. According to the authorities, an import ban on 
lamb and mutton breast meat was implemented on 1 July 2020 to discourage unhealthy lifestyles. 
No legal and institutional framework for the application of contingency measures exists.  
11. Tonga does not levy any export taxes; exports also remain exempt from internal taxes 
(zero-rated for consumption tax purposes). The exportation of green an d mature coconuts remains 
reserved for Tongan businesses. The Ministry of Trade and Economic Development assists exporters 
with overseas publicity, participation in trade fairs and exhibitions, market research and 
development, and facilitation of business negotiations.  
12. Tonga expanded considerably the list of excisable goods and modified some of their rates as 
part of its broad reform to reduce the consumption of what is considered unhealthy food and to 
address non -communicable diseases. Excise taxes on cert ain imported and locally produced goods 
(e.g. sausages, instant noodles, toilet paper, ice cream, beer, spirits, unmanufactured tobacco, and 
tobacco products)  are still applied in a non -uniform manner, thus affording local producers a 
considerable tax adva ntage. The consumption tax on goods and services was maintained at 15%.  
13. To promote investment or achieve social objectives,  Tonga maintains some indirect tax and 
non-tax (mostly activity -specific) incentives, involving duty and tax exemptions, preferentia l credit, 
and targeted subsidies, which are in general very limited in terms of scope. Exemptions from excise 
and consumption taxes were granted to various sectors, economic activities, and specific users 
(notably state -owned enterprises). The list of exem ptions broadened  with new tax exemptions for 
the tourism and construction sectors, as well as in response to the COVID -19 pandemic. A tax 
exemption remains in place for fuel used by fishing vessels, domestic airlines, and ferries, as well 
as in diesel powe r generation and village electricity and water supply. The main beneficiaries of 
customs duty and tax concessions were importers of fuels and public enterprises. The Government WT/TPR/S/409 • Tonga  
 
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  Development Loans programme was also reviewed in 2020 and extended for another five years, 
with additional resources earmarked for the fisheries and tourism sectors in response to the 
COVID -19 pandemic and Tropical Cyclone Harold. These loans are also directed to another 
five sectors, i.e. agriculture and forestry, manufacturing, liv estock, construction and utilities, and 
retail and wholesale.  
14. To strengthen the development and application of food standards,  Tonga updated its 
legislation on food safety by adopting the Food Act in 2014, which was reviewed and replaced in 
2020. It has st ill to develop a legal and institutional framework for the adoption of standards, 
technical requirements, and conformity assessment procedures.  
15. Tonga continues without a legal and institutional framework governing competition policy. 
Competition -related pr ovisions remain limited across different laws. A price -control mechanism for 
certain food products, chemicals, fuels, and services remains in place. State involvement in the 
economy remains significant, as the implementation of the 2007 public enterprise r eform 
programme was slow. Tonga identified seven public enterprises that could be reformed by 
conducting privatization, restructuring, outsourcing, or implementing another form of public -private 
partnership (PPP); reform plans for three of them were comple ted during the review period, whereas 
for the remaining enterprises the process is ongoing. Tonga made substantial progress in 
implementing its 2013 government procurement reform strategy, which involved regulatory and 
institutional changes leading to a mo re centralized procurement system by significantly reducing the 
relevant threshold. This threshold was subsequently increased from TOP  7,500 in 2016 to 
TOP 20,000 in 2019 without attaining its pre -reform level of TOP  100,000. This reform included the 
adopt ion of a new set of regulations.  
16. During the review period,  the regulatory framework governing intellectual property rights 
(IPR) remained virtually unchanged. According to the authorities, IPR protection follows to a large 
extent the TRIPS Agreement, with  some exceptions where the level of protection under domestic 
legislation is in general higher, e.g. utility models and moral rights for works, which are not covered 
under the Agreement.  
17. Agriculture remains an increasingly predominant economic activity des pite the impact of 
natural disasters. Its contribution to GDP rose from 14.2% in FY  2013/14 to 17.7% in FY  2018/19. 
The main agricultural products remain root crops, squash pumpkins, and kava. Food security 
challenges persist, as Tonga is a net importer of  staple foods whose self -sufficiency remains to be 
addressed together with other government policy objectives including climate -resilient agriculture, 
the enabling environment, subsistence -level production, import substitution, and export orientation. 
Certain regulatory and institutional changes were undertaken. Average tariff protection levels on 
agricultural products (WTO definition) dropped considerably (from 10.7% to 7.7%), and non -tariff 
measures were introduced to encourage healthy food consumption. T rade-related support, including 
a state -run pack -house, soft loans, and sector -specific tax incentives, remained available to 
producers and/or exporters.  
18. Fisheries remain important to the economy (accounting for 26.6% of exports in 2019), despite 
a slight  reduction of their contribution to GDP (1.9%, FY  2018/19). Government policy was aimed 
at maximizing the sustainable contribution of the sector to food security and economic growth. A 
separate Ministry of Fisheries was established in 2016. Regulatory chan ges related to, inter alia , 
fisheries issues of coastal communities, whereas action was taken to strengthen Tonga's framework 
against illegal, unreported, and unregulated fishing. Average tariff protection levels were reduced 
significantly, i.e. from 10.6%  in 2013 to 0.9% in 2020. A resource rent on the local value of 
commercially exported marine products continues to be charged. Activity -specific tax and non -tax 
incentives were available to fisheries stakeholders.  
19. Tonga remains heavily dependent on petrol eum imports to meet its energy needs for 
electricity and transportation, but initiatives for raising renewable energy sources helped reduce its 
dependency level. Policy initiatives for energy efficiency were pursued. Tonga Power Limited, the 
vertically int egrated and entirely state -owned utility, continues to own and operate virtually all 
in-front-of-meter electricity generation, as well as all transmission and distribution assets; its 
management has operated under a PPP arrangement since 2019. Electricity tariffs remain high by 
international standards but, despite differences in generation cost, they remain standardized across 
islands; a cross -subsidized "lifeline tariff" applicable to residential consumers remains in place. 
Legislation for seabed minerals was passed, although mining remains at the exploration stage.  WT/TPR/S/409 • Tonga  
 
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  20. The contribution of the manufacturing sector, concentrated in a few activities (e.g. food and 
beverage), slightly declined (5.2% of GDP, FY  2018/19). Average tariff protection levels for 
manufa cturing products were slightly reduced (11.5% in 2013 to 10.8% in 2020). Activity -specific 
tax and non -tax incentives involving customs duty, excise tax, and consumption tax concessions on 
inputs and soft loans were available to manufacturers.  
21. Services rem ain the main, albeit slightly declining, contributor to GDP (49.2% in FY  2018/19); 
services trade performance remained better than that of goods. Tonga's relatively extensive 
commitments under the General Agreement on Trade in Services (GATS) remain unchan ged; its 
regional trade agreements also cover trade in services, and GATS+ commitments were undertaken 
under PACER Plus. The structure of the relatively small, well -capitalized, and profitable banking 
system remained virtually unchanged; its regulatory fra mework was updated in certain areas, and 
the non -performing loans ratio reduced. The insurance market is being developed; a new insurance 
bill is being prepared. Telecoms connectivity improved, and the market's duopolistic structure 
remained unchanged; new  legislation was passed, and a regulator was established. Transport 
services remain crucial for Tonga's economic development and competitiveness. Several policy 
initiatives intended to address transport -related challenges were undertaken, and new air trans port 
legislation was passed. Air and maritime transport continued to receive support including under the 
fuel concession scheme. Cabotage is allowed only under certain circumstances in maritime transport 
services. Tourism and its linkages with other activi ties (e.g. transport, fisheries, and e -commerce) 
were the subject of major policy papers, and a separate Ministry of Tourism was established in 2015. 
Tax and non -tax incentives supported the development of tourism business operators. Distribution 
services remained of major importance to the economy; concessional loans supported small -scale 
wholesale and retail trade, and progress was made in enhancing the legal and regulatory frameworks 
for e-commerce, which is at a nascent stage.   
22. Tonga's growth prospects  are subject to considerable uncertainty related to the impact of the 
COVID -19 pandemic and natural disasters on economic activity, as well as to developments in 
remittances inflows and assistance from development partners. Future prosperity and sustained 
growth depend on the implementation of further fiscal consolidation, economic diversification, and 
productivity -enhancing reforms, as well as on addressing issues relating to infrastructure, regulatory 
uncertainty, investment framework, and state involveme nt in the economy. These and related 
reforms would increase the resilience of Tonga's economy, its ability to cope with external shocks, 
and its integration into the multilateral trading system, thus enabling it to continue meeting its 
economic and welfare  objectives.  
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  1  ECONOMIC ENVIRONMENT  
1.1  Main Features of the Economy  
1.1.  The Kingdom of Tonga is an archipelago comprising 176 volcanic and low -lying coral islands 
dispersed over 770,000 km2 in the South Pacific. Only 36 of these islands are inhabited. Tonga's 
small and fragmented total surface area (749 km2) significantly limits land availability and poses 
considerable transportation and communication challenges. Furthermore, Tong a is placed at a 
competitive disadvantage by remoteness from international markets, a narrow resource base, and 
limited possibilities for economies of scale.  
1.2.  Tonga is also particularly vulnerable to adverse shocks from natural disasters and climate 
change . It ranked fourth in the world in terms of the ratio of its climate -related losses to its GDP for 
the period 1999 -2018. Having borne the largest climate -related loss globally in 2018, when Tropical 
Cyclone (TC) Gita destroyed approximately 38% of its annu al GDP, Tonga also suffered extensive 
damage from TC Tino and TC Harold in January and April 2020, respectively. Besides frequent 
tropical cyclones, Tonga experiences intermittent droughts, earthquakes, and tsunamis, and is highly 
exposed to sea -level rise . It is still in the early stages of building resilience so that its infrastructure 
and public services are better prepared to face these risks.1 
1.3.  Tonga's economy remained fairly undiversified, with services and agriculture accounting for 
about 50% and 17%  of GDP, respectively, during the review period (Table  1.1). The main service 
activities were wholesale and retail trade, and real estate. Construction's GDP share was on an 
upward trend, reflecting significant public (including donor -funded) spending on i nfrastructure and 
on post -tropical cyclone reconstruction. Tonga remains a net food importer and its energy matrix 
continues to be dominated by imported fossil fuels, with consequent exposure to international price 
fluctuations.  
Table 1.1 Basic economic and employment indicators, FY 2013 -19 
  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19a 
Real GDP (TOP million, 2016/17 prices)  913.5  924.2  984.9  1,017.7  1,020.7  1,028.2  
Real GDP (USD million, 2016/17 prices)  502.7  475.3  441.8  460.0  465.1  452.2  
Nominal GDP (TOP million)  797.2  849.1  932.6  1,017.7  1,073.2  1,164.0  
Nominal GDP (USD million)  438.7  436.7  418.4  460.0  489.0  511.9  
Nominal GDP per capita (USD)  4,292.5  4,295.3  4,136.5  4,571.9  4,885.7  5,142.0  
Real GDP by economic activity  (year -on-year % change)  
Agriculture, forestry and fishing  2.5 -1.7 -1.3 -2.5 0.4 3.6 
Fishing  3.3 10.9 22.2 -26.7 -14.6 18.6 
Mining and quarrying  4.4 1.4 -10.8 3.2 14.2 -23.0 
Manufacturing  0.9 3.0 7.4 1.5 -0.8 -4.8 
Electricity, water and waste  3.5 1.2 8.7 9.9 0.0 11.0 
Construction  18.5 -5.1 22.8 18.0 -32.4 16.2 
Services  -1.0 1.4 5.5 1.8 3.3 0.8 
Wholesale and retail trade  -3.2 2.6 14.8 2.5 6.3 0.4 
Transport and storage  5.8 7.6 -2.1 19.6 1.8 2.2 
Accommodation and food service activities  -4.3 7.3 16.6 8.6 7.5 -3.3 
Information and communication  -20.3 12.9 2.0 -0.8 9.5 0.4 
Financial and insurance activities  1.1 -8.3 8.2 -4.3 4.5 0.1 
Real estate activities, of which:  -0.6 2.0 -0.5 1.2 -1.7 0.0 
Ownership of dwellings  0.2 0.2 0.5 1.5 -2.3 -0.6 
Other real estate activities  -4.5 11.1 -4.9 0.0 1.0 2.7 
Professional, scientific and technical activities  -1.2 1.5 8.1 -15.0 25.2 11.0 
Administrative and support service activities  23.4 10.7 22.2 -8.2 1.2 2.5 
Public administration and defence  0.3 1.7 0.6 -1.5 2.8 4.0 
Education  0.4 -0.2 0.1 -0.1 0.0 2.6 
Human health and social work activities  2.1 -4.3 21.0 8.6 5.4 -3.2 
 
1 IMF (2020), Tonga: Technical Assistance Report -Climate Change Policy Assessment , Country Report 
No. 2020/212. Viewed at: 
https://www.imf.org/~/media/Files/Publications/CR/2020/English/1TONEA2020001.ashx . WT/TPR/S/409 • Tonga  
 
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    2013/14  2014/15  2015/16  2016/17  2017/18  2018/19a 
Arts, entertainment and recreation  -10.5 2.8 8.4 2.1 -12.1 0.1 
Other service activities  6.2 -4.0 1.3 -3.4 3.5 -3.1 
Nominal GDP by economic activity  (%) 
Agriculture, forestry and fishing  16.4 16.9 16.6 16.8 17.1 19.6 
Fishing  2.2 2.1 2.0 1.9 1.8 1.9 
Mining and quarrying  0.8 0.7 0.6 0.6 0.8 0.7 
Manufacturing  6.2 6.0 6.0 6.0 5.9 5.2 
Electricity, water and waste  2.9 2.6 2.5 2.4 2.4 2.2 
Construction  6.2 6.1 6.8 7.4 6.4 7.0 
Services  54.0 53.4 52.1 50.7 50.5 49.2 
Wholesale and retail trade  9.9 9.5 9.8 9.8 10.1 9.7 
Transport and storage  3.9 4.2 3.6 3.9 3.7 3.4 
Accommodation and food service activities  2.6 2.6 2.7 2.9 3.1 2.9 
Information and communication  2.4 2.5 2.3 2.2 2.1 2.3 
Financial and insurance activities  6.0 5.1 5.0 4.7 4.8 5.0 
Real estate activities, of which:  10.5 10.2 9.3 9.1 9.4 9.0 
Ownership of dwellings  9.0 8.5 7.9 7.6 8.0 7.7 
Other real estate activities  1.5 1.7 1.5 1.5 1.5 1.4 
Professional, scientific and technical activities  0.6 0.4 0.6 0.5 0.6 0.7 
Administrative and support service activities  0.4 0.4 0.5 0.4 0.4 0.4 
Public administration and defence  8.0 8.7 8.6 7.7 7.1 7.2 
Education  4.9 4.9 4.7 4.6 4.4 4.2 
Human health and social work activities  2.3 2.3 2.7 2.7 2.5 2.3 
Arts, entertainment and recreation  0.5 0.5 0.5 0.5 0.4 0.4 
Other service activities  2.1 1.9 1.7 1.7 1.7 1.6 
Structure of national employmentb (% of occupied population)  
Agriculture forestry and fishing  26.1 25.1 24.1 23.1 22.1 21.1 
Mining and quarrying  0.4 0.4 0.4 0.5 0.5 0.5 
Manufacturing  20.0 18.6 17.1 15.6 14.2 12.8 
Electricity, gas and water supply  1.5 1.5 1.5 1.4 1.4 1.4 
Construction  6.0 6.3 6.6 6.9 7.2 7.5 
Services  46.0 48.2 50.3 52.5 54.6 56.8 
Wholesale and retail trade  7.3 7.4 7.6 7.7 7.8 7.9 
Transport and storage  2.9 3.0 3.0 3.1 3.1 3.2 
Accommodation and food service activities  3.3 3.5 3.7 3.9 4.1 4.3 
Information and communication  2.0 2.0 2.0 2.0 2.0 1.9 
Financial and insurance activities  2.2 2.3 2.4 2.5 2.5 2.6 
Real estate activities  0.0 0.0 0.1 0.1 0.1 0.1 
Professional, scientific and technical activities  0.7 0.8 0.9 1.0 1.1 1.2 
Administrative and support service activities  1.7 1.9 2.1 2.3 2.5 2.7 
Public administration and defence  8.4 8.3 8.2 8.0 7.9 7.8 
Education  6.8 6.8 6.9 6.9 7.0 7.0 
Human health and social work activities  2.3 2.6 2.9 3.1 3.4 3.6 
Arts, entertainment and recreation  0.4 0.4 0.5 0.5 0.5 0.5 
Other service activities  4.5 5.0 5.4 5.9 6.3 6.7 
Activities of households as employers  3.3 4.0 4.8 5.5 6.3 7.0 
Activities of extraterritorial organizations  0.2 0.1 0.1 0.0 0.0 0.0 
a Provisional.  
b Data reported on a calendar -year basis, instead of on Tonga's financial year (1 July to 30 June).  
Source : Tonga Statistics Department.  
1.4.  Like most small island economies, Tonga has limited human and financial capacity, and a 
narrow production base. Unemployment remains high, with a significant part of the population 
working in the informal economy or on a seasonal basis in foreign markets (primarily Australia and 
New Zealand).2 Large-scale emigration continues to be one of the main reasons for skilled labour 
 
2 According to the most recent po pulation census, in 2016 some 16.4% of the economically active 
population were unemployed. When subsistence workers were also factored in, the unemployment rate 
reached 34.8%. Some 23.7% of all "paid workers" reported in the census participated in overseas  seasonal WT/TPR/S/409 • Tonga  
 
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  shortages and low productivity growth. The available data suggest that Tonga made some progress 
in reducing poverty between 2009 and 2015, but this did not translate into lower i nequality.3 
Notwithstanding the authorities' prevention and control efforts, non -communicable diseases linked 
to unhealthy environments and lifestyles continue to pose major challenges.  
1.5.  Tonga remains heavily dependent on external financing, particularly f unding from development 
partners and remittances from Tongan expatriates. Most of its public debt is external and poorly 
diversified, with CNY -denominated liabilities representing over 58% of total external debt. 
Accordingly, Tonga continues to face signif icant sustainability risks, given its economy's vulnerability 
to natural disasters and global shocks and its debt portfolio's exposure to exchange rate movements.  
1.2  Recent Economic Developments  
1.2.1   Overview  
1.6.  Tonga's economy expanded at a strong pace through FY  2016/17, supported by construction 
as well as private consumption fuelled by a steady inflow of remittances. Real GDP grew on average 
by 2.35% annually (FY  2013/14 -FY 2018/19), compared with 1.27% over the previous review period 
(FY 2006/07 -FY 2011/12). Having stagnated in FY  2017/18 following the devastation caused by 
TC Gita, economic growth showed signs of a modest recovery in FY  2018/19 (Table  1.2). However, 
the COVID -19 pandemic and tropical cyclones brought about a significant downturn, prompting 
downwa rd revisions of the authorities' economic growth forecasts. Indeed, the Tongan economy is 
projected to contract by 2.9% in FY 2019/20 and by 5.8% in FY  2020/21.4  
1.7.  Tonga established a National Action Plan (NAP) for combatting the COVID -19 pandemic through 
its existing matrix comprising nine clusters: economic and social recovery; education; emergency 
and telecommunications; essential services; food security and livelihood; health, nutrition, water 
sanitation and hygiene; logistics and coordination; safety a nd protection; and shelter. An Economic 
and Social Stimulus Package worth TOP  60 million was put in place to fund the NAP through 
additional financial allocations to each cluster. The bulk of this short -term support funding was 
earmarked for enhancing heal thcare capacity and assistance to affected businesses.5 
1.8.  Between 2014 and 2019, headline inflation fluctuated between a low of -0.6% and a peak of 
7.3% (Table  1.2), but the average annual rate was moderate (3%). Pro -healthy -living tax reforms 
and domestic supply -side shocks following TC Gita triggered temporary price increases in 
FY 2016/17 -FY 2017/18. By and large, inflationary pressures mirrored the trends in international 
food and fuel prices. Pandemic -related restrictions translated into low aggregate d emand and 
declining prices ( -1.4% on an annual basis) in FY  2019/20.6 As a result, inflation remained well 
below the 5% reference rate adopted by the National Reserve Bank of Tonga (NRBT) in 2017.7  
1.9.  According to IMF projections, Tonga's economic performa nce is expected to be dented by 
spillover effects from the large pandemic -induced contraction in economic activity in remitting 
countries.8 Economic growth is expected to mirror the pace of a projected global recovery, reaching 
3%-4% in 2022 -23. Inflation  is forecast to remain low, due to weaker global food and fuel prices. 
However, Tonga's weak competitiveness and large import needs, coupled with the prospects of lower 
 
work programmes. Tonga Statistics Department, Tonga 2016: Census of Population and Housing, Volume 1,  
April 2018. Viewed at: https://tongastats.gov.to/download/60/2016/4062/2016 -census -report -volume -1-2nd-
edition.pdf .  
3 Whereas the share of the population living on less tha n USD  1.90 a day (at 2011 international prices) 
declined from 1.1% in 2009 to 1% in 2015 and that of Tongans living on less than USD  3.20 a day decreased 
from 8.9% to 7.5%, Tonga's estimated Gini coefficient increased from 37.5 to 37.6 over the same period . 
World Bank, World Development Indicators . Viewed at: https://databank.worldbank.org/source/world -
development -indicators .  
4 Ministry of Finance, Government of Tonga Budget  Statement for Year Ending 30th June 2021 . Viewed 
at: http://www.finance.gov.to/budgetpublication .  
5 Ministry of Finance, Government of Tonga Budget Statement for Year Ending 30th June 2021 . View ed 
at: http://www.finance.gov.to/budgetpublication . 
6 NRBT, Monthly Economic Review , Vol. 7, No.  6, 21 August 2020. Viewed at: 
http://www.reservebank.to/data/documents/Indicators/ER/2020/NRBT_ER_Jun20.pdf .  
7 Previously, the NBRT had an inflation reference range (6% -8%). 
8 IMF (2020), Tonga–IMF Assessment Letter for the World Bank, 2 April 2020 . Viewed at:  
https://www.imf.org/~/media/Files/Publications/PP/2020/English/PPEA2020024.ashx . WT/TPR/S/409 • Tonga  
 
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  remittances inflows and heavy debt repayments, are likely to widen current account defi cits and 
reduce reserve coverage to between three and four months of imports by 2023, well below the 
desirable buffer (about seven months of imports) for countries prone to natural disasters. Fiscal 
balances are also projected to be in deficit in the short  term, to accommodate the extra costs of 
containment, healthcare, and targeted economic support.  
Table 1.2 Selected macroeconomic indicators, FY 2013 -19 
  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
National accounts  (% change, unless otherwise indicated)  
Real GDP (at 2016/17 prices)  2.0 1.2 6.6 3.3 0.3 0.7 
Consumption  1.6 6.7 5.0 1.3 3.7 2.3 
Private consumption  1.6 8.2 6.5 1.0 4.2 0.5 
Government consumption  7.7 -1.3 5.6 1.7 4.8 4.6 
Gross fixed capital formation  -0.3 3.1 -1.4 2.4 1.1 9.7 
Exports of goods and services (XGS)  8.2 6.5 17.3 16.1 -27.4 13.9 
Imports of goods and services (MGS)  -20.4 110.5  -73.5 149.8  70.5 -48.9 
XGS/GDP (%) (at current prices)  17.0 17.0 21.7 22.2 21.4 22.0 
MGS/GDP (%) (at current prices)  58.0 64.5 63.3 65.8 66.1 65.2 
Prices and interest rates              
Inflation (CPI, % change)  2.3 0.1 -0.6 7.3 5.3 4.0 
Saving deposit rate (weighted average)  2.2 2.5 2.4 2.4 2.4 2.5 
Lending rate (weighted average)  8.7 8.2 7.9 7.8 7.9 8.0 
Deposit rate (weighted average)  2.0 2.3 2.2 2.1 2.1 1.9 
Interest rate spread (weighted average)  6.6 6.0 5.7 5.8 5.9 6.1 
Exchange rate              
TOP/USD (annual average)  1.8 1.9 2.2 2.2 2.2 2.3 
Nominal effective exchange rate 
(% change, end -period)  -3.6 -0.8 -6.6 0.2 -0.6 1.1 
Real effective exchange rate (%  change, 
end-period)  -3.5 -1.7 -7.7 9.2 0.3 1.1 
Money and credit  (% change, end -period)  
Broad money (M2)  8.1 2.4 12.6 11.3 10.6 1.8 
Total domestic credit  9.2 11.7 18.2 13.3 -2.2 2.8 
Credit to private sector  -0.6 8.9 19.8 22.8 7.0 8.6 
Central Government balance  (% of GDP, unless otherwise indicated)  
Revenue  37.8 34.6 38.7 43.2 42.6 41.7 
Tax revenue  17.4 18.9 19.8 21.0 21.9 20.9 
Grants  17.6 12.4 15.7 19.3 17.8 18.3 
Other revenue  2.7 3.3 3.2 3.0 2.9 2.5 
Expenditure  27.7 31.4 30.5 29.3 31.4 30.3 
Gross operating balance  10.1 3.2 8.2 13.9 11.2 11.4 
Net acquisition of non -financial assets  7.4 4.2 6.7 10.3 8.3 8.3 
Overall balance  2.7 -1.0 1.5 3.6 2.9 3.1 
Total government debt  45.9 49.9 48.2 44.3 46.4 42.7 
Domestic  3.7 4.8 5.8 5.5 5.9 5.2 
External  42.2 45.1 42.4 38.7 40.5 37.5 
External sector  (% of GDP, unless otherwise indicated)  
Current account balance  -6.8 -15.0 -6.5 -6.4 -5.6 -1.5 
Net merchandise trade  -38.6 -43.1 -40.0 -40.2 -41.4 -40.2 
Exports  4.1 4.5 6.0 4.5 2.9 3.1 
Imports  42.6 47.6 46.1 44.8 44.3 43.3 
Services balance  -2.4 -4.5 1.0 -3.4 -3.1 -3.1 
Capital account  12.9 12.5 18.6 17.6 18.5 18.9 
Financial account  15.3 17.0 17.6 21.1 21.6 22.0 
Direct investment, net  7.6 5.5 7.4 11.8 10.0 7.0 
Goods exports (% change in USD)  19.4 9.1 29.3 -17.4 -31.2 9.9 
Goods imports (% change in USD)  -0.1 11.0 -7.2 6.8 5.2 2.2 WT/TPR/S/409 • Tonga  
 
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    2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
Service exports (% change in USD)  -26.2 -3.4 42.5 4.1 11.3 7.1 
Service imports (% change in USD)  -29.0 10.4 -0.8 31.6 8.8 6.6 
Foreign exchange reserves (end -period, 
TOP million)  274.4  289.7  354.9  407.9  468.7  484.3  
in months of prospective MGS  7.0 6.5 7.1 7.5 8.0 7.9 
External debt service (% of XGS)  9.7 11.5 9.2 7.0 6.1 8.9 
Source : Tonga Statistics Department; NRBT; Ministry of Finance; IMF; and data provided by the authorities.  
1.10.   The Ministry of Finance expects the domestic economy's downturn and the fiscal position's 
deterioration to last through FY  2020/21. Thereafter, a recovery is expected to be driven by major 
construction -related projects, with real GDP growth projected at 3.5% in FY  2021/22 and 4.6% in 
FY 2022/23. After a fiscal deficit of TOP  37.4 mil lion in FY  2020/21, the authorities project surpluses 
of TOP  7.4 million and TOP  27.9 million for the two subsequent years.9 Both the IMF's and the 
Tongan authorities' forecasts are subject to considerable uncertainty, due to the unpredictable 
evolution a nd impact of the pandemic.  
1.2.2   Monetary and exchange rate policy  
1.11.   During the review period, Tonga undertook various initiatives aimed at modernizing its 
monetary policy and macroprudential frameworks. Despite the progress made, the NRBT's toolbox 
remains limit ed, comprising minimum reserve requirements for banks, the remuneration rate on 
required reserves, and foreign exchange controls. During 2014 -17, accommodative monetary policy 
fostered credit growth and a narrowing of the interest rate spread. Reserve requ irements were raised 
to 10% of banks' total deposits in July 2017, with a view to containing excess liquidity in the banking 
system. The NRBT also introduced a minimum target for banks' loan -to-deposit ratio (80%), 
intended to serve as an indicator that wo uld provide forward guidance to bank operations 
(Section  4.4.3).  
1.12.   The national currency, the pa 'anga (TOP), remains in a pegged exchange rate  arrangement 
with a maximum monthly  adjustment limit of 5% relative to a basket of currencies comprising the 
Austra lian, Fijian, New Zealand, and US dollars.10 The currency peg may affect the Tongan 
economy's resilience to external shocks. While the pa 'anga gradually depreciated against the 
US dollar during the review period, the real effective exchange rate was more v olatile (Table  1.2). 
1.13.   In 2018, Tonga's capital controls legislation was consolidated in a new Foreign Exchange 
Control Act and an Exchange Control Directive. Part of the NRBT's exchange control functions 
remained delegated to 16 "authorized persons" (banks and foreign exchange dealers).11 Pursuant 
to the legislation in force, exporters must repatriate, within six months of the export date, at least 
60% of their foreign exchange earnings from the sale of goods to a pa'anga -denominated account 
with a bank lice nsed in Tonga. Advance payments for imports worth up to TOP  500,000 are approved 
by authorized persons, whereas transactions exceeding that limit require NRBT approval.12 
1.2.3   Fiscal policy  
1.14.   During the review period, the Tongan authorities launched a comprehensi ve tax reform aimed 
at mobilizing revenue, addressing inequality, and discouraging consumption of various products 
deemed unhealthy. Changes were made to, inter alia , the pay -as-you-earn income tax, the 
consumption tax, and excise taxes and import duties ( Section  3). In 2015, Tonga introduced a flat 
"small -business tax" regime, with a view to fostering the formalization of informal businesses and 
thereby broadening the tax base and achieving a more equal distribution of the tax burden. Other 
 
9 Ministry of Finance, Government of Tonga Budget Statement for Year Ending 30 th June 2021 . Viewed 
at: http://www.finance.gov.to/budgetpublication . 
10 The Fijian dollar replaced the Japanese yen in the basket of currencies as from July 2014.  
11 NRBT, Exchange Control: Frequen tly Asked Questions . Viewed at: 
http://www.reservebank.to/index.php/exchange -control.html .  
12 The list of controlled overseas payments transactions and the corresponding delegated li mits can be 
viewed at: http://www.reservebank.to/data/documents/Legals/NRBT_ExchangeControlDirective_Sep18.pdf .  WT/TPR/S/409 • Tonga  
 
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  revenue -raising  measures included the introduction of a levy on foreign exchange transactions and 
the increase of the tourist departure fee in FY  2015/16.13  
1.15.   The authorities also took steps to enhance public finance management systems and, since 
2018, have been adhering to a policy of zero non -concessional borrowing. Fiscal rules, capping total 
external public debt at 50% of GDP, and public employees' compensation at 53% of domestic 
revenue and 45% of current expenses, have been explicitly incorporated in Tonga's  annual budget 
documents since 2017. An  additional rule aims at maintaining the domestic revenue to GDP ratio 
above 22%.14 Notwithstanding the fiscal consolidation efforts, donor grants remained central to 
achieving overall budget surpluses during most of the review period. The COVID -19 pandemic's 
negative impact on the fiscal position prompted the authorities to contain expenditure and focus on 
providing essential services to the public  within available resources.15 
1.16.   Public sector debt, most of which is ext ernal debt, peaked at 49.9% of GDP in FY  2014/15. 
Although it declined somewhat thereafter, it remained above 41% of GDP during the review period 
(Table 1.2). The authorities project total public debt to exceed 50% of GDP in FY  2020/21 and 
gradually declin e thereafter.16 Tonga's overall risk of public and external debt distress remains high, 
particularly in light of a projected spike in debt service obligations over the medium term.  
1.2.4   Balance of payments  
1.17.   Tonga's current account was in deficit throughout the r eview period (Table  1.3). Having 
reached 15% of GDP in FY  2014/15, the current account deficit narrowed to some 1.5% of GDP in 
FY 2018/19, reflecting steady improvements in the primary and secondary income balances. 
Construction projects (financed mostly b y donor grants) and remittance -led consumption were the 
main drivers of the widening goods deficit.  
Table 1.3 Balance of payments, FY 2013 -19 
(USD million)  
  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
Current account  -29.7 -65.3 -27.2 -29.3 -27.2 -7.5 
Goods and services balance  -179.8  -207.7  -163.2  -200.8  -217.4  -221.4  
Goods balance  -169.2  -188.2  -167.5  -185.1  -202.3  -205.7  
Exports  17.8 19.5 25.2 20.8 14.3 15.7 
Imports  187.1  207.7  192.7  205.9  216.6  221.4  
Services balance  -10.6 -19.5 4.4 -15.7 -15.1 -15.7 
Credit  56.6 54.7 78 81.1 90.3 96.7 
Debit 67.2 74.2 73.6 96.9 105.4  112.4  
Primary income, net  3.4 4.6 8.9 18.5 30.3 40.2 
Credit  22 23.4 19 37.6 49.6 54 
Debit 18.6 18.8 10.1 19.1 19.3 13.8 
Secondary income, net  146.7  137.7  127 153 160 173.6  
Credit  154.5  145.6  155 184.3  188.3  209.1  
Personal transfers  102.8  102.1  111.4  125.1  138 164.9  
Debit 7.8 7.9 27.9 31.3 28.4 35.5 
Personal transfers  4.3 5.8 23.5 24.4 19.1 26 
Capital account  33.5 24 30.8 54.1 49.1 35.8 
Credit  34.5 25.9 30.9 54.9 50.4 36.8 
Debit 1.1 1.9 0.1 0.7 1.4 1 
Current and capital account balance  3.8 -41.3 3.6 24.9 21.9 28.3 
 
13 IMF (2016), Tonga: 2016 Article  IV Co nsultation –Press Release; Staff Report; and Statement by the 
Executive Director for Tonga , Country Report No.  16/178. Viewed at: 
https://www.imf.org/~/media/Websites/IMF/imported -full-text-pdf/external/pubs/ft/scr/2016/_cr16178.ashx . 
14 IMF (2018), Tonga: 2017 Article  IV Consultation –Press Release; and the Staff Report for Tonga , 
Country Report No.  18/12. Viewed at: https://www.imf.org/~/media/Files/Publications/CR/2018/cr1812.ashx . 
15 Ministry of Finance, Government of Tonga Budget Statement for Year Ending 30th June 2021 . Viewed 
at: http://www.finance.gov.to/budgetpublication . 
16 Ministry of Finance, Government of Tonga Budget Statement for Year Ending 30th June 2021 . Viewed 
at: http://www.finance.gov.to/budgetpublication . WT/TPR/S/409 • Tonga  
 
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    2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
Financial account  -5.8 6.4 -3.1 28.1 -5.5 15.8 
Direct investment  -6.9 -8.7 -5.7 6.1 -19.1 0.2 
Assets  0.8 1.8 -0.1 0.6 -4.1 1.4 
Liabilities  7.7 10.5 5.6 -5.5 14.9 1.3 
Portfolio investment  0 0 0 0 0.6 4.9 
Assets  0 0 0 0 0 5 
Liabilities  0 0 0 0 -0.6 0.1 
Other investment  -2 9 -19.8 -1 -14.6 1.5 
Assets  2.5 0.1 -2.8 -1.3 -9 -0.7 
Liabilities  4.5 -8.9 17.1 -0.3 5.6 -2.2 
Reserve assets  3.1 6.2 22.4 23 27.5 9.3 
Net errors and omissions  -9.6 47.7 -6.8 3.2 -27.4 -12.4 
Memorandum:              
TOP/USD (period average)  1.82 1.94 2.23 2.21 2.19 2.27 
Source:  Tonga Statistics Department; and data provided by the authorities.  
1.18.   Tonga's gross foreign exchange reserves grew steadily during the review period, boosted by 
development partners' aid and remittances inflows (Table  1.2). In November 2020, foreign reserves 
held by the NRBT reached TOP  590.2 million, compared with TOP  267.9 million in November 2014.17 
The reserves coverage remained in the range of seven to eight months of prospective imports, well 
above the NRBT's target of at least three months. How ever, Tonga's foreign exchange reserves 
remain prone to rapid declines, given the country's high vulnerability to external shocks and 
significant external debt.  
1.3  Developments in Trade and Investment  
1.3.1   Trends and patterns in merchandise and services trade  
1.19.   The relatively high exposure of Tonga's economy to international trade and its degree of 
openness continued to be reflected by the ratio of its trade (exports plus imports) in goods and 
services to GDP; this ratio rose considerably from 75% in FY  2013/14 to 8 7.2% in FY  2018/19 
(Table  1.2). Tonga's total merchandise trade grew by approximately 21% between 2014 and 2019, 
although with considerable year -on-year fluctuations due to swings in international food and 
petroleum prices. Apart from a spike (36%) in 2016 , re-exports' share of total goods exports was 
generally stable at about 23% during 2014 -18 but contracted to 16% in 2019 (Table  A1.1). Annual 
merchandise imports outstripped exports more than 10 -fold throughout 2014 -19, reflecting the 
continued importance  of donor aid and remittances  for the financing of Tonga's import bill.  
1.20.   Merchandise exports remain small -scale and undiversified (Chart  1.1 and Table  A1.1). 
Vegetable products (mainly squash, root crops, and coconuts) and live animals (mostly seafood) 
were the main export categories throughout 2014 -19. The former's share of to tal exports increased 
from 35.8% in 2014 to 46.5% in 2019, whereas live animals' share declined somewhat over the 
same period. Re -exports continued to be concentrated in mineral products, and machinery and 
transport equipment.  
1.21.   Food and fuel continue to do minate Tonga's imports, albeit with some variation in their 
respective shares of total imports due to international price fluctuations. During the review period, 
the main import categories were mineral products (mainly refined petroleum products), foodstuf fs, 
machinery and electrical equipment, and transport equipment. The composition of imports shifted 
somewhat, with the share of transport equipment expanding, and those of mineral products and 
foodstuffs contracting (Table  A1.2).  
 
 
17 NRBT, Foreign Reserve Statistics for November 2020 . Viewed at: 
http://www.reservebank.to/index.php/financ ials/financial -markets/for -res.html .  WT/TPR/S/409 • Tonga  
 
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  Chart 1.1 Product composition of merchandise trade, 2014 and 2019  
 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
1.22.   Tonga's exports continue to have a significant sub -regional component, with New Zeala nd 
and Australia accounting for some 40% of total exports in 2019. The share of total exports destined 
to the United States increased from 13.1% in 2014 to 19.2% in 2019, whereas the share of exports 
to Japan decreased somewhat (Chart  1.2 and Table A1.3). New Zealand remained the principal origin 
of goods imported into Tonga, followed by Singapore and the United States (Table  A1.4).  
1.23.   During most of the review period, Tonga remained a net importer of services. Apart from a 
modest surplus in FY  2015/16, its se rvices balance was generally negative, with annual deficits 
amounting to approximately 3% of GDP. According to the authorities, the one -off services trade 
surplus was mainly attributable to higher transport and communication receipts during the 
King's  coronation celebrations. Travel, transportation, and other business services remain the major 
traded services (Table 1.4).  
 
Chart 1.[TNG]   Product composition of merchandise trade by main HS sections, 2014 and 2019
2014 2019
Exports
Source:  WTO calculations, based on data received by the authorities.Other
9.4%
Prepared food, beverages 
& tobacco  12.8%Plastics & rubber
2.2%Imports
Transport equipment
6.9%
Chemicals
3.9%Total:  USD 19.0 million Total:  USD 20.3 million
Total:  USD 218.8 million Total: USD 267.2 millionWood, articles
thereof  3.1%
Mineral products
18.7%Mineral products
15.5%
Chemicals
4.0%Machinery, electrical 
equipment  2.7%
Live animals, 
products thereof
35.3%
Mineral products
22.3%Plastics & rubber
2.6%Machinery, electrical 
equipment
18.0%
Other
11.5%
Vegetable products
2.7%Machinery, electrical 
equipment  
18.6%
Base metals, articles 
thereof 4.7%Vegetable
products
35.8%
Live animals,
products thereof
8.6%Transport equipment
15.3%
Prepared food, beverages 
& tobacco  11.2%Other
9.5%Wood, articles 
thereof 2.9%Base metals, articles 
thereof  5.7%Base metals, articles 
thereof  1.4%
Live animals, 
products thereof
11.4%
Vegetable products
3.3%Mineral products
8.2%
Base metals, articles 
thereof  1.8%
Machinery, electrical 
equipment  4.9%
Other
7.7%
Vegetable
products
46.5%
Live animals, 
products thereof
30.9%WT/TPR/S/409 • Tonga  
 
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  Chart 1.2 Direction of merchandise trade, 2014 and 2019  
 
Source:  WTO Secretariat calcul ations, based on data provided by the authorities.  
Table 1.4 Trade in services, FY 2013 -19 
  2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
Total credit (USD million)  56.6 54.7 77.6 81.1 90.3 96.7 
  % of total credit  
Manufacturing services on physical inputs 
owned by others  0.0 0.1 0.0 0.0 0.0 0.0 
Maintenance and repair services, n.i.e.  0.2 1.4 0.8 0.3 0.0 0.0 
Transportation  18.7 20.4 15.6 18.6 19.2 18.5 
Travel  63.4 65.2 65.7 59.3 53.3 58.8 
Business  4.7 4.6 6.2 5.1 4.3 4.3 
Personal  58.7 60.5 59.5 54.3 49.0 54.4 
Construction  0.7 2.4 4.2 2.4 1.6 6.7 
Telecommunications, computer and 
information  2.4 3.5 5.2 9.7 16.2 6.0 
Insurance and pension  0.0 0.0 0.0 0.0 0.0 0.0 
Financial services  0.5 0.3 0.0 0.1 0.0 0.0 
Charges of intellectual property  0.3 2.1 0.0 0.0 0.0 0.0 
WT/TPR/S/409 • Tonga  
 
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    2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  
Other business services  7.3 0.0 3.6 4.0 5.3 6.8 
Personal and cultural services  3.7 0.2 0.1 0.1 0.1 0.0 
Government goods and services, n.i.e.  3.0 4.3 4.9 5.5 4.3 3.2 
Total debit (USD million)  67.2 74.1 73.2 96.9 105.4  112.4  
  % of total debit  
Manufacturing services on physical inputs 
owned by others  0.0 0.1 0.2 0.0 0.0 0.0 
Maintenance and repair services, n.i.e.  0.1 1.3 2.0 0.9 0.5 1.8 
Transportation  32.0 26.4 36.4 28.9 30.2 27.8 
Travel  30.5 25.9 27.9 35.4 33.9 40.6 
Business  11.8 6.3 7.4 12.2 12.2 12.9 
Personal  18.8 19.6 20.4 23.2 21.7 27.7 
Construction  10.1 0.2 0.6 0.6 0.2 0.8 
Telecommunications, computer and 
information  2.3 2.6 4.9 8.7 6.8 4.6 
Insurance and pension  3.6 2.7 1.3 1.4 1.5 1.2 
Financial services  4.6 0.4 0.7 0.1 0.0 0.0 
Charges of intellectual property  0.2 0.2 6.6 0.0 0.0 0.0 
Other business services  11.0 27.7 13.9 17.1 20.0 16.5 
Personal and cultural services  0.7 0.6 1.5 0.1 0.6 0.3 
Government goods and services, n.i.e.  4.8 12.0 4.1 6.7 6.2 6.5 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
1.3.2   Trends and patterns in FDI  
1.24.   Foreign direct investment (FDI) into Tonga remains relatively modest and irregular. According 
to UNCTAD estimates, during 2014 -19 FDI inflows fluctuated between a peak of USD  56 million and 
a low of USD 8.8 million (Chart  1.3). According to the authorities, between 2014 and 2019 the bulk 
of FDI inflows originated from China. Si gnificant investments were also received from Chinese Taipei, 
Indonesia, and New Zealand. FDI was primarily channelled into services, notably professional 
services and tourism, followed by manufacturing/processing activities.  
Chart 1.3 Foreign direct investment, 2014 -19 
(USD million)  
 
Source:  UNCTAD, World Investment Report 2020 . Viewed at: 
https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Annex -Tables.aspx .  
 
WT/TPR/S/409 • Tonga  
 
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  2  TRADE AND INVESTMENT REGIMES  
2.1.  Since 2014, Tonga has updated its t rade-related policies within its broader strategic 
development framework and undertaken certain institutional changes. Its WTO participation has 
been relatively limited and its commitments unchanged since accession; at the same time, it was a 
recipient of Aid for Trade support. Tonga's main regional and international integration efforts 
remained mainly focused on the Pacific region. Tonga made efforts to ameliorate the legal framework 
of its investment regime and undertook a landmark improvement in dispute settlement. Efforts to 
implement the Foreign Investment Act 2020 and review its Foreign Investment Regulation are under 
way.   
2.1  General Framework  
2.2.  Tonga remains a constitutional monarchy headed by His Majesty King  Taufa'ahau Tupou  VI. 
During the review perio d, the Constitution (last amended on 3 May 2013) remained unchanged; an 
amendment Bill aimed at  judiciary -related reforms was under consideration in 2019 but was 
withdrawn in 2020.1  
2.3.  Executive authority continues to be vested in the Cabinet, consisting of  the Prime Minister 
elected by the Legislative Assembly, and Ministers nominated by the Prime Minister and appointed 
by the King. The King also appoints Governors to the islands of Ha'apai and Vava'u on the advice of 
the Prime Minister; they are responsibl e for the implementation of laws within their respective 
districts.  
2.4.  Legislative powers are exercised by the unicameral Legislative Assembly, comprising the 
speaker, the Cabinet, 9 nobles chosen by the 33 nobles of Tonga, and 17  representatives elected by 
all citizens aged 21 and over.2 The number of representatives in the Assembly varies between 26  and 
30, as all members of the Cabinet are also members of the Legislative Assembly.3 Elections are 
normally held every four years; the last election was held i n November 2017 and the next is due in 
2022. The Assembly is the only organ empowered to adopt laws (Constitution, Clause 56). Bills read 
and voted for by a majority of the representatives three times are presented to the King for royal 
assent. Upon receiv ing royal assent, Acts enter into force once gazetted, unless otherwise indicated 
in the Act.  
2.5.  Judicial power continues to be primarily held by the Magistrates Court, the Supreme Court, the 
Court of Appeal, and the Land Court.4 Judges are appointed by His Majesty in Council upon 
recommendation of the Judicial and Discipline Panel. Tonga's judicial system does not provide for 
specialized administrative or commercial courts. Currently, the Court of Appeal, composed of 
three  judges including the Chief Justice,  is the highest court. The lowest court, the Magistrates Court, 
has the jurisdiction to hear criminal cases in which the maximum penalty does not exceed 
 
1 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
2 Clause 38 of the Constitution allows the King to convoke the Legislative Assembly at any time, dissolve 
it "at his pleasure", and "command" that new representative s of the nobles and the people be elected to enter 
the Assembly.  
3 The representatives represent 17 electoral constituencies, i.e. 10 from Tongatapu, 1 from the Niuas 
(Niuatoputatu and Niuafa'ou), 1 from 'Eua, 2 from Ha'apai, and 3 from Vava'u. The nobles  are chosen to 
represent similar areas. Cabinet Ministers are in general among the elected representatives, and they continue 
to represent their electoral constituencies in the Legislative Assembly during their appointment as Minister. 
Clause  51(2)(a) of t he Constitution authorizes the Prime Minister to nominate up to four persons who are not 
elected representatives, provided that the Prime Minister and the Cabinet Ministers together amount to a 
number that is less than half the number of elected members of  the Legislative Assembly, excluding the 
Speaker.  
4 Administrative decisions may be reviewed in the first instance by the Supreme Court. Its decisions 
may be appealed to the Court of Appeal. Administrative actions relating to matters subject to WTO provis ions, 
such as customs classification and valuation, tariff application, licensing, technical barriers to trade, sanitary 
and phytosanitary measures, and issues related to the Agreement on Trade -Related Aspects of Intellectual 
Property Rights, may be brough t before the Commissioner for Public Relations Ombudsman pursuant to the 
Ombudsman Act. The Ombudsman's recommendations may be appealed to the Supreme Court. If a 
recommendation has not been acted upon within a reasonable period of time, the Ombudsman may transmit a 
copy of the recommendation to the Prime Minister. There have been no WTO -related cases under this 
procedure to date.   WT/TPR/S/409 • Tonga  
 
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  three  years' imprisonment or a fine of TOP  10,000. The Land Court adjudicates and determines all 
disput es, claims, and questions of title affecting any land or any interest in land in the Kingdom.5  
2.6.  Tonga is sub -divided into five administrative divisions: 'Eua, Ha 'apai, Niuas, Tongatapu, and 
Vava 'u. Each is further divided into a total of 23 districts. Acc ording to the FY  2019/20 budget 
estimate, Tongatapu (the leader in terms of population and economic activity) continued to be the 
largest recipient of recurrent expenditure with TOP  221 million (60.8% of total); it was followed by 
Vava'u with TOP  15.2 mill ion (4%), Ha'apai with TOP 8.9 million (2.4%), and the rest of the islands 
depending on their population size and other factors.6 At the same time, Tongatapu and Vava'u 
ensured recurrent revenue collection equivalent to TOP 128.3 million (21.4%) and about  
TOP 7.9 million (1.3%), respectively.   
2.2  Trade Policy Formulation and Objectives  
2.2.1   Trade policy formulation  
2.2.1.1   Executive branches of government  
2.7.  In the present Government, the Ministry of Trade and Economic Development (MTED) 
(previously the Ministry of Commerce and Industries (MCI) and then renamed in 2014 to the Ministry 
of Commerce, Tourism and Labour), in coordination with other relevant agencies, is in charge of 
trade polic y formulation and implementation, as well as foreign trade policy (including the WTO) and 
foreign investment policy matters.7 Its responsibilities include the business licensing regime, 
consumer protection, price regulation and control, and technical work  on trade matters, including 
import licensing and intellectual property.  
2.8.  A Tonga National Trade Negotiation Committee (TNTNC), established 27 November 2015 to 
formulate trade policies and negotiation strategies, reports directly to the Cabinet through the  Office 
of the Minister of Trade and Economic Development. It is responsible for all free trade negotiations, 
including the Pacific Island Countries Trade Agreement (PICTA) and various economic partnership 
agreements (EPAs) (Section 2.4.2). The TNTNC is ch aired by the Minister of Trade and Economic 
Development and co -chaired by the Minister of Revenue and Customs; originally its membership 
also comprises the CEOs of the Ministries of Agriculture, Food, Forests and Fisheries (MAFFF); 
Meteorology, Energy, Inf ormation, Disaster Management, Environment, Communication and Climate 
Change (MEIDECC); Revenue and Customs; Internal Affairs; and Finance and National Planning.  
2.9.  A Trade and Economic Development Working Group (TEDWG) was established on 18 July 2018 
to advi se the Cabinet Trade and Economic Development Steering Committee (CTEDSC). Its functions 
include: (i)  coordinating work pertaining to mainstreaming of trade and economic development 
across all sectors; (ii)  providing strategic guidance/direction to impleme nting Ministries/Agencies on 
how trade should be mainstreamed; (iii) making recommendations to the CTEDSC on strategic 
positions in trade negotiations and economic development matters; (iv) making recommendations 
to the CTEDSC on improvements to Tonga's Tr ade Policy Framework and relevant economic 
development policies; (v) assessing trade and economic development policy issues and appropriate 
recommendations to the CTEDSC; (vi) organizing meetings with development partners to support 
economic development an d trade -related activities; and (vii) implementing directions from the 
CTEDSC. Its original membership consisted of the CEOs of the MTED (chair); the MAFF; and the 
Ministries of Tourism, Infrastructure, Internal Affairs, Finance, Public Enterprises, and Re venue and 
Customs; as well as the Solicitor General and representatives from the private sector, non -
governmental organizations (NGOs), grassroots organizations, and academia.  
 
5 Appeals from the Land Court can be made to the Court of Appeal or the King in Privy Council (only for 
appeals to determine he reditary estates and titles or those of nobles), and these decisions are final and 
binding. The Minister of Lands represents the Crown in all land matters.  
6 Ministry of Finance (2019), Budget Statement 2019/20 . 
7 Other government agencies involved in tra de policy formulation and implementation of their areas of 
expertise include: the Ministry of Revenue and Customs (MoRC); the Ministry of Agriculture, Food and Forests 
(MAFF); the Ministry of Fisheries (MoF); the Ministry of Meteorology, Energy, Informatio n, Disaster 
Management, Environment, Communication and Climate Change (MEIDECC); the Ministry of Public Enterprises; 
the Ministry of Lands and Natural Resources; the Ministry of Infrastructure; the Ministry of Tourism; the 
Ministry of Health; the Ministry of Foreign Affairs; the Ministry of Finance; and the National Reserve Bank of 
Tonga (NRBT).  WT/TPR/S/409 • Tonga  
 
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  2.2.1.2   Advisory bodies  
2.10.   Despite the lack of an official procedure for the Legislative A ssembly to disseminate draft 
legislation for public comment, the 2019 Legislative Drafting Manual of the Attorney General's Office 
encourages consultation within the Government and with the broader community. In principle, all 
bills are now subject to publ ic consultations. In 2020, the Legislative Assembly collaborated with the 
Government to undertake public consultations on pending bills. These were conducted via talk -back 
radio  , which enabled constructive discussion with the general public. Public consul tations were held 
in the course of the rule -making process for the Foreign Investment Regulations 2020 
(Section  2.5.1).  
2.11.   The private sector may interact with government agencies and influence the legislative 
process through associations such as the Tonga C hamber of Commerce and Industry Inc. (TCCI), 
the Tonga Small Business Association, the Tonga Law Society, and the Tonga Society of Accountants. 
The Royal Oceania Institute (ROI), Tonga's first independent think tank, launched on 31 March 2016, 
and it suppo rts Pacific -centred, ethical, and fact -based research and analysis. In recent years, the 
ROI hosted various fora and closed round -table discussions on themes ranging from the government 
budget to Tonga's international relations.  
2.2.2   Trade and related policy o bjectives  
2.12.   Tonga is a Small Island Developing State (SIDS) that remains dependent on trade to meet its 
needs for the wide range of modern capital and consumer goods required for building its economy 
and reaching its sustainable development goals. Paragraph  107(a -d) of the 2014 SIDS Accelerated 
Modalities of Action (SAMOA) Pathway encourages successful engagement in trade, technical 
assistance through trade -related assistance, implementation of the WTO Trade Facilitation 
Agreement, and strengthening partners hips to enhance the participation of SIDS in international 
trade in goods and services.8 During the review period, Tonga's trade and investment policy vision 
was set within the broader framework of the second Tonga Strategic Development Framework 
(TSDF) 2 015-2025, which succeeded the first TSDF 2011 -2014.9 The TSDF 2015 -2025 sets 
7 National Outcomes and 29 Organisational Outcomes, which, together, guide the development of 
the Kingdom. The TSDF's purpose is to support good governance through strengthening the 
horizontal and vertical coherence of all secondary TSDF stakeholders. It, inter alia : informs all 
national stakeholders and development partners of the broad Organisational Outcomes that are 
needed to support the National Outcomes and Impact sought by the country; guides the formulation 
of sector plans, Ministries, Departments and  Agencies' (MDAs) corporate plans, and the 
medium -term budgetary framework (MTBF) through which resources are allocated; guides the 
development of government external economic relations and the country's strategies and assistance 
programmes of development partners; and provides indicators, with targets, to facilitate monitoring 
and measurement of high -level progress.  
2.13.   The TSDF 2015 -2025 recognizes that progressive, sustainable, and inclusive development 
and higher quality of life are not possible in isolati on from the rest of the Pacific and the world. 
Access to new knowledge, progressive ideas, trade, and employment opportunities, as well as 
foreign investment and development assistance, that are accessible to all are essential. Pillar 1 of 
the TSDF 2015 -2025 supports trade, overseas employment, and foreign investment, and Pillar 4 
recognizes the need to provide the infrastructure and technology to facilitate these links. Its strategic 
concepts for better access to overseas trade, employment, and foreign inv estment are to: (i)  ensure 
the capacity to engage effectively in regional and wider trade and access negotiations that support 
greater opportunities for Tongan exports and imports; (ii)  improve protocols and negotiate for 
greater access to overseas markets , in particular for agricultural and fisheries products; 
(iii) negotiate for greater access to overseas employment schemes, in particular for more skilled 
workers and opportunities for women workers; (iv)  provide clear and transparent rules, regulations, 
incentives, and information that encourage both foreign and domestic investment; and (v) build on 
 
8 UN Sustainable Development Knowledge Platform, SIDS Accelerated Modalities of Action (SAMOA) 
Pathway . Viewed at: https://sustainabledevelopment.un.org/samoapathway.html . 
9 WTO document WT/TPR/S/291/Rev.1, 27 February 2014; United Nations Office for Disaster Risk 
Reduction, Strategic Development Framework (2015 -2025) . Viewed at: 
https://www.preventionweb.net/english/policies/v.php?id=59665&cid=174 . Ministry of Finance and National 
Planning (2015), Tonga Strategic Development Framework 2015 -2025 – A more progressive Tonga: Enhancing 
Our Inheritance . Viewed at: http://www.finance.gov.to/sites/default/files/2020 -
09/Budget%20Statement%202015 -2016.pdf . WT/TPR/S/409 • Tonga  
 
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  the opportunities of mutually beneficial exchange with the Tongan Diaspora, and in particular among 
groups of women.   
2.14.   In line with TSDF outcomes, the second N ational Infrastructure Investment Plan (NIIP) 
2013-2023, shaped by TSDF 2011 -2014, outlines the priorities and plans for major infrastructure 
initiatives. It is focused on economic infrastructure facilities that support everyday life and business 
activity,  including major initiatives in energy (electricity, fuel); telecommunications (telephone, 
Internet, broadcasting); water and waste -related services (water supply, wastewater, drainage, 
solid waste); and transport (airports, roads, seaports).  
2.15.   Tonga's Natio nal Export Strategy (NES) was last revised in 2012, suggesting a Private Sector 
Development Strategy (PSDS) to address gaps in the NES, facilitate and improve private -sector 
performance, and increase the pace of trade development. With assistance from the Asian 
Development Bank, a PSDS with a five -year (2018 -22) action plan was developed and approved by 
the Cabinet for implementation.  
2.2.3   Trade laws and regulations  
2.16.   The regulatory framework of Tonga consists of the Constitution, laws/acts, regulations, 
orders, a nd notices. According to the authorities, during the review period the main trade -related 
legislative/regulatory amendments related to, inter alia: customs forms, income tax rates, seabed 
mining royalties, CEOs' approval thresholds on public procurement pr ojects, sandalwood imports, 
civil aviation, and communications.  
2.17.   Under the Laws Consolidation Act 2018 (Act 22 of 2018), in force from 21 February 2019, 
action was taken for the publication of a consolidated and revised edition of the laws of Tonga. The 
Act mandates the Attorney General to, inter alia , prepare and bring into force a complete revised 
edition of laws in both Tongan and English that is to be completed by December 2020. When the 
consolidated set is published, Ministries responsible for implement ing the laws can review, 
streamline, and reform their respective regulatory framework and tools. Comprehensive regulatory 
impact assessments have not yet been undertaken, due to the lack of extensive regulatory reform 
and resource constraints. Ministries a re assigned the responsibility of determining impacts and 
consulting affected stakeholders. The Tonga Law Commission Act, which is yet to come into force, 
envisages the set -up of a Commission entrusted with, inter alia,  providing advice on the general 
impact of a law.  
2.2.4   Transparency  
2.18.   Acts, as well as secondary legislation, bills, and judgements, are available electronically and 
free of charge in both Tongan and English from the website of the Office of the Attorney General 
(https://ago.gov.to/cms/ ), which is updated regularly. New laws and regulations are published in 
the Tonga Legal  Gazette . Editions of the Gazette have been available electronically on the same 
website sin ce 2011. Despite the COVID -19 pandemic, the digitization of information on government 
processes and functions is under way.10 Digitalization would allow swift access to and delivery of 
government services, and dissemination of information and communication  among government 
ministries and between the Government and major stakeholders. The implementation of an 
e-government project would assist with E -GOV development; develop a digital media platform to 
disseminate information; enhance service delivery to clie nts (call centre and help desk); and initiate 
technical innovation platforms for youth. Government e -services are to be based on a digital 
enterprise architecture to be developed with a framework to guide and execute the development of 
all digital services . A consultancy firm was selected and was scheduled to begin work during the last 
quarter of 2020. As at 30 September 2020, all line ministries and agencies were connected to the 
National Information and Communication Technology (NICT) infrastructure invol ving the 
Government's secured IT network backbone, cloud services from the government data centre, and 
the Government Unified Communication System. Tonga ranked 108th out of 193 economies (98th out 
of 190 in the 2014 index) in the 2020 UN E -Government Deve lopment Index (EGDI).11  
 
10 Ministry of Finance (2019), Budget Statement 2019/20 ; and Cabinet Decision of 31 March 2017 on 
National ICT (NICT) Project to Implement E ‐Government.  
11 E-government should be a breakthrough in terms of providing and improving public services to be 
effective,  efficient, transparent, and accountable. Astawa, I.P.M. and Dewi, K.C. (2018), "E -government WT/TPR/S/409 • Tonga  
 
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  2.19.   As in all countries, a lack of transparency, and thus a lack of public accountability, creates 
scope for administrative discretion and therefore corruption. The Anti ‐Corruption Commissioner Act 
2007, providing for the appointment o f an anti ‐corruption commissioner and commission to 
investigate instances of alleged corruption, has not yet been implemented, due to resource 
constraints. The oversight function of the Commission is to be with the Legislative Assembly. In late 
October 201 6, the Legislative Assembly seemingly approved the third and final reading of a Bill that 
would lead to the appointment of an anti -corruption commissioner.12  
2.20.   On 6 February 2020, Tonga acceded to the 2003 United Nations Convention Against 
Corruption (UNCAC), becoming the 14th and last Pacific Island country to do so and the UNCAC's 
187th party.13 According to the authorities, the UNCAC accession reflected Tonga's renewed political 
commitment to address issues of corruption and ensure that d omestic accountability standards met 
those set internationally. At the same time, it recognized the cross -boundary nature of corruption 
and the need for assistance from neighbouring countries. UNCAC parties are required to establish 
criminal and other pena lties for a wide range of acts of corruption. The authorities indicate that they 
are undertaking reforms aimed at strengthening the legal framework to better address corruption in 
all its forms; the Ministry of Justice is administering these reforms. In 20 19, the Attorney General's 
Office published a manual on legislative drafting that provides guidance to officials on how to develop 
and prepare laws, regulations, and other measures in a manner that supports compliance with core 
international principles. As  at June 2020, to address financial concerns, the authorities considered 
housing the Anti -Corruption Commissioner in an existing institution, i.e. the Ombudsman, until 
sufficient funding for a separate institution becomes available.  
2.3  Trade Agreements and Ar rangements  
2.3.1   WTO  
2.3.1.1   Features  
2.21.   Tonga has been a WTO Member since 27 July 2007. It grants at least most -favoured -nation 
(MFN) treatment to all trading partners. During the review period, Tonga kept its WTO commitments 
on tariffs and trade in services unchanged (Se ctions 3.1.3 and 4.4.2). Tonga does not participate in 
the WTO Agreements on Government Procurement or Trade in Civil Aircraft, or the Information 
Technology Agreement. As at December 2020, Tonga had not ratified the Trade Facilitation 
Agreement (TFA), but  had participated in its notification process; at its August 2019, WTO 
notification, the new definitive implementation dates for its Category C commitments were set for 
end-2024 or end -2029, depending on the issue, whereas those for Category B commitments were 
set for end -2020 (Section  3.1.1).14 
2.22.   Tonga maintains an interest in the negotiations to impose disciplines on fisheries subsidies 
(Section 4.1.2.5) and, together with its African, Caribbean, and Pacific (ACP) partners, Tonga is a 
W52 Sponsor. Tonga ful ly supports the WTO Work Programme on Small Economies and would like 
Members to adopt specific measures to facilitate fuller and more meaningful integration of these 
economies into the multilateral trading system in accordance with their level of developme nt. It also 
expects the issues of concern with which they are continuously faced, such as vulnerability to climate 
change (e.g. natural disasters, sea level rise, and floods), to be reflected.  
 
Facilities Analysis for Public Services in Higher Education", Journal of Physics: Conference Series , Vol. 953; and 
United Nations Department of Economic and Socia l Affairs, UN E-Government Surveys . Viewed at: 
https://publicadministration.un.org/en/research/un -e-government -surveys . 
12 Economist Intelligence Unit, "Anti -corruption Efforts Stepped Up," 9 November 2016. 
http://country.eiu.com/article.aspx?articleid=234799207&Country=Tonga&topic=Politics&subtopic=For_9 . 
13 United Nations Office on Drugs and Crime, Country Profiles . Viewed at: 
https://www.unodc.org/unodc/treaties/CAC/country -profile/CountryProfile.html?code= IDN. 
14 In mid -November 2020, the authorities indicated that, in collaboration with the World Bank Group and 
in consultation with relevant government ministries and agencies and the private sector, a roadmap for the TFA 
implementation would be developed. In  addition, as a result of these consultations, it seems that Tonga's 
Category A, B, and C commitments and their definitive implementation were subject to revision. WTO 
documents G/TFA/N/TON/1/Add.2, 23 August 2019. Viewed at: 
https://tfadatabase.org/uploads/notification/NTON1A2.pdf ; and G/TFA/N/TON/1/Add.1, 15 October 2018. 
Viewed at: https://tfadatabase.org/uploa ds/notification/NTON1A1.pdf . WT/TPR/S/409 • Tonga  
 
- 26 - 
 
  2.23.   So far Tonga has not been involved as a complainant, a respond ent, or a third party in a trade 
dispute under the WTO dispute settlement mechanism.  
2.24.   As a Member without a Geneva mission, Tonga's WTO participation continues to be handled 
directly by the MTED in Nuku'alofa, via the Embassy of the Kingdom of Tonga in Lon don. Whenever 
the MTED is unable to participate in person, the High Commissioner in London is authorized to 
represent the country. At the same time, the Pacific Islands Forum Secretariat (PIFS), the ACP 
Secretariat, and the Commonwealth Secretariat inform the authorities about ongoing trade -related 
discussions in Geneva.  
2.3.1.2   Trade -related technical assistance  
2.25.   Aid for Trade support to Tonga grew from average disbursements of USD 31 million during 
2014-16 to USD 36.5 million in 2017; in 2017, the top donors were  Japan (56%), the International 
Development Association (IDA, part of the World Bank) (18%), the Asian Development Bank (11%), 
EU institutions (6%), and New Zealand (6%).15 Tonga's need for WTO technical assistance and its 
capacity -building needs in FY  2019/20 included: (i)  WTO Agreement obligations, including the TFA 
(Section 2.4.1.1); (ii)  post-Doha negotiations; (iii)  food safety; (iv)  Hazard Analysis Critical Control 
Point (HACCP) and sanitary control related to fisheries; (v)  national workshop under WT O 
Agreements; (vi)  trade negotiation skills; (vii)  customs -related Agreements and obligations; 
(viii) utilization of the General System of Preferences; and (ix)  trade policy formulation issues.  
2.26.   Tonga's Trade Policy Framework 2017 -2025 was developed with t echnical assistance from the 
PIFS, the WTO/UNCTAD International Trade Centre (ITC), and the Commonwealth Secretariat (Hub 
and Spokes programme). The Framework is considered to be a useful tool to galvanize the 
mobilization of Aid for Trade, especially with  the implementation of key recommendations in its 
matrix.  
2.3.1.3   Notifications  
2.27.   During the review period, Tonga submitted 10 notifications to the WTO. From January  2014 
to August 2020, its notifications pertained to provisions of the Agreement on Safeguards (no r elevant 
laws or regulations), the Agreement on Subsidies and Countervailing Measures (SCM Agreement) 
(neither competent authority nor countervailing actions), the Agreement on Preshipment Inspection 
(no relevant laws or regulations), the TFA (contact point s and implementation dates 
(Section  2.4.1.1)), the Agreement on Trade -Related Aspects of Intellectual Property Rights (TRIPS 
Agreement) (contact point), and the General Agreement on Trade in Services (GATS) (contact 
points).16 Tonga continues to work close ly with the WTO Secretariat on the submission of its 
notification; as at December 2020, it planned submissions on agriculture domestic support (latest in 
2012 (Section 4.1.1.5)) and TFA commitments, and to have all outstanding notifications submitted 
by Fe bruary 2021.  
2.3.2   Regional and preferential agreements  
2.28.   During the review period, Tonga's regional and international integration policy  remained 
largely focused on the Pacific region. It remains a participant in the Pacific Islands Forum (PIF), the 
PICTA, the Pacific Agreement on Closer Economic Relations (PACER), and agreements with 
non-Forum island countries. A major positive development was the ratification of PACER Plus (see 
below), considered by the authorities as the most economically meaningful regional trade agreement 
(RTA) since the country's independence, which prevails in the event of any inconsistency between it 
and the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) (see 
below). PACER Plus was and remains a very large unde rtaking in terms of administrative resources, 
 
15 WTO, Accessions: Tonga . Viewed at: https://www.wto.org/english/thewto_e/acc_e/a1_tonga_e.htm . 
16 WTO documents G/VAL/N/1/TON/1, 9 September 2020; G/SG/N /1/TON/1, 5 May 2020; 
G/SCM/N/202/TON, 5 May 2020; G/PSI/N/1/Rev.4/Add.2, 15 June 2020; G/TFA/N/TON/2/Rev.2, 
19 March  2020; G/TFA/N/TON/2/Rev.1, 25  February 2019; IP/N/3/TON/3, 2 July 2020; IP/N/3/TON/2, 
21 February 2019; IP/N/3/TON/1, 19  October  2018; and  S/ENQ/78/Rev.18, 1 February 2019.  WT/TPR/S/409 • Tonga  
 
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  negotiation, and implementation. The SPARTECA and the PICTA were notified to the GATT/WTO 
under the Enabling Clause in 1981 and 2008, respectively.17  
Pacific Islands Forum (PIF)  
2.29.   Tonga remains a PIF member.18 Its Pacific Plan for Strengthening Regional Cooperation and 
Integration, which was to be implemented over a period of 10 years from 2005, envisaged increasing 
sustainable regional trade and investment through the lowering of trade barriers, including techni cal 
measures.19 Since July 2014, PIF work has been guided by the Framework for Pacific Regionalism 
(FPR), which replaces the Pacific Plan for Strengthening Regional Cooperation and Integration and 
sets out the strategic vision, values, objectives and appro aches to achieve deeper regionalism in the 
Pacific. Under the FPR, there has been an increased focus on: (i) increased inclusivity and 
participation in regional policy making and implementation; (ii) greater cohesion of the regional 
architecture in the Pac ific to deliver on regional priorities; and (iii) prioritization of the regional 
agenda, to ensure a focus on the most important regional issues. Under the FPR, Tonga anticipates 
furthering economic and trade ties with other South Pacific Forum Island Coun tries (FICs).20 The 
PIFS, located in Fiji, harmonizes regional positions on various political and policy issues and has 
technical programmes in economic development, transport, and trade. The PIFS is reviewing the 
current trade agreements in the Pacific, s uch as the PICTA, PACER Plus, and the Melanesian 
Spearhead Group (MSG) Trade Agreement to identify areas for harmonization and to encourage 
intra-regional trade.21 
2.30.   According to the authorities, in 2019 the share of PIF countries in Tonga's total merchandise 
exports and imports stood at 42.5% (36.8% in 2014) and 41.9% (42.1% in 2014), respectively. 
The main export items were agricultural and fisheries commodities (root crops and kava), and the 
main imports were food products (flour and lamb flaps).  
Pacific Island Countries Trade Agreement (PICTA)  
2.31.   Tonga continues to participate in the PICTA, signed in August 2001 and aimed at establishing 
a free trade area between the 14 Pacific Island States; it entered into force on 13 April 2003, and 
trade under t he agreement became operational on 1 January 2007.22 The PICTA includes schedules 
for the progressive elimination of tariffs on intra -regional trade, and covers trade in goods excluding 
alcohol and tobacco products. However, at the time of the previous Rev iew, the PICTA was only 
partially operational, as many of the participants had yet to pass the necessary legislation to extend 
tariff until 2021.23 As at November 2020, the review report of the rules of origin was completed and 
awaiting the PICTA Rules of Origin Committee's recommendations for consideration and 
 
17 GATT document L/5100, 20 February 1981, and WTO document WT/COMTD/N/29, 
17 September  2008.  
18 It comprises 18 members: Australia, the Cook Islands, the Federated States of Micronesia, Fiji, 
French Polynesia, Kiribati, Na uru, New Caledonia, New Zealand, Niue, Palau, Papua New Guinea, the Marshall 
Islands, Samoa, the Solomon Islands, Tonga, Tuvalu, and Vanuatu. Pacific Islands Forum, The Pacific Islands 
Forum.  Viewed at: https://www.forumsec.org/who -we-arepacific -islands -forum/ .  
19 The Pacific Plan was endorsed by PIF members in October 2005 and revised in October 2006.  
20 The South Pacific Forum comprises 14 FICs (the Cook Islands, the Federated States of Micronesia, 
Fiji, Kiribati, the Marshall Islands, Nauru, Niue, Palau, Papua N ew Guinea, Samoa, the Solomon Islands, Tonga, 
Tuvalu, and Vanuatu) and Australia and New Zealand.  
21 The MSG is a free trade agreement that allows trade to take place freely between Fiji, Papua New 
Guinea, Vanuatu, and the Solomon Islands. In 1993, the MSG signed its first trade agreement, known then as 
the MSG Trade Agreement One (MSGTA1), with the original three members of Papua New Guinea, the Solomon 
Islands, and Vanuatu. Fiji later joined the MSGTA1 in 1998, and a second agreement, the MSG Trade 
Agreeme nt Two (MSGTA2), was signed by the four parties in 2005. In 2016, the MSGTA2 was extended from 
covering goods alone to also include trade in services, labour mobility, and cross -border investments.  
22 The 14 participants are the Cook Islands, Fiji, Kiribati , the Marshall Islands, the Federated States of 
Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, the Solomon Islands, Tonga, Tuvalu, and Vanuatu.  
23 At the time of the previous Review, seven members (the Cook Islands, Fiji, Niue, Samoa, the 
Solomon  Islands, Tuvalu, and Vanuatu) had implemented the required domestic arrangements and announced 
their readiness to trade under the provisions of PICTA, thus benefiting from PICTA preferences since 
1 January  2007. Due to delays, the timetable for tariff eli mination was extended until 2021. Following 
directions from FIC Trade Ministers at their meeting in February 2020, a comprehensive review of regional 
trade agreements including the PICTA is currently under way.  WT/TPR/S/409 • Tonga  
 
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  endorsement by the FIC Trade Ministers. The revised rules of origin should provide improved 
conditions for trade amongst PICTA countries.  
2.32.   Tonga signed the agreement on 18 August 2001 and ratified it on 27 December 2001, but 
has yet to declare its readiness to trade under the agreement.24 At the time of the previous Review, 
it had submitted its timetables for the reduction and elimination of tariffs and notified a negative list 
("excepted imports") tha t includes bovine meat, eggs, ice cream, paints and varnishes, barbed wire, 
and toilet paper.25 The PICTA timetable for tariff reductions remained to be incorporated into 
domestic legislation. According to the authorities, technical issues were under consi deration, notably 
the implications on revenue. Consequently, in 2018 Tonga requested technical assistance from the 
PIFS to conduct an in -country consultation to take stocktaking of the PICTA implementation gaps 
and to identify areas of necessary reform to enable trade under the Agreement. As at 
November  2020, the majority of the reforms were customs -related, and work was still under way 
for its review. Tonga was awaiting policy direction to proceed with actions for the implementation of 
the PICTA, pending t he completion of the PICTA rules of origin reforms (see above).  
2.33.   According to the authorities, in 2019, the share of PICTA countries in Tonga's total 
merchandise exports and imports stood at 2.6% (5.6% in 2014) and 7.7% (8.3 in 2014), 
respectively. The mai n export items were re -exports of petroleum and automotive paints, and the 
main imports were foodstuffs (flour and cracker biscuits).  
2.34.   The integration of trade in services into the PICTA was endorsed in principle in 2001. 
Liberalization is designed to be g radual and flexible, with transitional periods agreed as appropriate. 
After seven  rounds of negotiations, the PICTA Trade in Services (TiS) Protocol was endorsed and 
opened for signature on 28 August 2012.26 As at December 2020, it had been ratified by 
four signatories (out of eight), namely: the Marshall Islands, Nauru, Samoa, and Tuvalu; it required 
two additional instruments of ratification prior to its entry into force. The Protocol covers 11 services 
sectors: business, communication, construction, dist ribution, educational, environmental, financial, 
health, tourism, recreational, and transport. Tonga signed the Protocol, and since the previous 
Review its ratification remains a priority as significant benefits from increased intra -regional trade 
in servi ces are foreseen. Given the COVID -19 pandemic, the PIFS reprioritized its trade programme 
for the Protocol, which is envisaged to be shifted to 2022.  
Pacific Agreement on Closer Economic Relations (PACER)  
2.35.   Tonga remains a party to the 2001 PACER framework agreement (in force from August  2002) 
for deeper, stepwise liberalization of trade and investment among the Pacific Island States. Within 
the PACER framework, the PICTA was designed as a vehicle for trade liberalization amongst the 
Pacific Island States as  a precursor to further liberalization between them and Australia and 
New Zealand.27  
2.36.   A PACER Plus comprehensive Free Trade Agreement between Australia, the Cook  Islands, 
Kiribati, Nauru, New Zealand, Niue, Samoa, the Solomon Islands, Tonga, Tuvalu, and Va nuatu 
covering goods, services, and investment was concluded in Brisbane on 20 April 2017.28 It opened 
for signature on 14 June 2017 in Tonga and was signed by the 11 parties. Tonga is the Depositary 
to the Agreement, which entered into force on 13 Decembe r 2020.29 Virtually all tariffs (see below) 
in the eight regional non -LDC developing country signatories must fall to zero within 25 years from 
the date of entry into force of the Agreement, with most tariff reductions taking place in the first 
10 years. T he tariff reduction schedule is slower for the three LDC signatories – Kiribati, the Solomon 
Islands, and Tuvalu – with reductions beginning in 2028, unless the country graduates from LDC 
 
24 As at November 2020, only eight FICs (the C ook Islands, Fiji, Kiribati, Niue, Samoa, the Solomon 
Islands, Tuvalu, and Vanuatu) had announced their readiness to trade under the PICTA. Viewed at: 
http://mted.gov.to/trade -and-investment/ . 
25 Pacific Islands Forum Secretariat. Viewed at: http://www.forumsec.org/pages.cfm/economic -
governance/regional -trade -1/picta/tonga.html .  
26 Samoa was the firs t country to ratify the services chapter of the PICTA in May 2013.  
27 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
28 Viewed at: http://mted.gov.to/trade -and-investment/ . 
29 Australian Government Department of Foreign Affairs and Trade, Pacific Agreement on Closer 
Economic Relations (PACER) Plus . Viewed at: https://www.dfat.gov.au/trade/agreements/not -yet-in-
force/pacer/pacific -agreement -on-closer -economic -relations -pacer -plus. WT/TPR/S/409 • Tonga  
 
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  status.30 According to the authorities, PACER Plus builds on the SPA RTECA, which provides the Pacific 
Islands with duty - and quota -free access to Australia and New Zealand, and the PACER (2001). It 
prevails in the event of any inconsistency between it and the SPARTECA.31 Market access under 
PACER Plus was broadened, while incoming services trade and investment liberalization depends on 
the schedule of commitments of the parties to the Agreement.  
2.37.   Tonga ratified PACER Plus on 27 March 2020, after completing its internal requirements. 
Under the Agreement, the parties are to a pply originating goods preferential tariff treatment as set 
out in each party's tariff schedule, while time -frames for implementing the tariff commitments vary 
between parties.32 Tonga's entire implementation of PACER Plus tariff elimination is to be compl eted 
within a 25 -year time -frame except for 135 lines that will not be zero -rated.  Parties are also obliged 
to provide non -discriminatory treatment and market access. The rules of origin under PACER Plus 
are modernized and contain flexible product -specific  rules (PSRs), which allow country producers to 
obtain inputs from a range of external and domestic sources and still qualify for duty -free entry into 
Australia and New Zealand, allowing for more domestic value addition or regional value content 
(40%). Und er the Agreement, Tonga received technical assistance under the Agreement, by means 
of help from UNCTAD (contracted by Australia and New Zealand), which developed trade portals for 
signatories. The portals were intended to ensure that transparency of infor mation is reflected and 
accessible to exporters and importers to a PACER Plus party. As at November 2020, Tonga's trade 
portal ( https://tonga.tradeportal.org/?l=en ) had six products uploaded, but work was  under way for 
the inclusion of all products as well as publication of other relevant information useful to traders.  
2.38.   According to the authorities, in 2019 the share of PACER countries in Tonga's total 
merchandise exports and imports stood at 34.6% (36.7% i n 2014) and 41.3% (42.1% in 2014), 
respectively. The main export items were agricultural commodities (root crops and kava), and the 
principal imports were prepared foodstuffs and petroleum products.  
Economic Partnership Agreement (EPA) (European  Union -African, Caribbean, and Pacific 
(ACP) States)  
2.39.   As a party to the Cotonou Agreement, which governs relations between the European  Union 
and the Organisation of African, Caribbean and Pacific States (OACPS) (which, until 2019, was called 
the ACP Group of States ), Tonga is involved in the negotiations for a Post -Cotonou Agreement, which 
could be ready for signature in early 2021.33 To emphasize support of and commitment to the ACP 
Group, the Tongan authorities received approval from the Cabinet and are now awaiti ng royal assent 
for ratification of the 2019 Revised Georgetown Agreement, which replaces the 1975 Georgetown 
Agreement. The Georgetown Agreement was the founding agreement of the Group and came into 
force on 5 April 2020, when it attained the requisite on e-third of Member States' signatures.34 
 
30 United Nations LDC Portal, Pacific Agreement on Closer Economic Relati ons (PACER Plus) . Viewed at: 
https://www.un.org/ldcportal/pacer -plus/. 
31 Reportedly, one of the reasons that Forum Island Countries (FICs) did not take full advantage of the 
SPARTECA was that the rul es of origin (RoO) that determined what qualified as a Pacific Island product were 
too onerous. Half of a product's value had to be added in -country. Despite calls for greater flexibility on RoO in 
PACER Plus, the value -addition requirement was reduced onl y slightly for most goods, and the Agreement 
introduced a so -called change in tariff classification. United Nations LDC Portal, Pacific Agreement on Closer 
Economic Relations (PACER Plus) . Viewed at: https://www.un.org/ldcportal/pacer -plus/. 
32 All schedules are available online. New Zealand Foreign Affairs & Trade. Viewed at: 
https://www.mfat.govt.nz/en/trade/free -trade-agreements/free -trade -agreements -concluded -but-not-in-
force/pacer/pacer -plus/. 
33 The Cotonou Agreement was initially scheduled to expire on 29 February 2020. As negotiations on a 
new OACPS -EU Partner ship are still ongoing, the parties decided to extend the Cotonou Agreement until 
31 December 2020. European Commission, "Future Africa -Caribbean -Pacific States/EU Partnership: 'Post -
Cotonou' Negotiations Resume at Ministerial Level", 12 June 2020. Viewed at: 
https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1015 . 
34 The revised Agreement includes significant changes to the organization, including a name change 
from th e ACP Group of States to the OACPS. Embassy of the Kingdom of Eswatini, "Signing Ceremony of the 
Revised Georgetown Agreement", 17 June 2020. Viewed at: https://www.eswatini -
embassy.eu/2020/06/17/signing -ceremony -of-the-revised -georgetown -
agreement/#:~:text=The%20Revised%20Georgetown%20Agreement%20came,sign%20the%20Revised%20G
eorgetown%20Agreement . WT/TPR/S/409 • Tonga  
 
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  2.40.   The European Union's trade relationship with the Pacific States continues to be set by an 
EPA.35 The agreement was ratified by the European Parliament in January 2011 and by Papua New 
Guinea in May 2011. Furthermore,  Fiji started applying the agreement in July 2014, Samoa acceded 
in December 2018 and has been applying it since then, and the Solomon Islands on 17 May 2020. 
In July 2018, Tonga, the last State to take action, notified its intention to accede to the inter im 
Economic Partnership Agreement (IEPA) between the European Union and the Pacific States (Fiji, 
Papua New Guinea, and Samoa, as well as the recently acceded Solomon Islands). The European 
Commission assisted Tonga to review and update its Market Access O ffer (MAO) to reflect HS17 
changes. As at August 2020, Tonga had yet to complete its internal procedures and submit its final 
MAO offer. In late 2019, the MTED convened public consultations with government agencies and 
private -sector stakeholders to finali ze Tonga's MAO, but an updated analysis of the fiscal impact of 
trade with all parties involved, especially ACP partners, has yet to be conducted. Tonga received 
technical assistance under a TradeCommII project to undertake a legal review and fiscal impact  
assessment of its accession to the IEPA.  
2.41.   According to the authorities, in 2019 the share of the European Union in Tonga's total 
merchandise exports and imports stood at 0.4% (0.7% in 2014) and 2.8% (0.13% in 2014), 
respectively. The main export items were re -exports of iron or steel and electric motors, and its 
main imports were parts suitable for use solely with machines and other parts of electrical 
transformers and inductors.  
2.3.3   Other agreements and arrangements  
2.42.   Tonga remains a beneficiary of the generalized system of preferences (GSP) schemes of  
Australia, Canada, the European  Union (pending participation in the EPA and graduation state 
(Section 2.3.2)), Japan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, and 
the United States.36 The authorities indicate that despite their el igibility for GSP preferences, the 
majority of Tonga's exports to Japan and the United States remain subject to MFN tariff rates; in 
2018, 11.2% of total exports to the United States benefited from GSP preferential tariff treatment.37 
No data on the utiliz ation rates of other schemes were available from the authorities.  
2.4  Investment Regime  
2.43.   During the review period, Tonga undertook certain initiatives to improve its investment regime 
framework in the regulatory, procedural, and dispute settlement areas (Secti ons 2.5.1, 2.5.3, and 
2.5.5). Tonga attracts relatively little foreign direct investment (FDI), most of which is in agriculture 
and tourism (Section 1.3.2). Despite efforts to attract investors, the country seemingly presents 
discouraging factors38, includ ing vulnerability to external shocks, lack of infrastructure development, 
 
35 The EC Market Access Regulation (MAR) 1528 of 1 January 2008 provides duty -free, quota -free 
market access for ACP countries that have concluded an EPA. EPAs date back to the signing of the Cotonou 
Agreement and, inter alia : (i) are "tailor -made" to suit specific regional circumstances; (ii)  open up EU markets 
fully and immediately, but allow ACP countries long transition periods to open up partially to EU imports while 
providing protection for sensitive sectors; (iii)  provide scope for wide -ranging trade cooperation on areas such 
as sanitary norms and other stan dards; and (iv)  help kick -start reform and contribute to good economic 
governance. European Commission, Economic Partnerships . Viewed at: 
https://ec. europa.eu/trade/policy/countries -and-regions/development/economic -partnerships/ ; European 
Commission, Countries and Regions: Pacific . Viewed at: https://ec.europa.eu/t rade/policy/countries -and-
regions/regions/pacific/ ; and WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
36 In 2013, 2014, and 2015, Tonga was classified by the World Bank as an upper middle -income country 
and therefore was to be removed from the European  Union's list of GSP beneficiary countries in Annex II of EU 
Regulation 978/2012 with effect from 1 January 2017. However, in 2016 Tonga was classified by the World 
Bank as a lower middle -income country and was reinstated to the list of GSP beneficiary cou ntries in Annex II 
of EU Regulation 978/2012 with effect from 1 January 2017. Tonga has been categorized as an upper 
middle -income country with expiration of its transition period for three consecutive years (2016 -18) on the 
basis of the World Bank determi nation. As a result, Tonga was to graduate from the European Union's GSP as 
at 1 January 2021. Tonga does not qualify for duty -free quota -free access under the EU's "Everything But 
Arms" initiative. Viewed at: http://mted.gov.to/trade -and-investment/ ; and Government of the 
United  Kingdom,  Tonga and Ukraine Removed from the General System of Preference (CIP7) . Viewed at:  
https://www.gov.uk/guidance/tonga -and-ukraine -removed -from-the-general -system -of-preference -cip7. 
37 Office of the United States Trade Representative, Pacific Islands . Viewed at: 
https://ustr.gov/countries -regions/southeast -asia-pacific/pacific -islands -0. 
38 Santander, Tonga: Foreign Investment . Viewed at: https://santandertrade.com/en/portal/establish -
overseas/tonga/investing -3; and Lloyds Bank, Tonga: Investing . Viewed at: 
https://www.lloydsbanktrade.com/en/market -potential/tonga/investing . WT/TPR/S/409 • Tonga  
 
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  difficult/limited access to certain regions, investment restrictions, land purchase constraints, 
unpredictable government policies, the State's oversized role, uncertainty about the enforcement of 
property rights, and an inadequately resourced judiciary. Tonga's international ranking in terms of 
ease of doing business worsened and stood below certain neighbouring countries, although such 
indicators have been criticized for their stati stical methodology, on the issue of whether they 
accurately reflect the business environment, and on conceptual grounds.39   
2.4.1   Regulatory and institutional framework  
2.44.   During the review period, the regulatory framework was changed. A new Foreign Investment 
Act 2020 (Act 7 of 2020), passed on 8 September 2020 with royal assent granted on 
29 October  2020, is to replace the current Foreign Investment Act 2002 (Act No.  22 of 2002), which 
was enforced when the Foreign Investment Implementing Regulation s 2006 also entered into force, 
i.e. on 2 April 2007.40 As at December 2020, the MTED was reviewing the Foreign Investment 
Regulations, which include the list of restricted and reserved activities (Section 2.5.2); the reserved 
list is to be reduced and the  restricted list increased. The Act requires a foreign investor to obtain a 
foreign investment registration certificate before applying for a business licence. The Foreign 
Investment Act 2020 defines a foreign investor (overseas person) as an individual wh o is not Tongan 
or a company with any foreign ownership share. Under the new Act, the Appeal Committee that 
hears appeals from the Registrar could be replaced by an arbitrator appointed by the Minister. A 
time-frame for an appeal and determination of an ap peal could also be proposed. There would not 
be a custodial (imprisonment) sentence if someone is found guilty of an offence, only a fine.  
2.45.   No Trade and Investment Board has been established yet; the MTED's Investment Facilitation 
and Promotion Unit provid es information to domestic and foreign investors, assists them in obtaining 
necessary permits and licences, and provides other services as required.41  
2.4.2   Restricted activities   
2.46.   During the review period, the lists of prohibited, restricted, and reserved activ ities remained 
unchanged, but the Foreign Investment Regulations may bring changes to these lists (Section 2.5.1). 
Schedule 1 of the Business Licences Act (Revised Edition 2016), incorporating the Business Licences 
(Amendment) Act 2012 (Act No.  21 of 2012) , lists some prohibited business activities, i.e. activities 
that are closed to domestic and foreign investors alike (Section 3 of the Act).42 Under the Foreign 
Investment Regulations 2006, under review as at December 2020 (Section 2.5.1), certain activiti es 
remain either restricted for foreign investors (Table 2.1) or reserved for Tongan investors 
(Table  2.2). However, until implementation of the new Foreign Investment Act 2020 (Section 2.5.1), 
 
39 In the World Bank's Doing Business 2020  study, Tonga ranked 103rd out of 190 economies for ease of 
starting a business (62nd of 185 in 2013). In the 2020 report, Tonga scored best in getting credit (48th), 
starting a business (62nd), and dealing with construction permits (69th). It scored lowest in registering property 
(166th), protecting minority investors (153rd), and resolvi ng insolvency (138th). The authorities indicate that 
between DB2014 and DB2015 and from DB2016 to DB2020, Tonga's ease of doing business rating improved 
under the DB2015 and DB2017 -20 methodologies. Between, Tonga's rating improved under the methodology. 
Overall, they are of the view that there has been a slight improvement in the business environment as 
measured by the DB methodology since the last Review. Paul Holden and Alma Pekmezovic (2020), How 
Accurate Are the Doing Business Indicators? A Pacific Isl and Case Study , 13 October. Viewed at: 
https://onlinelibrary.wiley.com/doi/full/10.1002/app5.313 ; and World Bank  (2020), Economy Profile of Tonga - 
Doing Business 2020 Indicators – Comparing Business Regulation in 190 Economies . Viewed at: 
https://www.doingbusiness.org/en/rankings  and 
https://www.doing business.org/en/data/exploreeconomies/tonga# . 
40 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
41 The Tonga Trade and Investment Board Act (Act 19 of 2005) envisaged the formation of a Trade and 
Investment Board to promote, stimulate, and facilitate the  growth and development of trade and investment in 
Tonga. At the time of the previous review, funding concerns impeded its establishment. WTO document 
WT/TPR/S/291/Rev.1, 27 February 2014.  
42 These activities are: storage, disposal, or transport of nuclear  or toxic waste; pornography; export, 
import, or production of any products that are prohibited under the laws of Tonga; prostitution; processing or 
export of endangered species; production of weapons of warfare; or an activity that, in the opinion of the 
minister, may constitute a threat to national security and public order. Kingdom of Tonga, Business Licences 
(Amendment) Act 2012 . Viewed at: http://www.businessregistries.gov.to/wp -
content/uploads/2014/11/BusinessLicencesAmendmentAct2012.pdf ; and Business Licences Act . Viewed at: 
https://tonga.tradeportal.org/media /BusinessLicencesAct_2.pdf .  WT/TPR/S/409 • Tonga  
 
- 32 - 
 
  as long as the foreign share in a venture remains 25% or less,  the project is considered to be a 
Tongan investment for both restricted and reserved activities.  
Table 2.1 Restricted activities  
Business activity  Condition  
Commercial fishing comprising:  
- Tuna fishing;  
- Bottom fishing in water deeper than 500 m;  
- Other deep -water fishing not less than 100 m; 
and 
- Aquaculture.  Subject to the relevant Resource Management Plan 
(administered by the Department of Fisheries of MAFFF, 
now Ministry of Fisheries)  
Agricultural supply store distributing seeds, 
fertilizers, chemicals  Subject to the requirements of the Pesticide Act 2002  
Education facility  Subject to requirements of the Education Act (Cap. 86)  
Medical or health activity  Subject to requirements of the Public Health Act 1992; 
Therapeutic Goods Act 2001; Nursing Act 2001; Medical 
and Dental Practices Act 2001; Pharmacy Act 2001; and 
Health Practitioners Review Act 2001  
Source:  Foreign Investment Regulations 2006, Revised Edition 2016, Chapter 38.18.1, Schedule 2.  
Table 2.2 Business activities reserved for Tongan investors   
No. Product description  
1 Taxis 
2 Passenger vehicles for hire  
3 Used-motor -vehicle dealers  
4 Retailing activity that consists of the distribution of grocery products (food and household provisions) 
for final consumption  
5 Wholesaling activity  
6 Baking of white loaf bread  
7 Tongan cultural activities including:  
(a) Folk tales, folk poetry, and folk riddles;  
(b) Folk songs and instrumental folk music;  
(c) Folk dances and folk plays; and  
(d) Production of folk art in particular, drawings, paintings, carvings, sculptures, woodwork, jewellery, 
  handicraft s, costumes, and indigenous textile.  
8 Raising of chicken for the production of eggs  
9 Security business  
10 Export of green and mature coconuts  
11 Wiring and installation of residential and commercial buildings with capital investment of less than 
TOP 500,000  
12 Production/farming of:  
(a) root crops (yams, taro, sweet potato, cassava);  
(b) squash;  
(c) paper mulberry;  
(d) pandanus; and  
(e) kava.  
13 Fishing activities comprising:  
(a) reef fishing;  
(b) inshore fishing within 12 nm (Zone C) in water less than 1,000 metres; and  
(c) bottom fishing in water depth less than 500 metres.  
Source:  Foreign Investment Regulations 2006, Revised Edition 2016, Chapter 38.18.1, Schedule 1.  
2.47.   Under the Land Act, the sale of land is prohibited in Tonga.43 Clause 104 of the Constitution 
and Section 13 of the Land Act vest all land in the Kingdom to the Crown (being the King). However, 
the lands of the Kingdom are already prescribed in the Land Act as Hereditary Estates (Schedule I 
of the nobles, titular chi efs, and talking chiefs), Royal Estates (Schedule II), Royal Family Estates 
 
43 The Land Act makes it clear that any verbal or documentary disposition by a land holder to effect a 
voluntary conveyance or out -and-out sale is null and void (Section 6) and subject to imprisonment not 
exceeding 10 years (Sec tion 12).  WT/TPR/S/409 • Tonga  
 
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  (Schedule III), and Crown Estates (all those lands not falling within Schedules I, II, or III). Individual 
hereditary town allotments, hereditary tax allotments, and leasehold inte rests can be allocated and 
registered from any of these estates. Every estate ( tofia) and allotment ( api) is hereditary, according 
to prescribed rules of succession. The majority of land is held in hereditary estates.  
2.48.   The Minister for Lands represents the Crown in all matters concerning the land of the Kingdom. 
He/she may grant leases, subleases, and permits with the consent of the Cabinet. Foreign investors 
are eligible to be granted a lease, sublease, or permit with the same terms and conditions applicabl e 
to Tongan nationals. Leases of estates and town allotments may exceed 99 years with the consent 
of His Majesty in Council. A lease of a town allotment is normally granted only for 50 years. The 
lease of a tax allotment is restricted to 20 years, in order  to protect the food security and other 
agricultural livelihoods/income for Tongan nationals. Therefore, major infrastructure and investment 
projects that require long -term leases are restricted to estate or Crown land and are subject to 
current land -use regulations.  
2.4.3   Registration and approval  
Business licensing  
2.49.   During the review period, the legislation governing business licences remained unchanged. It 
consists of the Business Licences Act (last amended in 2012) and the Business Licences Regulations 
that came into effect in 2013 (Section 2.5.2). Filing a first -time application for a business licence, 
the applicant is requested to indicate the beneficial owner, the ownership structure (individual, 
partnership, or corporate), gender composition, and the typ e(s) of intended business (from among 
21 identified categories of activity). Export/import is one of the listed activities, and thus requires a 
business licence. Importation (or exportation) per se  is not subject to any special requirement, but 
the distrib ution of certain types of goods or the provision of certain services may require additional 
governmental approvals, permits, or inspections prior to starting business (Table 2.3). Foreign 
investors should have a valid foreign investment registration certif icate (see below) before applying 
for a business licence.  
Table 2.3 Business activities requiring the fulfilment of additional conditions  
Activity  Additional requirement  
Liquor sales  Liquor licence from the Ministry of Police  
Fish and marine product -related 
business  Fishing licence from the Ministry of Agriculture, Food, Forests, and 
Fisheries, now Ministry of Fisheries  
Restaurant and food -related business  Health Certificate  
Distribution  Health Certificate  
Technical trades and professions  Qualification documents or practicing certificates specific to each 
trade or profession  
Financial institution  Letter of approval from the National Reserve Bank of Tonga  
Electrical services  Letter of approval from the Tonga Electric Power Board  
Construction services  Letter of approval from the Ministry of Infrastructure  
Taxi services  Vehicle registration certificate  
Therapeutic goods outlets  Letter of approval from the Ministry of Health  
Flammable goods outlets  Letter of approval from the Fire Department  
Services involving the use of gases  Letter of approval from the Department of Environment  
Businesses involving agricultural 
products and/or plants  Letter of approval from the Ministry of Agriculture, Food, Forests, 
and Fisheries  
Recycling operators  Letter of approval from the Waste Authority  
Source:  Business Licences Regulations 2012, Schedule 3, Item 8.  
2.50.   A business licence is issued automatically within three working days provided the application 
is complete and does not involve prohibited goods under the Business Licences Act (Section 2.5.2). 
The applicant should be at least 18 years of age with no prior convictions in relation to indictable 
offences or the failure to pay legally recognized debts.44 The fee for a first -time (paper copy) 
application is TOP  100 (+15% consumption tax (CT)); the fee for filing the annual notice of continued 
business activity is TOP  50 (plus tax).45  
 
44 In the case of partnerships, all partners should be at least 18 years old.  
45 The fees are reduced by 50% for applications and notices filed electronically.  WT/TPR/S/409 • Tonga  
 
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  2.51.   Business licences are not transferable. A lic ence holder wishing or needing to amend a licence 
must notify the Registrar of the changes, in writing, within 10 working days of the change.46 The 
Registrar is obliged to record changes or amendments to the licences within seven working days of 
receipt of  the notice. The Business Licence Register kept by the MTED is available for inspection by 
the public. On 2 December 2014, Tonga launched the region's first integrated online business 
registry ( www.busin essregistries.gov.to ) providing up -to-date information on Tongan companies 
and businesses to the public 24 hours a day, 7 days a week.47 Between 2014 and August 2020, a 
total of 6,053 business registrations (2,500 by end -August 2013) were made.  
2.52.   The Regist rar may reject or refuse a licence application, or cancel a granted licence, on 
statutory grounds (Sections 5 and 11 of the Business Licences Act). The decision of the Registrar 
may be appealed to the Minister of the MTED, whose decision is final. No cases  have been appealed 
since 2014.  
2.53.   Incorporation of an enterprise requires applying to the Companies Office of the Kingdom of 
Tonga; it maintains an electronic register available to the public at all times. Incorporation is 
governed by the Companies Act 1995 and the Companies Regulations 1999 as amended in 2010. 
An enterprise may be incorporated as a Tongan company or an overseas company. The registration 
fees are higher for an overseas company. According to the Companies Regulations, the registration 
fee is T OP 400 for a Tongan company (Companies Act, Section 16(1)), and TOP 800 for an overseas 
company (Section 354(1)).48 Other fees, such as the registration of changes or the filing of annual 
returns, are also higher for overseas companies. CT (15%) is added t o all fees.  
Foreign investment certification  
2.54.   Foreign investment registration certificates are required and generally valid for the lifetime of 
the project, as long as the business activity begins within one year of the granting of the certificate. 
Applicat ions are addressed to the CEO of the MTED. A certificate may be transferred to another 
foreign investor provided he or she also satisfies the criteria under the Foreign Investment Act 
(Section  2.4.1). Applications for a foreign investment registration cert ificate are subject to a fee of 
TOP 100, and amended certificates are issued for a fee of TOP  15.49 A dissatisfied applicant may 
appeal to the MTED, who appoints an Arbitrator to decide the appeal. A decision by the MTED CEO 
to cancel a foreign investment registration certificate may be appealed to the Supreme Court, and 
the decision is suspended while the appeal is pending. Between 2014 and 2020, there have been no 
appeal cases, and 23 foreign companies were registered in Tonga. Most foreign businesses rem ain 
engaged in trade and other services, excluding retail and wholesale of groceries (which are reserved 
for Tongan investors) (Section 2.4.2).  
2.4.4   Investment promotion  
2.55.   So far no income tax incentives have encouraged investment. Investments in specific 
activities (e.g. agriculture, fisheries, manufacturing, and tourism) are assisted primarily through 
zero or low (3%) tariffs on equipment, machinery, or raw materials and equipment/materials for 
packing (unlimited); tariff exemptions under Chapter 98 of Tonga's  Customs Tariff; and (upon 
application) exemptions from payment of excise tax or CT on investment goods (Sections 4.1.1.5, 
4.1.2.5, and 4.3.3). No designated free zones or free economic zones exist.  
2.56.   Tonga maintains a 20 -acre (8 -hectare) industrial estate now known as Tonga Asset Managers 
& Associates Ltd (TAMA) (previously Small Industries Center (SIC)) on the main island, Tongatapu, 
and an 8 -acre (3.2 -hectare) estate on the island of Vava'u. The estates provide land for lease and 
premises for rent on long -term contracts. Since 1980, the Ma'fanga TAMA has operated under a 
long-term lease that is to expire in October 2076. Its land is demarcated into 42 industrial land plots 
 
46 The fee for amendments to a business licence (e.g. change of address, type of busin ess, or authorized 
signature(s)) is TOP  30 (or TOP  20 for an online submission).  
47 The website allows users to file and access company records, business names, and business licences. 
Asian Development Bank, "Tonga's Innovative Online Business Registry Goe s Live", 2 December 2014. Viewed 
at: https://www.adb.org/news/tonga -s-innovative -online -business -registry -goes-live-adb. 
48 The fees are reduced by 50% for applications filed electronically. At the time of the previous Review, 
the authorities maintained that the higher fees for overseas compan ies reflect additional costs, including the 
screening of foreign directors and the shareholding structure.  
49 Transfer of a foreign investment registration certificate is subject to a fee of TOP  45. The applicable 
fees are set out in Schedule 3 of the Fore ign Investment Regulations 2006.  WT/TPR/S/409 • Tonga  
 
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  of variable size, some of which ( 36 in 2013),  involving 24 foreign tenants as at 202 0, were built and 
rented out.  The Neiafu TAMA, operating since 1990, has a lease until August  2097. The entire 8 -acre 
estate was developed with all necessary supply utilities and demarcated into 16  industrial land plots, 
of which six (four in 2013), involv ing two foreign tenants, were rented out. Enterprises located on 
the estates have priority access to electricity, telephone, and water connections. Work permits are 
granted to foreign investors and their families subject to normal immigration rules. As at 
December  2020, the enterprises were involved in storage, processing (fish products, drinking water, 
cigarette, nonu juices, paints, and toilet paper) and assembly (mobile phones); they employed 
186 persons, of which 74 were foreigners.  
2.4.5   Dispute settlement  
2.57.   Tonga does not currently have a legal framework for domestic or international arbitration, 
except for arbitration in respect of certain investment disputes subject to the provisions of the 
Arbitration Act 1996 of the United Kingdom.50  
2.58.   Tonga rat ified the Convention on the Settlement of Investment Disputes Between States and 
Nationals of Other States (International Centre for Settlement of Investment Disputes (ICSID)) in 
1990. On 12 June 2020, it acceded to the 1958 United Nations Convention on th e Recognition and 
Enforcement of Foreign Arbitral Awards, a landmark development that should improve the ease of 
doing business in Tonga and lead to increased confidence from foreign investors.51  
2.4.6   Investment treaty developments  
2.59.   During the review period, n o new bilateral investment treaties (BITs) were signed. Tonga's 
only BIT is the Agreement between the United Kingdom of Great Britain and Northern Ireland and 
the Government of the Kingdom of Tonga for the Promotion and Protection of Investments (1997). 
The Agreement entered into force 22 October 1997 with a duration of 10 years and remains in force 
unless either party provides written notice of termination. In case of termination, existing 
investments retain protection for an additional 20 years.  
2.60.   So far T onga has not been a party to bilateral Agreements for Avoidance of Double Taxation 
(DTAs).   
 
 
 
50 Section 16(1) of Tonga's Foreign Investment Act 2002 states: "The provisions of the Arbitration Act 
1996 (UK) shall apply to any arbitration under this Act." Section 2 of the Reciprocal Enforcement of Judgments 
Act 1988 defines "judgment" to include an arbitral award.  
51 Tonga is the 6th Pacific Island State to accede to the Convention after the Marshall Islands, the Cook 
Islands, Fiji, Papua New Guinea, and, most recently, Palau. Reportedly, the Asian Development Bank 
previously reported that the absence of an effective arbitration regime in Tonga adds to the costs and 
uncertainty associated with business agreements, as well as the resolution of disputes that arise over them. It 
also highlighted that the lack of any basis for enforcing overseas arbitration awards in Tonga increases risk for 
foreign investors, and recommended that Tonga establish an effective arbitration regime and adopt an 
arbitration act to address these issues. Kluwer Arbitration Blog, "Tonga Accedes to t he New York Convention", 
4 August 2020. Viewed at: http://arbitrationblog.kluwerarbitration.co m/2020/08/04/tonga -accedes -to-the-
new-york-convention/?doing_wp_cron=1597935389.7225821018218994140625 . WT/TPR/S/409 • Tonga  
 
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  3  TRADE POLICIES AND PRACTICES BY MEASURE   
3.1.  During the review period, the general thrust of Tonga's trade and trade -related policies wa s 
revised in several areas. The simple average applied MFN tariff decreased from 11.5% in 2013 to 
10.4% in 2020, reflecting mainly an increase in the share of duty -free tariff lines. Most import duties 
eliminated during the review period concerned agricult ural products. Tonga has bound its entire 
tariff. In 2020, the simple average bound tariff rate was 7.2 percentage points higher than the 
average applied MFN rate.  
3.2.  Having ratified the Pacific Agreement on Closer Economic Relations Plus (PACER Plus), Tonga 
enacted regulations on the corresponding preferential rules of origin in December 2020. In the initial 
phase of implementation, Tonga grants preferences on 67% of its dutiable tariff lines, and the gap 
between the simple average rate for preferential partners and the average MFN rate is only 
0.7 percentage points.  
3.3.  According to the authorities, Tonga continues to apply the WTO Customs Valuation Agreement 
and use the transaction value of goods as the primary method. Tonga notified its catego ry 
commitments under the Agreement on Trade Facilitation (TFA) in 2017 but is yet to present to the 
WTO its instrument of acceptance of the TFA. Ratification is expected in 2021.  
3.4.  Non-automatic licensing requirements continue to apply on a number of import s. The legal 
instruments governing restricted imports are not consolidated and the granting of licences is 
administered by several line ministries and government agencies.  
3.5.  Tonga does not levy any export taxes; exports remain exempt from internal taxes and are 
zero-rated for consumption tax (CT) purposes. The exportation of green and mature coconuts 
remains reserved for Tongan businesses.  
3.6.  Tonga continues to support business activities through fiscal concessions, access to preferential 
credits, and targeted subsidies, which are in general very limited in terms of scope. Tonga reformed 
its taxation system of food products to reduce the consumption of food deemed unhealthy and 
address non -communicable diseases. In the area of sanitary and phytosanitary (SPS) me asures, it 
adopted the Food Act in 2014 to strengthen the development and application of food standards. 
Six years later, it was reviewed and replaced by the Food Act 2020.  
3.7.  Tonga remained without a legal and institutional framework governing competition policy 
during the review period, and no substantial progress was made in this regard. It continues to apply 
a price -control mechanism to certain food products, chemicals, fuels, and services. State -owned 
enterprises continue to have a significa nt presence in the economy, and progress has been limited 
in the implementation of the public enterprise reform initiated in 2007. Tonga made great strides in 
implementing its 2013 procurement reform strategy and moved from a decentralized system to a 
partially centralized one.  
3.8.  The protection of intellectual property rights (IPRs) under Tonga's legislation continues to follow 
to a large extent the Agreement on Trade -Related Aspects of Intellectual Property Rights 
(TRIPS  Agreement), with some exceptions whe re the level of protection provided under domestic 
legislation is in general higher. No major change took place in this area during the review period.  
3.1  Measures Directly Affecting Imports  
3.1.1   Customs procedures, valuation, and requirements  
3.9.  Anyone wishing to imp ort into (or export from) Tonga goods for commercial purposes must 
have a valid business licence (Section  2.5.3). According to the authorities, apart from certain 
product -specific requirements, there are no other activity registration or licensing prerequi sites for 
engaging in cross -border trade . 
3.10.   Importers may choose to fulfil customs formalities themselves (acting on their own behalf) or 
engage the services of professional customs brokers. In November 2020 , there were 15 licensed 
customs brokers, down from  21 in 2014 . According to the authorities, customs brokers compete 
freely; their fees are not regulated, and there are no geographic restrictions on their operations WT/TPR/S/409 • Tonga  
 
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  within Tonga . In addition to an annual licence fee (Table  3.4), customs brokers are requir ed to 
provide a security of TOP  5,000 to ensure revenue protection and compliance with customs 
legislation.  
3.11.   Commercial imports are cleared on the basis of a declaration (C13 entry form), suppliers' 
invoices, a packing list, and a bill of lading (or air way bill). Where applicable, the supporting 
documentation must also include an import licence and/or permit,  a certificate of origin,  or a 
quarantine entry permit . According to the authorities, licences and permits are required whenever 
an import consignment i s to benefit from duty and tax concessions, or it contains restricted goods. 
Customs declarations must be submitted both electronically and in hard copy, and the supporting 
shipping documentation is to be lodged manually.  
3.12.   A risk management unit became ope rational at Tonga Customs in March 2016. Since then, 
import declarations have been assigned into one of three selectivity lanes: green (immediate 
release), yellow (documentary check), and red (documentary and physical checks). The assessment 
methodology is  based on a matrix of risk indicators comprising the importer's and the customs 
broker's characteristics and prior record, as well as the consignment's nature and origin. Some 
21.3% of import declarations processed between March 2016 and September 2019 wer e channelled 
into the red lane, and the share of declarations channelled into the yellow lane was 19.6%.  
3.13.   Tonga notified its category commitments under the TFA in 2017. As at September 2020, its 
implementation record covered approximately 12% of all TFA mea sures. Tonga is yet to present to 
the WTO its instrument of acceptance of the TFA.1 The Tongan authorities expect ratification to take 
place in 2021.  
3.14.   The 2020 World Bank Doing Business  survey ranks Tonga 97th of 188 economies on the 
trading across borders  indicator. On average, importing merchandise into Tonga is estimated to 
require 26 hours and USD  330 for "border compliance", and 72 hours and USD  148 for "documentary 
compliance". On exportation, the corresponding figures are 52 hours and USD  201, and 10 8 hours 
and USD  70, respectively.2 A time release study was conducted for the first time at Tonga's main 
seaport, Nuku'alofa Port, in February 2020.  
3.15.   According to the authorities, Tonga applies the WTO Customs Valuation Agreement and uses 
the transaction value of goods as the primary method (approximately 90% of import declarations). 
The dutiable value of imports is the sum of the purchase cost and all expenses incurred for insurance 
and freight up to the point of entry into Tonga. Consignments can be rele ased under bond prior to 
the final determination of duties.  
3.16.   In case of disagreement with Tonga Customs decisions, importers must first lodge an appeal 
to the Chief Commissioner of Revenue. The Chief Commissioner's decisions can be appealed to the 
Tax Tribu nal within 30 days of receipt of the decision. According to the authorities, only two customs 
decisions were appealed in the Tax Tribunal between 2014 and 2020.  
3.1.2   Rules of origin  
3.17.   Tonga's customs legislation does not contain any provisions on non -preferentia l rules of origin. 
Regulations implementing preferential rules of origin under the PACER Plus were enacted in 
December 2020.3  
3.1.3   Tariffs  
3.18.   During the review period, customs duties and taxes on imports accounted for approximately 
two thirds  of tax revenue. The  relative importance of customs duties and CT on imports in tax 
receipts was in decline, whereas that of excise tax on imports was on the rise (Table  3.8).  
 
1 WTO, Trade Facilitation Agreement database. Viewed at: https://tfadatabase.org/members/tonga . 
2 World Bank, Ease of Doing Business in Tonga . Viewed at: 
https://www.doingbusiness.org/en/data/exploreeconomies/tonga#DB_tab . 
3 Tonga Government, Gazette Supplement Ext raordinary , No. 54, 11 December 2020.  WT/TPR/S/409 • Tonga  
 
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  3.19.   Tonga's 2020 applied MFN customs tariff is based on the 2017 version of the Harmonized 
Commodity De scription and Coding System (HS), and comprises 5,726 lines at the 8 -digit level. All 
tariff lines have ad valorem  rates (Table  3.1). There are no seasonal tariffs, or tariff quotas.  
Table 3.1 Structure of MF N tariff, 2013 and 2020  
  MFN applied  Final bounda 2013  2020  
Simple average rate (%)  11.5 10.4 17.6 
 Agricultural products (HS01 -24) 10.5 5.5 19.2 
 Industrial products (HS25 -97) 11.7 11.6 17.3 
 WTO agricultural products  10.7 7.7 19.0 
 WTO non-agricultural products  11.7 10.9 17.4 
Duty-free tariff lines (% of all tariff lines)  15.0 22.7 0.0 
Simple average of dutiable lines only  13.6 13.5 17.6 
Tariff quotas (% of all tariff lines)  0.0 0.0 0.0 
Non-ad valorem  tariffs (% of all tariff lines)  0.0 0.0 0.0 
Domestic tariff "peaks" (% of all tariff lines)b 0.2 0.0 0.0 
International tariff "peaks" (% of all tariff lines)c 29.5 6.9 53.1 
Nuisance applied rates (% of all tariff lines)d 0.0 0.0 0.0 
Overall standard deviation  6.5 7.1 2.5 
Total number of tariff lines  5,286  5,726  5,726  
 Ad valorem  rates  5,285  5,726  5,724  
 of which: duty -free rates  793 1,302  0 
 Alternate rates  1 0 1 
 Unbound  n.a. n.a. 1 
n.a. Not applicable.  
a Based on an uncertified concordance from HS12 to HS17 nomenclature to enable comparison with 
the 2020 tariff schedule.  
b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied 
rate. 
c International tariff peaks are defined as those exceeding 15%.  
d Nuisance rates are those greater than zero, but less than or equal to 2%.  
Note:  Calculations of averages are based on national tariff lines (8 -digit level). The 2013 a nd 2020 tariff 
schedules are based on HS07 and HS17 nomenclatures, respectively, at the 8 -digit level.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.20.   The simple average applied MFN tariff decreased from 11.5% in 2013 to 10.4% in 2020, 
reflecting mainly an increase in the share of duty -free tariff lines . Over the same period, the simple 
average rate on dutiable lines remained virtually unchanged. Some 6.9% of all lines carry rates of 
20% or higher, down from 9.6% in 2013 (C hart 3.1). Overall tariff dispersion remains significant, 
with rates ranging from zero to 20% (Table  3.2). The average applied rate on non -agricultural 
products (WTO definition) is 10.9% (down from 11.7% in 2013), whereas the corresponding average 
for agri cultural products stands at 7.7% (down from 10.7% in 2013). The drop of 3 percentage 
points in the latter average is mainly due to the elimination of import duties on certain fish and 
crustaceans, vegetables, fruit and nuts, and sausages.  
3.21.   Apart from one t ariff line that remains unbound (monetary gold, HS 7108.20.00), Tonga has 
bound its tariff lines at ad valorem  rates of either 15% or 20%. As a result, the simple average 
bound rates on agricultural and non -agricultural products (WTO definition) are of com parable 
magnitude (Table 3.1). In 2020, the simple average bound tariff rate was 17.6%, some 
7.2 percentage points higher than the average applied MFN rate. At the HS section level, the gap 
between bound and applied rates was most pronounced for works of a rt, live animals, machinery, 
and transport equipment (Chart  3.2). WT/TPR/S/409 • Tonga  
 
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  Chart 3.1 Frequency distribution of MFN tariff rates, 2013 and 2020  
 
n.a. Not applicable.  
Note:  Figures above bars denote the share of the res pective tariff schedule's total lines.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
Table 3.2 Summary analysis of MFN tariff, 2020  
  Number 
of lines  Average 
(%) Range 
(%) Standard 
deviation  Duty free 
(%) 
Total  5,726  10.4 0-20 7.1 22.7 
HS 01 -24 1,069  5.5 0-20 7.3 63.0 
HS 25 -97 4,657  11.6 0-20 6.5 13.5 
By WTO category       
WTO agricultural products  855 7.7 0-20 7.6 48.9 
 Animals and products thereof  124 0.8 0-15 3.5 94.4 
 Dairy products  28 7.5 0-15 7.5 50.0 
 Fruit, vegetables, and plants  221 6.8 0-20 8.1 57.5 
 Coffee and tea  24 12.7 0-20 5.8 16.7 
 Cereals and preparations  106 11.9 0-20 6.1 20.8 
 Oils seeds, fats, oil and their products  84 10.4 0-20 5.6 19.0 
 Sugars and confectionery  18 8.3 0-15 7.5 44.4 
 Beverages, spirits and tobacco  104 4.9 0-15 7.0 67.3 
 Cotton  5 15.0 15-15 0.0 0.0 
 Other agricultural products, n.e.s.  141 11.0 0-20 7.0 28.4 
WTO non -agricultural products  4,871  10.9 0-20 6.8 18.1 
 Fish and fishery products  282 0.9 0-20 3.9 94.7 
 Minerals and metals  947 13.0 0-20 5.7 13.6 
 Chemicals and photographic supplies  955 13.0 0-15 5.1 12.9 
 Wood, pulp, paper and furniture  294 11.8 0-20 6.6 22.4 
 Textiles  595 14.7 0-20 2.5 2.5 
 Clothing  218 15.0 15-15 0.0 0.0 
 Leather, rubber, footwear and travel goods  162 13.9 0-20 0.5 18.5 
 Non-electric machinery  546 4.2 0-20 1.0 7.1 
 Electric machinery  254 9.1 0-20 0.7 10.6 
 Transport equipment  223 5.4 0-20 1.4 43.5 
 Non-agricultural products, n.e.s.  382 12.2 0-20 0.7 20.7 
 Petroleum  13 1.5 0-20 3.5 92.3 
By ISIC sector       
 ISIC 1 - Agriculture, hunting and fishing  412 5.8 0-20 7.4 61.9 
 ISIC 2 - Mining  96 12.3 0-20 6.2 19.8 
 ISIC 3 - Manufacturing  5,217  10.8 0-20 6.9 19.7 
 Manufacturing excluding food processing  4,515  11.6 0-20 6.5 12.9 
 Electrical energy  1 15.0 15 0.0 0.0 
By stage of processing       
 First stage of processing  786 7.9 0-20 7.8 49.1 
 Semi-processed products  1,832  13.7 0-20 4.5 9.4 
 Fully processed products  3,108  9.2 0-20 7.4 23.9 
By HS section       
 01  Live animals and products  408 2.1 0-20 5.3 86.8 
WT/TPR/S/409 • Tonga  
 
- 40 - 
 
    Number 
of lines  Average 
(%) Range 
(%) Standard 
deviation  Duty free 
(%) 
 02  Vegetable products  331 8.2 0-20 7.9 47.1 
 03  Fats and oils  49 10.2 0-20 4.5 12.2 
 04  Prepared  food, beverages and tobacco  281 6.6 0-20 7.5 56.2 
 05  Mineral products  155 10.9 0-20 7.1 29.0 
 06  Chemicals and products thereof  886 12.7 0-20 5.5 15.2 
 07  Plastics, rubber, and articles thereof  220 14.2 0-20 4.4 8.2 
 08  Raw  hides and skins, leather, and its products  72 8.6 0-20 9.0 51.4 
 09  Wood and articles of wood  125 10.1 0-15 7.0 32.8 
 10  Pulp of wood, paper and paperboard  147 12.7 0-15 5.4 15.6 
 11  Textiles and textile articles  807 14.8 0-15 1.9 1.6 
 12  Footwear, headgear, etc.  47 19.3 15-20 1.8 0.0 
 13  Articles of stone, plaster, cement  153 14.2 0-20 3.8 6.5 
 14  Precious stones and metals, pearls  53 19.2 0-20 3.8 3.8 
 15  Base metals and articles thereof  594 12.9 0-20 5.2 10.1 
 16  Machinery, electrical equipment, etc.  802 5.6 0-20 5.6 9.4 
 17  Transport equipment  234 5.6 0-20 7.3 41.9 
 18  Precision equipment  210 11.0 0-20 8.6 21.9 
 19  Arms and ammunition  18 20.0 20-20 0.0 0.0 
 20  Miscellaneous  manufactured articles  127 14.9 0-20 6.8 14.2 
 21  Works of art, etc.  7 0.0 0-0 0.0 100.0  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.22.   In 2020, applied MFN rates on four tariff lines (HS  4011.70.00, 4011.80.00, 4011.90.00, and 
9503.00.00) partially exceeded  Tonga's bindings. According to the authorities, most of these 
instances were due to aggregation of previously split tariff lines following the migration to the HS 17 
nomenclature. Tonga has bound ot her duties and charges within the meaning of Article  II:1(b) of 
the GATT 1994 at zero.  
Chart 3.2 Average applied and bound tariff rates, by HS section, 2013 and 2020  
 
Note:  The 2013 MFN tariff is based on HS07 nomenclature; the 2020 MFN tariff and final bound rates are 
based on HS17 nomenclature.  
Source:  WTO Secretariat calculations, based on data p rovided by the authorities.  
3.23.   Tonga ratified the PACER Plus, which became effective on 13 December 2020 (Section  2.4.2). 
Upon the Agreement's entry into force, imports into Tonga under the PACER Plus are eligible for 
preferential rates on 67% of dutiable tariff lines. In the initial phase of implementation, the simple 
average rate for Tonga's preferential partners is only 0.7 percentage points lower than the average 
MFN rate (Table  3.3).  
WT/TPR/S/409 • Tonga  
 
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  Table 3.3 Summary analys is of preferential tariff, 2020  
 
Total  WTO agriculture  WTO 
non-agriculture  
  
Average 
(%) Range 
(%) Coveragea 
(%) Duty -
free 
ratesb 
(%) Average 
(%) Duty -
free 
ratesb 
(%) Average 
(%) Duty -
free 
ratesb 
(%) 
MFN 10.4 0-20  
22.7 7.7 48.9 10.9 18.1 
PACER+  9.7 0-20 67.1 23.1 7.2 49.7 10.1 18.5 
a Share of the total number of tariff lines. Only lines with rates that are lower than the corresponding 
MFN rate are taken into account.  
b Duty-free lines as a percentage of total tariff lines.  
Source:  WTO Secretariat ca lculations, based on data provided by the authorities.  
3.1.4   Other charges affecting imports  
3.24.   Import declarations remain subject to a processing fee of TOP  10. The fees and charges for 
services rendered by Tonga Customs have remained unchanged since the previous Review 
(Table  3.4). 
Table 3.4 Customs -related fees and charges, 2020  
Description of service  Fee (TOP)  
Import declaration processing fee  10 
Attendance fees:   
- Attendance at bonded warehouse:   
-- per officer per hour, normal working hours (8:30 a.m. -4:30 p.m.)  20 
-- per officer per hour outside normal working hours  20 
-- per officer per hour during the weekend or public holidaya 20 
- International ports and airports   
-- per officer per hour, normal working hours (8:30 a.m. -4:30 p.m.)  Free 
-- per officer per hour outside normal working hours  20 
-- per officer per hour during the weekend or public holiday  20 
-- inwards or departing clearance, normal working hours  Free 
-- inwards or departing clearance outside normal working hours  80 
-- inwards or departing clearance during the weekend or public holiday  100 
Certificate of landing (on request)  15 
Export cargo clearance fee (written approval for departure of ship or aircraft)  20 
Export goods declaration fee  2 
Requests for rulings (on Customs Form C33), per application  20 
Bonded warehouse licence application fee  50 
Bonded warehouse licence renewal fee  500 
Customs broker annual licence fee, natural person  200 
Customs broker annual licence fee, legal person  500 
a In addition, reasonable and actual transport and sustenance are to be paid or arranged.  
Source:  Ministry of Revenue and Customs.  
3.25.   Imported and locally produced goods are subject to CT and, where applicable, excise tax 
(Section 3.3.1.1).  
3.1.5   Duty and tax concessions  
3.26.   Tonga grants duty and tax concessions under various initiatives aimed at promoting 
investment or achieving social objectives (Section  2.5.4). According to the authorities, during the 
review period, duty and tax concessions granted to imports resulted in forgone revenue in the range 
of TOP  38.3 million -TOP 72.3 million. Revenue losses on import -related concessions remained at 
approximately 13% of fiscal revenue and some 40% of revenue c ollections by Tonga Customs 
through FY  2018/19 but rose considerably in FY  2019/20 (Table 3.5). The main beneficiaries of 
import duty and tax concessions were importers of fuels and public enterprises (Table  A3.1).  WT/TPR/S/409 • Tonga  
 
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  Table 3.5 Forgone revenue from imports, FY 2014 -20 
  2014/15  2015/16  2016/17  2017/18  2018/19  2019/20  
Total concessions on 
imports (TOP million)  38.3 45.0 63.7 55.7 65.3 72.3 
Import duty  8.6 10.9 15.5 11.8 14.3 20.2 
Excise tax on imports  11.7 13.0 22.0 21.9 21.9 18.0 
CT on imports  17.9 21.1 26.2 22.0 29.1 34.1 
Memo:        
Import concessions/total 
fiscal revenue (%)  13.0 12.5 14.5 12.2 12.7 31.8 
Import concessions/fiscal 
revenue from customs (%)  34.5 35.1 45.1 35.7 41.9 47.7 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.1.6   Import prohibitions, restrictions, and licensing  
3.27.   Tonga did not submit any notifications to the Committee on Import Licensing during the 
review period; its only notification dates back to 2011 (Section  2.4.1.3). The authorities affirm that 
licensing requirements are mainly used for national security, public safety, health, and 
environmental reasons. Non -automatic licensing requirements continue to apply on a number of 
imports, including fir earms, explosives, noxious gases, ozone -depleting substances, narcotics, 
medicines, alcoholic beverages, tobacco and cigarettes, and endangered species. The legal 
instruments governing restricted imports are not consolidated, and the granting of licences i s 
administered by several line ministries and government agencies. According to the authorities, 
Tonga does not maintain any licensing requirements for quantitative restrictions purposes.  
3.28.   Prohibited imports include counterfeit currency, pornographic or su bversive materials, goods 
infringing on IPRs, and hazardous waste. An import ban on lamb and mutton breast meat was 
implemented on 1 July 2020 (Section  4.1.1.4).4 
3.1.7   Anti-dumping, countervailing, and safeguard measures  
3.29.   Tonga has no legal and institutional frameworks for the application of anti-dumping, 
countervailing, and safeguard measures. Consequently,  no contingency actions have been taken by 
Tonga to date.  
3.1.8   Other measures affecting imports  
3.30.   Tonga applies the trade sanctions deci ded by the United Nations or by regional organizations 
to which it belongs. It is not a party to any countertrade and offsetting arrangements, or agreements 
aimed at influencing the quantity or value of goods or services exported to its market.  
3.31.   As part of its annual petroleum price review mechanism, Tonga maintains reserve stock 
requirements for petrol, diesel, and kerosene (Sections 3.3.5 and 4.2.2.1.2).  
3.2  Measures Directly Affecting Exports  
3.2.1   Customs procedures and requirements  
3.32.   The registration and customs cl earance procedures for exports remain similar to those for 
imports (Section 3.1.1), requiring notably a declaration, a commercial invoice, a packing list, a bill 
of lading/airway bill and, where applicable, a conformity, sanitary, or phytosanitary certific ate, and 
original export permits and/or licences.  
3.33.   Exporters wishing to benefit from preferential access to foreign markets may obtain the 
necessary certificate of origin from Tonga Customs free of charge. The exportation of green and 
mature coconuts remain s reserved for Tongan businesses.  
 
4 Customs and Excise Management Act (Amendment) Order 2020 of 30 June 2020.  WT/TPR/S/409 • Tonga  
 
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  3.2.2   Taxes, charges, and levies  
3.34.   Tonga does not levy any export taxes; exports are also exempt from internal taxes and are 
zero-rated for CT purposes. Exported consignments are subject to a cargo clearance fee of TOP  20 
and a p rocessing fee of TOP  2 per customs declaration form.  
3.2.3   Export prohibitions, restrictions, and licensing  
3.35.   No new export restrictions or bans have been introduced since 2014. In addition to the general 
business licence for engaging in cross -border trade, special licensing requirements remain in place 
for certain exports, such as fisheries and agricultural produ cts. As with imports, the legal instruments 
governing export restrictions are not consolidated, and the granting of licences is administered by 
several line ministries and government agencies. Prohibited exports include articles of Tongan 
culture, raw cora l, and endangered species.  
3.2.4   Export support and promotion  
3.36.   Tonga has not submitted any notifications regarding export subsidies to the Committee on 
Agriculture or the Committee on Subsidies and Countervailing Measures since 2011.5 According to 
the authoritie s, work on export subsidy notification is ongoing.   
3.37.   The Ministry of Trade and Economic Development (MTED) assists exporters with overseas 
publicity, participation in trade fairs and exhibitions, market research and development, and 
facilitation of business  negotiations. Annual export promotion disbursements, earmarked principally 
for showcasing and participating in trade fairs, nearly doubled between 2014 and 2019 (Table  3.6).  
Table 3.6 Export promotion disbur sements, 2014 -19 
Year Amount (TOP)  No. of trade fairs and exhibitions  
2014 54,697  1 domestic and 6 overseas  
2015 74,300  1 domestic and 4 overseas  
2016 73,000  4 overseas  
2017 67,000  5 overseas  
2018 104,278  3 overseas  
2019 96,809  4 overseas  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.2.5   Export finance, insurance, and guarantees  
3.38.   Export credit on preferential terms is available through several Government Development 
Loan facilities operated by the Tonga Development Bank (TDB) (Section  3.3.1). According to the 
authorities, the TDB also provides short -term export credit and guarantees on market terms, and 
plans to launch a trade finance product in the near future. Exporters of agricultural produce can  also 
access short -term loans on favourable conditions from the Agricultural Export Marketing Fund 
(Section  4.1.1).  
3.3  Measures Affecting Production and Trade  
3.3.1   Incentives  
3.39.   Tonga continues to apply various types of initiatives to support business activities in general 
and specific sectors such as agriculture, fisheries, and manufacturing (Sections 4.1 and 4.3). These 
initiatives include fiscal concessions, access to preferent ial credits, and targeted subsidies, and are 
to a large extent  limited in terms of scope due to budget constraints. During the review period, 
Tonga conducted a broad tax reform on food products (starting in 2016) to promote healthy eating 
 
5 WTO documents G/AG/N/TON/1, 27 June 2011; and G/SCM/N/220/TON, 17 October 2011.  WT/TPR/S/409 • Tonga  
 
- 44 - 
 
  habits and addres s non -communicable diseases among the population.6 Tonga also implemented 
new tax exemptions to support business operators in various sectors, including tourism, 
construction, and air transportation, as well as in response to the COVID -19 pandemic. 
COVID -19-related measures include the exemption of duties, excise tax, and CT on imports of any 
good used to combat the spread of COVID -19 in Tonga (e.g. medical and personal protective 
equipment).7   
3.40.   In FY  2019/20, forgone revenue resulting from the exemptions  of import duties, CT, and 
excise tax for imported goods exceeded TOP  72 million (Table 3.5) up from TOP  38 million in 
FY 2014/15.  
3.41.   During the review period, Tonga did not make any notification regarding the existence of 
subsidies as defined in Article  1.1 of the Agreement on Subsidies and Countervailing Measures 
(SCM  Agreement), which are specific within the meaning of Article  2 of the SCM  Agreement, or which 
operate directly or indirectly to increase exports from or reduce imports into its territory withi n the 
meaning of Article  XVI:1 of the GATT 1994.  
3.3.1.1   Taxation and fiscal incentives  
3.42.   Tonga continued its efforts to develop a sound tax system and investment climate to attract 
investors and support business activities while balancing its revenue needs. During 2014 -19, the 
share of tax revenue in GDP increased from 17.3% to 22.2%8, but Tonga's reliance on revenue from 
trade taxes declined, with their contribution accounting for 26% in 2019 down from about 50% in 
2014.  
3.43.   Tonga applies a corporate tax of 25 % just slightly above the world average but well below 
that in the Oceania region .9 In FY  2019/20, Tonga collected TOP  22.1 million in corporate tax, up 
from TOP  13.7 million in FY  2013/14, accounting for 9.8% and 10.4%, respectively, of total tax 
revenue  (Table  3.7).10 It also applies a CT on the sale of all goods and services and an excise tax on 
a selected number of goods. Both taxes apply to imports and locally produced goods, but in the case 
of the excise tax, the rate may differ depending on the orig in of the good.  
Table 3.7 Revenue from taxation, FY 2013 -20 
 
2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  2019/20a 
Total tax revenue 
(TOP million)  132.5  156.3  176.3  203.8  227.1  232.1  227.4  
 
% of total  
Direct tax  22.5 24.4 20.8 22.8 22.3 24.5 23.9 
Personal income tax  10.3 10.1 9.8 9.9 8.1 7.9 8.8 
Corporate tax  10.4 8.9 8.9 8.5 8.5 9.6 9.8 
Other taxes on 
income, profits and 
capital gainsb 1.9 5.3 2.1 4.4 5.8 7.0 5.4 
Indirect tax  77.5 75.6 79.2 77.2 77.7 75.5 76.1 
Consumption tax  44.1 41.2 41.7 40.7 40.9 40.5 41.1 
Imports  39.0 36.5 35.2 32.8 31.9 32.2 31.6 
Domesticc 5.1 4.7 6.5 7.9 8.9 8.3 9.5 
Excise tax  21.3 22.5 25.5 26.0 26.1 23.6 26.4 
Imports  17.7 20.1 22.5 23.8 23.9 22.3 23.9 
Domestic  3.5 2.4 3.0 2.2 2.2 1.3 2.5 
Import duties  11.3 11.2 11.1 9.8 9.7 10.6 7.9 
 
6 Some reforms in this area were conducted in 2013.  
7 The information was published in the Gazette Supplement Extraordinary  on 27  March 2020 as follows: 
Consumption Tax (Exemp tion) Order in No.  13; Customs Duty (Exemption) Order in No.  14; and Excise Tax 
(Exemption) Order in No.  15. 
8 Tonga budget statements FY 2015 -16 and FY 2019 -20.  
9 In 2020, the world average corporate tax rate was 23.8%, while that for the Oceania region was 
28.4%. KPMG Corporate Tax Rates Table. Viewed at: https://home.kpmg/xx/en/home/services/tax/tax -tools-
and-resources/tax -rates-online/corporate -tax-rates-table.html . 
10 According to the authorities, only five entities benefited from a corporate tax exemption during the 
review period: two hotels and three independent power producers working with Tonga Power Limited.  WT/TPR/S/409 • Tonga  
 
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2013/14  2014/15  2015/16  2016/17  2017/18  2018/19  2019/20a 
Other taxes on 
international traded 0.8 0.9 0.9 0.7 1.0 0.8 0.6 
Memo:         
Total customs revenue 
(TOP million)  95.9  110.9  128.3  141.3  156.0  155.9  151.4  
a Provisional estimates.  
b  Other taxes on income, profits, and capital gains refer to the withholding tax and tax debt 
collections.  
c Revenue from the CT consists of revenue from the domestic and government CTs.  
d Other taxes on international trade are customs processing fees, wharfage, attendance fees, bond 
rent, and revolving funds.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
Excise tax  
3.44.   During the review period, Tonga expanded considerably t he list of excisable goods, and 
modified some of their rates as part of a broad reform to promote healthy habits (see below).11 In 
2020, the list of excisable goods consisted of 206  products (at the 8 -digit tariff line), compared with 
103 products in 2013 (Table A3.2). Additions included instant noodles, fruit juices, toilet paper12, 
ice cream, biscuits, sugar, confectionery, and sausages13, while existing products involved mainly 
certain meat products, sweetened and non -alcoholic beverages, alcoholic beverages, tobacco 
products, fuels, and cars.14  
3.45.   All excise tax rates are non -ad valorem , and for certain products, they are not app lied in a 
uniform way to imported and domestic goods, thus affording local manufacturers a tax advantage. 
In 2020, this was the case for 11 product categories (at the 4 -digit level), including some the 
products that became taxable during the review period,  namely sausages, instant noodles, toilet 
paper, ice cream, and unmanufactured tobacco (Table 3.8). Other products subject to this 
differentiation include beer, spirits, and tobacco products.  
Table 3.8 Product s subject to a different excise tax rate based on their origin in 2020  
HS code  Description  Unit FY2020/21  FY2013/14  
Imported 
(TOP)  Locally 
produced 
(TOP)  Imported 
(TOP)  Locally 
produced 
(TOP)  
  Sausages and similar 
products   
        
16010011; 
16010019  Sausages and similar products, 
of meat, meat offal or blood; 
food preparations based on 
these products (beef)  per kg  1 0.5 0 0 
16010021; 
16010029  Sausages and similar products, 
of meat, meat offal or blood; 
food preparations based on 
these products (pork)  per kg  1 0.5 0 0 
16010091; 
16010099  Sausages and similar products, 
of meat, meat offal or blood; 
food preparations based on 
these products (other than beef 
or pork)  per kg  1 0.5 0 0 
  Pasta   
        
19021911;  
19021919  Instant noodles  per kg  2 0.5 0 0 
  Ice cream   
        
21050010;  
21050090  Ice cream and other edible ice, 
whether or not containing cocoa  per litre  1.5 0.25 0 0 
 
11 Informatio n provided by the authorities.  
12 The authorities indicated that the excise tax on toilet paper was imposed as a revenue measure to 
address misdeclaration of customs values on commercial importations. Similarly, the excise tax on certain 
meats was imposed d ue to their contribution to the high rate of non -communicable diseases and with the 
intention to deter their importation and consumption.  
13 Excise Tax (Amendment) Order 2018; and Excise Tax (Amendment No.  2) Order 2018.  
14 Excise Tax schedule last amended 1  July 2019.  WT/TPR/S/409 • Tonga  
 
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  HS code  Description  Unit FY2020/21  FY2013/14  
Imported 
(TOP)  Locally 
produced 
(TOP)  Imported 
(TOP)  Locally 
produced 
(TOP)  
  Sweetened and non -
alcoholic beverages   
        
22021011;  
22021012; 
22021019; 
22021092;  
22021099  Waters, including mineral 
waters and aerated waters, 
containing added sugar or other 
sweetening matter or flavoured 
(excluding fruit or vegetable 
juices)  per litre  1.5; 
4 0.05;  
0.75;  
1.5 0.5 0.5 
22029111;  
22029112;  
22029119;  
2202919 2;  
22029199  Non-alcoholic beer  per litre  1.5; 
4 0.05;  
0.75;  
 1.5 0.5 0.5 
22029911;  
22029912;  
22029919;  
22029992;  
22029999  Other non -alcoholic beverages  per litre  1.5;  
4 0.05;  
0.75;  
1.5 0.5 0.5 
  Beer made from malt   
        
22030010;  
22030091;  
22030092;  
22030099  Beer made from malt  per litre 
alcohol  65 25 50 10 
  Fermented beverages   
        
22060010; 
22060090  Other fermented beverages (for 
example, cider, perry, mead); 
mixtures of fermented 
beverages and mixtures of 
fermented beverages and non -
alcoholic beverages, n.e.s.  per litre 
alcohol  60 30 42 42 
  Alcoholic beverages, spirits, 
liqueurs and other spirituous 
beverages   
        
22082010;  
22082090  Spirits obtained by distilling 
grape wine or grape marc  per litre 
alcohol  65 35 42 21 
22083010;  
22083090  Whiskies  per litre 
alcohol  65 35 42 21 
22084010;  
22084090  Rum and Tafia  per litre 
alcohol  65 35 42 21 
22085010;  
22085090  Gin and Geneva  per litre 
alcohol  65 35 42 21 
22086010;  
22086090  Vodka  per litre 
alcohol  65 35 42 21 
22087010;  
22087090  Liqueurs and cordials  per litre 
alcohol  65 35 42 21 
22089010;  
22089090  Other undenatured ethyl alcohol 
of an alcoholic strength by 
volume of less than 80 % vol.  per litre 
alcohol  65 35 42 21 
  Unmanufactured tobacco   
        
24011010;  
24011090  Tobacco, not stemmed/stripped  per kg  750 200 0 0 
24012010; 
24012090  Tobacco, partly or wholly 
stemmed/stripped  per kg  750 200 0 0 
24013010;  
24013090  Tobacco refuse  per kg  750 200 0 0 
  Cigars, cheroots and 
cigarillos of tobacco   
        
24021010;  
24021090  Cigars, cheroots  and cigarillos, 
containing tobacco  per 
1,000 
sticks  750 580 250 238 
24022011; 
24022019; 
24022090  Cigarettes containing tobacco  per 
1,000 
sticks  750 100;  
580 250 238 
24029010; 
24029090  Other tobacco  per 
1,000 
sticks  750 580 250 238 WT/TPR/S/409 • Tonga  
 
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  HS code  Description  Unit FY2020/21  FY2013/14  
Imported 
(TOP)  Locally 
produced 
(TOP)  Imported 
(TOP)  Locally 
produced 
(TOP)  
  Other manufactured tobacco 
and tobacco substitutes   
        
24031110; 
24031190  Water pipe tobacco  per kg  750 200 210 210 
24031910;  
24031990  Other smoking tobacco  per kg  750 200 210 210 
24039110;  
24039190  "Homogenised" or 
"reconstituted" tobacco  per kg  750 200 250 250 
24039910;  
24039990  Other manufactured tobacco  per kg  750 200 250 250 
  Toilet paper   
        
4818.10.10; 
4818.10.90  Toilet paper and similar paper, 
cellulose wadding  or webs of 
cellulose fibres, of a kind used 
for household or sanitary 
purposes, in rolls of a width not 
exceeding 36 cm, or cut to size 
or shape  per kg  1.1 0.3 0 0 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.46.   To support certain activities and based on health considerations, Tonga exempts some 
products from these taxes.15 In 2016, Tonga introduced a broad tax reform applying to food 
products, with the goal of modifying the consumption habits of the population and addressing 
non-communicable diseases. The reform sought in particular to encourage and promote local food 
products as healthier substitutes for imported food. Under this reform, it imposed or increased the 
excise taxes on high -sugar food, ce rtain meats, soft drinks, tobacco products, alcoholic beverages, 
and other food products considered unhealthy, thus exacerbating in some cases the price differences 
between imported and locally produced goods. The reform also included an exemption of the C T on 
imported healthy products such as fruits, a reduction in their import duties, and an increase in the 
duties of unhealthy products.16  
3.47.   Other goods exempted from the excise tax were fuels and lubricants used in international air 
transport and for domest ic commercial air and shipping services ; fuel for use by the National 
Electricity Authority for generation of electricity; fuel for use in independent communal electricity 
and water schemes; imports by diplomatic missions  or for the development o f charitab le projects; 
goods used for disaster relief ; goods in transit; and temporary imports . During the review period, 
additions to this list included imports of heavy machinery and its parts, imports by licensed tourism 
businesses,  and goods to combat the spread  of COVID -19, which also benefit from an exception 
from the CT (see below).17  
3.48.   Tonga also maintains a fuel subsidy known as the fuel concession scheme, under which fuel 
is exempted from, inter alia , the excise tax for users in the fisheries sector (Section s 4.1.2.5 and 
4.2.2.2).  
Consumption tax  
3.49.   Tonga applies a CT of 15% on the sale of all goods and services, including in their importation. 
CT registration with the Ministry of Revenue and Customs (MoRC) is compulsory for businesses 
whose annual gross turnove r reaches TOP  100,000. The CT on imports is  calculated on the sum of 
the cost, insurance, freight (CIF) value plus import duties, excise tax or any other tax (where 
applicable), and fees and charges in connection with importation.  For domestically supplied goods 
and services,  the tax base is the sale price.18 According to the authorities, the CT regime remained 
 
15 Excise tax and CT exemptions may be granted on a case -by-case basis by the Minister of the MoRC 
and with the approval of the Cabinet.  
16 World Bank (2019), Using Taxation to Address Noncommunicable Diseases: Lessons from Tonga . 
Viewed at: http://documents1.worldbank.org/curated/en/844811561475012529/pdf/Using -Taxation -to-
Address -Noncommunicable -Diseases -Lessons -from-Tonga.pdf.  
17 Excise Tax (Exemption) Orders 2020 published in Gazette Supplement Extraordinary , Nos. 15, 23, 
and 25; and information provided by the authorities.  
18 Consumption Tax Act 2003, last amended in 2012, Articles 3, 5, 6, and 14.  WT/TPR/S/409 • Tonga  
 
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  largely unchanged during the review period, except for the taxation of outbound international calls, 
which went from zero to the regular rate of 15% in March 2019, and for the introduction of new 
exemptions.19 
3.50.   While most goods are subject to the tax rate of 15%, some goods are exempted from the CT 
or are zero -rated. The latter are eligible for refund of the CT paid on inputs used in their production, 
and include  all exports;  international transport services; and basic provision of electricity and water 
to households, agricultural machinery and implements, and seeds and fertilizers ( Box 3.1 ). 
Box 3.1 Consumption tax exemptions and zero rates, 2014 -20a 
Supplies exempt from CT  
- Medical prescriptions, dental, nursing or health services;  
- Educational services;  
-  Financial services;  
-  Public transport services;  
-  Lease of land for residential purposes;  
-  Project supplies for all aid projects;  
-  Domestic supplies to foreign missions in Tonga;  
-  Supply of telecommunication services by Tonga Communications Corporation to Government;  
-  Supply of coral fills by c ontractors to Government for road maintenance;  
-  Supplies for specific constructions projects;  
-  Project supplies for the Pacific Resilience Programme (2018 -2020); and  
-  COVID -19-related measure : supply of accommodation services for COVID -19 quarantinin g purposes.  
Supplies subject to a zero -rate CT  
-  Exports of goods;  
-  Exports of services supplied for use outside of Tonga;  
-  Supply of international and domestic transport services of goods or passengers;  
-  Supply of goods as part of the transfer of a business as a going concern;  
-  Supplies of goods and services by a supplier in Tonga to His Majesty the King;  
-  Electricity su pplied for household or commercial use;  
-  First 20 cubic metres of water per month supplied for household purposes;  
-  Insecticides, pesticides, and fungicides for use in agriculture;  
-  Agricultural machinery and implements, including hand tools and timb er milling machinery;  
-  Agricultural seeds and fertilizers;  
-  Packaging materials for use in agriculture;  
-  Stock feed;  
-  Live poultry, bovine animals, and swine;  
-  Fish (expired in June 2020);  
-  Vessels, equipment and materials for licensed fisherie s businesses; and  
-  Supply of waste collection and disposal services.  
Imports exempt from CT  
- Personal items valued up to TOP 500;  
-  Imports by diplomats, according to law;  
-  Insecticides, pesticides and fungicides for use in agriculture;  
-  Agricultural machinery, and implements, including hand tools and timber milling machinery;  
-  Agricultural seeds and fertilizers;  
-  Packaging material for use in agriculture;  
-  Stock feed ; 
-  Live poultry, bovine animals, and swine;  
- Licensed fisheries businesses: vessels, equipment, and materials;  
-  Fuel for use of fishing vessel and ferries;  
-  Fuel for use of domestic airlines (from 2014);  
-  Imports from Tonga National Emergency Man agement Office (from 2014);  
-  Packaging materials for exports of fish and aquaculture (from 2015);  
-  Items for the Coronation of His Majesty King Tupou VI (one -off in 2015);  
 
19 According to the authorities, such change was a correction to the previous regulations and rulings, 
which treate d outbound international calls as an export of services.  WT/TPR/S/409 • Tonga  
 
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  - Imports by the Shanghai Construction Group Company Ltd for the construction of the Comprehensive 
Office Building Project and for the company's daily necessities (2015 -2030);  
-  Items for the construction of Tanoa International Hotel (2015 -2020);  
-  Items for the construction of Kongakava Hotel (2016 -2031);  
-  Fresh fr uits (HS 0803 to 0810) (from 2016);  
-  Imports for facilitation of the 2019 Pacific Games (from 2016);  
-  Imports by Tonga Power (2017, 2019, 2020);  
- Imports (except tobacco and liquor) for use by approved tourist businesses (2016 -2018, 2020 -2035);  
-  Building materials and equipment imported by Vast Ocean (Tonga) Aquaculture Limited for commercial 
farming of sea cucumber (from 2018);  
-  Aircrafts and aircraft parts imported by a licensed public domestic airline operator and vessels and vessel 
parts import ed by a licensed public domestic maritime transport operator (from 2018);  
- Bitumen for government road works (from 2018);  
- Building materials, food, and clothes imported for those affected by Tropical Cyclone Gita (one -off in 
2018);  
- Imports (except tob acco and liquor) for use by approved manufacturing businesses (one -off in 2019);  
- Imports from China by Beijing Machinery Repair Company Limited (one -off in 2019);  
-  Materials for the construction of the Fatumu wharf (one -off in 2019);  
-  Tools and equip ment imported by the Tonga Water Board under the Smart Water Metering Project 
(2019 -2034);  
-  Heavy machinery and parts thereof (from 2020);  
- Imports by licensed tourism business operators (2020 -2035);  
-  COVID -19-related measure:  any goods used to combat  the spread of COVID -19 in Tonga, such as 
medical and personal protective equipment) (from March 2020); and  
-  COVID -19-related measure:  all imports of food and personal consumer goods not for commercial 
purposes (from April to June 2020).  
a Unless indicated otherwise, the supplies of goods and services were subject to the respective 
measure throughout the review period.  
Source:  Information provided by the authorities; WTO document WT/TPR/S/291/Rev.1, 27 February 2014; 
and Tonga Attorney General's Of fice. Viewed at: https://ago.gov.to/cms/ .  
3.51.   Imports exempted from the CT include inputs used in agriculture and fisheries such as 
packaging material, machinery, and navigating equipment ( Box 3.1 ). Fuel imports for use by fishing 
vessels are also exempted fr om this tax. During the review period, other imports were added to the 
list of exemptions, such as fresh fruits, goods (except tobacco and liquor) for use by approved 
manufacturing businesses and licensed tourism business operators, fuel for use by domesti c airlines, 
bitumen for government road works, heavy machinery and its parts, goods for use of specific 
companies or government agencies, and goods to combat the spread of COVID -19 in Tonga . In some 
cases, the new exemptions were time -limited.  
3.52.   Other incent ives included the exemption of import duties on inputs used in the preparation of 
food or beverages, such as bottles, malt, yeast and sugar, and inputs used in agriculture and 
fisheries, such as packaging material, machinery, and navigating equipment (Sect ion 3.1.5).20 The 
commercial construction sector is also exempted from import duty on specific building materials.21 
3.3.1.2   Support programmes  
3.53.   Tonga provides support mainly through concessional credits, and in limited cases through 
subsidies; this is the case par ticularly in the agricultural sector (Section 4.1.1.5).22 For example, 
Tonga distributed chicks and provided the seedlings of coconut, fruit trees, and vegetables for free 
to farmers, as well as planting materials for various crops (e.g. cassava, sweet pot atoes, swamp 
taro, and corn). It also subsides electricity (Section 4.2.2.2), tractor services for land preparation, 
and more recently equipment (wheelbarrows, hoes, and spades) under the COVID -19 preparedness 
programme.23  
 
20 Government of Tonga, Investment Incentives 2014/2015 , August 2014.  
21 Building materials for community projects (i.e. education projects and private dwellings) were 
covered by this exemption until 3 1 December 2020.  
22 One of the four components of the Tonga Agriculture Sector Plan 2016 to 2020 (TASP) consists of 
achieving "sustainable economic growth and foreign exchange earnings by targeting increased exports and 
import substitution".  
23 Information p rovided by the authorities.  WT/TPR/S/409 • Tonga  
 
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  3.54.   Tonga also provides loans at pre ferential conditions known as Government Development 
Loans (GDL) through the TDB to support producers and exporters in various sectors. The GDL 
programme was reviewed in October 2020 and extended for another five years. Under the new GDL, 
the funds to be a llocated increased by TOP 5 million to about TOP 18.2 million, and the interest rate 
was set at 3%, regardless of the type of loan.24 The loans are currently directed to seven sectors, 
namely agricultural and forestry, fisheries, tourism, manufacturing, li vestock, construction and 
utilities, and retail and wholesale (Table 3. 9) (Sections 4.1 and 4.3), which together accounted for 
TOP 15.7 million of the available funds (or 86% of the total).25 The remaining amount (i.e. 
TOP 2.5 million) serves to cover two non-sector -specific type of loans: (i) the "overseas medical 
cover" that supports patients seeking medical care overseas; and (ii)  the education loan fund that 
supports post -secondary education. Since 2014, the GDL has benefitted 3,267 borrowers.   
3.55.   The form er GDL programme included a micro loan to support women entrepreneurs. However, 
in June 2019 the fund was transferred to the MTED and became the informal sector loan. So far, 
this new fund has assisted small -scale farmers to plant squash for export.   
3.56.   As at  June 2020, outstanding loans amounted to TOP 8.7 million, compared with 
TOP 7.6 million the previous year. Of this amount, 52% was lent to the agriculture sector, followed 
by the education programme (16%), fisheries (13%), and manufacturing (7%). By the e nd of 2020, 
10% of the GDL portfolio was in arrears.26 Loans (micro or short -term) and grants may also be 
available under activity -specific funds administered by the Ministries, and typically for the 
agricultural and manufacturing sectors (Sections 4.1.1 a nd 4.3.3).  
Table 3.9 Categories of sector -specific GDLs granted by the Tonga Development Bank, 
2020  
Loan category and its objectives (maximum amounts in '000 TOP and payment conditions in 
parentheses)  
Agriculture and Forestry Development  Fund (max TOP  300 to be repaid within 4 years)  
▪ Boost exporter's confidence by providing a facility to allow the ear ly payment to primary producers for 
their exports  
▪ Expand agricultural production and value -added activities  
Fisheries Development  Loan Fund (max TOP  100 to be repaid within 2.5 years)  
▪ Assist fishermen, vessel owners, and exporters to generate increased exports, income, and employment 
in the sector  
▪ Finance and upgrade second -hand fishing vessels from overseas  
Fisheries Development Loan Fund: COVID -19 and Tropical Cyclone (TC) Harold (max TOP 200 to be repaid 
within 5  years)  
▪ Assist fishermen, v essel owners, and exporters affected by COVID -19 and TC Harold to generate 
increased exports, income, and employment in the sector  
▪ Allow refinancing of existing fishing loans  
Tourism Loan Fund (TLF) (max TOP  50 to be repaid within 2 years)  
▪ Promote the development of new tourism products and events  
▪ Improve the quality of small and medium -sized accommodations  
▪ Develop a clean and beautiful tourist environment  
▪ Support and encourage community participation in development of heritage sites and cultural events  
▪ Support coordination within the sector  
▪ Support the establishment and sustainability of Tongan -owned businesses  
Tourism Loan Fund (TLF): COVID -19 and Tropical Cyclone Harold (max TOP 500 to be repaid within 5 years)  
▪ Support the same objectives as the TLF , but prioritize the rebuilding of tourism -related businesses 
affected by COVID -19 and TC Harold.  
▪ Allow refinancing of tourism loans  
▪ Support coordination among tourism -related services, such as promoting transportation businesses 
affected by COVID -19 
Manufacturing Loan Fund (max TOP  50 to be repaid within 2 years)  
▪ Promote the development of competitive and value -added products  
▪ Stimulate innovation and product diversification  
▪ Support production and marketing capacity of export -ready manufactu rers 
▪ Promote and encourage cooperation and coordination in the sector  
Livestock Development Fund  (max TOP  20 to be repaid within 2 years)  
▪ Support livestock projects that will provide economic benefits for the communities, and improve living 
conditions in rural areas  
 
24 Prior to October 2020, the interest rates were of 1% or 4%, depending on the amount of the loan.  
25 The additional funding of TOP 5 million allocated in October 2020 was for the fisheries and tourism 
sector affected by COVID -19 and Tropical Cyclone Harold.  
26 Information provided by the authorities.  WT/TPR/S/409 • Tonga  
 
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  Loan category and its objectives (maximum amounts in '000 TOP and payment conditions in 
parentheses)  
Construction and Utilities Loan Fund (max TOP  100 to be repaid within 2 years)  
▪ Support and cater to investments that require capital equipment, tools, and safety gear  
▪ Provide capacity building and training in specialized fields  
▪ Assist and encourage local contractors who are bidding for development projects  
▪ Assist local communities with their community utility requirements  
Retail and Wholesale Loan Fund (max TOP  50 to be repaid within 2 years)  
▪ Support small medium enterprises in the retail and wholesale business with expansion and service 
development  
Source:  Data provided by the authorities.  
3.3.2   Standards and other technical requirements  
3.57.   During the review period, there was no major change in the area of technical barri ers to trade 
(TBT). Tonga has still to develop a legal and institutional framework for the adoption of standards, 
technical requirements, and conformity assessment procedures. Some general provisions on 
standards and labelling can be found under the Consum er Protection Act (CPA) (last amended in 
2012) and its regulations. Tonga does not have a national standardization body or a single agency 
responsible for coordinating efforts in this area.  
3.58.   The MTED is Tonga's TBT notification authority and WTO Enquiry Po int.27 Pending the creation 
of a national standardization body, the MTED together with other relevant Ministries are responsible 
for implementing TBT -related policies or initiatives.28 On May 2020, the MTED launched consultations 
with stakeholders from both the public and private sectors on TBT measures with the goal of 
collecting information to develop a catalogue containing all standards, technical regulations, and 
conformity assessme nt procedures that are currently being applied (including international 
standards that are being adopted as a reference).29 The MTED is also conducting, together with 
Standards Australia, the Indo -Pacific Digital Trade Standardisation Initiative to, inter alia, strengthen 
Tonga's participation in international standard organizations (e.g. the International Organization for 
Standardization and the International Telecommunication Union), establish a technical committee to 
coordinate Tonga's standards developm ent programme, develop a trade standards strategy, and 
prepare a bill or regulation for the establishment of an independent National Standards Body. The 
initiative was launched in May 2019 and is temporarily on hold due to the COVID -19 pandemic.30 As 
at No vember  2020, activities had not resumed.  
3.59.   In the area of metrology, Tonga has the Weights and Measures Act, which was last reviewed 
in 2012. During the review period, there were efforts conducted to review this Act but without 
success.31 
3.3.3   Sanitary and phytos anitary requirements  
3.60.   Tonga's regulatory framework for sanitary and phytosanitary measures consists of various 
laws, which are mostly outdated (Table 3.1 0), and do not include procedures for the development 
and adoption of SPS measures. During the review pe riod, Tonga made some progress in this regard 
by updating its legislation on food safety, and adopting a Food Act in 2014 to strengthen the 
development and application of food standards. The new Act entered into force in October 2014 but 
was repealed and r eplaced in 2020 by another one – the Food Act 2020 – following a review that 
was launched in 2019 to bolster its implementation. The Food Act 2020 entered into force in 
October  2020 upon receiving royal assent.  
 
27 As at December 2020, Tonga has not submitted any TBT -related notifications to the WTO.  
28 According to the authorities, the MTED contributes to the development of national standards  but its 
enforcement is under the discretion of the relevant Government Ministry or Agency.   
29 The authorities indicate that this work is ongoing and will continue during 2021.  
30 According to the authorities, the project is on hold, as Australia diverted t he funding from this project 
due the COVID -19 pandemic.  
31 Information provided by the authorities.  WT/TPR/S/409 • Tonga  
 
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  Table 3.10 SPS legislation, as at December 2020  
Law (official citation)  Issued  Last 
amended  
Food Act 2020a 2020 n.a. 
Sandalwood Regulations 2016  2016 n.a. 
Forest Produce Regulations  2010 n.a. 
Noxious Weeds Act  2010 2012 
Biosafety Act  2010 2012 
Consumer Protection (product safety and labelling standards) regulations  2006 n.a. 
Aquaculture Management Act  2003 2012 
Agricultural Commodities Export Act  2002 n.a. 
Consumer Protection Act  2001 2012 
Plant Quarantine (Fees) Regulation 1997  1997 n.a. 
Plant Quarantine (Squash and Vanilla) (Fees) Regulations 1997  1997 n.a. 
Plant Quarantine Regulations 1995  1995 1995 
Fruit Export (Buttercup Squash) Regulations 1993  1993 1994 
Fruit Export (Vanilla) Regulations 1993  1993 n.a. 
Plant Quarantine Act  1982 2012 
Animal Disease Act  1979 2012 
Public Health (Meat) Regulations  1967 n.a. 
Diseases of Plants Regulations  1964 n.a. 
Forests Act  1961 2010 
Copra Act  1926 2010 
Proclamation of Noxious Weeds  1917 2010 
Rhinoceros Beetle Act  1912 2010 
n.a. Not applicable.  
a  The Food Act 2020 replaced the Food Act 2014, which had been in force since October 2014.  
Source:  WTO Secretariat based on information provided by the authorities.  
3.61.   In addition to the Food Act 2020, SPS measures are mainly regulated by the Plant Quarantine 
Act (last amended in 2012) and its regulations, and the Animal Disease Act (last amended in 2012). 
The Food Act 2020 regulates, inter alia , the production, sale, im port, and export of food for 
commercial purposes to guarantee food safety and the protection of human health. It also includes 
provisions on labelling, traceability, inspections, enforcement, and sanctions, and it established the 
National Food Authority an d the National Food Council, which were originally introduced under the 
Food Act 2014. The Food Act 2020, which was built upon the Food Act 2014, expanded it by making 
some provisions more detailed or adding new ones. For instance, the Food Act 2020 adds t wo 
sections on enforcement32, a specific provision on requirements for marine products , and more 
detailed provisions regarding the responsibilities of the National Food Authority, including the 
procedures for the application and approval for a food licence  or permit to operate a food business .33 
3.62.   At the institutional level, the Ministry of Agriculture, Food, and Forests (MAFF) is the main 
agency responsible for developing SPS measures, and implementing and enforcing SPS -related 
legislation. Its functions are  carried out through its Food Division and its Quarantine and Quality 
Management Division. The MAFF is also the WTO SPS Enquiry Point and notification authority. As at 
December 2020, Tonga had not submitted any notification to the WTO SPS Committee on its 
legislation or SPS measures, and did not maintain a public catalogue with all measures currently in 
force.  
3.63.   In the area of food standards, the MAFF is supported by the National Food Authority and the 
National Food Council. The National Food Authority is re presented by the Food Division of the MAFF, 
and is responsible for formulating strategies and policies on food security, employing risk 
management tools to ensure that all safety and quality standards are met by all products sold 
domestically (regardless o f their origin) and all Tongan products sold abroad. The National Food 
Authority also conducts inspections and certification services as necessary. The National Food 
Council consists of 10 members representing various Ministries, the Attorney General, the food 
 
32 Food Act 2020, Parts XII and XIII.  
33 As at December 2020, the Food Regulations had still to be developed. Pending their adoption, Tonga 
applies the Codex Alimentarius. According to the authorities, the Food Regulations will regulate, inter alia , the 
acceptable level of food additives, enviro nmental contaminants, veterinary drugs, pesticides and other 
residues, and other chemical and microbiological contaminants in food.  WT/TPR/S/409 • Tonga  
 
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  industry, the food scientific community, and civil society. Its functions include advising the National 
Food Authority on food control, safety, and quality assurance matters.  
3.64.   According to the authorities, all standards are applied equally to imported  and domestic goods 
following the quarantine policies, the Food Act 2020, and the Codex Alimentarius.  
3.65.   All food products, imported or locally produced, must comply with the Food Act and the Codex 
Alimentarius. Food imports are subject to import permits iss ued by the Quarantine and Quality 
Management Division, and require a zoosanitary, phytosanitary, or sanitary certificate from the 
relevant authority of the exporting country to enter Tonga. Import and export procedures are based 
on the Quarantine and Quali ty Management Division Operational Manual of 1998, which was partially 
updated in 2016.34 Exports shall be certified by the National Food Authority and meet the 
corresponding standards and the importing country's requirements.  
3.66.   The importation of plants an d plant materials35 is also subject to an import permit issued by 
the Quarantine and Quality Management Division and must be accompanied by a phytosanitary 
certificate issued by the relevant agency of the exporting country. Upon arrival in Tonga, such 
imports may be subject to an inspection, and if found contaminated with plant pests or unauthorized 
material the inspector may require re -exportation, the elimination of the contamination prior to 
release from quarantine facilities, or destruction of the consi gnment.36 The importation of animals 
and animal products also requires an import permit issued by the Quarantine and Quality 
Management Division and must be accompanied by a zoosanitary, or sanitary certificate issued by 
the relevant authority of the expor ting country.37 Export procedures are complemented by 
the requirements of the importing country and require an SPS certificate.  
3.67.   Tonga has a bilateral quarantine arrangement for watermelon with Ne w Zealand and applies 
a high -temperature, forced -air quarantine treatment (HTFA) for fruit fly host plants to minimize the 
risk of pests and diseases entering into these countries while facilitating bilateral trade.  
3.68.   Labelling provisions are found in the Food Act 2020 and in the  CPA and its regulations.38 The 
Food Act 2020 describes requirements related to food labelling and packaging for both foreign and 
locally produced goods; the Food Division in the MAFF is responsible for enforcement. Tonga requires 
a label on every package of food intended for sale in the country, which: (i)  permits its traceability; 
(ii) indicates its characteristics as required; and (iii)  is written in English or Tongan or a combination 
of both.39 The MTED is responsible for labelling and packaging standar ds of non -food items.  
3.69.   Tonga's legislation includes provisions on living modified organisms (LMOs) and genetically 
modified organisms in the Biosafety Act and the Aquaculture Management Act, respectively. Both 
laws were last modified in 2012. Imports of LMO s and genetically modified fish are subject to prior 
approval/authorization by the corresponding authorities.40 Under the Aquaculture Management Act, 
an aquaculture officer may seize and destroy any unauthorized genetically modified fish, or take 
possessio n of the consignment to determine whether it is genetically modified. According to the 
authorities, the Ministry of Fisheries did not provide any authorization to import genetically modified 
fish during the period 2014 -20. 
3.70.   Tonga is member of the Codex Alim entarius Commission and the International Plant 
Protection Convention but not of the World Organisation for Animal Health (OIE).41 
 
34 The authorities indicated that while some sections of the Quarantine and Quality Management Division 
Operational Manual ha ve been updated since it was issued, no comprehensive review of the entire manual has 
been undertaken so far. For example, in 2016 the Export Certification System (ECS) was implemented as an 
upgrade for the high-temperature, forced -air quarantine treatment  for fruit fly host plants  to be exported.  
35 Plant material refers to all materials of plant origin (Plant Quarantine Act, Article  2). 
36 Plant Quarantine Act, Sections 18, 25, and 33.  
37 Animal Disease Act, Section 6.  
38 In the past, this was regulated by th e Public Health Act of 1992, which has been now repealed.  
39 Food Act 2020, Section 35.  
40 Biosafety Act, Section 12; and Aquaculture Management Act, Section 29.  
41 Tonga's authorities indicate that Tonga cannot export animal products, as it is not a member  of the 
OIE. WT/TPR/S/409 • Tonga  
 
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  3.3.4   Competition policy  
3.71.   Tonga does not have a dedicated legal and institutional framework governing competition 
policy and, during  the review period, no substantial progress was made in this regard. Under the 
existing legislation, competition -related provisions are limited and scattered across different laws, 
namely the Protection Against Unfair Competition Act, the CPA, the Financia l Institutions Act, and 
the Industrial Property Act. Most of these laws remain unchanged during the review period. As at 
November 2020, a Banking Bill was being drafted. Once approved and enacted, this new legislation 
will repeal and replace the Financial Institutions Act.  
3.72.   Most of competition -related provisions are found in the Protection Against Unfair Competition 
Act (last amended in 2008), a 10 -page document that prohibits companies from engaging in unfair 
practices. Such practices include misleading the public in relation to a business or product, causing 
confusion, discrediting another business, or disclosing secret information without the consent of the 
owner. No regulations complement this Act. In addition, the CPA contains provisions de aling with, 
for example, monopolization (Section 30), exclusive dealing (Section 24), and price discrimination 
(Section  25), while the Financial Institutions Act (last amended in 2014) includes provisions on the 
effects of mergers and acquisitions on the c ompetitive environment of the banking sector 
(Sections  11A and 14A). The Industrial Property Act includes a section on unfair competition 
(Section  34). 
3.73.   Tonga does not have a competition enforcement agency or regulator. Pending the 
establishment of such an entity, the Division of Consumer Affairs in the MTED is responsible for, 
inter alia , receiving complaints from consumers, advising them on the Act's provisions, and 
investigating complaints.42 The Act also includes provisions on enforcement and sanctions t hat can 
take the form of a fine and/or imprisonment (Sections 30 -34 of the CPA).  
3.74.   According to the authorities, Tonga acknowledges the need for a competition Policy but has 
not been able to develop it yet. During the review period, it mainly worked on a bi ll on consumer 
protection.  
3.3.5   Price controls  
3.75.   Tonga maintains a price -control mechanism for certain food products, chemicals, fuels, and 
services43, which is regulated by the Price and Wage Control Act and implemented by the Tonga 
Competent Authority under the  MTED.44 During the review period, the legal and institutional 
framework governing this mechanism did not undergo any substantial change.  
3.76.   According to the authorities, Tonga is drafting a new legislation, the Price Control Bill and its 
regulations, which w ill replace the Price and Wage Control Act. This new law seeks, inter alia,  to 
clarify the membership and functions of the Tonga Competent Authority, strengthen the functions 
of the Consumers Affairs Division, revise the pricing template and mechanism fixi ng maximum 
prices, establish a process for selecting the goods and services that should be regulated, and 
establish the Price Control Appeals Tribunal as the body to consider appeals under the Act.45 
Moreover, according to the Tonga Trade Policy Framework 2017-2025, Tonga shall replace its 
existing price -control regime by an effective competition policy regime so as to enhance the business 
environment in price -controlled sectors.  
3.77.   The Tonga Competent Authority is responsible for implementing the Price and Wa ge Control 
Act, and for fixing maximum prices for regulated goods and services .46 The Competent Authority 
consists of : the Minister of the MTED (Chairperson); the Minister of Finance; the CEO of the MTED; 
the President of the Tonga Chamber of Commerce and  Industries; the President of the Tonga Small 
Business Association; and consumer representatives.47 The Enforcement and Monitoring Unit of 
Tonga's Competent Authority is in charge of ensuring business compliance.  
 
42 The Division of Consumer Affairs was established as per the CPA, Section 4.  
43 The authorities indicate that this mechanism has been in place for more than 30 years.  
44 The original Price and Wage Control Act was issued in 1947 and last amende d in 2013.  
45 Information provided by the authorities.  
46 Price and Wage Control Act, Sections 5 and 6.  
47 The authorities indicate that the consumer representatives are currently selected from the 
Parliament's Social Services Committee until the Consumers Council is set up.  WT/TPR/S/409 • Tonga  
 
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  3.78.   Price controls are applied to imports and domestic goods for wholesale and retail.48 In total, 
Tonga regulates the price for 21 types of food  products, paper, and 4 types of chemicals including 
lubricants, fertilizers, and insecticides for agricultural use (Table 3.1 1).49 It also regulates the retail 
prices for petroleum products (petrol, diesel, and kerosene) and liquid petroleum gas (LPG). Th e 
price of petroleum products is reviewed monthly, while the price of LPG is reviewed quarterly based 
on a template negotiated by both the regulator and the suppliers annually. The pricing template is 
based on the retail prices, for which the reference pri ce for fuel is Singapore's price, and adds 
shipping and storage fees, as well as wholesale and retail mark -ups.50  
3.79.   Tonga also sets the maximum rates for bus fares and for hiring vehicles (i.e. taxi services and 
truck hires). A review of bus fares was compl eted in July 2020 based on information and feedback 
from relevant stakeholders, but the review of taxi rates was still ongoing as at November 2020.51 
Table 3.11 Products and services subject to price control u nder the Price and Wage 
Control Act, 2020  
N° Sector  Items  
1 Food Flour 
2 Food Brown and white sugar  
3 Food Butter and margarine  
4 Food Milk (liquid or powder)  
5 Food Tea 
6 Food Rice 
7 Food Coffee, Milo, cocoa  
8 Food Cooking oils  
9 Food Cheese and dripping  
10 Food Salt 
11 Food Infant food for babies  
12 Food Tinfish  
13 Food Vegetables  
14 Food Potatoes  
15 Food Onions  
16 Food Chicken  
17 Food Beef 
18 Food Fruits  
19 Food Grapes  
20 Food Fish (frozen and chilled)  
21 Food Lamb flaps, sternums, and necks  
22 Paper  Paper for tapa cloth  
23 Chemicals  White benzene  
24 Chemicals  All lubricant oils  
25 Chemicals  Insecticide, weedicides, and fungicides for agricultural use  
26 Chemicals  Chemical and fertilizer for agricultural use  
27 Fuels Petroleum products (i.e. petrol, diesel, and kerosene)  
28 Fuels Liquid petroleum gas  
29 Services  Bus, truck, and taxi services (vehicle hire)  
Source:  WTO Secretariat based on information provided by the authorities.  
3.3.6   State trading, state -owned enterprises, and privatization  
3.80.   Despite reform efforts, the Government continues to have a significant presence in the 
economy through state -owned enterprises (SOEs). During the review period, Tonga made some 
progress , although limited, in the implementation of the public enterprise reform programme 
initiated in 2007, and adopted new programmes such as the Public Enterprise Reform Policy (2014) 
 
48 The Tonga Competent Authority determines the maximum  price of regulated goods by set ting the 
mark-up for wholesale and retail. According to the authorities, it also provides add -on cost for rural areas and 
freight and handling costs to outer islands, and works with importers to review regulated imported goods and 
calculate their maximum p rices upon arrival.  
49 The authorities indicate that the most recent product added to the list of regulated goods was lamb 
flaps, sternums, and necks, whose inclusion was approved by the Tonga Competent Authority and the Cabinet 
in 2020.  
50 Information provi ded by the authorities.  
51 Information provided by the authorities.  WT/TPR/S/409 • Tonga  
 
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  and the Public Enterprise Ownership and Divestment Policy (2015) to support  this process.52 These 
initiatives include guidelines and priority actions to advance reforms to improve transparency, 
governance, and performance of public enterprises; and to identify opportunities for restructuring 
or increasing private -sector participa tion. 
3.81.   At the legal and institutional level, no major changes took place. The operations of Tonga's 
public enterprises are mainly governed by the Public Enterprises Act, the Companies Act, and their 
regulations. These Acts were last amended in 2010 and 2012 , respectively, and are complemented 
by sector -specific laws (Box 3. 2). In 2020, Tonga owned 13 SOEs active in a variety of sectors 
including utilities (power, water, and waste management), transportation (air and sea), 
communications (telecommunications, broadcasting, and postal services), and banking.53 The 
two largest public enterprises are Tonga Communications Corporation and Tonga Power Limited. At 
the institutional level, the Ministry of Public Enterprises is responsible for implementing the Public 
Enterprises Act and overseeing 12 of the 13 SOEs.54 The remaining SOE, the TDB, has been under 
the responsibility of the Ministry of Finance since 2017.55 
3.82.   According to its authorities, Tonga does not have any state -trading enterprises as defined 
under Article  XVII of the GATT 1994, and has therefore not made any notification in this regard since 
acceding to the WTO.  
Box 3.2 SOEs: activities and legislation, 2020  
1. Tonga Airports Limited  
Activities: Oversees the airport operations and provides air navigation services.  
Legislation: Civil Aviation Act 2014, Civil Aviation (Airport Charges) Regulations, Civil Aviation (Licensing 
Charges) Regulations, and Civil Aviation (Restrictions on Use of Land) Regulations.  
2. Tonga Asset Managers & Associates Limited  
Activities: Operates the assets of the Small Industries Center and provides collocated factory and wareho use 
space for small and medium -sized businesses.  
Legislation: Companies Act, Public Enterprises Act, Income Tax Act, and Consumption Tax Act.  
3. Ports Authority Tonga  
Activities: Manages and maintains the operations and assets of the ports.  
Legislation: Ports Authority Act, Ports Management Act, and Harbours Act.  
4. Tonga Broadcasting Commission  
Activities: Manages radio and local TV stations, all free to air.  
Legislation: Broadcasting Commission Act.  
5. Tonga Cable Limited  
Activities: Is the only provider of fibre -optic services in Tonga.  
Legislation: Companies Act, Public Enterprises Act, Income Tax Act, Consumption Tax Act, and 
Communication Act.  
6. Tonga Communications Corporation  
Activities: Provides fixed-line, mobile, and Internet services in Tonga.  
Legislation: Communications Act 2015, Broadcasting Commission Act, and Internet Corporate Register 
(Fees) Regulation.  
7. Tonga Development Bank  
Activities: Promotes social and economic development throu gh loans, savings, investments, and advisory 
services to individual and companies.  
Legislation: Tonga Development Bank Act 2014.  
 
52 World Bank (2016), International Development Association Program Document for the Kingdom of 
Tonga ; and Asian Development Bank, Pacific Private Sector Development Initiative: Tonga Countr y Overview, 
April 2020 . Viewed at: http://www.adbpsdi.org/assets/Uploads/PSDI -CountryFactSheet -April2020 -Tonga.pdf.  
53 Prior to 2019, Tonga owned 16 SOEs, but in that year it granted a 50 -year concession to the private 
sector to control and manage Tonga For est Products Limited, which may be renewed for another 25 years. 
Moreover, according to the authorities and Tonga's Financial Statement FY 2017/18, Tonga Export Quality 
Management and Sea Star Fishing ceased to operate as SOEs in 2018 and 2019, respectivel y.  
54 For certain decisions, the Cabinet must be consulted.  
55 TDB, Annual Report 2018 . WT/TPR/S/409 • Tonga  
 
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  8. Friendly Islands Shipping Agency Limited  
Activities: Provides ferry services between Tongatapu and the outer islands.  
Legislation: Companies Act and Public Enterprises Act.  
9. Tonga Market Corporation Limited  
Activities: Is responsible for establishing the main market, Talamahu, as a prosperous  market that satisfies 
customers' needs. Products include fresh vegetables and fruits, local handmade craft goods, and clothes. 
The market also hosts retail service centres, such as convenience shops.  
Legislation: Markets Act and Market Regulations.  
10. Tonga Post Limited  
Activities: Is responsible for the collection, processing, and delivery of mail; the collection and processing of 
outgoing mail; and the production and sale of stamps. Other responsibilities include printing production and 
manufactu ring activities, conducted since Tonga Fast Print Limited merged with Tonga Post Limited.  
Legislation: Postal Services Act, Postal Regulations, and Postal (Insured Articles) Regulations.  
11. Tonga Power Limited  
Activities: Has been granted a concession t o generate and supply power.  
Legislation: Electric Power Board Act and Electricity Act 2007.  
12. Tonga Water Board  
Activities: Is responsible for the provision of water on Tongatapu, parts of the Vava'u and Ha'apai groups, 
and 'Eua.  
Legislation: Water Board Act 2000.  
13. Waste Authority Limited  
Activities: Is responsible for establishing, maintaining, operating, and managing the collection and disposal 
of all waste in Tongatapu, including the provision of commercial, industrial, and  residential waste collection, 
and for providing waste management facilities.  
Legislation: Waste Management Act 2000.  
Source:  WTO Secretariat based on information provided by the authorities.  
3.83.   The majority of  Tonga's public enterprises are wholly owned by the Government and very 
often enjoy a monopoly in their markets. Some (e.g. the TDB, Ports Authority Tonga, and Tonga 
Market Corporation Limited) also rely on government funding (i.e. loans) to sustain their operations, 
which is one of the main arguments for reform.56  
3.84.   In accordance with its reform programme, Tonga identified a first set of seven public 
enterprises that could be reformed by privatizing, restructuring, or outsourcing their activities, or by 
forming partnerships with the private sector. These seven SOEs were: (i) Tonga Forest Products 
Limited (para. 3.85); (ii) Tonga Water Board; (iii) Tonga Power Limited; (iv) Tonga Cable Limited; 
(v) Ports Authority Tonga; (vi) Tonga Commun ications Corporation; and (vii) Tonga Broadcasting 
Commission. Reform plans for three of the seven were completed during the review period, and the 
process is still ongoing for the others (Table 3.1 2). 
Table 3.12 SOEs: capital, ownership, and market participation, 2020  
SOE name  State 
ownership  Participates 
as the sole 
operator  Reform 
plans during 
2014 -19 Action taken during 
2014 -19 
Tonga Airports Limited  100%  Yes No n.a. 
Tonga Asset Managers & Associates 
Limited  100%  Yes No n.a. 
Ports Authority Tongaa 100%  Yes Yes Ongoing plans to enter 
into a PPP  
Tonga Broadcasting Commissiona 100%  Yes Yes Ongoing plans for 
restructuring  
Tonga Cable Limitedb 83.3%  Yes Yes Increase of private 
participation  
Tonga Communications Corporation  100%  No Yes Ongoing plans for 
privatization  
Tonga Development Bank  85% Yes Noc Some shares sold to the 
Retirement Fund Board  
 
56 Ministry of Finance, Tonga Budget Statements 2014 -2015 to 2018 -2019 WT/TPR/S/409 • Tonga  
 
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  SOE name  State 
ownership  Participates 
as the sole 
operator  Reform 
plans during 
2014 -19 Action taken during 
2014 -19 
Friendly Islands Shipping Agency 
Limited  100%  Yes No n.a. 
Tonga Market Corporation Limited  100%  Yes No n.a. 
Tonga Post Limited  100%  Yes No n.a. 
Tonga Power Limited  100%  Yes Yes Completed PPP  
Tonga Water Boarda 100%  Yes Yes Plans for outsourcing on 
hold 
Waste Authority Limited  100%  Yes No n.a. 
n.a. Not applicable.  
a Ports Authority Tonga, Tonga Broadcasting Commission, and Tonga Water Board are statutory 
bodies and hence not covered by the Companies Act.  
b Tonga Cable Limited (TCL) has three shareholders: Tonga Government, 66.6%; Tonga 
Communications  Corporation (TCC), 16.7%; and Digicel Tonga Limited (DTL), 16.7%. Viewed at: 
www.tongacable.to . 
c Although not originally planned for this period, the Retirement Fund Board bought 15% of the 
authorized capital of t he TDB in 2019.  
Source:  Information provided by the authorities; and Retirement Fund Board, Annual Report 2018 -2019.  
3.85.   Tonga sold some of its shares of the TCL to the private sector in 2017 but remains the main 
shareholder. In 2019, it concluded a public -private partnership (PPP) to manage Tonga Power 
Limited, and granted a 50 -year concession to the private sector to control and manage Tonga Forest 
Products Limited, which may be renewed for another 25 years. In 2018, the Cabinet also endorsed 
the Ports Autho rity Tonga strategic review, which recommends establishing a PPP through a 
concession.57 Other plans of reform include the privatization of the Tonga Communications 
Corporation, the corporatization of the Tonga Broadcasting Commission58, and the outsourcin g of 
the operations of the Tonga Water Board, which was initially scheduled for 2015 but was put on 
hold, according to the authorities.  
3.86.   In 2015 the Ministry of Public Enterprises introduced the concept of shared boards in order to 
improve transparency and  governance and to reduce management costs. Under this scheme, SOEs 
were grouped according to five different areas of activity, and directors could hold positions on more 
than one board. Originally, the five areas were utilities, transport, information and  communications 
technology, agriculture, and other (i.e. property management and banking), but the current 
classification does not include agriculture and banking, as the SOEs in these areas are no longer 
under the responsibility of the Ministry of Public Enterprises. With a view to further reducing costs, 
shared boards are also expected to encourage the development of shared services (e.g. accounting, 
customer services, and if possible, operations).59  
3.3.7   Government procurement  
3.87.   During the review period, Tonga  made substantial progress in implementing its procurement 
reform strategy, launched in 2013, and has since moved from a decentralized system to a partially 
centralized one. This reform included two major changes in the legal and institutional framework, 
one in 2016 and another in 2019. In 2016, a new set of regulations – the Public Procurement 
Regulations 2015 (PPR  2015) – was issued to replace those from 2010; in 2019, the PPR  2015 were 
further amended.60 These changes sought to establish a partially centralized procurement system 
and improve the efficiency, monitoring, and enforcement of procurement procedures. Additionally, 
 
57 World Bank (2019), International Development Association Program Document for the Kingdom of 
Tonga; and Asian Development Bank (2020), Pacific Private Sector Development Initiative: Tonga Country 
Overview, April 2020 . Viewed at: http://www.adbpsdi.org/asse ts/Uploads/PSDI -CountryFactSheet -April2020 -
Tonga.pdf . 
58 Asian Development Bank (2019), Pacific Private Sector Development Initiative: Annual Progress 
Report, July 2018 -June 2019 .  
59 Asian Development Bank (2016), Finding Balance 2016: Benchmarking the Perf ormance of 
State -owned Enterprises in Island Countries .  
60 The Regulations were published in Tonga's Gazette  as follows: Public Procurement Regulations on 
17 July 2015 (currently subordinated), Public Procurement Regulations 2015 on 27 May 2016, and Public  
Procurement Regulations (Amendment) 2019 on 13 November 2019.  WT/TPR/S/409 • Tonga  
 
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  in May 2020 the Cabinet requested a review of the procurement provisions of emerg ency supplies, 
and as at November 2020, the corresponding amendments were being drafted.61  
3.88.   Tonga has not signed the WTO Agreement on Government Procurement, and does not have 
observer status in the WTO Committee on Government Procurement.  
3.3.7.1   Legal and instit utional framework  
3.89.   Public procurement is governed by the PPR  2015 and the Contracting Entity Procurement 
Manual, issued in 2016 and 2015, respectively. The PPR 2015 repealed the Public Procurement 
Regulations 2010 and were amended in 2019. The new regulatio ns established contract thresholds 
so that larger contracts – those exceeding TOP  7,500 – could be re -centralized to the Procurement 
Division (PD) of the Ministry of Finance. Contracts below the threshold will continue to be 
decentralized to individual pro curement units within the contracting entities.62 The PPR 2015 also 
provided for the creation of a new Central Procurement Unit with broader responsibilities under the 
PD and of a new complaint and appeal mechanism to improve enforcement. This new mechanis m 
covers practices undertaken by a bidder or a contracting entity during the selection procedure and 
the execution of the contract.63  
3.90.   In 2019, the PPR 2015 were further modified to, inter alia , increase the contract threshold 
from TOP  7,500 to TOP  20,000,  so that only contracts exceeding TOP  20,000 are processed and 
approved by the PD (Table 3.1 3). The 2019 amendments also provided for changes in the 
responsibilities of the contracting entities and the Central Procurement Unit, and an increase in the 
perce ntage of the domestic preference to up to 15%, which until then was between 5% and 10% 
for eligible bids.64  
Table 3.13 Main changes in entities' responsibilities by procurement thresholds  
Procurement carried out and 
approved by  Contract thresholds in '000 TOP by year of adoption  
2010  2016  2019  
Contracting entity  ≤100,000a ≤7,500  ≤20,000  
Carried out by contracting entity / 
approved by the Procurement Division    n.a. 7,500 -10,000  n.a. 
Central Procurement Unit   n.a. >10,000a  >20,000a  
n.a. Not applicable.  
a  Contracts of more than TOP 100,000 require authorization by the Government Procurement 
Committee.  
Source:  WTO document WT/TPR/S/291/Rev.1, 27 February 2014; PPR 2015; and Public Procurement 
Regulations (Amendments) 2019.  
3.91.   The main governmental entities responsible for public procurement are the Government 
Procurement Committee (GP C) and the PD under the Ministry of Finance. The GPC is the entity 
 
61 Information provided by the authorities.  
62 Prior to the reform launched in 2013, the procurement process of contracts worth up to TOP  100,000 
was carried out and approved by the head of the procuring entity (WTO document WT/TPR/S/291/Rev.1, 
27 February 2014). In subsequent years and prior to the i ssue of the PPR 2015, a first threshold of TOP  3,000 
seems to have been applied by the authorities before adopting the threshold of TOP  7,500 to decentralize 
procurement to contracting entities (Treasury Circular 15/13/518, adopted on 1 July 2014; and Publ ic 
Procurement Regulations issued in July  2015, currently subordinated). Under the Public Procurement 
Regulations issued in July 2015 but replaced in May  2016, the procurement for contracts below TOP 3,000 is 
carried out by the contracting entity. For cont racts between TOP 3,000 and TOP 7,500, procurement is carried 
out by the contracting entity but endorsed by the PD. For contracts exceeding TOP  7,500, procurement is 
carried out the PD. Contracts of more than 100,000 require further authorization by the Go vernment 
Procurement Committee.   
63 PPR 2015, Sections 73 -79. 
64 PPR 2015, Section 43; and Public Procurement Regulations (Amendment) 2019, Section 17.  WT/TPR/S/409 • Tonga  
 
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  responsible for the formulation of Tonga's procurement policy and for proposing revisions or 
amendments to its existing legislation. It is also in charge of reviewing all procurements whose  value 
exceeds TOP  100,000. The GPC is composed of senior government officials, including from the 
Ministry of Finance, the MoRC, the Cabinet, and the Solicitor General's Office.65  
3.92.   The PD is responsible for the implementation, monitoring, and enforcement of the PPR 2015. 
It also provides support to the GPC. The PD consists of two offices: the Central Procurement Unit 
(CPU) and the Public Policy Unit (PPU). The CPU is responsible for conducting government 
procurement for all contracts worth more than TOP  20,00066, while the PPU is responsible for 
assessing complaints and enforcing regulations.  
3.3.7.2   Procurement procedures  
3.93.   The regulations and procedures under the PPR 2015 (and its amendments) apply to all 
procurements carried out by the Government. The entity resp onsible for procurement depends on 
the value of the contract. In some cases, an endorsement by the PD or the GPC is also required. The 
procurement process for contracts of goods, services, or works exceeding TOP 20,000 is carried out 
entirely by the CPU. C ontracts exceeding TOP 100,000 are subject to the approval of the GPC. Once 
the GPC approves the contract, it will issue a Letter of No Objection. For contracts worth TOP  20,000 
or less, the contracting entity is responsible for the entire procurement proc ess up to approval.67 
3.94.   In addition, contracting entities must appoint an Evaluation Committee for all contracts whose 
value exceeds TOP 20,000. The Evaluation Committee will prepare a bid evaluation report and 
recommendations for the award of a contract, wh ich shall be submitted to the procurement unit of 
the contracting entity or the CPU, depending on the value of the contract.68 Prior to 2019, an 
Evaluation Committee was established for contracts exceeding TOP  7,500.  
3.95.   The procurement of goods, services69, and works are conducted according to the following 
methods, depending on the amount of the contract and product characteristics: (i) competitive 
bidding (national or international, single -stage or two -stage); (ii) selective bidding (national or 
internatio nal); (iii) restricted bidding (national or international); (iv) request for quotations; and 
(iv) limited bidding (PPR 2015, Sections 31 -35).  
3.96.   In general, government procurement contracts are awarded by national competitive bidding 
on a single -stage basis. This method is used for contracts between TOP  50,000 and TOP  150,000 for 
goods and services (excluding consultancy services), and between TOP  100,000 and TOP  5 million 
for works. Prior to 2019, the contract threshold for works was betwe en TOP  100,000 and 
TOP 1 million (Table 3.1 4). The procurement notice with the requirements is advertised locally but 
may also be advertised abroad, depending on market availability. Foreign suppliers can participate 
in the bidding without restrictions. Th e procurement notice is published: (i) in at least one national 
newspaper with wide circulation; (ii) on the Internet, usually on the websites of the contracting 
entity and the PD; and (iii) via radio or television broadcast. An international bidding is us ed for 
contracts exceeding TOP  150,000 for goods and services, and TOP  5 million for works. Prior to 2019, 
the contract threshold for works was TOP  1 million. International biddings are conducted on a 
competitive, selective, or restricted basis and used in stead of national competitive bidding when 
better value for money could potentially be obtained by inviting foreign suppliers. The corresponding 
procurement notice shall be advertised locally and internationally. It is published in at least 
two English -language newspapers or other printed media, such as magazines. It may also be 
published online.  
 
65 Members of the GPC include the CEO of the Ministry of Finance, the CEO of the MoRC, the Chief 
Secretary and Secretary to the Cabinet, and the Solicitor General.  
66 Public Procurement Regulations (Amendment) 2019, Section 2, adopted on 13 November 2019. Prior 
to 2015, the CPU's role in this regard was mainly on processing procurements, as each ministry or agen cy was 
responsible for managing its own procurement ( Treasury Circular No.  15/13/518, adopted on 1 July 2014).  
67 PPR 2015, Section 13, as amended in 2019. Prior to 2019, contracting entities conducted the 
procurement for all contracts worth less than TOP  7,500. For contracts worth between TOP 7,500 and 
TOP 10,000, the procurement process was carried out by the contracting entity but subject to the approval of 
the PD. The CPU was responsible for contracts exceeding TOP  10,000.  
68 PPR 2015, Sections 10 and 15 , as amended in 2019.  
69 Excluding consultancy services. For consultancy services, additional methods and procedures may 
apply.  WT/TPR/S/409 • Tonga  
 
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  3.97.   In January 2020, the procurement procedures applying to contracts up to TOP 20,000 were 
amended through the adoption of new Treasury Instructions. Under these new rules, the contracting 
entities may conduct purchases at their discretion (discretionary shopping) for contracts below 
TOP 12,000, and they may request quotations and require at least two  quotations for contracts 
between TOP  12,000 and TOP  20,000.70  
Table  3.14 Type of contract and main changes in procurement thresholds  
Procurement 
method  Contract thresholds in '000 TOP by year of adoption  
Goods and services  Works  
2010  2016  2019  2010  2016  2019  
Limited bidding or 
direct shopping  <3a <7.5 <20b <3a <7.5 <20b 
Request for quotations 
with at least three 
quotes  3-100 (goods)  
3-75 (services)  7.5-50 20-50 3-75 7.5-100 20-100 
National bidding 
(competitive, 
selective, or 
restricted)  75-500 
(services)  50-150 50-150 75-500 100-1,000  100-5,000  
International bidding 
(competitive, 
selective, or 
restricted)  ≥100 (goods)  
≥500 (services)c ≥150  ≥150  ≥500  ≥1,000  ≥5,000  
a For contracts up to TOP 3,000, contracting entities may request only one quotation.  
b As at 1 January 2020, contracting entities may conduct purchases at their discretion (discretionary 
shopping) for contracts below TOP 12,000, and use a request for quotation requiring at least 
two quotations for contracts between TOP 12,000 and TOP 20,000.  
c Procurements of supply services worth more than TOP  500,000 were considered unlikely.  
Source:  Public Procurement Regulations 2010; PPR 2015; Public Regulations (Amendments) 2019; and WTO 
document WT/TPR/S/291/Rev.1, 27 February 2014.  
3.98.   In 2019, 28% of the t otal procurement amount was awarded through competitive methods 
(Table 3.1 5).71 
Table 3.15 Use of competitive methods in public procurement, 2016 -19 
 2016  2017  2018  2019  
Share (%) of value of contracts awarded through competitive methods  41% 31% 36% 28% 
Source:  Ministry of Finance. Viewed at: http://www.finance.gov.to/procurementpublications .  
3.3.8   Intellectual property rights  
3.99.   Tonga's legal and regulatory framework for intellectual property (IP) did not experience any 
major changes between 2014 and 2020. Its IP regime is mainly regulated by the Industrial Property 
Act (IPA), the Copyright Act (CA), the Protection of Geographical  Indications Act (PGIA), the 
Protection of Layout -Designs (Topographies) of Integrated Circuits Act (PLDICA), and the Protection 
Against Unfair Competition Act (PAUCA), and their regulations (when available) (Box 3. 3). These 
laws were last amended in 2012,  except the PAUCA, which was amended in 2008. In 2019, a bill to 
amend the CA was issued to criminalize the infringement of copyright by means of a computer 
system.72 There is no legal instrument dealing with the protection of plant varieties.  
 
70 Treasury Circular No.  15/23/22, issued on 16 January 2020.  
71 Information provided by the authorities. Competitive methods comprise national competitive bidding, 
international competitive bidding, and request for quotations.  
72 Copyright (Amendment) Bill 2019.  WT/TPR/S/409 • Tonga  
 
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  Box 3.3 IP laws and regulations, 2020  
Industrial Property Act (last amended in 2012) and its regulations: provide for the protection of 
patents, utility models, industrial designs, marks, collective marks, and trademarks.  
Copyright Act (last amended in 2012): provide for the protection of works, including computer 
programmes, audiovisual and photographic works, as of performers, producers of phonograms, and 
broadcasting organizations.  
Protection of Geographical Indication s Act (last amended in 2012) and its regulations: provide for 
the protection of geographical indications for natural and agricultural products, handicrafts, and wines.   
Protection of Layout -Designs (Topographies) of Integrated Circuits Act (last amended i n 2012) 
and its regulations: provide for the protection of layout -designs.  
Protection Against Unfair Competition Act (last amended in 2008): provide for the protection of 
undisclosed information. The acquisition or use of secret information without the co nsent of the person 
lawfully in control of that information and contrary to honest commercial practices constitutes an act of 
unfair competition, for which any person damaged or likely to be damaged by this is entitled to remedies. 
The unfair commercial us e or disclosure of secret tests or other data relating to pharmaceutical or 
agricultural chemical products using new chemical substances and which have been submitted to a 
competent authority for marketing approval also constitutes an act of unfair competi tion. 
Source:  Tonga Attorney General's Office . Viewed at: https://ago.gov.to/cms/ . 
3.100.   Tonga has been a member of the World Intellectual Property Organization (WIPO) since 
2001 and is a signatory to 2 of the 26 agreements administered by this organization, namely the 
Paris and Berne Conventions.73 Tonga has not signed any other WIPO -administered treaty since 
then. Tonga is not a member of the International Union for the Protection of New Varieties of Plants 
(UPOV) Convention but holds observer status in its Council.  
3.101.   At the institutional level, the main entity dealing with IP issues is the Intellectual Property 
Division of the MTED. The Intellectual Property Division is responsible for the administration and 
implementation of IP legislation, inc luding the registration of patents, industrial designs, trademarks, 
utility models, and geographical indications. The MTED is also the WTO Enquiry Point for all IP 
issues.74 In 2019, it recorded 170  trademark applications for registration and had 240 regis trations, 
compared with 148 and 123, respectively in 2014 (Table 3.1 6).75 
Table 3.16 Trademark registrations, 2014 -19 
 
2014  2015  2016  2017  2018  2019  
Applications recorded  148 170 170 185 215 170 
Registered  123 91 114 145 195 240 
Renewals  34 39 66 44 54 46 
Abandoned  15 12 11 15 0 0 
Source:  MTED, IP Unit Division.  
3.102.   The protection of IP rights under Tonga's legislation follows to a large extent the TRIPS 
Agreement, with some exceptions where the level of protection provided under Tonga's legislation 
is higher in some cases and lower in others. For example, Tonga prote cts trademarks for a longer 
period, 10 years instead of 7 under the TRIPS Agreement, and also protects utility models, which 
are not included under the TRIPS  Agreement. Tonga also provides for the protection of undisclosed 
information from clinical trials regarding pharmaceuticals and agricultural chemicals. The duration 
of the protection shall not be less than five  years, except in exceptional circumstances.76 In the case 
of layout -designs, the TRIPS  Agreement provides for a greater period of protection: a t least 
10 years, compared with a non -renewable 10 -year limit under Tonga's legislation (Table 3.1 7). 
 
73 WIPO IP Portal, Tonga . Viewed at: https://wipolex.wipo.int/en/legislation/profile/TO . 
74 WTO document IP/N/3/TON/3, 2 July 2020.  
75 The authorities indicate that the number of trademark registrations can be larger than the number of 
applications in a given year, as it may include the registrations of trademarks whose applications were 
submitted in previous years. This was, for instance, the case of the number of registrations approved in 2019.  
76 The authorities indicate that the duration of the pr otection is determined, upon application, by the 
Court, taking into account the nature of the tests or data and the effort and expenditure involved.  WT/TPR/S/409 • Tonga  
 
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  3.103.   Tonga's legislation also provides for the protection of moral rights for works (including 
audiovisual and applied arts), which are also protected under th e Berne Convention (Article  6bis) 
but not under the TRIPS Agreement.    
Table 3.17 Terms of protection, 2020   
Duration of 
protection  Under Tonga's legislation  Under TRIPS  Agreement  
Patents  20 years (IPA, Section 14).  20 years (Article  33). 
Industrial designs  5 years, extendable for two successive periods of 
5 years (IPA, Section 24).  At least 10 years (Article  26). 
Trademarks  
(marks, collective 
marks and trade 
names)  10 years, extendable for consecutive periods of 
10 years (IPA, Section 29).  7 years, renewable indefinitely 
(Article  18). 
Utility models  7 years not renewable (IPA, Section 18).  Utility models are not 
mentioned explicitly in the 
TRIPS Agreement.  
Copyrights and 
related rights  Works' rights (both economic and moral) (including 
photographic works) are in general protected 
during the life of the author and for 50 years after 
his or her death (CA, Article  18). 
Audiovisual rights (both economic and moral) are 
protected for 50 years from the date on which the 
work was either made, first made available to the 
public, or first published, whichever date is the 
latest (CA, Article  18). 
The rights (both economic and moral) of works of 
applied art (i.e. artistic creation) are protected for 
25 years the making of the work (CA, Article  18). 
The rights of performers and broadcasting 
organizations are protected for 50 years from the 
end of the year in which the performance was fixed 
in a phonogram or took place, and the broadcast 
took place (CA,  Sections 22 and 25).  
The rights of producers of phonograms and 
phonograms are protected for 50  years computed 
from the end of year in which the phonogram was 
published/fixed for the first time, or from the end 
of the year in which the performance took pla ce 
(CA, Sections 22 -23). Works' right, other than those 
for a photographic work or a 
work of applied art are in 
general protected during life of 
the author and 50 years after 
his or her death (Articles 9 
and 12). 
Photographic works and works 
of applied art  are protected for 
25 years from the making of 
the work (Berne Convention, 
Article  7, as incorporated in the 
TRIPS  Agreement).  
Performers and producers of 
phonograms are protected for 
50 years, and broadcasting 
organizations for 20 years 
(Article  14.5).  
Layout -Designs 
(Topographies) of 
Integrated Circuits  10 years, non -renewable, counted from the date of 
registration or from the first commercial 
exploitation (PLDICA, Section 8).  At least 10 years counted from 
the date of registration or from 
the first comm ercial 
exploitation, wherever in the 
world it occurs.  
Geographical 
indications  Geographical indications, registered or 
unregistered, are protected:  
(a) provided there is presumption that such 
indication is a geographical indication;  
(b) against a geographical indication which, 
although true as to the territory, region, or locality 
in which the goods originate, falsely represents to 
the public that the  goods originate in another 
territory (PGIA, Section 5).  Geographical indications are 
protected:  
(a) against being misused by 
misleading the public as to the 
geographical origin of the 
good, and against any use that 
may constitute unfair 
competition;  
(b) against a geographical 
indication which, although true 
as to the territory, region, or 
locality in which the goods 
originate, falsely represents to 
the public that the goods 
originate in another territory 
(Article  22). WT/TPR/S/409 • Tonga  
 
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  Duration of 
protection  Under Tonga's legislation  Under TRIPS  Agreement  
Undisclosed 
information  Undisclosed information on data from clinical trials 
for pharmaceuticals and agricultural chemicals is 
protected for at least five years (PAUCA, 
Section  9).  Undisclosed information on 
data from clinical trials for 
pharmaceuticals and 
agricultural chemicals shall be 
protected against unfair 
commercial use and disclosure 
(Article  39). 
Source:  WTO Secretariat based on Tonga's legislation and the TRIPS  Agreement.  
3.104.   All of Tonga's IP -related laws except for the PAUCA provide for an enforcement mechanism 
and sanctions.77 Sanctions for violating the law include fines and/or imprisonment that vary 
depending on the type of infringement. Any person who infringes the rights granted to trademarks, 
layout -designs, and geographical indications is liable upon conviction to a fine of up to TOP  5,000 or 
to imprisonment for a maximum of five years, or both. Violators of a copyright are subject to a fine 
and/or imprisonment not to exceed TOP  20,000 and three years, respectively.  
3.105.   At the border, Tongan customs authorities may suspend cleara nce of allegedly illegal goods 
(e.g. counterfeit or misleading) in accordance with the legislation on the protection of copyright and 
related rights (CA, Section 27). Any person who imports, offers for sale, or has in his or her 
possession counterfeit good s, documents, seals, or marks is liable upon conviction for a fine of up 
to TOP  100,000 or a term of imprisonment for a maximum of 10 years, or both. Any person receiving 
any imported counterfeit goods is liable upon conviction for a fine of up to TOP  50,000 or a term of 
imprisonment not exceeding four years, or both (Customs and Excise Management Act, Section  94).  
 
 
77 Enforcement provisions are described in: CA, Part III; Industrial Property Act, Section 43; 
Geographical  Indications Act, Section 8; and PLDICA, Sections 15 and 16.  WT/TPR/S/409 • Tonga  
 
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  4  TRADE POLICIES BY SECTOR  
4.1.  During the review period, trade -related policy, institutional, and regulatory developments 
affecte d certain activities.  
4.2.  Agriculture remains the predominant economic activity with food security challenges to be 
addressed; its average tariff protection levels dropped considerably, and trade -related support 
available to producers and/or exporters remains  unchanged. Fisheries policy has been aimed at 
maximizing the sustainable contribution of the sector to food security and economic growth; 
institutional and regulatory initiatives were undertaken. A resource rent of the local value of 
commercially exported  marine products continues to be charged, and activity -specific tax and 
non-tax incentives remained available to stakeholders. Initiatives for raising renewable energy 
sources and energy efficiency helped reduce the dependency level on petroleum imports to  meet 
energy needs. The virtual state monopoly in electricity persists, tariffs remain high, and a 
cross-subsidized "lifeline tariff" applicable to all small consumers remains in place. The contribution 
of the small and concentrated manufacturing sector sl ightly declined, and its average tariff protection 
levels were slightly reduced; activity -specific tax and non -tax incentives have been maintained.  
4.3.  Services continue as the main, albeit slightly declining, contributor to GDP. Tonga's substantial 
commitment s under the General Agreement on Trade in Services (GATS) remain unchanged. The 
banking system regulatory framework was updated in certain areas. The insurance market is being 
developed. Telecoms connectivity improved, new legislation was passed, and a reg ulator was 
established. Several policy initiatives intended to address transport -related challenges and new air 
transport legislation were passed. Air and maritime transport continued to receive support. Cabotage 
is allowed only in maritime transport under  certain circumstances. Tourism has been part of major 
policy papers and subject to institutional developments, and tax and non -tax incentives continue to 
support its development. Distribution services remain significant for the economy; small -scale 
wholes ale and retail trade benefited from support, and progress was made in enhancing the 
regulatory framework for nascent e -commerce.  
4.1  Agriculture, Forestry, and Fisheries  
4.1.1   Agriculture  
4.1.1.1   Features  
4.4.  Agriculture remains the predominant economic activity in Tonga. Its contribution to GDP 
(excluding fisheries (Section 4.1.2)) rose from 14.2% in FY  2013/14 to 17.7% in FY  2018/19, 
despite the impact of Tropical Cyclone (TC) Gita in the first half of 2018. The sector's share in total 
employment (including fisheri es) dropped from 26.1% (FY  2014/15) to 22.1% (FY  2018/19) 
(Table  1.2).1 This may be a cautious indication of improving labour productivity.  
4.5.  Fallow land takes up 33,717 acres (51%) of the total agricultural land area. In 2015, annual 
crops occupied 23,999  acres (36%); pastureland 4,858 acres (7%); perennial crops 3,207 acres 
(5%); and livestock 421 acres (1%). Most land is held in royal estates and nobles' hereditary estates. 
Each male Tongan head of household is legally entitled to a land grant, from the noble of the village 
or the Government, of up to 3.34 hectares (ha) as a heritable "tax allotment" (Land Act, Section 7), 
but in practice there is not enough land.2 The sale of land is prohibited; land may be leased and 
mortgaged by both men and women to locals and foreigners (Section 2.5.2). It appears that some 
fertile land is under -utilized, in part because of the large number of expatriate Tongan landowners.  
4.6.  Less than 10% of farmers are commercial producers who grow excess products for the formal 
marke t.3 Agriculture remains largely based on traditional/subsistence farming systems, some of 
 
1 Tropical Cyclone (TC) Gita had major impact on agricultural production, such as perennial crops, fruit 
trees, handicraft trees (mulberry and pandanus), kava and vanilla, and also on annual crop s (cassava, yam, 
and taro), causing significant losses. Ministry of Finance (2019), Government of Tonga Budget Statement for 
Year Ending 30th June 2020 .  
2 According to the 2015 agricultural census, 62% (41% in 2001) of households owned a tax allotment. 
WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
3 Ministry of Agriculture and Food, Forests and Fisheries (MAFFF) (2019), The Kingdom of Tonga: Tonga 
Agriculture Sector Plan 2016 -2020. WT/TPR/S/409 • Tonga  
 
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  which are under pressure from declining organic matter in the soils and declining crop diversity. 
Most farmers maintain multi -crop systems based on root crops (e.g. taro, manioc, yams, and sweet 
potatoes), which satisfy their basic food needs; vegetable crops are also cultivated. The majority of 
land holdings are small (eight acres or about 3.24 ha). Most Tongan households keep livestock.4 
Roaming livestock (mainly p igs) cause major crop losses, and even though this is a "community 
problem", there are few examples of successful resolution. Livestock productivity is low, and cattle, 
in particular, suffer from inadequate supplies of feed and water.5 Few commercial live stock 
operations are in place. Forestry accounts for a very small share of GDP (0.3% in FY  2017/18) in 
the primary sector; in 2016, Tonga granted a 50 -year concession to the Maori trust from 
New Zealand Aotearoa Tonga Forest Products Limited to control and manage the formerly state -
owned Tonga Forest Products Limited, which was responsible for producing and marketing quality 
logs and wood products in the Kingdom and the South Pacific Region at the 'Eua Forest Reserve, the 
Vaitaki Sawmilling Site,  and the Mataliku Forest Plant (Section  3.3.6).6  
4.7.  During the review period, agriculture continued to dominate exports. Its share of total 
merchandise exports (excluding fisheries (including crustaceans and coral)) ranged from 38.2% 
(2016) to 54.4% (2018) (Table  A1.1). The main agricultural export commodities remain squash 
pumpkins, root crops, and kava, representing 11.5%, 14%, and 12.2% of domestic merchandise 
exports in 2019, respectively. The sector continued to account for a small part of merchandise 
imports; its share ranged from 23.6% (2019) to 30% (2017), with the main import items involving 
prepared food, beverages, and tobacco (11.2% of imports) and live animals and products thereof 
(8.6%) in 2019 (Table  A1.2).  
4.8.  Similar to other Pacific countries, T onga has persistent food security challenges, as it is a net 
importer of staple foods; its self -sufficiency remains to be addressed (Section 4.1.1.2). No 
self-sufficiency indicators of staples, or targets set for raising them, were available with the 
autho rities. Concerns include reliance on imported food products with poor nutritional value, high 
prices of food products, and over 50% of average household income spent on food.7 
4.9.  Agricultural development continues to face several constraints with, inter alia , some food 
security implications. They include land availability, transportation logistics of servicing many islands 
over a large expanse of ocean, remoteness, a narrow resource base, the small size of the economy, 
and the drain on resources from the dama ge caused by frequent natural disasters such as cyclones 
and occasional droughts. Notwithstanding these limitations, rural communities appear to have been 
able to sustain their food security and general livelihoods through an integrated approach to the 
management of a productive and natural ecosystem.8  
4.1.1.2   Policy and institutional framework  
4.10.   During the review period, certain policies were put in place. The Tonga Agriculture Sector Plan 
(TASP) 2016 -2020 aimed to: promote a balance between export -oriented object ives, import 
substitution, and subsistence agriculture; and incorporate a strong focus on sustainability and 
building resilience against climate change and natural disasters.9 The TASP is based on designing 
groups of activities (in the form of Programmes)  for achieving four strategic objectives: (i) develop 
a climate -resilient environment; (ii) improve the enabling environment; (iii) develop diverse, 
climate -resilient farming systems for the Kingdom's islands; and (iv) increase and sustain rural 
incomes ac ross the Kingdom. The TASP focuses on four areas: (i) climate -resilient agricultural 
production systems, which are determined by healthy soils, secure and sustainable water supplies, 
diverse farming systems, and adaptive communities; (ii)  the enabling envi ronment in which the 
 
4 According to the 2015 agricultural census, about 92% or 12,589 house holds raised livestock, 
consisting mainly of pigs and chickens.  
5 According to the 2015 agricultural census, only about 4% of the cultivated land area (4,858  acres) was 
under pasture for cattle.  
6 Radio New Zealand, "Maori Trust to Control Tongan Forests" , 21 June 2016. Viewed at: 
https://www.rnz.co.nz/international/pacific -news/306960/maori -trust-to-control -tongan -forests ; Ministry of 
Finance (201 9), Government of Tonga Budget Statement for Year Ending 30th June 2020 .  
7 Parliament of Tonga, "Food Security Challenge Needs to Be Addressed", 24 July 2015. Viewed at: 
https://www.parliament.gov.to/media -centre/latest -news/latest -news-in-english/375 -food-security -challenge -
needs -to-be-addressed . 
8 MAFFF (2015), The Kingdom of Tonga: Tonga Agriculture Sector Plan 2016-2020; and Ministry of 
Finance (2019), Government of Tonga Budget Statement for Year Ending 30th June 2020 . 
9 MAFFF (2015), The Kingdom of Tonga: Tonga Agriculture Sector Plan 2016 -2020. WT/TPR/S/409 • Tonga  
 
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  sector operates, in terms of country systems and international relationships, human resource 
availability and capacity, regulations and compliance, and quarantine; (iii)  subsistence -level staple 
food, cash crop, and livestock productio n, associated with rural livelihoods, and including income 
from local domestic sales; and (v)  increasingly active and export -oriented agriculture, with a strong 
focus on vegetables, plus import replacement.  
4.11.   Under the TASP, staple food self -sufficiency and  food import replacement are equally 
important objectives in the longer term.10 It is envisaged to replace the importation of some chicken, 
pork, mutton, and to a lesser extent, beef. Continued and sustained self -sufficiency in staple foods 
is arguably as important as increasing exports, particularly in the face of greater weather extremes.  
4.12.   As at 2020, the authorities planned to better utilize agriculture roads and certified pack -
houses to increase exports, as well as to improve the productivity of root cr ops, watermelons, and 
vegetables.11 These prioritized national projects support four policy priorities: National Food 
Security; Rural Livelihood and Commercial Farming; Conservation of Sustainable Agricultural 
Resources; and Climate -Smart and Resilient Agr iculture. The policies are to be implemented by the 
Ministry of Agriculture, Food and Forests (MAFF) through its FY  2020/21 -FY 2022/23 Corporate 
Planning and Budgeting Process.  
4.13.   During the review period, certain institutional changes were undertaken in the responsibilities 
of the Ministry in charge of the formulation and implementation of agricultural policy (Section 4.1.2). 
The Ministry of Agriculture, Food, Forests and Fisheries (MAFFF) was turned into the Ministry of 
Agriculture, Food and Forests (MAFF), and the Ministry of Fisheries (MoF) was approved by the 
Cabinet to be established as an independent Ministry on 11 August 2017 (Section 4.1.2.2).   
4.1.1.3   Regulatory framework  
4.14.   During the review period, the main changes to the regulatory framework governing agricu lture 
included: the Food Act 2014 reviewed and replaced by the Food Act 2020 (Section 3.3.3); the Plant 
Quarantine Act 2012 revised in 2016 (Section 3.3.3 and Table 3.1 0); and the Sandalwood Act 2016 
and Sandalwood Regulations 2016 created. The Food Act re gulates the manufacture, sale, import, 
and export of food for commercial purposes to guarantee food safety and fitness for human 
consumption, promote fair trade practices, and provide for related matters.12 It provides for the 
establishment of the National  Food Authority and the National Food Council, which was established 
in 2016 but has not yet met, and provides for the control on the quality of food, including imported 
food or food intended for exportation (Section 3.3.3). It also regulates the labelling  and packaging 
of all food products imported or exported for sale. As at December 2020, the Food Regulations 
implementing the Food Act 2020 were to be yet to be developed.  
4.15.   Tonga maintains tax and non -tax import and/or consumption restricting measures on s ome 
food products (Section 4.1.1.4), e.g. fat and sweet food and drinks. Further information on the legal 
instruments enforcing these restrictions and their scope (products) and type (import/manufacture/  
consumption restriction/prohibition/control) was not  available from the authorities. A sweetened 
beverage excise tax of TOP 0.50/L, introduced in 2013, was increased in 2016 (to TOP  1.00/L) and 
in 2017 (TOP  1.50/L; USD 0.02/oz), as part of the reform to reduce the number of food products 
considered unhealth y (Section 4.1.1.5); according to international findings, the sugar -sweetened 
beverage taxes in Tonga were seemingly associated with increased prices, decreased taxed beverage 
imports, increased locally bottled water, and, more concerning, a small increase  in the local 
manufacturing of soft drinks.13  
4.16.   Egg production, farming of a number of crops (including root crops, squash, paper mulberry, 
pandanus, and kava), and export of coconuts are restricted to Tongan nationals or a 
 
10 Tonga has an "unwritten" objective of not becoming dependent on  imported rice, not only because of 
the impact on the balance of trade, but also because of the "food vulnerability" element. MAFFF (2015), The 
Kingdom of Tonga: Tonga Agriculture Sector Plan 2016 -2020. 
11 MAFF (2020), Corporate Plan for the Financial Year 2020/21 -2022/23 . 
12 Ecolex, Food Act 2014 (No.  18 of 2014) . Viewed at: https://www.ecolex.org/details/legislation/food -
act-2014-no-18-of-2014-lex-faoc141352/ . 
13 Teng, A. Puloka, V., Genç, M., et al. (2020), "Sweetened Beverage Taxes and Changes in Beverage 
Price, Imports and Manufacturing: Interrupted Time Series Analysis in a Middle -income Country", International 
Journal of Behavioral Nutrit ion and Physical Activity , Vol. 17, Article  90, 9 July. Viewed at: 
https://ijbnpa.biomedcentral.com/articles/10.1186/s12966 -020-00980 -1. WT/TPR/S/409 • Tonga  
 
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  company/partnership with 75% ownership by a Tongan (Table 2.2), although excepti ons may be 
granted.14  
4.1.1.4   Border measures  
4.17.   During the review period, the simple average applied most -favoured -nation (MFN) tariff rate 
on agricultural products dropped considerably from 10.7% to 7.7% (WTO definition) and from 10.5% 
to 5.5% (HS basis), resultin g in higher gaps with the corresponding average bound rates 
(11.3  percentage points (WTO definition) and 13.7 percentage points (HS  basis)), and remained well 
below the overall (10.4%) and the industrial products averages (Table 3.2). Applied MFN tariffs o n 
agricultural products continued to range from zero to 20% (Table 3.2).  
4.18.   Imports of all agricultural products, including fruits, vegetables, root crops, processed food 
products, and meat, remain subject to licensing and import permits from the MAFF's Quar antine and 
Quality Management Division. There are no import quota policies. All food imports must comply with 
the Food Act 2020 and the Codex Alimentarius standards requirements (Sections 3.3.3 and 4.1.1.3). 
An April 2020 policy approval for absolute impor t prohibition of meat of lamb and mutton breast to 
prevent the importation and consumption of this unhealthy food was passed through the Customs 
and Excise Management Act (Amendment) Order, which was published on 30 June 2020 and became 
effective as from 1  July 2020.  
4.19.   Exports of fruit and vegetables, including root crops, remain subject to licensing. 
Licences/permits are granted for exports of specific commodities, subject to quarantine 
requirements and production line and export pathways inspections. There  are no export bans or 
controls in place on most agriculture products; however, the Sandalwood Act 2016 restricted the 
export of sandalwood for the purposes of security and conservation of limited natural resources.  
4.20.   As from 2010, the MAFF has operated a p ack-house at its main office building in Ma'ufanga 
for farmers and exporters who want to use the facility to prepare and pack produce for export for 
free.15 The MAFF is responsible for the operation and management of the fumigation facility for which 
farme rs and exporters are charged TOP  7.75/m3 and TOP  130 per 20 -foot container of produce such 
as watermelon, which is the main and most common produce treated for export. UNDP -India funded 
the reconstruction of the MAFF pack -house and fumigation facility afte r they were damaged in 
TC Gita, but work had not yet started as at December 2020 as the MAFF was still in the procurement 
process. A second privately owned registered pack -house, the Nishi Trading Co. in 'Utulau, is also 
operational.  
4.21.   Since 2012, an Agricul tural Export Marketing Fund has provided short -term loans to exporters 
of agricultural commodities.16 Its concessional interest rate (1% per quarter) remained unchanged 
during the review period. Since 2014, Tonga also provided loans at preferential conditi ons under the 
Government Development Loans (GDL) facility of the Tonga Development Bank (TDB) to support 
producers and exporters in various sectors (Sections 3.3.6, 4.1.1.5, 4.1.2.5, 4.3.3, 4.4.3.1.1, 
4.4.4.1, and 4.4.7). According to the authorities, the TDB's short -term loans for agricultural export 
and marketing are provided at commercial rates; its GDL at low interest rates finances stakeholders 
requiring funding assistance to produce and export agricultural products. As from 2019, an informal 
sector lo an scheme under the Ministry of Trade and Economic Development (MTED) has assisted 
small -scale farmers to plant squash for export (Section 3.3.1.2).  
 
14 WTO document WT/TPR/S/291/Rev.1, 27 February 2014; Revenue Policy Committee, Ministry of 
Finance and National Planning, Ministry of Revenue and Customs, and Ministry of Commerce, Tourism and 
Labour (2014), Partnership in Driving Economic Growth – Governme nt of Tonga Investment Incentives 
2014/2015 , August.  
15 The pack -house established with EU STABEX funding in 2010 is equipped for washing, peeling, 
cutting, bagging, chilling, and freezing produce with a capacity of between 4 and 5 tonnes per day. It also 
includes a methyl bromide fumigation chamber with a capacity of around 20 tonnes per day. The facility 
operated by Nishi Trading was Tonga's first international -standard export pack -house and food -processing 
plant, and was partly financed by a grant from th e EU-funded Increasing Agricultural Commodity Trade 
programme.  
16 At the time of the previous Review, the TOP  1 million credit scheme set up within the framework of 
the FY  2012/13 budget was administered by the Ministry of Finance and National Planning. Whi le the loans are 
available to exporters of all produce, most were disbursed to squash exporters, according to the authorities.  WT/TPR/S/409 • Tonga  
 
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  4.22.   Tonga maintains a "zero commitment" in its Schedule with respect to agricultural export 
subsidies.17 At the  time of the previous Review, Tonga had notified the WTO Committee on 
Agriculture that no export subsidies were provided in FY  2007/08 and FY  2008/09, but since then 
no notification on this issue has been submitted. The authorities indicate that a new subm ission was 
to be made in January 2021.18  
4.1.1.5   Domestic support  
4.23.   During the review period, sector -specific tax and non -tax incentives were available to 
agricultural producers. Agricultural tools, live animals, stock feed, and packaging materials, including 
timbe r milling equipment, insecticides, pesticides, fungicides, agricultural equipment, and 
implements (including hand tools, seeds, fertilizer, and packaging materials), remain free from 
customs duty and consumption tax (CT).19 Tax expenditure relating to cust oms duty, excise tax, 
and CT to support agriculture stood at TOP  1,191,000.70 in FY  2014/15 (3.1% of all eligible 
activities), TOP  1,406,396.64 in FY  2015/16 (3.2% of all eligible activities), TOP  1,605,241.85 in 
FY 2016/17 (2.8% of all eligible activities ), TOP  1,939,120.68 in FY 2017/18 (3.7% of all eligible 
activities), and TOP  2,027,135.25 in FY 2018/19 (3.3% of all eligible activities). In 2016, excise 
taxes on healthy foods decreased, and oranges and apples were exempt from the CT, whereas taxes 
on un healthy foods, soft drinks, and tobacco increased (Section 3.3.1.1).20 
4.24.   During the review period, the MAFF provided seedlings of coconut, vegetables, fruit trees, 
various crops' planting materials (for six months for cassava, sweet potatoes, swamp taro, and  
corns), and distribution of one -week checks for free to all farmers and communities, including women 
and youth groups.  
4.25.   Since 2014, low interest rate loans through the GDL scheme administered by the TDB have 
been provided at interest rates of 1% and 3% (4%  prior to 2020) for farmers participating in 
agricultural development programmes (Section  3.3.1.1).21 The total outstanding loan under this 
scheme as at June 2020 was at TOP  8.7 million, compared with TOP  7.6 million in June 2017. Of the 
outstanding loans as at June  2020, 52% (47.3% in 2018) was lent to the agricultural sector, followed 
by the education, fisheries, and manufacturing sectors at 16%, 13% (17.9% in 2018), and 7%, 
respectively (Sections  4.1.2.5 and 4.3.3). Concessional loans were been provided under the Credit 
Union and Micro Finance Development Scheme.22  
4.26.   Tonga maintains a price control mechanism under which it fixed the maximum price for 
21 food products (Section 3.3.5).  
4.27.   Tonga's aggregate measure of support (AMS) remains bound at zero in its Schedule of 
Commitments.23 At the time of the previous Review, all domestic support measures notified by Tonga 
were in the general services category of the Green Box (TOP  1 million in FY  2009/10), but since then 
no notification on this issue has been submi tted. As at December 2020, the authorities planned to 
submit a new one by February  2021 (Section 2.4.1.3).24  
 
17 Kingdom of Tonga, Part IV, Section II, Schedule CLIX. Tonga notified its Accession working party that 
no export subsidies were provided during the "representative period" of FY  1996/97 -FY 1998/99. WTO 
document  WT/ACC/SPEC/TON/3/Rev.3, 28 October 2005.  
18 WTO document G/AG/N/TON/1, 27 June 2011.  
19 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Reven ue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August.  
20 Cardno (2018), Final Report of the Australian Department of Foreign Affairs and Tra de (DFAT)'s 
evaluation of the Economic and Public -Sector Reform Program III (EPSG III) to the Kingdom of Tonga 2015/16 
to 2017/18 . 
21 National Reserve Bank of Tonga (NRBT) (2018), Annual Report 2018 for the Year Ended 
30 June 2018. Viewed at: 
http://www.reservebank.to/data/documents/Publications/AnnualReports/NRBT_AR_1718_TON_ENG_  
FINAL.pdf . 
22 Ministry of Finance (2019), Government of Tonga Budg et Statement for Year Ending 30th June 2020 . 
23 Kingdom of Tonga, Part IV, Section I, Schedule CLIX.  
24 WTO documents WT/ACC/SPEC/TON/3/Rev.3, 28 October 2005; and G/AG/N/TON/3, 
12 January  2012.  WT/TPR/S/409 • Tonga  
 
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  4.1.2   Fisheries  
4.1.2.1   Features  
4.28.   Tonga remains dependent on fisheries and ocean resources for food, employment, income, 
and economic development.25 During the review period, the sector's contribution to GDP dropped 
progressively from 2.2% in FY  2013/14 to 1.9% in FY  2018/19 (Table 1.2).26 Tonga's Exclusive 
Economic Zone (EEZ) of approximately 700,000  km2, compared with its land area of 749  km2, 
creates both a massive challenge and a huge opportunity for the effective management and 
development of sustainable fisheries, and maximizing the economic benefits of the country's 
fisheries resources.27 The share of fisheries (including crustaceans and coral) in total merchandise 
exports dropped from 35.5% (2014) to slightly above 19% (2016, 2017) and to 15.5% (2018), 
possibly due to TC Gita damages, after rising to 26.6% in 2019 (Table A1.1).28 The three main 
export marine products are tuna, snapper, and aquar ium species. The Sea Star Fishing Company 
Limited has operated as a state -owned enterprise in the sector until 2019.  
4.1.2.2   Policy and institutional framework  
4.29.   During the review period, action was taken to develop the fisheries policy framework. The 
MOF's first C orporate Plan FY 2016/17 -FY 2018/19 (see below), which is directly linked to the Tonga 
Strategic Development Framework (TSDF) (Section 2.3.2), provides a renewed focus on the 
development and management of the country's sustainable fisheries.29 It supports the establishment 
of community -based special management areas (SMAs), and fosters sustainable and profitable 
commercial fisheries and aquaculture.  
4.30.   The Tonga Fisheries Sector Plan (TFSP) 2016 -2024 aims to maximize the sustainable 
contribution of the fisheri es sector to food security and economic growth.30 It provides a solid 
foundation for seeking financial assistance from development partners for high -priority projects. The 
implementation of the TFSP is ongoing, with potential funding from the World Bank Pa cific Islands 
Regional Oceanscape Program (PROP). A USD 10 million grant from the World Bank supports funding 
of TFSP implementation over six years, starting in July 2019, through the Halafononga Ki Ha Ngatai 
Tu'uloa – Pathway to Sustainable Oceans (Tongaf ish Pathway) project.31 The Tongafish Pathway 
project has four components: Strengthening Fisheries Governance (national International 
Development Associations (IDA): USD  0.4 million; regional IDA: USD  1.7 million); Strengthened 
Knowledge Base for Fisheries  and Aquaculture (national IDA: USD  1.17 million; regional IDA: 
USD 3.38 million); Investing in Sustainable Fisheries Management and Development (national IDA: 
USD 1.22 million; regional IDA: US  0.5 million); and Supporting Effective Project Management 
(national IDA: 1.56 million; regional IDA: USD  0.06 million).  
4.31.   The National Fisheries Policy, aimed at maximizing the sustainable contribution of the sector 
to food security and economic growth by presenting key policies to support the implementation of 
the T FSP, was announced in March 2018 and is currently being implemented.32 The authorities' 
10 policy priorities for the period FY  2019/20 -FY 2021/22 were: (i)  implementing the TFSP (e.g. 
Expanding of Special Management Area (SMA) Program); (ii)  developing aqu aculture (farming of 
pearls, giant clams, sea cucumber, tilapia, mud crab, seaweed, and prawns); (iii)  building 
institutional capacity (infrastructure and additional staff); (iv)  developing new fisheries (e.g. squid 
fishery and mini -longline); (v)  developi ng and managing tuna and deep -water snapper fisheries; 
(vi) implementing fisheries assessment, monitoring, and data collection (survey of sea cucumber, 
 
25 Ministry of Finance (2019), Government of Tonga Budget Statement for Year Ending 30th June 2020 . 
26 Damages of TOP  1.3 million were caused by TC Gita, mainly on fi sheries assets including fishing 
vessels; engines; fishing gear; fish fences; and pearl, clam, and seaweed farms and hatcheries. Ministry of 
Finance (2019), Government of Tonga Budget Statement for Year Ending 30th June 2020 . 
27 MoF, Annual Report – Financi al Year 2016/17 .  
28 WTO calculations based on data provided by the authorities.  
29 MoF (2018), Tonga National Fisheries Policy,  Parts 1, 2, and 3, March. Viewed at: 
http://www.tongafish.gov.to/index.php/policies -legislation/tonga -national -fisheries -policy . 
30 Pacific Community, Tonga Fisheries Sector Plan 2016 -2024. Viewed at: 
https://pafpnet.spc.int/resources/628 -tonga -fisheries -sector -plan-2016-2024; and MoF (2018), Tonga National 
Fisheries Policy,  Parts 1, 2, and 3, March. Viewed at: http://www.tongafish.gov.to/index.php/policies -
legislation/tonga -national -fisheries -policy . 
31 MoF (2019), Corporate Plan and Budget 2019/20 –2021/22 . 
32 MoF (2019), Corporate Plan and Budget 2019/20 –2021/22 . WT/TPR/S/409 • Tonga  
 
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  data collection for all fisheries etc.); (vii)  reviewing legislation to facilitate fisheries development  and 
management; (viii)  developing local fishing industry human resources capacity (trainings for crews, 
e.g. Safety and Master Class); (ix) implementing the Strengthening Monitoring, Control and 
Surveillance (MCS) Program – Port State Measure Agreement, R egional Air Surveillance, and 
Regional MCS programmes; and (x) planning a fishing port and onshore infrastructure.  
4.32.   In 2017, the Fisheries Division of the MAFFF was granted by the Cabinet the independence to 
function as the MoF.33 The MoF relies on the Cabi net and the Parliament for high -level strategic 
direction, and for support for policy and legislation, and budget resources.34 Support for its activities 
is provided by the Ministry of Finance, the Tonga Navy through fisheries patrols, and Tonga Customs 
through border controls for imports and exports of fish products. The MoF maintains ties with 
two regional agencies, the Forum Fisheries Agency (FFA) and the South Pacific Community (SPC). 
Bilateral memoranda of understanding (MOUs) with many development par tners for the provision of 
services to Tonga, such as support for management planning, compliance, resource assessment, 
and aquaculture development, are in place. Tonga is a member of, inter alia , the Pacific Island Forum 
Fishery Agency and the Western and  Central Pacific Fisheries Commission.  
4.1.2.3   Regulatory and operational framework  
4.33.   During the review period, the regulatory framework governing fisheries was subject to a few 
changes, including the Fisheries (Coastal Communities) (Amendment) Regulations 2016 (ena cted 
on 16  December 2016) and the Fisheries (Coastal Communities) (Amendment) Regulations 2017 
(enacted 29  June 2017).35  
4.34.   The main fisheries legislation remains the Fisheries Management Act (FMA) 2002, supported 
by regulations and fishery management plans.  As at December 2020, a Fisheries Management 
(Amendment) Bill 2016 was still with the Legislative Assembly's Law Committee. Aquaculture is 
governed by the Aquaculture Management Act 2003. As at September 2020, the following 
management plans were in force: Tonga National Marine Seaweed (Limu Tanga'u) Fisheries 
Management and Development Plan 2012 -2013; Tonga Bareboat Charter Policy Framework 2016; 
Tonga Marine Aquarium Plan 2017 -2019; Tonga Deepwater Fishery Management Plan (TDFMP) 
2017-2019; Tonga National Tuna Fisheries Management And Development Plan 2018 -2022; Tonga 
National Sea Cucumber Fishery Management and Development Plan; Kingdom of Tonga – Revised 
Shark -Plan 2018 -2022; and the National Aquaculture Management and Development Plan 
2018-2022.36  
4.35.   The T DFMP 2017 -2019 is the third plan for this fishery and is based on the TDFMP 2014 -2016 
and the previous Snapper Fisheries Management Plan (SFMP) 2007.37 It encourages co -management 
of the resources to foster an active partnership with fishermen, stakeholder s, and the Government. 
The nature of the fisheries has changed; the majority of the target species are exported, while the 
by-catch and shallow -water species are sold on the local market. The TDFMP set, inter alia,  the total 
allowable catch (TAC) of 200 me tric tonnes for all deep -water snapper species combined annually 
(Table 4.1); and gear and boat restrictions. At the same time, the tuna TAC dropped considerably 
from 8,000 to 2,500 metric tonnes (Table 4.1). In practice, TAC ceilings for both species were  
exceeded in certain years.  
Table 4.1 Total allowable and actual catch, 2014 -20 
Year Tuna (mt)  Snapper (mt)  
Quota  Actual  Quota  Actual  
2014 8,000  1,275.02  200 79 
2015 8,000  4,111.48  200 161 
2016 2,500  5,520.81  200 197 
2017 2,500  4,552.63  200 251 
 
33 MoF, About Us . Viewe d at: http://www.tongafish.gov.to/index.php/about -us. 
34 MoF (2019), Corporate Plan and Budget 2019/20 -2021/22 . 
35 MoF (2017), Annual Report – Financial Year 2016/17 .  
36 All management plans are available online. MoF, Management Plans . Viewed at: 
http://www.tongafish.gov.to/index.php/policies -legislation/management -plans . At the ti me of the previous 
Review, there were management plans for tuna (2002), snapper and grouper (2007), sea cucumber, and 
aquarium fish.  
37 MoF (2017), Tonga Deepwater Fishery Management Plan 2017 -2019, March. Viewed at: 
http://www.tongafish.gov.to/index.php/policies -legislation/management -plans . WT/TPR/S/409 • Tonga  
 
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  Year Tuna (mt)  Snapper (mt)  
Quota  Actual  Quota  Actual  
2018 2,500  1,449.80  200 216 
2019 2,500  3,237.19  200 177 
2020 2,500  1,559.24  200 146 
Source:  Data provided by the authorities.  
4.36.   Access to the Tongan EEZ remains mainly governed by the FMA in conjunction with the fishery 
management plans (see above), vessel -licensing requirements (see below), the Foreign Investment 
Act (see below), and access agreements with foreign countries. All f oreign fishing vessels/companies 
planning to fish for tuna in the EEZ must complete and sign the access agreement provided by the 
MoF. Tonga is a party to the 1987 Multilateral Treaty on Fisheries between Certain Governments of 
the Pacific Island States an d the Government of the United States of America.  
4.37.   Licensing requirements apply to local and foreign fishing vessels.38 In addition to the vessel 
registration requirement with the Marine and Ports Division (Section  4.4.4.5.2), fishing vessels must 
be re-registered with the MoF. There are nominal licensing fees for local vessels, depending on their 
size. Foreign fishing vessel licence fees reached USD  45,000 in 2013 for vessels exceeding 500 gross 
register tonnage (GRT). Between July 2016 and July 2017, 40 f ishing vessels held a valid licence to 
fish within the EEZ39, including 7 foreign fishing vessels, 5 local tuna -fishing vessels, 4  commercial 
sport-fishing vessels, and 24 snapper -fishing vessels. During the same period, 76 licences were 
issued, including 4 for local tuna vessels; 19 for snapper vessels; 7 for foreign fishing vessels; 3 for 
the export of tuna, snapper, or reef fish; 2 for export of other marine products; 2  for aquarium fish, 
and 39 for fish fences.  
4.38.   Foreign investment is not allowed in a nu mber of fisheries (Tables 2.1 and 2.2), including reef 
fishing, inshore fishing within 12 nautical miles and in water less than 1,000 metres deep, and 
bottom fishing in water less than 500 metres deep.40 Foreign investment in commercial fishing, such 
as tuna fishing, deep -water bottom fishing (in water deeper than 500 metres), and other deep -water 
fishing (not less than 100 metres), are subject to their respective management plans (Section 2.5.2). 
Foreign investment in aquaculture is also subject to the req uirements of the Pesticide Act 2002, and 
the Tonga Marine Aquaculture Fishery Management and Development Plan (see above). As at 2017, 
foreign investments in fisheries were in tuna fishing and game fishing, mainly for access to Tongan 
waters. There is very  little foreign investment for onshore fisheries activities, such as processing and 
value -added activities, partly due to the high cost of transport to international markets.   
4.1.2.4   Border measures  
4.39.   During the review period, the average applied MFN rate on fish and fishery products dropped 
considerably from 10.6% in 2013 to 0.9% in 2020, as most tariff rates at 5% and 20% in 2013 were 
cut to zero in 2020, and the tariff lines for fish and fish products rose from 136 in 2013 to 282 in 
2020 due to nomenclature chan ge (Table  3.2). Rates continue to range from zero to 20% (five lines 
under HS 0301.9 – live fish, excluding ornamental fish, and one line under HS 1603.00.00 – extracts 
and juices of meat, fish or crustaceans, molluscs or other aquatic invertebrates).41  
4.40.   As from 1994, a resource rent at rates of 0.5%, 1%, and 5% of the local value of commercially 
exported marine products has been collected by the MoF.42 The export levy on fish was zero in 2013 
and seemingly remains unchanged.  
4.41.   Exports of fish, fish products , and other marine products, including live aquarium fish, giant 
clams, and corals, remain subject to licensing (FMA, Article  35). Licensing conditions include 
compliance with the relevant fisheries management plan (Section 4.1.2.3) and any export 
restrict ions that may be in force (Fisheries Conservation Regulations 2008). As at 2017, there were 
10 exporters with valid licences: four for tuna, snapper, or reef fish; four for aquarium fishery; one 
 
38 More information on the FMA vessel licensing requirements is available in WTO document 
WT/TPR/S/291/Rev.1, 27 February 2014.  
39 MoF (2017), Annual Report – Financial Year 2016/17 .  
40 MoF (2018), Tonga National Fisheries Policy  Parts 1, 2, and 3, March. Viewed at: 
http://www .tongafish.gov.to/index.php/policies -legislation/tonga -national -fisheries -policy . 
41 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
42 MoF (2017), Annual Report – Financial Year 2016/17 .  WT/TPR/S/409 • Tonga  
 
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  for giant clam shell; and one for seaweed.43 Between July 201 6 and June 2017, 17,050 export 
permits were issued, including 572 for tuna and snapper, 147 permits for aquarium fishery, 10 for 
seaweed, and 1 for other export.  
4.1.2.5   Domestic support  
4.42.   During the review period, sector -specific tax and non -tax incentives were ava ilable to fisheries 
stakeholders. The fuel subsidy (fuel concession scheme) introduced in 2000 to support the 
development of fisheries as a strategic industry remains in place (see below). Licensed fishers remain 
exempt from the payment of excise taxes on motor fuels. The fuel concession is granted with respect 
to locally registered vessels, including foreign vessels registered in Tonga, as well as foreign fishing 
vessels that unload 50% of their catch in Tonga. The scheme is implemented by the MoF, which 
issues refuel certificates. Since 2013, a customs tariff and CT exemption for fuel fishing boats, baits, 
engines and spare parts, and fishing gear has been granted.  
4.43.   Tax expenditure relating to customs duty, excise tax, and CT to support fisheries -related 
activities stood at TOP  1,217,877 in FY  2014/15 (3.2% of eligible activities), TOP  2,240,323 in 
FY 2015/16 (5.1%), TOP  897,264 in FY  2016/17 (1.6%), TOP  664,022 in FY  2017/18 (1.3%), and 
TOP 452,114 in FY 2018/19 (0.7%). Furthermore, tax expenditure relatin g to customs duty, excise 
tax, and CT for the equipment, engines, devices, or parts of domestic fishing vessels stood at 
TOP 4,879 in FY  2014/15 (0.01% of eligible activities), TOP  66,810 in FY  2015/16 (0.1%), and 
TOP 1,824,311 in FY  2018/19 (2.9%).  
4.44.   Tax ex penditure relating to customs duty, excise tax, and CT for the operation of the fuel 
concession scheme (covering fuel for use by fishing vessels, diesel power generation, village 
electricity, village water schemes, domestic airlines, and ferries) stood at TOP 13,392,348 in 
FY 2014/15 (about 35% of eligible activities), TOP  14,116,088 in FY  2015/16 (32.2%), 
TOP 21,875,202 in FY  2016/17 (38.7%), TOP  12,226,434 in FY  2017/18 (23.3%), and 
TOP 10,345,979 in FY  2018/19 (16.6%).  
4.45.   In the FY  2016/17, fuel accounted f or 86% of the total exemption, with the remaining 14% 
accounted for by fishing gear and bait.44 Out of 3,501,860 litres of duty - and tax -exempt fuel, 67.4% 
benefited foreign fishing vessels, 25% deep -sea long -line vessels, and the rest deep -sea 
bottom -fishing vessels. A total of 43 fishing vessels were eligible under this scheme, and they were 
predominantly tuna and snapper boats. The total value of exemption was increased by 40% from 
the previous financial year, due to the increase in the number of fishing  vessels from 39 to 43.  
4.46.   Low interest rate loans through the Fisheries Development and Export Fund administered by 
the TDB continued to be provided at rates of 3% (maximum TOP  100,000) with a 2.5 -year 
repayment period.45 The Fisheries Development Loan Fund : COVID -19 and TC Harold is at 3% 
interest (maximum TOP 200,000) repayable within 5 years. These loans are to assist fishermen, 
vessel owners, and exporters generate increased exports, income, and employment.  
4.1.2.6   Illegal, unreported, and unregulated (IUU) fis hing 
4.47.   Tonga faces challenges in monitoring fishing vessels and enforcing regulations in combatting 
IUU fishing due to the lack of capacity within the MoF. At the regional level, collaboration with FFA 
members in combatting IUU fishing increased. Tonga signe d the FAO Agreement on Port State 
Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing (PSMA) in 
June 2017.46 It has started a monitoring programme to review its legislation to facilitate PSMA 
implementation. The first revie w of its legislation was conducted in February 2017. As at 
 
43 MoF (2017), Annual Report – Financial Year 2016/17 .  
44 MoF (2017), Annual Report – Financial Year 2016/17 .  
45 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August.  
46 The PSMA complements an existing suite of measures in place internationally to combat IUU; 
47 States or regional economic integration organizations are parties, including 4 FFA member countries 
(Australia, New Zealand, Palau, and Vanuatu). United Nations, Implementation of Port Measures Agreement 
(PSMA) to Prevent, Deter and Eliminate IUU Fishing Which Support Target 14.4 and 14.6 . Viewed at: 
https://oceanconference.un.org/commitments/?id=21404 . WT/TPR/S/409 • Tonga  
 
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  December  2020, Tonga was at the initial stage of PSMA implementation, which includes the 
amendment of its fisheries legislation.  
4.2  Mining and Energy  
4.2.1   Minerals  
4.48.   Mining for seabed minerals remains at th e exploration stage.47 The prospective deposits are 
located at the bottom of the Pacific Ocean in depths of 4,500  m-6,000 m at the Clarion -Clipperton  
Zone (CCZ) beyond national jurisdiction and within the EEZ.48 The minerals are in nuggets about 
the size of golf balls (so -called polymetallic nodules) that are potentially rich in various metals, 
including gold, silver, copper, nickel, manganese, cobalt,  zinc, and other trace metals.  
4.49.   During the review period, the contribution of mining and quarrying to GDP and employment 
ranged from 0.6% to 0.8% and from 0.4% to 0.5%, respectively (Table 1.2). In 2019, minerals 
(other than petroleum oils), and base metal s and articles thereof, accounted for 6.6% and 5.7%, 
respectively, of total merchandise imports (Table A1.2).  
4.50.   Tonga maintains exploration licences within the EEZ, which were granted in 2007.49 At the 
time of the previous Review, three companies – Blue Wat er Metal, Nautilus Minerals Tonga Ltd., 
Korean Oceanographic Research Development Institute – held exploration licences under the 
Minerals Act, valid for two years (renewable). In 2012, Nautilus Minerals Tonga Ltd., a subsidiary of 
Nautilus Minerals of Can ada, announced the discovery of precious metal deposits on its tenements 
within the EEZ.50 Moreover, Tonga Offshore Mining Ltd., another subsidiary of Nautilus Minerals of 
Canada, was awarded an exploration licence in 2012 by the International Seabed Autho rity to 
explore seabed minerals in the CCZ within international waters or what is defined as the "Area" 
under the United Nations Convention on the Law of the Sea. In April 2020, DeepGreen Metals Inc., 
a Canadian -based seafloor mining developer, took over t he Tonga Offshore Mining  Ltd., and 
expanded its footprint of mining for polymetallic nodules in the central Pacific, as it plans to extract 
cobalt and other battery metals from the seafloor.51  
4.51.   Tonga remains committed to take appropriate action "to protect the economy and the political 
system from any possible economic disruption and potential corruption that might eventuate from a 
failure to effectively manage mineral wealth."52 The Ministry of Lands and Natural Resources remains 
entrusted with mana ging exploration and mining.  
4.52.   In 2014, Tonga passed the Tonga Seabed Minerals Act, to regulate exploration and 
exploitation activities within its national jurisdiction.53 The Seabed Minerals Authority, established 
under the Act 2014, drafted Licensing Regul ations and also Seabed Minerals Trust Fund Regulations, 
a mechanism to protect income from seabed minerals activities through appropriate investment 
financing mechanisms, for the Government's consideration.  
 
47 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
48 The international seabed resources are administered by the International Seabed Authority under the 
United Nations Convention of the La w of the Sea, and related agreements.  
49 Secretariat of the Pacific Regional Environment Programme, Tonga Seeks Support to Determine the 
Best Way Forward to Explore Seabed Minerals While Protecting Its Marine Environment , 23 November 2018. 
Viewed at: https://www.sprep.org/news/tonga -seeks -support -to-determine -the-best-way-forward -to-explore -
seabed -minerals -while-protecting -its-marine -environment . 
50 Nautilus Minerals. Viewed at: http://www.nautilusminerals.com/s/Home.asp . 
51 Matangi Tonga Online, DeepGreen Metals Acquires Tonga Offshore Mining Ltd's Exploration Rights , 
23 April 2020. Viewed at: https://matangitonga.to/2020/04/23/deepgreen -metals -takes -over-tonga -offshore -
mining . 
52 Tonga Strategic Development Framework (TSDF) 2011 -2014. Viewed at: 
http://www.ausaid.gov.au/countries/pacific/tonga/Documents/tonga -strat-dev-frame-2011-2014.pdf . 
53 Secretariat of the Pacific Regional Environment Programme, Tonga Seeks Support to Determine the 
Best Way Forward to Explore Seabed Minerals While Protecting Its Marine Environment , 23 November 2018. 
Viewed at: https://www.sprep.org/news/tonga -seeks -support -to-determine -the-best-way-forward -to-explore -
seabed -minerals -while-protecting -its-marine -environment . WT/TPR/S/409 • Tonga  
 
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  4.53.   During the review period, the simple average MFN rate applied for minerals and metals 
remained virtually unchanged (12.9% in 2013, and 13% in 2020 (WTO definition); and 12.4% in 
2013, and 12.3% in 2020 (ISIC 2)), with tariffs continuing to range from zero to 20% (Table 3.2).  
4.2.2   Energy  
4.54.   Tonga remains heavily dependent on petroleum imports to meet its energy needs for 
electricity and transportation (Section 4.2.2.1). Electricity generation consumes nearly 
13 million  litres of fuel per year, at a cost equivalent to about 10% of total GDP, and transportation 
consumes 25 million litres at a cost close to 20% of GDP.54 This situation keeps Tonga in a vulnerable 
position due to volatile fuel prices, which have a downstream effect on electricity, transportation, 
and cost -of-living expenses.  
4.55.   A 2009 Tonga Energy Road Ma p (TERM) 2010 -2020 focused on reducing Tonga's fossil fuel 
dependence through increased energy efficiency and improved supply chains in an effort to mitigate 
the price volatility of imported products, as well as to reduce greenhouse gas emissions and impro ve 
national energy security.55 The TERM initially set a goal of approving a policy to supply 50% of 
electricity generation through renewable energy (RE) resources by 2020; the TSDF 2015 -2025 
(Section 2.3.2) revisits the original TERM goal of 50% renewable by 2025, and by 2020 for rural 
communities. The TERM includes improvements in the petroleum supply chain by reducing the price 
and price fluctuation of imported petroleum products, increasing the efficiency of converting 
petroleum to electricity (e.g. thro ugh increases in efficiency and reductions in losses at Tonga Power 
Limited (TPL) (Section 4.2.2.2)), and improving the efficiency of converting electricity into consumer 
electrical services (demand -side management measures). It also includes replacing a p ortion of 
current or future grid -based generation with RE. Several energy efficiency policies and initiatives 
that, inter alia , set goals and launch projects have been implemented since the creation of the 
TERM.56 The Tonga Energy Efficiency Master Plan (T EEMP), complementing the TERM's approach, 
was endorsed by the Cabinet in September 2020.  
4.56.   As at 2019, Tonga's energy -related priorities consisted of reviewing the existing energy sector 
bill, developing new legislation and policies for rural electrificatio n, implementing an energy roadmap 
and RE projects for Tongatapu and outer islands, and revising the electricity tariff (Section 4.2.2.2).57 
A total of TOP  44.02 million of the development budget was estimated to contribute to energy 
projects in FY  2019/20.   
4.57.   Since 2014, the Ministry of Meteorology, Energy, Information, Disaster Management, 
Environment, Climate Change, and Communications (MEIDECC) has been responsible for managing 
energy.  
4.2.2.1   Hydrocarbons  
4.2.2.1.1   Upstream  
4.58.   Tonga continues to lack domestic production of o il and natural gas.58 Hydrocarbon exploration 
and production remain governed by the Petroleum Mining Act 1969 and its regulations. Exploration 
licences valid until 2018 were awarded to three companies of the Modulus Baringer Group (Modulus 
Pacific Tonga, B aringer Tonga Central Ltd., and Baringer Tonga South Ltd.). As at December 2020, 
the licence holders had made progress in their desktop studies, revealing a potential hydrocarbon 
reservoir underwater between Tongatapu and 'Eua. Investors and exploration co mpanies are invited 
to apply for licences.  
 
54 United Nations' Climate Technology Centre and Network (2018), Government of Tonga Energy 
Efficiency Master Plan , August.  
55 United Nations' Climate Technology Centre and Network (2018), Government of Tonga Energy 
Efficiency  Master Plan , August.  
56 Projects since 2014 include Promoting Energy Efficiency in the Pacific (2014), the Outer Island 
Renewable Energy Project (2017), and the Tonga Renewable Energy Plan (2017). United Nations' Climate 
Technology Centre and Network (2018 ), Government of Tonga Energy Efficiency Master Plan , August.  
57 Ministry of Finance (2019), Government of Tonga Budget Statement for Year Ending 30th June 2020 .  
58 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  WT/TPR/S/409 • Tonga  
 
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  4.2.2.1.2   Downstream  
4.59.   During the review period, the share of petroleum oils and oils obtained from bituminous 
minerals in total merchandise imports dropped considerably from 20.3% (2014) to 12% (2019), 
inter alia, as a resu lt of changes in world prices and reduced energy dependence on fossil fuels 
related to RE initiatives, despite the growth of the liquid fuels market being driven by domestic 
economic growth (Table  A1.2 and Section 4.2.2.3). The suppliers of refined petrole um products 
remain Pacific Energy Ltd. and Total (Fiji) Ltd., with imports from Singapore, with transhipment via 
Fiji. Natural gas (LPG in bulk) continues to be imported by Tonga Gas (a subsidiary of Fiji Gas/Origin 
Energy of Australia), and distributed by  Home Gas Ltd. of Tonga. Gogas, a new supplier, entered 
the LPG market in 2016, importing gas in isotainers from New Zealand.  
4.60.   Although free from customs duty, petroleum products remain subject to excise tax 
(Section  3.3.1.1). Activities exempt from fuel ex cise duties include commercial fishing, domestic and 
international air transport, domestic maritime passenger transport, and fuel used in electricity 
generation (Section 3.3.1.1). Petroleum products and LPG sold on the domestic market are subject 
to price controls (Section 3.3.5). The Tonga Competent Authority sets the price of petroleum on a 
monthly basis and the price of LPG on a quarterly basis. A price template endorsed by the Tonga 
Competent Authority covers all the cost components and returns to suppl iers. Prices are based on 
the lowest cost submitted by the suppliers. The components are reviewed annually by the Tonga 
Competent Authority and the suppliers.59  
4.2.2.2   Electricity  
4.61.   During the review period, Tonga's installed capacity increased, and its dependence  on diesel 
generators decreased as more RE generation was deployed. As at June 2019, the total installed 
electricity -generating capacity connected to the grid stood at 70.6 GWh, consisting of diesel 
generation (88.07%), solar photovoltaics (8.27%), and win d (3.66%), as compared with 54.7 GWh 
composed of diesel generation (94.47%) and solar (5.57%) in 2014.60 Tonga has one of the highest 
levels of access to electricity in the region, with 98.89% of the population on -grid in 2018, and high 
levels of supply re liability, but at the same time it has historically had one of the highest costs of 
electricity.61 The overall losses for all four -grid island systems decreased significantly from 16.01% 
in 2011 to 10.12% as at end -June 2019, largely reflecting improvements to the network. In 2019, 
the residential sector accounted for 80.2% (44% in 2017) of electricity  consumption, with 
commercial, religious, government, and public service accounts making up the remaining (56% in 
2017).62  
4.62.   TPL, the vertically integrated entirely state -owned utility, continues to own and operate 
virtually all in -front-of-meter electricit y generation, as well as all transmission and distribution 
assets.63 Following the introduction of independent power producers (IPPs), TPL no longer owns and 
operates all in -front-of-meter generation; as at December 2020, IPP generation was not a large 
amount but more is anticipated in the near future. Three IPPs working with TPL benefit from 
corporate tax exemption (Section 3.3.1.1). As at 2019, TPL generated, distributed, and sold 
electricity to approximately 24,054 customers on Tongatapu, Vava'u, Ha'apai , 'Eua, and the outer 
 
59 The Annual Petroleum Price Review is a n annual negotiation between the MTED and suppliers to 
develop the pricing template to determine the maximum prices of petroleum products on a monthly basis. The 
national reserve component of the Government of Tonga was built into the pricing template to e nsure there is 
sufficient stock to address any shortage in supply and is also reflected in the price paid by domestic 
consumers. The pricing template established 40 -day reserves in Vuda, Fiji, and 22 -day reserves in Nuku ʻalofa 
for petrol; 49 -day reserves i n Vuda, 31 -day reserves for Pacific Energy Limited, and 20 -day reserves for Total 
Limited in Nuku'alofa for diesel; and 53 -day reserves in Vuda, and 30 -day reserves in Nuku'alofa for kerosene.  
60 TPL (2014), Annual Report for Year Ended June 2014 ; and TPL ( 2019), Annual Report 2019 . 
61 World Bank, Development Indicators . Viewed at: https://tradingeconomics.com/tonga/access -to-
electricity -percent -of-population -wb-data.html ; and Government of the Kingdom of Tonga/Pacific Region 
Infrastructure Facility (undated, possibly 2013), Tonga National Infrastructure Investment Plan 2013 -2023.  
62 United Nations' Climate Technology Centre and Network (2018), Government of Tonga Energy 
Efficiency Master Plan , August.  
63 TPL provides electricity under an exclusive concession regime governed by the Electricity Act of 2007 
and the Electricity Concession Contract between the Government and TPL. The contract sets, inter alia , safety 
and performance standards, regulates tariffs, and is administered by the Electricity Commission, established in 
2008. The contract, a publicly available document under Section 20(8) of the Electricity Act, ended on 
30 June 2015 and may be extended for seven -year periods. United Nations' Climate Technology Centre and 
Network  (2018), Government of Tonga Energy Efficiency Master Plan , August.  WT/TPR/S/409 • Tonga  
 
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  islands of Niuatoputapu and Niuafo'ou. According to the authorities, it remains profitable and invests 
its own resources to rehabilitate and increase the efficiency and safety of the electricity generation 
and supply system. Additiona lly, it is working with development partners to upgrade village power 
supply systems and off -grid supply.64 In 2019, Tonga concluded a public -private partnership (PPP) 
with Sunergise New Zealand, which will finance, build, operate a 6  MW solar farm, and se ll its output 
to TPL for 25 years.  
4.63.   Responsibility for (on -grid) electricity policy is shared between the Prime Minister and the 
Ministry of Finance.  
4.64.   During the review period, three IPPs working with TPL benefited from corporate tax 
exemption.  
4.65.   Electricity  tariffs remain subject to approval by the Electricity Commission, following a review 
of TPL's tariff adjustment proposals. TPL is permitted by law to pass on fuel costs to consumers (on 
a quarterly basis) and charge an inflation -indexed non -fuel tariff.65 The non -fuel component includes 
a regulated return on investment; investment plans require approval from the regulator.  
4.66.   Electricity tariffs remain high by international standards due to Tonga's diesel dependence 
and remote location, involving a high cost  of transport. As a consequence, electricity tariffs follow 
international oil price trends and are high by international standards, despite the provision of tax 
expenditure subsidies (i.e. fuel exemption from excise taxes, Sections 3.3.1.1 and 4.1.2.5) for  
electricity generation. Between July 2014 and June 2019, they ranged from TOP 0.6999 per kWh to 
TOP 0.9173 per kWh. The tariff set -back in November 2019 of TOP 0.8316 per kWh was subsidized 
under the fuel concession scheme to remain at TOP 0.7990 per kWh,  up to March 2020 
(Section  3.3.1.1).66 Despite differences in generation cost, the TPL tariff rates remain standardized 
across the four main islands.67 There is also a cross -subsidized "lifeline tariff" of TOP  0.7 for the 
first 100 kWh of monthly consumpti on, applicable to residential customers.  
4.2.2.3   Renewable energy  
4.67.   RE is a major element of the strategy to enhance energy security, as reflected in the TERM 
(see above) and other policy tools. During the review period, a number of projects were under way 
to cont ribute to meeting the TERM RE target and objectives, including installation of a 1.3  MW solar 
generation facility on Tongatapu, an on -grid solar generation facility on Vava'u, investment in 
off-grid solar power systems for households on outer islands, rese arch into other sources of RE (such 
as wind power, tidal power, and producing bio -fuel from coconuts), and investigation of options for 
stabilizing and potentially reducing the cost of petroleum fuels by measures such as hedging and/or 
improving the fuel s upply chain.68 
4.68.   The MTED and the MEIDECC are tasked with technical and financial advisory and finance 
auditing of off -grid RE projects. The functions of the RE division at the MEIDECC's Energy Department 
include: management and monitoring off -grid systems o n the outer islands; implementing off -grid 
projects on the outer islands; seeking donor funding on RE projects, such as solar water pumps, 
solar freezers, and solar home systems; and conducting trainings for local technicians on RE 
equipment. An RE Authori ty under the MEIDECC is operational.  
4.69.   RE is regulated by the Renewable Energy Act 2008. Off -grid RE is regulated by the 
Incorporated Society Act/Regulation 2016 and Corporative Society Act/Regulations 1973 with 
 
64 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023. 
65 Electricity Act 2007, Fir st Schedule. The fuel cost is the landed price of diesel as fixed by the 
"Competent Authority".  
66 TPL, Electricity Tariff Reduction Effective 1st April 2020, 31 March 2020. Viewed at: 
http://www.tongapower.to/NewsRoom/TariffNews/ElectricityTariffReductione ffective1stApril2.aspx#:~:text=El
ectricity%20Tariff%20Reduction%20effective%201st%20April%202020&text=The%20tariff%20set%20back%
20in,kWh%20up%20to%20March%202020 . 
67 Given that most of Tonga's electricity is generated from diesel, the price of electricity i s sensitive to 
fluctuations in fuel costs. United Nations' Climate Technology Centre and Network (2018), Government of 
Tonga Energy Efficiency Master Plan , August.  
68 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, poss ibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023.  WT/TPR/S/409 • Tonga  
 
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  diverse roles shared among key stakeholders in cluding the MTED and the MEIDECC. TPL permits 
IPPs to use its grid as a "storage battery" (i.e. selling and buying from the operator), but there has 
been no such case since 2014. TPL may enter into purchase agreements (generation connection 
contracts) with  IPPs. In 2016, TPL signed a long -term Power Purchase Agreement with Zhuhai 
Singyes Green Building Technology Co. for the construction and commissioning of a 2  MW solar 
facility on Matatoa, which was commissioned in 2017. In addition to achieving the 50% R E target, 
TPL signed a power purchase agreement (PPA) with Sunergise New Zealand Limited in 2019 to 
finance, build, and operate the 6  MW solar farm on Tongatapu. No legal framework for a feed -in 
tariff regime exists. Electricity tariffs have important impl ications for incentivizing or disincentivizing 
energy efficiency investments.69 As at 2017, RE capacity stood at 4.2 MW, of which 6.7% was off -
grid household generators, solar home systems, and solar water pump systems.70  
4.3  Manufacturing  
4.3.1   Features  
4.70.   During the review period, the share of Tonga's small manufacturing sector in GDP and 
employment dropped considerably from 6.2% (FY  2013/14) to 5.2% (FY  2018/19) and from 20% 
(FY 2014/15) to 12.8% (FY  2018/19), respectively (Table 1.2). These changes in shares imply 
persistent low, albeit rising, labour productivity in manufacturing. The main a ctivity remains food 
and beverage production (e.g. baking products, juices, soft drinks, coffee, water bottling, and beer); 
other small -scale manufacturing activities and products include arts and handicrafts (e.g. tapa 
cloth), furniture, printing, paints,  construction materials, and small boats. Manufacturing continues 
to account for a large part of merchandise imports. During the review period, its share in 
merchandise imports (excluding minerals/petroleum products) ranged from 48.9% (2014) to 57.8% 
(2019 ) (Table A1.2); the main import items were machinery and electrical equipment, transport 
equipment (seemingly re -exported in part), precision instruments, and chemicals.  
4.3.2   Policy, institutional, and regulatory framework  
4.71.   During the review period, the MTED "B uy Tonga Made" was aimed at promoting and 
encouraging the manufacture and production of locally made goods, encouraging import 
substitution, and reducing dependency on key imports. According to the authorities, the Ministry of 
Public Enterprises and Tonga Asset Managers & Associates Ltd. are in charge of policies in this area.  
4.72.   Baking of white bread and production of various Tonga artefacts are reserved for Tongan 
nationals or registered companies/partnerships with 75% Tongan ownership (Section 2.5.2).  
4.3.3   Borde r and domestic support measures  
4.73.   The average applied MFN tariff rate for manufacturing products (ISIC 3) was slightly reduced 
from 11.5% in 2013 to 10.8% in 2020, and continued ranging from zero to 20% (Table 3.2). 
Customs duty -free access remains in place for: compound alcoholic preparat ions, bottles, malt, 
yeast, and sugar imported for the manufacture of beer; egg trays; packaging, bottles, bottle caps, 
resins, dyes, pigments, benzoic acids, etc., for paint making; sugar; powdered milk for ice cream; 
carbonates; and materials for the man ufacture of roofing iron.71 Concessional customs duty for 
capital items is 3%, and basic building materials are duty free. Moreover, Tonga's excise taxes on 
certain tobacco products and alcoholic beverages are structured to give local production an 
advanta ge over imported products (Section 3.3.1.1).  
4.74.   Tax expenditure relating to customs duty, excise tax, and CT to support manufacturers stood 
at TOP  630,910 in FY 2016/17 (1.1% of eligible activities) and TOP  599,019 in FY 2017/18 (1.1%). 
 
69 Given that most of Tonga's electricity is generated from diesel, the price of electricity is sensitive to 
fluctuations in fuel costs. United Nations' Climate Technology Centre and Netw ork (2018), Government of 
Tonga Energy Efficiency Master Plan , August.  
70 Given that most of Tonga's electricity is generated from diesel, the price of electricity is sensitive to 
fluctuations in fuel costs. United Nations' Climate Technology Centre and Net work (2018), Government of 
Tonga Energy Efficiency Master Plan , August.  
71 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August . WT/TPR/S/409 • Tonga  
 
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  Tax expenditure relati ng to customs duty, excise tax, and CT to support local manufacturers of goods 
subject to excise tax (excisable) (e.g. cigarettes, alcohol, toilet paper, sausages, soft drinks, and ice 
cream) stood at TOP  25,742 in FY  2014/15 (0.07% of eligible activities) , TOP  62,369 in FY 2015/16 
(0.1%), and TOP  1,269,264 in FY  2018/19 (2%). Tax expenditure relating to customs duty, excise 
tax, and CT to support local manufacturers of goods not subject to excise tax (non -excisable) stood 
at TOP  136,241 in FY 2014/15 (0.4%  of eligible activities), TOP  673,595 in FY  2015/16 (1.5%), and 
TOP 5,155,325 in FY  2018/19 (8.3%). According to the authorities, in FY  2019/20, total duty and 
tax exemptions for local manufacturers relating to all raw materials, machinery, and equipment f or 
manufacturing and materials for packaging for retail sale represented a tax expenditure amount of 
TOP 3.5 million.  
4.75.   Low interest rate loans through the TDB -administered Manufacturing Fund continued to be 
provided at 3% for a maximum of TOP 50,000 with a two-year repayment period.72 These loans are 
intended to support export ‐ready manufacturers, stimulate innovation, promote development of 
competitive value -added products, and promote and encourage cooperation and coordination in the 
manufacturing sector. Since 2015, grants of TOP  250,000 have been provided by the Handicrafts 
Fund to increase demand and production of Tongan handicrafts.  
4.4  Services  
4.4.1   Features  
4.76.   Services continue to be the main, albeit slightly declining, contributor to GDP; their share 
dropped f rom 54% (FY  2013/14) to 49.2% (FY  2018/19) (Table 1.2). Conversely, their share in total 
employment rose from 46% in FY  2014/15 to 56.8% in FY  2018/19, possibly indicative of a 
deterioration of labour productivity in the sector overall. In FY  2018/19, the leading services sectors 
were wholesale and retail trade, real estate activities, public administration, and education. 
Moreover, public administration, wholesale and retail trade repair of motor vehicles and motorcycles, 
and education accounted for almost  23% of total employment. Compared with merchandise trade 
(Table 1.3), services trade performance remained better during the review period; the services trade 
deficit was much lower than that of goods, which in FY 2018/19 was at least 14 times higher, as a  
result of significantly higher exports, much lower imports, and faster growth.73 Similar to goods 
exports, trade in services remains highly concentrated. Transportation and personal travel partly 
related to tourism remain the main components of trade in s ervices (Section 1.3.1 and Table  1.4); 
in 2018, it ranked as the 188th largest exporter and the 191st largest importer of commercial services 
in the world.74 
4.77.   Most services remain overseen by sectoral regulators, and suppliers are subject to business 
licens ing requirements (Section  2.5.3 and Table 2.3).  
4.4.2   GATS and RTAs commitments  
4.78.   Tonga's specific commitments under a relatively large range of services activities under the 
GATS, covering the substantial commitments of 89 of 160 subsectors, remain unchanged.75 They 
include open and non -discriminatory regimes for 90 of about 160 services subsectors. Most 
sector -specific commitments are "full commitments" (i.e. unrestricted). Horizontal limitations relate 
to tax measures and subsidies, approval procedures for fore ign investments, and a prohibition on 
the ownership of land by foreigners. Mode 4 commitments are limited to intra -corporate transferees, 
services salespersons, and persons engaged in the establishment of a commercial presence. Tonga 
has additional commitm ents on maritime transport (access to and use of port services) and on 
 
72 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August. 
73 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australia (undated, 
possibly 2020), Tonga National e -Commerce Readiness Assessment .  
74 WTO, Tonga and the WTO . Viewed at: 
https://www.wto.org/english/thewto_e/countries_e/tonga_e.htm . 
75 More information on these commitments is available at WTO document WT/ACC/TON/17/Add.2, 
2 December 2005; and WT/TPR/S/291/Rev.1, 27 February 2014.  WT/TPR/S/409 • Tonga  
 
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  telecommunications services (Reference Paper on Regulatory Principles in Basic 
Telecommunications).  
4.79.   Tonga maintains three Article  II (MFN) exemptions for audiovisual services, in relati on to 
preferential treatment linked to co -production agreements, support programmes, and broadcasting 
services.  
4.80.   Concerning RTAs commitments, the Pacific Island Countries Trade Agreement (PICTA) Trade 
in Services (TiS) Protocol and the Pacific Agreement on  Closer Economic Relations (PACER) Plus 
Agreement also deal with trade in services liberalization (Section 2.4.2). Tonga signed and ratified 
the PACER Plus Agreement (between Australia, New Zealand, and other Pacific Island countries), 
which includes commi tments on trade in services and entered into force on 13 December 2020.76 
Tonga undertook certain GATS+ commitments in the context of PACER Plus, including in Business 
Services.  
4.81.   At present, the MTED acts as Tonga's services enquiry point under GATS; at th e time of the 
previous Review, the then Ministry of Commerce, Tourism and Labour ensured this function.  
4.4.3   Financial services  
4.82.   During the review period, the financial sector's contribution to GDP had an overall declining 
trend and ranged from 4.7% (FY  2016/17)  to 6% (FY  2013/14), and its employment rose slightly 
from 2.2% (FY  2014/15) to 2.6% (FY  2018/19) (Table 1.2).  
4.4.3.1   Banking services  
4.4.3.1.1   Features  
4.83.   Since the previous Review, the structure of the banking system has remained virtually 
unchanged. In addition to the sta te-owned TDB, three (four in 2013) foreign commercial banks 
operate: Australia New Zealand Banking Group (ANZ), MBF Bank Ltd (MBF Bank), and Bank of the 
South Pacific Tonga Ltd (BSP).77 There is some competition in the credit market from institutions 
such as the Retirement Fund Board and the South Pacific Business Development Microfinance Ltd. 
There are also numerous small moneylenders that are not regulated, although they require a 
business licence.  A private -sector Credit Bureau continues to provide infor mation to banks on 
potential borrowers to assist their lending decisions; the Bureau will soon be required to obtain a 
licence under the Moneylenders Act 2018 (Section 4.4.3.1.2), effective as from 
30 September  2020.78 According to the IMF, the banking sys tem has a simple structure and is 
appropriately regulated.79 Financial inclusion remains an issue in Tonga; in 2017, only 41% of adults 
had a bank account, with 34% completely excluded from any type of financial services.80 Mobile 
payment services are available (Section 4.4.4.1).  
 
76 As at 1 Oct ober 2020, seven signatories had completed ratification procedures.  
77 Westpac Bank of Tonga was bought by BSP, and its bank licence was cancelled in 2015. The TDB 
competes with other commercial lenders in almost all of  its market segments, and with the Retirement Fund 
Board for some consumer loans. The TDB is the only commercial bank that lends to the agriculture and 
fisheries sectors. Since 2016, TDB has been required to keep a minimum of 10% of its assets in a non -interest-
bearing account with the NRBT. The TDB maintained high capital adequacy levels from 2010 to 2018, far 
exceeding the 18% minimum set by the NRBT (Section  4.4.3.1.3). Asian Development Bank (2019), Finding 
Balance 2019 – Benchmarking the Performance of  State -owned Banks in the Pacific , August. Viewed at: 
https://www.adb.org/sites/default/files/publication/521901/finding -balance -2019.pdf ; and NRBT, Financi al 
Institutions in Tonga . Viewed at: http://reservebank.to/index.php/financials/financial -
institutions/financial_institutions.html . 
78 The banks ar e currently the only members of the credit bureau.  
79 IMF (2018), Tonga:  2017 Article  IV Consultation –Press Release; and the Staff Report for Tonga , IMF 
Country Report No.  18/12. Viewed at: https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -
2017-Article -IV-Consultation -Press -Release -and-the-Staff-Report -for-Tonga -45566 . 
80 Pacific Islands Fo rum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australia (undated, 
possibly 2020), Tonga National e -Commerce Readiness Assessment . WT/TPR/S/409 • Tonga  
 
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  4.84.   Banking system assets rose from TOP  515.0 million (December 2012) to TOP  892.7  million 
(January 2019); in 2012, 87% were held by commercial banks and 13% by credit institutions.81 No 
recent data on the allocation of the sector's assets by financial institution (both banks and non -bank 
financial institutions (NBFIs)) were available from the authorities.  
4.4.3.1.2   Regulatory framework  
4.85.   During the review period, the regulatory framework for banking was updated. The National 
Reserve Bank of Tonga (NRBT) Act was amended in 2014 and 2017.82 New legislation included the 
Microfinance Institutions Act 2018, the Moneylenders Act 2018, and the Foreign Exchange Control 
Act 2018.83 These acts regulated the licensing and supervision of microfinance institutions and 
moneylenders, and amended legislation for the licen sing of foreign exchange dealers. Separate 
legislation for the licensing and supervision of insurance companies and retirement funds has been 
in process since 2018 (Section 4.4.3.2). The NRBT issued the Credit Bureau Licensing Guidelines in 
July 2017 pursu ant to its power under the NRBT (Amendment) Act 2014 to licence and regulate 
systems that disseminate credit information amongst financial institutions. In 2018, a new Banking 
Act, which according to the IMF is to enhance regulatory capacity of the NRBT, e specially regarding 
bank liquidation, was being prepared.84 As at December 2020, the Banking Bill was with the Minister 
of Finance and about to be submitted for a Cabinet Decision approving its processing; it was 
anticipated that it would be submitted to P arliament soon. At the same time, a bill to regulate credit 
reporting was at the drafting stage; consultation will be conducted prior to submitting it to the 
Minister for processing. According to the NRBT, there is need to develop and implement 
comprehensi ve supervision and disclosure frameworks covering the entire financial sector, beyond 
the banking system as stipulated under the amended NRBT Act. This includes the supervision of 
NBFIs, such as microfinance, foreign exchange dealers, and money lenders.  
4.4.3.1.3   Institutional and prudential developments  
4.86.   The NRBT, the central bank, remains responsible for regulating the issue and supply of 
domestic and international currencies, as well as promoting monetary stability and economic 
development. It is responsible for r egulating, licensing, and supervising financial institutions (i.e. 
banks and credit institutions).85 Under the NRBT Act, the NRBT is independent and accountable in 
the pursuit of its objectives and the performance of its functions.86  
4.87.   According to the IMF,  as at 2018 the banking system remained well capitalized and profitable 
(see below).87 Capital adequacy remained well above the NRBT's unchanged minimum requirement 
of 15%88, based on the Basel I framework (banks' risk -weighted capital ratio was 26.3% in 
FY 2010/11 and 30.8% in January 2019).89 The NRBT continued to closely monitor the implication 
 
81 WTO document WT/TPR/S/291/Rev.1, 27 February 2014; Ministry of Finance (2019), Government of 
Tonga Budget Statement for Year Ending 30th June 2020 .  
82 NRBT, Our Regulatory Framework . Viewed at: http://reservebank.to/index.php/about/about -the-nrbt-
others/regula tory-framework.html . 
83 NRBT (2018), Annual Report 2018 for the Year Ended 30 June 2018 . Viewed at: 
http://www.reservebank.to/data/document s/Publications/AnnualReports/NRBT_AR_1718_TON_ENG_ 
FINAL.pdf . 
84 IMF (2018), Tonga:  2017 Article  IV Consultation –Press Release; and the Staff Report for Tonga , IMF 
Country Report No.  18/12. Viewed at: https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -
2017-Article -IV-Consultation -Press -Release -and-the-Staff-Report -for-Tonga -45566 . 
85 Bank li censing information is available at WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
86 Reportedly, the NRBT lacks sufficient independence to pursue the requisite monetary operations, 
because its establishing Act allows it to provide direct credit to the Government (Article  48A (Government 
securities and credits to the Government) of the NRBT Act, Chapter  38.20 Arrangement, 2016 Revised Edition). 
IMF, Pacific Island Economies: Tonga , 2006. Viewed at: https://www.elibrary.imf.org/view/IMF071/05081 -
9781589065161/05081 -9781589065161/ch16.xml?language=en&redirect=true . 
87 IMF (2018), Tonga:  2017 Article  IV Consultation –Press Release ; and the Staff Report for Tonga , IMF 
Country Report No.  18/12. Viewed at: https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -
2017-Article -IV-Consultation -Press -Release -and-the-Staff-Report -for-Tonga -45566 . 
88 18% for credit institutions.  
89 According to the IMF, notwithstanding the large increase in risk -weighted asset s associated with 
strong credit growth, the capital ratio remains high. IMF (2018), Tonga:  2017 Article  IV Consultation –Press 
Release; and the Staff Report for Tonga , IMF Country Report No.  18/12. Viewed at: 
https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -2017-Article -IV-Consultation -Press -
Release -and-the-Staff-Report -for-Tonga -45566 ; and Ministry of Finance (2019), Government of Tonga Budget 
Statement for year ending 30th June 2020 .  WT/TPR/S/409 • Tonga  
 
- 82 - 
 
  of the increase in the Statutory Reserve Deposit requirement from 5% to 10%, in July 2017, on 
banks' liquidity. In addition, it monitored banks' compliance with the NRBT minimum target 
requirement on the loans to deposit ratio of 80% intended to serve as an indicator that would provide 
forward guidance to bank operations; as at June 2018, no bank had achieved this target. The excess 
liquidity in th e banking system (credit/GDP) rose from 33.1% of GDP (FY  2013) to 44.6% (FY  2017) 
and remained high in FY 2017/18; this resulted in continued active competition amongst banks, 
which contributed to the lowest weighted average lending rate since June  2012 (C hart 4.1).90 At the 
time of the previous Review, liquidity in the banking sector was also high, at over 15% of GDP, 
reflecting the NRBT's accommodative monetary policy and banks' reduced appetite to lend and take 
risks in the then weak economic environment .  
4.88.   During the review period, non -performing loans (NPLs) decreased. The NPL ratio declined 
from 13.6% in FY  2013 to 4% in FY  2017 and 3.7% in January 2019, reflecting, inter alia,  a decrease 
in NPLs, driven by a large write -off that occurred in FY  2017 and  high credit growth.91 A slight decline 
in the NPLs ratio between 2018 and 2019 was driven by continuous loan growth, the settlement of 
some NPLs loans, and write -offs mainly of private business loans and some housing loans.  
4.89.   Despite excess liquidity in th e banking system, access to (affordable) finance remains one of 
the main business concerns in Tonga. Interest rates and spreads are relatively high, partly due to 
banks' write -off costs for bad loans. During the review period, Tonga's bank interest rate sp read 
between the weighted lending and deposit rates bottomed to 5.7% in FY  2015/16 and then rose to 
6.09% in FY  2018/19 (Chart 4.1). Changes in the spread are an indicator of profitability 
developments, as the spread is where the bank makes its money. The increased profitability of the 
banking system in recent years has been due to, inter alia,  a rise in net interest income.92  
Chart 4.1 Interest rate spread, FY 2012/13 -FY 2019/20  
 
Source:  NRBT. Viewed at: 
http://www.reservebank.to/data/documents/statistics/QB/2020/NRBT_QB_Sep20.pdf . 
 
90 IMF (2018), Tonga:  2017 Article  IV Consultation –Press Release; and the Staff Report for Tonga , IMF 
Country Report No.  18/12. Viewed at: https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -
2017-Article -IV-Consultation -Press -Release -and-the-Staff-Report -for-Tonga -45566 . 
91 IMF (2018), Tonga:  2017 Article  IV Consultation –Press Release; and the Staff Report for Tonga , IMF 
Country Report No.  18/12. Viewed at: https://www.imf.org/en/Publications/CR/Issues/2018/01/17/Tonga -
2017-Article -IV-Consultation -Press -Release -and-the-Staff-Report -for-Tonga -45566 ; and Ministry of Finance 
(2019), Governmen t of Tonga Budget Statement for Year Ending 30th June 2020 . 
92 NRBT (2018), Annual Report 2018 for the Year Ended 30 June 2018 . Viewed at: 
http://www.reservebank.to/data/documents/Publications/AnnualReports/NRBT_AR_1718_TON_ENG_ 
FINAL.pdf ; and Ministry of Finance (2019), Government of Tonga Budget Statement for Year Ending 
30th June 2020. 
0%1%2%3%4%5%6%7%8%9%10%
2012/13  2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20Weighted average
lending rate
Weighted average
deposit rate
Interest spread
Source:  National Reserve Bank of Tonga.   Viewed at: 
http://www.reservebank.to/data/documents/statistics/QB/2020/NRBT_QB_Sep.pdfChart 4.1   Interest rate spread, FY 2012/13 -FY 2019/20WT/TPR/S/409 • Tonga  
 
- 83 - 
 
  4.4.3.2   Insurance  
4.90.   The insurance market is being developed.  Tonga permits the establishment, including through 
direct branches, of foreign life and non -life insurance companies, insurance brokers and agencies, 
and insurance underwriting and management companies servicing the domestic market.93 There are 
no laws on insurance. As at D ecember 2020, draft bills to regulate insurance companies and pension 
funds were in the consultation phase with the industries; the draft bills will be subsequently 
submitted to the Minister of Finance for processing. The NRBT is the insurance sector regul ator. 
Tongans are permitted to purchase insurance policies abroad.  
4.91.   A few Tongan -based companies provide insurance services. As at December  2020, 
three  overseas insurance companies operated as general insurers, while only one  Tongan -based 
insurer provided l ife insurance service. The National Pacific Insurance (NPI) and Federal Pacific 
Insurance (FPI) are branches with Head Offices in Samoa, whereas Capital Insurance is a subsidiary 
of the Fiji -based Capital Insurance Limited (formerly known as Dominion Insur ance). NPI, FPI, and 
Capital Insurance offer several insurance services for both general personal and business risks. 
Family Assurance Limited offers only life insurance policies, and is the only locally incorporated 
insurance company.  
4.4.4   Telecommunication s ervices  
4.4.4.1   Features  
4.92.   During the review period, the share of information and communication services in GDP ranged 
from 2.1% (FY  2017/18) to 2.5% (FY 2014/15), whereas their share in total employment remained 
unchanged at 2% (Table 1.2). Tonga's telecoms connect ivity improved in all services except for 
Internet broadband (Table 4.2). The voice services penetration rate (unique subscribers) was 
estimated to be 68% in 2018.94 It seems that while the partly state -owned Tonga Cable Limited 
(TCL) built an optical fibr e backbone on Tongatapu, business and household deployment of optical 
fibre has so far been limited, and fixed broadband services are primarily provided through 
asymmetric digital subscriber lines (ADSL).95 Wireless and mobile connectivity for Internet ser vices 
through Wi -Fi is limited to Nuku'alofa and other urban centres; as at December 2020, only 15 of 
45 base stations were upgraded to 4G, and 5G was still being planned. As at 2015, Tonga had the 
highest and most affordable mobile -broadband connectivity among developing Pacific region 
islands.96  
4.93.   The virtually duopolistic structure of the telecoms market remains unchanged (Table  4.2). 
The TCC, a 100% state -owned enterprise (Section 3.3.6), provides network infrastructure and 
communications services, and r etains a de facto  monopoly on fixed telephone services.97 The 
remaining services are shared with Digicel Tonga Ltd. (Digicel), and from 2017 to 2019 with Ocean 
Tel (mobile Internet only, 2% of the market). Since 2012, mobile payment services providing an 
alternative payment method for people without a bank accou nt, credit card, or smart phone have 
been operated by Digicel (Beep & Go) in collaboration with the TDB.  
 
93 Commonwealth Network, Tonga: Find Insurance and Rein surance Expertise in Tonga . Viewed at: 
http://www.commonwealthofnations.org/sectors -tonga/business/insurance_and_reinsurance/ . 
94 Pacific Islands Forum Se cretariat, Department of Foreign Affairs and Trade (DFAT) Australia (undated, 
possibly 2020), Tonga National e -Commerce Readiness Assessment . 
95 A submarine fibre -optic cable laid between Fiji and Tonga connects Tonga to the Southern Cross 
Cable system that  links the United States and Australia. As at 2018, work was under way to extend this cable 
to two other major island groups (Ha'apai and Vava'u), which will cover more than 90% of Tonga's population. 
TCL, which manages and builds submarine fibre -optic cab le, is the only provider of fibre -optic services. TCC 
holds a 20% stake in TCL. In 2017, Tonga sold 16.7% of its shares to the private -sector company Digicel 
(Section 3.3.6). UNESCAP (2018), Broadband Connectivity in Pacific Island Countries , January.  
96 UNESCAP (2018), Broadband Connectivity in Pacific Island Countries , January.  
97 TCC. Viewed at: http://www.tcc.to/about . WT/TPR/S/409 • Tonga  
 
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  Table 4.2 Telecommunications market, 2013 and 2018   
Service  Penetration 
(% of 
population) 
2013  Penetrat ion 
(% of 
population) 
2018  Market structure  
Fixed -line telephone  13 14.24  Tonga Communications Corporation 
(TCC) (100%)  
Mobile telephone  70 99 TCC/Ucall  (50% market share) and 
Digicel Tonga Ltd. (50%) with about 
20,000 subscribers each in 2013 and 
2020 
Internet (mobile 
broadband)   <1 50 TCC/Ucall 51%, Digicel Tonga Ltd. 
(49%)  
Internet (fixed 
broadband)   3 2.4 TCC (51%), Digicel Tonga Ltd.(49%) 
(2020)  
Source:  Information provided by the authorities; TCC, Company Overview . Viewed at: 
http://www.tcc.to/company -overview -0; Digital 2018 Tonga . Viewed at: 
https://www.slideshare.net/DataReportal/digital -2018-tonga -january -2018; and World Data Info, 
Telecommunication in Tonga . Viewed at: 
https://www.worlddata.info/oceania/tonga/telecommunication.php . 
4.4.4.2   Policy and institutional framework  
4.94.   Telecommunications policy and regulation remain the responsibility of the MEIDECC. As at 
December 20 20, the issuance of a policy in this area and the establishment of  a four -member 
Communications Commission (including one information and communication technology (ICT) 
expert), mandated to enforce a regulatory framework that encourages competition as stip ulated 
under the Communication Commission Act 2015 (Section 4.4.4.3), were pending.  
4.4.4.3   Regulatory framework  
4.95.   During the review period, the regulatory framework governing telecommunications was 
updated. New legislation and its implementing rules included the C ommunications Act 2015; 
Communications Act (Amendment) 2016; Communications Commission Act 2015; Interconnection 
and Access (Submarine Cable Services) Rules 2017; Communication Numbering Rules 2018 Tariff; 
Numbering & Technical Gazette Notice No.  43, 2018;  Communication Tariff Rules 2018; 
Communication Radio Spectrum Rules 2019; Communication Licensing Rules 2017; and 
Communications Licensing Amendment Rules 2019.98 The comprehensive Communications Act 
2015, which replaced the Communications Act 2000, was a n important milestone that introduced a 
new regulatory and licensing regime. It regulates, inter alia: the powers of an independent Regulator 
(the Communications Commission, Section  4.4.4.2); the licensing of network operators; conditions 
for service provi ders; consumer protection; tariffs; the universal service regime; numbering and 
electronic addressing (including number portability); Internet service providers (ISPs); and hosting 
service providers.  
4.96.   All proposed tariff changes for communication services require approval by the MEIDECC, 
pending the establishment of the Communications Commission. Despite the extensive coverage of 
the Communications Act 2015, interconnection and roaming rates, as well as number portability 
provisions, are not regulated. Simi larly, Tonga has not yet implemented a formal universal service 
policy or mechanism, as envisaged in Division 4 of the Communications Act 2015. The TCC and 
Digicel remain under universal service obligations, although Digicel does not have coverage for the 
Niuas islands. At the time of the previous Review, a universal service fund was to be established to 
help cover under -served areas; as at December 2020, no further information was available on 
progress in this respect.  
 
98 Viewed at: https://mic.gov.to/index.php/regulator . WT/TPR/S/409 • Tonga  
 
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  4.4.5   Transport services  
4.97.   Transport services remain crucial for Tonga's economic development, competitiveness, and 
social well -being of its population.99 Over the review period, the share of transport and storage in 
GDP declined overall, ranging from 3.4% (FY  2018/19) to 4.2% (FY  2014/15), whereas their share 
in total employment rose from 2.9% (FY  2014/15) to 3.1% (FY  2018/19) (Table 1.2). High transport 
costs continue to affect domestic stakeholders that depend on imported inputs, supplies, and capital 
goods; they need affordable t ransport infrastructure and services.100 Tonga faces serious challenges 
in developing and maintaining sustainable domestic, regional, and international transport linkages; 
it is ranked second in the world for disaster risk, with the transport sector conside red to be one of 
its most vulnerable elements.101 International passenger and cargo volume levels varied and 
remained concentrated in air and maritime transport, respectively (Chart 4.2).  
4.98.   During the review period, several policy initiatives were intended to  address transport -related 
challenges. The National Infrastructure and Investment Plan (NIIP) 2013 -2023 was aimed at a 
comprehensive overhaul of the transportation infrastructure, with particular emphasis on improving 
connectivity to the outer islands.102 The strategic concepts of the TSDF 2015 -2025 (Section 2.3.2) 
emphasized reliable, safe, and affordable transport services and aimed to: (i)  provide improved 
transport infrastructure construction, management, and maintenance; (ii)  improve road networks 
on islands; (iii)  develop a minimum transport infrastructure policy, providing the minimum standard 
for connecting each island to the national transport network; (iv)  ensure adherence with 
international shipping and aviation safety regulations and standards; (v )support strong private -
sector aviation, shipping services, and land transport services; (vi)  encourage more international 
shipping and aviation links; and (vii)  maintain and enforce appropriate air, sea, and land transport 
regulatory standards and require ments.103 The Tonga Trade Policy Framework (TTPF) 2017 -2025 
envisages initiatives for a regional pooling of transport infrastructure and a strategy on optimum use 
of existing services providers (in particular, air transport services) as a means to reduce tr ansport 
costs.104 In addition, the TTPF envisages the further development of domestically operated transport 
services; no market access or national treatment commitments were scheduled as part of Tonga's 
WTO accession.105  
4.99.   The Ministry of Infrastructure (MOI ) remains responsible for transport policy formulation and 
implementation.  
4.100.   Air and maritime transport continued to receive support, including under the fuel concession 
scheme (Section 3.3.1.1). Customs duty -free treatment is available for life -saving equi pment, 
equipment for use within airports, communication and signal equipment, and basic building 
materials.106 Exemptions from customs duties and taxes on the importation of aircrafts, vessels, and 
their parts are also available to the public domestic trans port sector. Tax expenditure relating to 
customs duty, excise tax, and CT for the operation of the fuel concession scheme (covering fuel for 
use by fishing vessels, domestic airlines, and ferries) stood at TOP  13,392,348 in FY 2014/15 (about 
35% of eligibl e activities), TOP  14,116,088 in FY  2015/16 (32.2%), TOP  21,875,202 in FY  2016/17 
(38.7%), TOP  12,226,434 in FY  2017/18 (23.3%), and TOP  10,345,978 in FY  2018/19 (16.6%).  
 
99 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australia (undated, 
possibly 2020), Tonga National e -Commerce Readiness Assessm ent.  
100 MTED (undated), Tonga Trade Policy Framework 2017 -2025. 
101 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australia 
(undated, possibly 2020), Tonga National e -Commerce Readiness Assessment .  
102 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Aust ralia 
(undated, possibly 2020), Tonga National e -Commerce Readiness Assessment ; Government of the Kingdom of 
Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), Tonga National Infrastructure 
Investment Plan 2013 -2023. 
103 Ministry of Fina nce and National Planning (2015), Tonga Strategic Development Framework 
2015-2025 – A More Progressive Tonga: Enhancing Our Inheritance , May. Viewed at: 
https://www.preve ntionweb.net/english/policies/v.php?id=59665&cid=174  and 
http://www.finance.gov.to/tonga -strategic -development -framework . 
104 MTED (undated), Tonga Trade Policy Framework 2017 -2025. 
105 WTO, Trade Policy Review of Tonga , WT/TPR/S/291/Rev.1, 27 February 2014.  
106 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Drivi ng Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August.  WT/TPR/S/409 • Tonga  
 
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  Chart 4.2 International passengers arr ivals and type of maritime freight, 2012 -19 
 
a  Including imported freight at Queen Halaevalu Wharf, Neiafu, only.  
Source:  Data provided by the aut horities.  
020406080100120140
2012 2013 2014 2015 2016 2017 2018 2019Chart 4.2 International passengers arrivals and type of maritime freight, 2012 -19
Source: Tonga Statistics Department. Viewed at: https://tongastats.gov.to and Pacific 
Community, Statistics for Development Division.  Viewed at : http://www.spc.int/prism/tonga .Number of persons '000
AirCruise ships and yachtsPassengers by mode of transport
02468101214161820
2014 2015/16 2016/17 2017/18 2018/19 2019/20Vehicle
Cement
Timber
Liquid cargo (aviation gas)
Liquid cargo (LP gas)
Liquid cargo (benzene)
Liquid cargo (diesel)
Frozen cargo
Dry cargoMaritime cargo by type of freighta
'000 tonnes
a   Including imported freight at Queen Halaevalu Wharf, Neiafu, only.WT/TPR/S/409 • Tonga  
 
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  4.4.5.1   Air transport  
4.4.5.1.1   Air services  
4.101.   Aviation plays a vital connecting role in terms of tourism; inter-island and international 
commerce; and travel for social, educational, and medical needs.107 At the time of the previous 
Review, Tonga handled about 70,000 international and 50,000 domestic air passengers each year; 
commercial air cargo amounted to ab out 2,500 tonnes per year, comprising mainly agricultural and 
marine products.  
4.102.   Tonga continues without a national carrier for international routes. Prior to the COVID -19 
lockdown, regular international air services were provided to and from Fiji by Fiji A irways (six times 
weekly to Nadi and Suva), to and from Auckland by Air New Zealand (five times weekly), to and 
from Sydney and Auckland by Virgin Australia (twice weekly), and to and from Samoa by Talofa 
Airways (twice weekly).108 There are no air services on Sundays, as the Tongan airports are closed 
(Constitution, Clause 6). Since March 2013, domestic services have been operated by the private 
Tongan -owned airline Real Tonga, which was replaced by the state -established Lulutai Ai rlines, which 
was operational as at 24 September 2020. Domestic and international air services remain partly 
subsidized (see above).  
Policy, institutional, and regulatory framework  
4.103.   The primary policy objectives in the aviation sector (aside from safety and  security) are to 
encourage competition and attract market entrants to Tonga.   
4.104.   The sector remains regulated by the Civil Aviation Division of the MOI. Its responsibilities 
include development of air transport policy, negotiation of air services agreements (in collaboration 
with the Ministry of Foreign Affairs), licensing (including of airlines, aircraft, personnel, and aircraft 
maintenance), and oversight of the airport operator.  
4.105.   The sector's regulatory framework was updated with the Civil Aviation Act 201 4109, using 
New Zealand legislation as a model, and replacing the Civil Aviation Act 1990. The main changes 
included the authority to make emergency rules resting with the Director of the Civil Aviation 
Division, as well as the transfer of the authority to issue, renew, and revoke aviation licences and 
approvals from the Minister to the Director. In 2015, the New Zealand Civil Aviation Rules were 
adopted as the Tonga Civil Aviation Rules. Air fares are not regulated. The Pacific Aviation Safety 
Office (PASO)  conducts the air services certification (pilots, engineers, and aircraft) on behalf of the 
Government, and carries out the main (user -paid) audits.  
International cooperation  
4.106.   During the review period, participation in international air transport services agreements 
remained unchanged. Tonga concluded both bilateral and plurilateral Air Services Agreements with 
no cabotage allowed (Table 4.3). As indicated at the time of the previous review, a 2013 "open 
skies" separate bilateral agreement with Singapore (a  Multilateral Agreement for the Liberalization 
of International Air Transportation (MALIAT) party, see below) has been maintained since 
March  2013, and a bilateral air services agreement with China was still at the draft stage as at 
December 2020.  
 
107 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023. 
108 More flights are deployed by Fiji Airways, depending on demand.  
109 Kingdom of Tonga, Civil Aviat ion Act 2014 . Viewed at: 
https://tonga.tradeportal.org/media//CivilAviationAct_2_1.pdf . WT/TPR/S/409 • Tonga  
 
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  Table 4.3 Air Transport Agreementsa, 2020  Partner  
Date  
Entry into 
force  
5th1 
7th2 
Cabotage3 
Coop4 
Designation5 
Withholding6 
Pricing7 
Capacity8 
Stat9 
Air 
Liberalisation 
Index (ALI)  
Australia  14/08/2002  14/08/2002  Y N N Y M PPoB FP PD Y 29 
Fiji 17/11/1971  06/05/2008  Y N N N S SOEC  DA PD Y 6 
a  The term "Air Transport Agreements" is used here to refer to Air Services Agreements, MoUs, 
Exchange of Notes, and other such relevant instruments.  
1  If 5th freedom rights are subject to approval by the aeronautical authorities, they are coded as NOT 
granted , i.e. "N".  
2  If 7th freedom rights are subject to approval by the aeronautical authorities, they are coded as NOT 
granted, i.e. "N".  
3  If cabotage rights are subject to approval by the aeronautical authorities, they are coded as NOT 
granted, i.e. "N".  
4  Clauses allowing cooperation between airlines, e.g. code -sharing is coded as Y.  
5  Single designation is coded as "S", multiple as "M".  
6  The type of withholding clause is coded as Substantial Ownership and Effective Control "SOEC", or 
Principal Place o f Business "PPoB".  
7  The type of pricing clause is coded as Double Approval "DA", or Free Pricing "FP".  
8  The type of capacity clause is coded as Pre -Determination "PD".  
9  An exchange of statistics foreseen by the agreement is coded as "Y".  
Source:  WTO Secretariat based on information provided by the authorities.  
4.107.   On the plurilateral front, Tonga is a signatory to the MALIAT and the Pacific Islands Air 
Services Agreement (PIASA). The MALIAT, in force for Tonga since January 2004, is an "open skies" 
agree ment providing for unlimited 3rd, 4th, and 5th freedom rights, free determination of capacity 
and tariffs, multiple designation, and the right to enter into cooperative arrangements.110 A Protocol 
to the Agreement extends the "open skies" provisions to 7th freedom rights and limited cabotage 
rights, but Tonga has not yet signed it; this continues to be motivated essentially by the need to 
protect the interests of its domestic carrier. PI ASA, which entered into force in October 2007, aims 
to create a "single Pacific aviation market", involving progressive allowance of 3rd, 4th, and 
5th freedom rights, free determination of capacity and tariffs, multiple designations, and the right to 
enter  into cooperative arrangements.111 The MALIAT and the PIASA apply between Tonga and 
Samoa, and between Tonga and the Cook Islands, as all three are signatories to both agreements. 
In both the MALIAT and the PIASA, capacity limitations remain in place, altho ugh existing limits have 
not yet been reached.  
4.4.5.1.2   Airport management and ground -handling services  
4.108.   During the review period, the airport setting remained unchanged. Under the regulatory 
oversight of the Civil Aviation Division, the state -owned Tonga Airports Ltd. (TAL) continued to 
manage Tonga's six airports, including two international airports, and provide air navigation 
services.112 There are no plans to build additional airports. The airport operator is required to comply 
with the standards and regulations  of the Civil Aviation Act, New Zealand civil aviation legislation, 
and International Civil Aviation Organization (ICAO) guidelines. According to the authorities, Tonga 
already meets required service standards and complies with ICAO requirements, or has be en granted 
a temporary exemption from some requirements during a transition period.113 In July 2015, the 
 
110 Other MALIAT signatories are Brunei Darussalam, Chile, the Cook Islands, Mongolia (for al l-cargo 
only), New Zealand, Singapore, and the United States.  
111 Other PIASA signatories are the Cook Islands, Nauru, Niue, Samoa, and Vanuatu.  
112 The main international airport and domestic feeder is Fua'amotu on Tongatapu. TAL also operates 
five other airp orts: Lupepau'u International Airport on Vava'u, Salote Pilolevu Airport on Ha'apai, Kaufana 
Airport on 'Eua, and Lavinia Airport and Mata'aho Airport on Niuatoputapu.  
113 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023. WT/TPR/S/409 • Tonga  
 
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  airport operator issued revised aeronautical charges and conditions of use.114 Changes of 
aeronautical charges require Government approval.  
4.109.   Ground -handl ing services continue to be provided, under concession, by Air Terminal 
Services, a private company duly incorporated in Tonga. The airport duty -free shop (Leiola Duty 
Free) was privatized and operates on a lease from Tonga Airports Ltd. The concession for  refuelling 
services is held by Pacific Energy Ltd. The new domestic airlines, Lulutai (Section 4.4.5.1.1), holds 
a Part 145 Certificate on Aircraft Maintenance Organizations and is the only authorized aircraft 
maintenance organization.  
4.4.5.2   Maritime transport   
4.4.5.2.1   Shipping services  
4.110.   The maritime services sector supports: tourism; inter -island and international cargo 
transport; and inter -island travel for social, educational, and medical needs.115 International cargo 
liner services are provided by the shipping agents  Dateline Shipping, Pacific Forum Line Ltd., 
TRANZAM, and Matson Shipping, and a domestically registered shipping agent (JAWS) for cargo 
trade between New Zealand, Samoa, and Tokelau. Domestic shipping services for passengers and 
cargo are provided by the state-owned Friendly Island Shipping Agency Ltd. (FISA), Pacific Tonga 
Trading, South Seas Shipping (cargo only), Eua Sea Transport Council, and Tofa Ramsay. Foreign 
shipping companies are permitted to offer domestic services (cabotage), provided they enga ge a 
Tongan agent or an agent based in Tonga. Fuel for use in domestic shipping services are exempt 
from excise taxes (see above); the authorities indicated that, as at December 2020, the MoRC was 
processing legislation for the exemption of lubricants too.   
Policy, institutional, and regulatory framework  
4.111.   As at December 2020, Tonga's maritime policy and Strategy were still in draft; there were 
plans for development projects of the domestic and outer island wharves.   
4.112.   The Marine and Ports Division of the MOI remains responsible for, inter alia , the management 
of the outer islands ports (excluding the Port of Nuku'alofa) (Section 4.4.5.2.2), ship registration, 
enforcement of relevant conventions of the International Mari time Organization (IMO), monitoring 
the activities of Tongan ships operating overseas, issuing certificates for ships and seafarers, and 
pilotage for ships outside Nuku'alofa.  
4.113.   The main pieces of legislation on maritime shipping services remain the Shippin g Act 1988 
(last reviewed in 2016) and the Marine Pollution Prevention Act, as amended. Tonga generally 
applies the regional Secretariat of the SPC standards for domestic shipping and smaller vessels, and 
IMO standards for larger vessels and vessels operat ing outside the EEZ. The authorities indicate that 
Tonga applies IMO standards, but there are other maritime standards reflected in the Shipping Act 
that set the relationship between the SPC and the IMO ( https://www.spc.int/partners/transport -
energy/international -maritime -organization ).  
4.114.   To fly the Tongan flag, ships (15 metres or longer, and unless exempted) must be recorded 
in the National Registry of Ships, which is administered by the registrar of ships of the Marine and 
Ports Division.116 Under the Shipping Act, vessels must be 100% crewed with Tongans, but these 
levels are being reviewed due to lack of domestic maritime training capacity for seafarers. Tong a's 
International Registry of Ships was closed in 2002.   
 
114 Tonga Airports Limited, Aeronautical Charges and Conditions of Use . Viewed at: 
http:// www.tongaairports.com/about/aeronautical -charges -and-conditions -of-use/. 
115 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023; Pacific Islands Forum S ecretariat, Department of 
Foreign Affairs and Trade (DFAT) Australia (undated, possibly 2020), Tonga National e -Commerce Readiness 
Assessment .  
116 Most registered ships are fishing vessels, which must also be registered with the MoF.  WT/TPR/S/409 • Tonga  
 
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  4.4.5.2.2   Port management and port services  
4.115.   Tonga's three main ports are Port of Nuku'alofa, which serves both domestic and 
international trade; Port of Neiafu (Vava'u); and Port of Pangai (Ha'apai), which is used by inter -
island ferries and smaller inter -island shipping vessels. Most of Tonga's maritime traffic is from 
Auckland, and is handled by the port at Nuku'alofa. Between 2015 and 2019, the number of vessels 
arriving at Tonga's ports rose by 52.4% to 218  and dropped to 193 in 2020; during the same period, 
trade cargo and container throughput increased by 48.6% to 430,656 cargo tonnes with a decline 
to 423,172 cargo tonnes in 2020, and by 47.8% to 26,046 20 -foot equivalent units (TEUs) with a 
drop to 23,20 6 TEUs in 2020, respectively.117  
4.116.   Tonga's main port at Nuku'alofa and its assets are owned, operated, and managed by the 
Ports Authority Tonga Ltd. (PAT). The smaller ports are operated and managed by the MOI's Marine 
and Ports Division. The PAT is required  by law to operate on commercial principles (Ports Authority 
Act 1998, Section 12) and, according to the authorities, it does not receive subsidies.118 Services 
provided by the PAT include berthing, towing, and mooring; loading and unloading vessels; 
embark ing and disembarking passengers; pilotage; maintenance of marine navigation aids; and 
supply of fuel, water, and telephone services.119 The port fees and charges applied by the PAT were 
last revised in December 2013 (Ports Authority Tariff Fees Standing Ord er 2007).120 According to 
the authorities, the tariffs and fees are charged independent of the vessel's flag. Pilotage is 
compulsory for foreign vessels exceeding a certain length or tonnage.121 There are no ship repair 
services in Tonga. According to the authorities, the international ports comply with relevant 
international and IMO operating requirements.122 During the review period, the PAT continued to 
address the challenges of upgrading aging wharf infrastructure and port facilities to maintain safety 
and operationa l efficiency.123  
4.4.6   Tourism  
4.117.   Tourism continued to support the upward trend of economic growth. Over the review period, 
the share of accommodation and food service activities in GDP ranged from 2.6% (FY  2018/19) to 
3.1% (FY  2017/18), and their share in total em ployment rose from 3.3% (FY  2014/15) to 4.3% 
(FY 2018/19) (Table 1.2). Between 2014 and 2019, overall arrivals rose by 41.2% to 90,748, of 
which 72.6% by air, 25.5% by ship, and the rest by yacht; tourist arrivals grew by 18% in 
January  2020 but rapidly dr opped by 86% by March 2020 as the borders closed in response to the 
COVID -19 pandemic.124 Nevertheless, most of the annual arrivals are those visiting relatives and 
friends; therefore, the number of genuine tourists is thought to be small, and no tourist ar rivals 
were recorded from April to December 2020. Reportedly, in 2019 there were 58,783 international 
visitors arriving from: New Zealand (49%); Australia (22%); the United States (14%); China (3%); 
and Fiji  (2%).125 The accommodation rooms remain limited b ut rose from 916 FY  (2016/17) to 
939 (FY 2017/18).126 Tonga remains a high -cost destination, and the Sunday Observance Act also 
poses constraints to the tourism sector due to limitations on Sunday trading and associated travel 
restrictions. TC Gita is estim ated to have caused physical damage and economic losses to the tourism 
sector estimated at TOP  40.6 million (TOP  26.3 million in approximate damages and 
TOP 14.3 million in expected losses).127 The tourism stakeholders expanded during the review 
period; as at December 2020, there were 149 (127 in 2017) accommodation establishments, 
108 restaurants (74 in 2017), 28 travel agents (6  in 2017), 27 tour operators (16 in 2017), and 
52 marine activities (43 in 2017).  
 
117 PAT (2019), Annual Re port 2019 , 20 December.  
118 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
119 PAT. Viewed at: http://www.portsauthoritytonga.com/ . 
120 PAT, Ports Authority (Tariff Fees) . Viewed at: 
https://www.portsauthoritytonga.com/index.php?option=com_phocadownload&view=file&id=11&Itemid=472 . 
121 Ports Management Act 2001, Section 29. As at 2013, the PAT had o ne pilot boat.  
122 Government of the Kingdom of Tonga, Pacific Region Infrastructure Facility (undated, possibly 2013), 
Tonga National Infrastructure Investment Plan 2013 -2023.  
123 Ports Authority Tonga (2019), Annual Report 2019 , 20 December.  
124 Ministry of Tourism (2020), Tourist Statistics Report 2018 & 2019 . 
125 New Zealand MFAT, Pacific Tourism Organization (2020), Pacific Tourism: COVID -19 Impact & 
Recovery Sector Status Report: Phase 1B , 5 May.  
126 Ministry of Tourism (2018), Annual Report 2017/2018 . 
127 Ministry of Finance (2019), Government of Tonga Budget Statement for Year Ending 30th June 2020 . WT/TPR/S/409 • Tonga  
 
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  Policy, institutional, and regulatory framework  
4.118.   During the review period, tourism development and its linkages with other activities 
(e.g. transport, fisheries, and e -commerce) were part of major policy papers. The TTPF 2017 -2025 
identifies tourism as a priority sector, and its diversification was to b e considered by developing new 
products and feeder markets (Sections 2.3.2, 2.4.1, and 4.4.5).128 A corresponding tourism strategy 
was to be envisaged and implemented, and linkages with other sectors to be ensured. The TTPF also 
refers to targeted regional interventions, such as the promotion of community -based tourism.  
4.119.   Since 2015, the Ministry of Tourism, which took over from the then Ministry of Labour, 
Commerce and Tourism, has been responsible for the formulation and implementation of policy in 
this area .129 As from 2013, the Tonga Tourism Authority (TTA) under the Ministry of Tourism has 
been in charge of policy and strategies for the development, promotion, and marketing of tourism 
under the Tonga Tourism Authority Act 2012 (last revised in 2016).130 The TTA is also responsible 
for promoting tourism products, empowering tourism operators, and safeguarding culture and 
heritage. No other changes were made to the main legislation during the review period.  
4.120.   Hotels, restaurants, and other tourist establishments  require a business licence issued from 
the MTED upon submission of a letter of support/recommendation from the Ministry of Tourism. 
According to the authorities, foreign investors wishing to operate a tourism venture do not need to 
have a local partner th at owns at least 51% of the business. Land leases for tourism projects are 
considerably shorter than for other investments (Section 2.5.2). The Tonga Quality Mark Assessment 
Star rating programme is divided into five major categories: hotel, guesthouse, re sort, apartment, 
and eco beach fales. Each category has specific marking criteria and eight areas that reflect the 
quality of the visitor experience: exterior, arrival, public area, bedrooms, bathrooms, dining, facilities 
cleanliness and business practices , and checkout. Ratings range from 1 (low) to 5 (high) stars.  
4.121.   Whale Watching and Swimming Regulations require that all whale -watching companies, 
including foreign -based operators, obtain a licence issued by the Ministry of Tourism. At the time of 
the prev ious Review, the licence fees were TOP  3,000 for whale watching, and TOP  3,450 for 
whale -watching and swimming operations. During the review period, action was taken to enforce 
the Whale Watching Act 2008 and Regulation 2013, as well as to coordinate train ing for whale -
watching guides, and Restricted Skipper Master Class 6, aimed at lowering fees for training and thus 
encouraging local participants. In 2020, there were 41 licensed whale -watching and swimming 
operators (26 in 2013), of which 20 were on Vava' u, 10 on Ha'apai, 7 on Tongatapu, and 4 on 'Eua.  
Domestic support  
4.122.   During the review period, tax and non -tax incentives supported the development of business 
operators in the tourism industry. Two establishments benefited from corporate tax exemptions: the  
Tonoa International Dateline Hotel and the Kongakava Hotel. Customs duty on goods imported 
(excluding tobacco or tobacco -making materials, and liquor or liquor -making materials) by approved 
and licensed tourist businesses, including basic building materia ls (timber, roofing iron, cement, 
guttering, and plumbing pipes (PVC)), has been fully exempt, whereas the relevant CT part has been 
50% exempt as long as importation has been carried out within two  years of the date of this order.131 
Tax expenditure relati ng to customs duty, excise tax, and CT to support tourism was TOP  120,531 
in FY 2014/15 (0.3% of eligible activities), TOP  1,181,927 in FY  2015/16 (2.7%), TOP  49,439 in 
FY 2016/17 (0.09%), TOP  13,046 in FY  2017/18 (0.03%), and TOP  283,039 in FY  2018/19 (0. 5%). 
As at FY  2017/18, 52 tourism businesses utilized these exemptions/incentives.132  
4.123.   New tax exemptions were introduced in 2019 and seemingly implemented as from 2020.133 
Licensed businesses were eligible for duty, excise, and CT exemptions on goods imported for their 
 
128 MTED (undated), Tonga Trade Policy Framework 2017 -2025. 
129 Ministry of Tourism (2018), Annual Report 2017/2018 .  
130 WTO document WT/TPR/S/291/Rev.1, 27 February 2014.  
131 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Govern ment of Tonga Investment Incentives 2014/2015 , August; and Ministry of Tourism (2018), Annual 
Report 2017/2018 . 
132 Ministry of Tourism (2018), Annual Report 2017/2018 . 
133 Gazette  No. 5 of 2019 containing the Excise Tax Order 2019, the CT Order 2019, and the Customs 
Duty Order 2019, 5 February 2019; Consumption Tax (Exemption) Order, Gazette Supplement Extraordinary , WT/TPR/S/409 • Tonga  
 
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  business, up to their total value (cost, insurance, freight (c.i.f.)). There is no expiry date for this 
new initiative. In 2018 and 2019, the threshold for t ax incentives was increased to c.i.f. value of 
TOP 100,000, and both CT and duty were fully exempted. In May 2020, the Cabinet approved an 
increase from TOP  100,000 to TOP  500,000 (food items excluded). Total forgone tax revenue from 
these incentives was T OP 5,949 in 2015, TOP 71,482 in 2016, TOP  9,797 in 2017, TOP  91,604 in 
2018, and TOP  423,379 in 2019, when the threshold of TOP  100,000 was introduced. As at 
December 2020, the total forgone tax revenue was estimated at TOP  1.78 million.  
4.124.   Low interest rate loans through the TDB -administered GDL Tourism Fund Loans continued 
to be provided for amounts up to TOP 50,000 with a two -year repayment period, and through the 
Tourism Loan Fund: COVID -19 and TC Harold (maximum loan TOP  500,000) with a five -year 
repaymen t period available at an interest of 3% (as at 2020). Previous GDL loans seemed to be 
available at rates of 1% (maximum TOP  500,000) or 4% (maximum TOP  1 million) with an one -year 
repayment period.134 The Tourism Loan Fund: COVID -19 and TC Harold Loan is si milar to the GDL 
Tourism Loan Fund but includes assistance to rebuild affected tourism -related businesses. These 
loans are intended to promote the development of new tourism products and events, improve the 
quality of small and medium -sized accommodations,  develop a clean and beautiful tourist 
environment, support and encourage community participation in the development of heritage sites 
and cultural events, and promote and encourage cooperation and coordination within the sector.  
4.4.7   Distribution services inc luding e -commerce  
4.125.   Distribution services remained of major importance to the economy. During the review 
period, the share of the wholesale and retail trade services in GDP ranged from 9.5% (FY  2014/15) 
to 10.1% (FY  2017/18), and their share in total employment rose slightly from 7.3% (FY  2014/15) 
to 7.8% (FY  2018/19) (Table 1.2). The retail and wholesale industry consists of a few large stores 
in the main towns and hundreds of little stores scattered throughout towns and villages.135 In 
addition, there  are retailers in produce markets, as well as along the foreshore, selling fish and 
marine products. The industry also includes the people selling imported second -hand clothing and 
other goods at flea markets. Businesses are not officially classified by si ze or other criteria (e.g. 
number of outlets by size, or number of local markets); registration for a business licence is issued 
according to business activities.  
4.126.   Low interest rate loans administered by the TDB continued to be provided through GDL Retail 
and Wholesale Loan Fund at rates of 3% (maximum TOP  50,000) with a repayment of two years, 
available to small - and medium -scale operators of the wholesale and retail sector to assist their 
expansion and service development.136  
4.127.   Tonga's e -commerce sector is i n the nascent stage.137 However, it appears that the dynamic 
C2C scene, although informal and involving social media platforms, proved that the market is ripe 
for more B2B and B2C transactions, with local e -commerce platforms appearing in recent years. 
Certain services activities, e.g. ICT, tourism, and transport, could be among the early adopters and 
earners. Issues of physical addresses and ICT capacity at the Tonga Post may constrain e -commerce 
logistics. Two Tongan -owned and -operated marketplaces (Made in Tonga (madeintonga.com, a 
marketplace for Tonga -made products (export focus)) and EZ Tonga138 (retail (food, grocery 
shopping, delivery))) gained traction. Both have a vision of helping local producers and micro, small, 
and medium enterprises (MSMEs) get  digital, sell online, and therefore improve their distribution.  
 
No. 24, 2020; Excise Tax (Exemption) Order, Gazette Supplement Extraordinary , No. 25, 2020; and Customs 
Duty (Exemption) Order, Gazette Supplemen t Extraordinary , No. 24, 2020.  
134 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investm ent Incentives 2014/2015 , August.  
135 Harkness, L. (2001), "Recent Economic Developments in the Kingdom of Tonga", Pacific Economic 
Bulletin , Vol.  16, No.  1, May.  
136 Revenue Policy Committee, Ministry of Finance and National Planning, Ministry of Revenue and 
Customs, and Ministry of Commerce, Tourism and Labour (2014), Partnership in Driving Economic Growth – 
Government of Tonga Investment Incentives 2014/2015 , August.  
137 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australi a 
(undated, possibly 2020), Tonga National e -Commerce Readiness Assessment .  
138 EZ Tonga. Viewed at: https://eztonga.com . WT/TPR/S/409 • Tonga  
 
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  4.128.   Through the MTED, Tonga secured funding from the Government of Australia, e -Commerce 
Aid for Trade Fund. TradeWorthy, as the implementing agency, is to implement a one -year project 
in partner ship with the MTED focused on three objectives: (i)  development of a National Digital 
Economy Roadmap; (ii)  development of a Roadmap on E -Commerce Legal Framework; and 
(iii) capacity building for Tonga's Cross -Border Digital Trade commitments.   
4.129.   With suppor t from development partners, Tonga recently made progress in enhancing its 
legal and regulatory frameworks for e -commerce.139 Some laws are nearing completion; the 
inclusion of relevant and up -to-date provisions (e.g. on consumer protection and data privacy ) would 
make them e -compatible. An e -Transactions Bill (based on the United Nations Commission of 
International Trade Law's (UNCITRAL) Model Law on Electronic Commerce and the Model Law on 
Electronic Signatures) was prepared but, as at August  2019, is yet to be enacted.  
4.4.8   Professional services  
4.130.   Legal services remain governed by the Law Practitioners Act 1989. The Act requires a legal 
practitioner to be included in the Roll of Law Practitioners held by the Supreme Court, possess a 
practising certificate, and b e a member of the Tonga Law Society. Membership in the Tonga Law 
Society requires documented professional knowledge and experience in a common law jurisdiction, 
a minimum of three character references, and an expressed intent to practice law in Tonga. 
Residence in Tonga is not required. Foreign lawyers are subject to the same rules as domestic legal 
practitioners, according to the authorities. Foreign law firms and lawyers are allowed to provide 
consultations on Tongan legislation, but no such firms operate  in the country.  
4.131.   Providers of accounting services require a business licence, but approval from the Tonga 
Society of Accountants is not needed. No specific requirements apply to practice engineering or 
architectural services, except a business licence. Li cences are issued upon presentation of a 
certificate from a recognized university, regardless of the country, and a reference document from 
a former employer in the same business activity (optional).  
 
 
139 Pacific Islands Forum Secretariat, Department of Foreign Affairs and Trade (DFAT) Australia 
(unda ted, possibly 2020), Tonga National e -Commerce Readiness Assessment .  WT/TPR/S/409 • Tonga  
 
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  5  APPENDIX TABLES  
Table A1. 1 Merchandise exports and re -exports by HS section, 2014 -19 
  2014  2015  2016  2017  2018  2019  
Total exports (USD million)  19.0 17.7 21.5 18.9 13.0 20.3 
Domestic exports  15.3 13.6 13.7 14.5 9.9 17.0 
Re-exports  3.7 4.1 7.7 4.4 3.1 3.3 
  (% of total exports and re -exports)  
HS Chapters 01 -24 73.6 62.9 57.7 62.0 70.0 77.9 
01 Live animals and products  35.3 19.4 20.3 21.1 16.9 30.9 
02 Vegetable products  35.8 39.6 37.0 39.7 52.5 46.5 
03 Fats and oils  0.2 0.0 0.0 0.0 0.0 0.0 
04 Prepared food, beverages and tobacco  2.4 3.9 0.5 1.2 0.6 0.5 
HS Chapters 25 -97 26.4 37.1 42.3 38.0 30.0 22.1 
05 Mineral products  15.5 11.5 7.0 8.5 16.1 8.2 
06 Chemicals and products thereof  1.7 1.1 0.9 0.4 0.9 0.7 
07 Plastics and rubber  0.3 0.1 0.3 0.1 0.0 0.1 
08 Raw hides and skins; leather and articles thereof  0.0 0.0 0.1 0.0 0.0 0.0 
09 Wood, cork, straw  2.6 2.3 1.6 1.5 3.3 1.3 
10 Pulp of wood; paper and paperboard  0.1 0.1 0.1 0.1 0.1 0.0 
11 Textiles and textile articles  0.1 0.2 0.3 0.1 0.1 0.1 
12 Footwear, headgear, etc.  0.0 0.0 0.0 0.0 0.0 0.0 
13 Articles of stone, plaster, cement  0.1 0.1 0.1 0.8 0.0 1.1 
14 Precious stones and metals  0.6 0.4 0.3 0.6 0.3 0.2 
15 Base metals and articles thereof  1.4 1.1 1.0 1.5 1.2 1.8 
16 Machinery, electrical equipment  2.7 5.0 10.8 8.2 3.9 4.9 
17 Transport equipment  0.6 7.9 19.0 14.6 1.1 1.2 
18 Precision equipment  0.6 5.9 0.5 0.7 2.8 1.9 
19 Arms and ammunition  0.0 0.0 0.0 0.0 0.0 0.0 
20 Miscellaneous manufactured articles  0.2 0.2 0.3 0.4 0.1 0.4 
21 Works of art, etc.  0.0 1.2 0.0 0.3 0.0 0.0 
Memorandum:        
Fisheries (incl. crustaceans and coral)  35.3 19.7 19.5 19.4 15.5 26.6 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
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  Table A1. 2 Merchandise imports by HS section, 2014 -19 
  2014  2015  2016  2017  2018  2019  
Total imports (USD million)  218.8  209.1  225.7  237.5  228.0  267.2  
  (% of total imports)  
HS Chapters 01 -24 27.3 29.1 27.3 30.0 27.5 23.6 
01 Live animals and products  11.4 10.6 10.2 12.1 11.2 8.6 
      Meat and edible offals  8.7 7.7 6.7 7.4 8.5 5.7 
02 Vegetable products  2.7 3.0 2.9 3.1 3.2 3.3 
03 Fats and oils  0.4 0.6 0.6 0.5 0.5 0.5 
04 Prepared food, beverages and tobacco  12.8 14.8 13.6 14.2 12.6 11.2 
HS Chapters 25 -97 71.2 69.7 72.1 70.0 72.5 76.4 
05 Mineral products  22.3 19.3 16.0 19.0 21.3 18.7 
      Oils from petroleum and bituminous minerals  20.3 16.8 14.4 14.1 14.2 12.0 
06 Chemicals and products thereof  3.9 4.3 3.5 4.0 3.8 4.0 
07 Plastics and rubber  2.2 2.6 2.4 2.3 2.5 2.6 
08 Raw hides and skins; leather and articles thereof  0.1 0.1 0.1 0.1 0.1 0.1 
09 Wood, cork, straw  2.9 3.6 4.0 3.6 4.3 3.1 
10 Pulp of wood; paper and paperboard  2.7 2.8 1.9 1.8 2.3 1.6 
11 Textiles and textile articles  2.0 2.3 2.1 1.9 1.9 1.6 
12 Footwear, headgear, etc.  0.5 0.5 0.5 0.5 0.4 0.5 
13 Articles of stone, plaster, cement  1.1 1.2 1.2 1.3 2.4 1.1 
14 Precious stones and metals, pearls  0.0 0.3 0.1 0.0 0.0 0.0 
15 Base metals and articles thereof  4.7 5.4 7.1 6.1 6.0 5.7 
16 Machinery, electrical equipment  18.6 12.6 18.8 14.0 13.7 18.0 
17 Transport equipment  6.9 11.1 9.8 9.8 10.0 15.3 
      Vehicles  5.2 8.7 7.4 8.3 8.4 5.7 
18 Precision instruments  0.7 0.9 1.2 2.2 1.3 1.4 
19 Arms and ammunition  0.0 0.0 0.0 0.0 0.0 0.0 
20 Miscellaneous manufactured articles  2.4 2.8 3.2 3.2 2.4 2.6 
21 Works of art, collectors' pieces and antiques  0.0 0.0 0.0 0.0 0.0 0.0 
Other  1.5 1.2 0.6 0.0 0.0 0.0 
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
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  Table A1. 3 Merchandise exports, by destination, 2014 -19 
  2014  2015  2016  2017  2018  2019  
Total exports (USD million)  19.0 17.7 21.5 18.9 13.0 20.3 
  (% of total exports)  
Americas  13.2 30.0 19.7 17.9 23.8 19.3 
   United States  13.1 29.9 19.9 17.9 23.8 19.2 
Europe  0.2 0.3 0.1 0.2 0.1 0.4 
   EU-28 0.1 0.3 .. .. 0.1 0.4 
   EFTA 0.1 0.0 0.0 0.0 0.0 0.0 
Commonwealth of Independent States (CIS)  0.1 0.4 0.0 0.0 0.0 0.0 
Africa  0.0 0.0 0.2 7.5 0.1 0.0 
Middle East  0.0 0.0 .. .. 0.0 0.0 
Asia/Oceania  71.2 69.4 78.4 73.5 75.9 80.3 
   China  0.0 0.1 0.3 1.1 1.7 1.9 
   Japan  10.9 8.6 9.3 11.2 5.5 8.1 
   Other Asia/Oceania  60.3 58.4 68.8 61.2 68.8 70.4 
      New Zealand  23.2 22.6 28.9 25.3 35.1 29.1 
      Australia  8.8 8.3 22.1 25.5 16.7 10.7 
      Korea, Republic of  1.9 4.1 4.4 9.1 10.0 7.8 
      Thailand  0.2 0.2 0.0 0.8 0.2 6.7 
      Chinese Taipei  0.6 0.6 0.5 0.8 1.8 6.6 
      Viet Nam  0.5 3.9 0.0 0.0 0.0 4.1 
      American Samoa  0.8 1.6 0.0 0.0 1.3 1.8 
      Fiji 1.1 4.7 2.0 1.4 1.7 1.1 
      Samoa  2.5 5.2 0.0 0.0 0.9 1.0 
      Vanuatu  0.9 0.1 0.0 0.0 0.1 0.2 
      Papua New Guinea  0.0 0.1 0.0 0.0 0.4 0.1 
      Cook Islands  0.0 0.0 0.0 0.0 0.0 0.1 
      Hong Kong, China  17.7 3.0 0.0 0.0 0.0 0.1 
      Niue 0.0 0.0 0.0 0.0 0.0 0.1 
      Korea, Democratic People's Republic of  0.2 0.0 0.0 0.0 0.0 0.1 
Other  15.5 0.0 1.5 0.8 0.0 0.0 
.. Not available.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
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  Table A1. 4 Merchandise imports, by origin, 2014 -19 
  2014  2015  2016  2017  2018  2019  
Total imports (USD million)  218.8  209.1  225.7  237.5  228 267.2  
  (% of total imports)  
Americas  12.0 10.7 10.8 10.6 10.7 15.2 
  United States  10.9 9.6 10.0 9.5 9.9 14.4 
  Other America  1.2 1.1 .. .. 0.8 0.9 
     Brazil  0.1 0.4 .. .. 0.5 0.4 
     Chile 0.4 0.5 .. .. 0.2 0.3 
     Canada  0.5 0.3 .. .. 0.0 0.2 
Europe  1.3 2.5 0.8 1.4 0.6 3.8 
  EU-28 0.7 2.1 .. .. 0.3 3.0 
     France  0.0 0.1 .. .. 0.0 2.2 
     Spain  0.0 0.0 .. .. 0.0 0.4 
     United Kingdom  0.4 1.5 .. .. 0.1 0.2 
  EFTA 0.4 0.2 .. .. 0.1 0.7 
     Switzerland  0.4 0.2 .. .. 0.1 0.7 
  Other Europe  0.2 0.2 .. .. 0.1 0.1 
Commonwealth of Independent States (CIS)  0.0 0.0 .. .. 0.0 0.0 
Africa  0.1 0.1 0.1 0.1 0.1 0.0 
Middle East  0.1 0.1 .. .. 0.0 0.1 
Asia/Oceania  86.4 86.4 88.3 88.0 88.5 80.8 
  China  7.5 9.4 11.3 8.6 9.3 8.4 
  Japan  8.0 5.3 8.4 9.8 8.0 7.6 
  Other Asia/Oceania  70.9 71.6 68.5 69.6 71.2 64.8 
     New Zealand  28.6 31.5 31.4 28.6 29.8 27.7 
     Singapore  21.1 9.7 11.3 18.4 19.4 17.3 
     Fiji 7.8 17.5 11.6 8.0 7.7 7.2 
     Australia  5.4 6.5 7.6 6.7 7.5 6.5 
     Indonesia  1.6 1.7 1.5 1.5 1.5 1.6 
     Thailand  1.4 1.2 1.1 1.7 1.7 1.1 
     Malaysia  1.5 0.7 0.8 0.9 1.0 0.6 
     Viet Nam  0.3 0.4 .. .. 0.6 0.5 
     Hong Kong, China  1.2 0.4 0.6 1.2 0.5 0.5 
     Chinese Taipei  0.8 0.8 0.7 0.6 0.6 0.4 
     India 0.3 0.5 .. .. 0.2 0.4 
     Vanuatu  0.1 0.0 .. .. 0.0 0.3 
     Philippines  0.2 0.3 .. .. 0.2 0.2 
.. Not available.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
 
 
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  Table A3. 1 Forgone revenue from imports, sectoral breakdown, FY  2014/15 -FY 2018/19  
(TOP)  
  Duty forgone  Excise tax 
forgone  Consumption 
tax forgone  Total dues 
forgone  
Total 61,123,995.8  90,379,388.9  116,477,083.0  268,285,548.5  
Agricultural sector  1,138,794.3  5,375.7  6,935,601.3  8,080,880.6  
Construction projects  6,197,204.1  174.6  9,048,511.6  15,245,890.2  
Building supplies  8,299,289.5  1,726.3  1,577,637.8  10,137,202.2  
Charitable activities  256,237.3  4,399.6  371,308.4  631,945.3  
Development projects  3,783,927.5  8,950.7  5,503,048.3  9,295,926.5  
Diplomatic mission  2,662,699.6  695,729.9  4,531,610.8  7,890,040.2  
Fisheries sector  840,072.2  1,666,618.2  3,176,816.3  5,683,506.7  
Fuel concession  12,184.3  59,334,954.5  14,489,365.2  73,836,504.0  
Government ministries  2,715,163.9  28,291.7  7,453,047.3  10,241,926.0  
Health sector  219,513.9  0.0 2,157,359.1  2,376,873.0  
Licensed excisable local 
manufacturer  149,273.6  100,598.4  503,434.4  753,306.4  
Licensed non-excisable local 
manufacturer  1,606,249.3  5,136.3  2,523,618.0  4,135,003.6  
Manufacturing sectors  1,576,329.3  0.0 252,618.8  1,828,948.1  
Palu Aviation/Real Tonga  978,345.9  288,283.5  2,377,029.9  3,643,659.3  
Domestic vessels  20,423.9  0.0 51,264.5  71,688.4  
Passenger allowances  203,617.8  1,965,362.9  476,701.1  2,645,681.8  
Legal residents  31,493.7  14,799.3  16,244.4  62,537.4  
Education sector  1,815,692.2  11,236.4  613,853.9  2,440,782.5  
Sports sector  466,618.9  0.0 317,433.6  784,052.4  
Ground equipment for airport  32,430.0  19.6 8,309.0  40,758.5  
Temporary imports  68,967.9  665.0  163,931.0  233,563.9  
Public enterprises  16,529,120.5  153,621.0  27,963,343.2  44,646,084.7  
Tongan Mat/Ta'ovala  163,933.0  0.0 32,311.5  196,244.5  
Tourism  611,141.4  3,669.2  763,178.7  1,377,989.3  
Water scheme development  79,052.4  776,488.5  309,905.7  1,165,446.6  
Disaster relief  1,741,686.4  88,774.9  4,860,431.8  6,690,893.1  
Statutory boards  4,089,529.1  430,777.5  7,554,896.9  12,075,203.5  
Goods for upgrade of domestic 
wharf  297,579.5  4,605.4  873,051.3  1,175,236.2  
2019 Pacific Games  41,555.2  0.0 69,710.5  111,265.7  
Tonga Power Limited  2,349,297.2  22,149,070.9  6,666,366.1  31,164,734.2  
Teufaiva Stadium project  106,100.0  52.0 192,362.9  298,514.9  
Other  2,040,472.1  2,640,006.7  4,642,780.1  9,323,258.9  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
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  Table A3. 2 List of excisable goods, by product heading (HS 4 -digit level), as at 
November 2020  
HS 
heading  Description  Number 
of tariff 
lines  Average excise duty  
2020  
(TOP)  
0204 Meat of sheep or goats, fresh, chilled  or frozen: 
mutton breast and flaps  4 1.15/kg  
0207 Turkey tails, fresh or chilled  2 2/kg 
1501 Pig fat (including lard) and poultry fat  3 2/kg 
1502 Fats of bovine animals, sheep or goats  2 2/kg 
1601 Sausages and similar products, of meat, meat offal 
or blood; food preparations based on these products  6 0.75/kg  
1602 Other prepared or preserved meat of bovine animal  1 2.5/kg  
1701 Cane or beet sugar and chemically pure sucrose, in 
solid form: flavours in powdered and ready -to-drink 
form 1 4/kg 
1704 Sugar confectionery (including white chocolate), not 
containing cocoa  2 5/kg 
1806 Chocolate and other food preparations containing 
cocoa  4 5/kg 
1902 Instant noodles  2 1.25/kg  
1905 Sweet biscuits; waffles and wafers  2 1.5/kg  
2009 Fruit juices and vegetable juices, unfermented and 
not containing added spirit  23 2.8/kg  
2103 Mayonnaise  1 2/kg 
2105 Ice cream and other edible ice  2 0.875/kg  
2202 Waters, including mineral waters and aerated 
waters, containing added sugar or other sweetening 
matter  15 1.56/kg  
2203 Beer made from malt  4 55/kg  
2204 Wine of fresh grapes  5 42/kg  
2205 Vermouth and other wine of fresh grapes flavoured 
with plants or aromatic substances  2 42/kg  
2206 Other fermented beverages  2 45/kg  
2208 Undenatured ethyl alcohol of an alcoholic strength by 
volume of less than 80% vol.; spirits, liqueurs and 
other spir ituous beverages  14 50/kg  
2401 Unmanufactured tobacco; tobacco refuse  6 475/kg  
2402 Cigars, cheroots, cigarillos and cigarettes, of tobacco 
or of tobacco substitutes  7 584/1,000 sticks  
2403 Other manufactured tobacco and manufactured 
tobacco substitutes  8 475/kg  
2710 Petroleum oils and oils obtained from bituminous 
minerals  12 0.75/litre  
2711 Petroleum gases and other gaseous hydrocarbons  7 300/metric tonne  
4818 Toilet paper and similar paper  2 0.7/kg  
8703 Motor cars and other motor vehicles principally 
designed for the transport of persons  67 0.52/cc of engine capacity  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
__________