RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/TON/5 
23 June 2003 
 (03-3341) 
Working Party on the  
Accession of Tonga Original:   English 
 
 
 
ACCESSION OF TONGA  
 
Trade in Services  
 
 With regard to the Kingdom of Tonga’s revised services offer 
(WT/ACC/SPEC/TON/2/Rev.2) the Government of T onga has also submitted an explanatory note.  
The comments are reproduced below.  
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  Please find herewith Tonga’s revised offer rega rding services commitments.  With regards to 
this offer, and questions posed by various WTO Members, we would like to make the following 
comments:  
HORIZONTAL COMMITMENTS
 
Limitations on Market Access  
Mode (3)  Government approval is required for al l businesses to establish in the Kingdom. 
All businesses, irrespective of whether domestically or foreign owned, must obtain a business Licence 
in order to conduct business in Tonga (as per our Business Licences Bill, which will replace the 
Licences Act Cap. 47). 
The Business Licences Bill introduces a simple, tr ansparent procedure for the issuance of business 
licences that is of a non-discriminatory nature and therefore applies equally to nationals and 
foreigners. 
Under the new Act, a licence must be issued if: - The application is for a business which does not carry on, and does not propose to carry on, a 
prohibited activity;  and 
- In the case of an applicant who is an individual,  the applicant is 18 years or older;  or 
- In the case of a partnership, all the partners are 18 years or older;  or 
- In the case of an applicant who is a foreign investor, the applicant holds a valid foreign 
investment registration certificate. 
A copy of the Business Licences Bill has been provided to the WTO Secretariat for the information of 
Members.  A copy of the regulations will be provided as soon as they are finalised. WT/ACC/SPEC/TON/5 
Page 2  
 
 Limitations on National Treatment
 
Mode (3)  Government approval is required for foreign investors to invest in the Kingdom. 
The Foreign Investment Act provides regulations of foreign investors in Tonga who wish to carry on 
any activity for the purpose generating revenue in tr ade, commerce or industry , including any trade, 
profession or calling. 
The Act details the rules of foreign investment in to Tonga, the registration requirements for foreign 
investors and the duration of registration certificat es;  lists those activities that are classified as 
reserved or restricted and the relevant conditions fo r foreign investment into such activities;  details 
the terms for transfer of registration, cancellation of registration and the means for appeal if registration is refused;  and sets out transitional arrangements for foreign investors already operating 
in Tonga at the time of the legislation being implemented. 
The regulations to the Act, currently in the drafti ng stages, will detail the conditions to be met by a 
foreign investor wishing to invest in a designated restricted activity.  
Unless an activity is designated as restricted, r eserved or prohibited ther e are/will be no foreign 
participation limitations (i.e. caps on foreign in vestment, restrictions on wholly foreign-owned 
enterprises, rules covering joint ventures and other si milar measures), in law or in practice, for foreign 
investors wishing to invest into the Kingdom.  Any sectors in which there are restricted activities have 
now been indicated as such in the Services Schedule. 
Tonga confirms that, other than where currently  indicated in our Services Schedule, no activities 
related to sectors contained within the schedule will be included on the reserved or restricted lists of 
the Foreign Investment Act and its regulations. 
A copy of the Foreign Investment Act was sent to the WTO Secretariat for the information of 
Members.  A copy of the regulations will be provided as soon as they are finalised. 
Mode (3)
 The Tongan Constitution prohibits the sales of  land to all foreigners.  Foreigners can 
only attain land through leasing. 
It is illegal to buy and sell land in  Tonga.  All land in the country is organised into estates belonging 
to the King and his nobles, or the government.  Individual titles to land within these estates are also 
held by Tongan born males over the age of 16 who ha ve been successful in registering the land.   
Any person, regardless of their gender or nationality, can lease land in Tonga from an estate owner or 
a Tongan male who has registered title to an allotmen t of estate land.  A land lease can either be an 
informal arrangement between the estate owner/re gistered title-holder and the lessee, or a formal 
arrangement that must be processed by the Ministry of Lands. 
Land that has been leased can also be sub-leased to another party.  The process to sub-lease land is the 
same the process to lease land.    
There is also a small amount of land available to  investors within two Small Industry Centres (SIC) 
located on Tongatapu and Vava’u.  The SICs are ma naged by the Ministry of Labour, Commerce and 
Industry.  The procedures for leasing SIC land are diff erent to the process used to obtain a formal land 
lease.  WT/ACC/SPEC/TON/5 
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 Tonga recognises the need for land lease reform.  Our Strategic Development Plan for 2001 – 2004, 
issued by the Central Planning Department in July  2001, highlights the need to address issues related 
to land availability for investment by: 
- Considering legislative amendments to permit longer leases; 
- Allowing arrangements for the review of lease rates to be at the discretion of negotiating 
parties; 
- Simplifying the process of lease and mortgage registration;  and 
- Introducing mechanisms to ensure  the security of tenure during the term of a lease and to 
facilitate the access of investors to needed land. 
- However, until these issues are addressed, the process for arranging a formal land lease in 
Tonga is as per the following table: 
 Process steps 
Overview Details 
1 Identification of 
Potential Land Consult the Ministry of Land, Survey and Natural Resources (MLSNR) or 
members of the private sector  to identify vacant plots and other areas that may be 
available for leasing.   
At the request of the investor, MLSNR will consult with registered land title-
holders (private and government) to confirm the availability of land for lease, as 
well as introduce the investor to the landowner. 
Tonga does not have a register that identifies land available in the country for 
lease.  There is also no real estate s ector to facilitate investor access to land. 
2 Negotiation of lease 
terms and 
conditions Negotiation of the terms and conditions of the lease is a private matter between 
the landowner (lessor, represented by the King) and the investor (lessee). 
It is essential that the landowner has re gistered title to the land.  Only Tongan 
males can hold registered title to land.  Women, who husbands have died, have the 
right to use their husband’s land until they remarry or die, but cannot enter into a 
lease agreement for this land.   
In the case of government land, the Valuation Division, MLSNR is required to 
value the land.  This is done based on the following criteria: location, 
infrastructure and services available, and market prices. 
The Land Act allows for a lease term up to  a maximum of 99 years, although they 
are typically not granted for more than 50 years. 
Lease rates are not guided by legislation.  It is standard practice for the lessor and 
lessee to review the lease rate at regular in tervals, i.e. every 5 years, and adjust it 
accordingly. WT/ACC/SPEC/TON/5 
Page 4  
 
  Process steps 
Overview Details 
3 Preparation and 
submission of 
application to 
register a lease Once the terms and conditions of the leas e have been agreed on, the two parties 
obtain an application form from MLSNR, or in the case of Vav’au and Haa’pai at 
the Governor’s office.  The application form (Form L.9) requests the following 
information: 
- Contact information of the applicant (lessee) 
- Purpose of the lease 
- Location of the property (district, es tate, date registered and area of the 
holding) 
- Area of the property 
- Term of the lease 
- Rent per annum 
The application is to be signed by both the lessee, as well as the landowner, along 
with one witness. 
On submission, MLSNR or the Governor’s  office calculates the fee for conducting 
a survey and preparing a map of the proper ty.  Fees are stipulated in Schedule IV 
of the Land Act and are payable to MLSN R or the Governor’s office at the time 
the application is submitted. 
4 Application 
assessment On Tongatapu, the Valuation Division, MLSNR assesses the application.  On 
Vava’u and Ha’apai staff at the Govern or’s office completes this task.  The 
application is assessed using the following criteria: 
- Complete - Includes all required information 
- Accurate - Landowner specified in  application is the registered 
landowner appearing on MLSNR register 
- Unencumbered - Property is free of mortgage or any other lien 
- In the case of government land, there must not be any conflicting 
government uses for the property. 
If the criteria are met the application is submitted to the Minister of Lands in 
Nuku’alofa for signature. 
If approved by the Minister, the application is submitted to Cabinet for signature. 
5 Notification of 
decision If the application fails to meet any of the above criteria MLSNR will notify the 
applicant of the problem. It is the app licant’s (i.e. investor’s) responsibility to 
consult the landowner and resolve any outstanding issues. 
Once the application has been signed by Cabinet MLSNR will notify the applicant 
(lessee) of the approval and initiate the surveying and mapping of the property. 
6 Survey and 
preparation of Deed 
of Lease & map for property The approved application is forwarded to the Mapping & Drafting Division, 
MLSNR who prepare a sketch plan of the property based on MLSNR records.  
The sketch plan is then forwarded to the Survey Division, MLSNR who conduct a 
field survey of the property.  Survey offices are located on Tongatapu, Vava’u and 
Ha’apai.  The results of the survey are then sent back to the Mapping & Drafting 
Division for preparation of the Deed  of Lease and map of the property. 
The survey can be done by a private surveyor rather than MLSNR.  In 2003 there 
was one commercial surveyor operating in Tongatapu.  
MLSNR contacts the applicant (investor) once the Deed of Lease and map have 
been completed.  The applicant is required to pay MLSNR a registration fee to 
obtain the Deed of Lease and map. 
The Deed of Lease requires the lessee to submit a letter to the Minister of Lands 
seeking permission to make changes to the stated purpose, period or rate.  Written 
permission must also be obtained from the Ministry of Lands for any buildings or structures constructed on the property.   
  WT/ACC/SPEC/TON/5 
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 SECTOR-SPECIFIC COMMITMENTS  
Legal services (CPC 861)  
The 1989 Law Practitioners Act re quires any legal practitioner to: 
- be included in the Roll of Law Practitioners held by the Supreme Court; 
- possess a practising certificate;  and 
- be a member of the Tongan Law Society. 
Membership of the Tongan Law Society requires: 
- documented professional knowle dge and experience in common law jurisdiction; 
- a minimum three character references;  and  
- an expressed intent to practice law in Tonga. 
“An expressed intent to practice law in Tonga” does not  mean that the lawyer must reside in Tonga to 
practice law.  Members of the Tongan Law Society can reside overseas and provide legal services (to Tonga) from there. 
Appearance before Tonga’s Supreme Court requires a Diploma in Law from the University of the 
South Pacific (USP) or at least a Bachelor’s degree in law from a recognised university. 
Foreign lawyers are subject to the same rules as domestic legal practitioners.  
Foreign legal firms and lawyers are allowed to provide  consultations on legislation other than that of 
their home state. 
Accounting, auditing and bookkeeping services (CPC 862)
 
Architectural services (CPC 8671)  
Engineering services (CPC 8672)  
Tonga has very few domestic suppliers for th e above-mentioned business services.  Essentially 
therefore, given our reliance on importation of these services, our markets have always been liberalised. 
Obviously we would like to encourage the establishmen t of such industries within Tonga rather than 
having to rely on the importation of these ser vices, which was the underlying reason for our 
“unbound” commitment to Mode (1) and (2) supp lies and our “none” commitment to Mode (3) 
supplies. 
Medical and dental services (CPC 9312)
 
Educational services (CPC 921, 922, 923, 924, 929)  
Environmental services (CPC 9401, 9402, 9403, 9404, 9405, 9406, 9409)  
Hospital services (CPC 9311)  
Tonga initially indicated that it would have no commitment (i.e. “ unbound”) under National 
Treatment, Mode (3) for these services.  This was to  ensure that government could provide subsidies 
to domestic suppliers of such services if and when this was necessary. 
After further consultation, Tonga has now included a horizontal commitment with regard to subsidies 
and is therefore prepared to change the Nati onal Treatment, Mode (3) commitment to “none”. WT/ACC/SPEC/TON/5 
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 Telecommunication services
 
Tonga acknowledges that it initially indicated, in  WT/ACC/SPEC/TON/2, that it was prepared to 
commit to the liberalisation of telecommunication servi ces.  However, given that competition in this 
sector has already been introduced in Tonga (Tonga currently has two providers of voice and data 
services, who compete for market share on a commercial basis) we feel it is prudent to delay a 
commitment to the full liberalisation of th is sector whilst observing how competition in 
telecommunication services works in Tonga. 
The Communications Act 2000 opened up both domes tic and international telecommunications 
services for any person or company wishing to operate them, subject to Part V of this Act which sets out the authority, rights and obligations associated  with either an Individual or a Class License. 
The opening of this sector saw the entrance of a new telecommunication services provider into the 
Tongan market.  This provider competes with th e incumbent operator, the now “corporatised” Tonga 
Communications Corporation. 
The incumbent operator has a significant embedded i nvestment in “legacy” equipment and a lack of 
resources to change out this equipment other than over a number of years.  Obviously this puts the 
incumbent at a huge disadvantage, when the new entrant to the market has the enormous cost 
advantage of using the latest technologies. 
Although the incumbent has been “corporatised”, it is  still obliged, under the terms of its licence, to 
provide the loss making services that the country needs, including operator services, emergency 
services and provision of services to sm all rural or outer island communities. 
As you are aware, the Tongan market is a small one .  It is questionable whether it is economically 
viable for suppliers to compete in such a market and whether such suppliers will be able to survive in 
the long term.  Obviously the last thing we want is  to end up with no telecommunications supplier. 
Given that Tonga is the only Forum Island Country to “enjoy” competition within the 
telecommunication services sector, we feel it is prudent to observe the situation over a period of time before committing to the full liberalisation of this sector. 
We are prepared to make a commitment regarding telecommunications as follows: 
“The future regime in this sector will be decided in  light of experience gained during the first five (5) 
years of competition being introduced in this sector i.e. 2002 – 2007.” 
We would welcome any technical assistance Member s may wish to give with respect to conducting 
such a review. 
Financial services 
 
- Insurance  
Tonga’s insurance sector is essentially liberalised how ever we are reluctant to make a commitment to 
this effect given the absence of prudential re gulation of the insurance industry in Tonga. 
Tonga would welcome technical assistance from Members with respect to the drafting and 
implementation of prudential regulation for the insu rance industry in Tonga.  Until such regulations 
are in place however, Tonga feels that it would not be prudent to make commitments in this area.  WT/ACC/SPEC/TON/5 
 Page 7 
 
 
 - Other  
The following are our comments in  response to questions raised: 
Question: What types of financial service providers, aside from banks and insurance companies, 
may provide services in Tonga?  
Answer: Authorised foreign exchange dealer s also provide financial services in Tonga. 
Question: What laws and regulations govern  the financial services sector in Tonga? 
Answer: The financial services sector in Tong a is governed by the following laws and 
regulations: 
- National Reserve Bank of Tonga Act 
- Financial Institutions Act and regulations 
- Tonga Development Bank Act 
- Westpac Bank of Tonga Act 
- Foreign Exchange Control Act and regulations 
- Money Laundering and Proceeds of Crime Act 
Question: Are financial institutions currently allowed to provide financial information and 
advisory services? 
Answer: Yes, financial institutions are allowed to provide financial in formation and advisory 
services. 
Question: In what specific financial activities do the existing three commercial banks in Tonga 
engage? 
Answer: The commercial banks in Tonga provide  normal banking services such as the taking 
of deposits and loans and other services such as local and international money 
transfer. 
Distribution services  
Tonga has been requested to consider committing to the liberalisation of distribution services.  For a 
number of reasons, as detailed below, Tonga is not  willing to commit to the liberalisation of these 
sectors: 
- Liberalisation of these sectors would comp letely undermine the development of the 
indigenous entrepreneurial class who are often in small retail ventures and see this as their 
natural path to development (as it was in many developed countries). 
- Liberalisation of these sectors would make it almost impossible to control certain types of 
business migration to Tonga.  This would most  definitely undermine public and political 
support for WTO accession. 
Although developed country Members say that opening up retail distribution would allow the sort of 
investments in retail trade that would increase effi ciency and lower prices, for a small island state 
such as Tonga this is not a creditable argument.  The consumer base is not large enough to attract such 
investment.   WT/ACC/SPEC/TON/5 
Page 8  
 
 We have attempted to address all concerns raised by Members and where appropriate have revised our 
schedule to reflect this.  We hope that Member’s  will view Tonga’s revised offer favourably.   
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