Regions and Countries

	Table of Contents
p. 10 of 18 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Governance Dimensions of ADB Operations C. Gender Dimensions of ADB Operations D. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Tonga : III. Sector Strategies

---

B. Governance Dimensions of ADB Operations

31. In Tonga the relatively large public sector is characterized by low productivity and inefficiencies. The proposed EPSRP is expected to address a number of governance issues, particularly related to transparency and efficiency in the public sector and improvements in regulations to promote private sector growth. The EPSRP will promote the development of a sound macroeconomic framework to encourage efficient and productive domestic investment and keep inflation low to protect real incomes of the poor. It will aim to improve public expenditure management to achieve better fiscal discipline, and promote economic growth and equity. Some of the specific reform areas that will be explored as part of the preparation of the EPSRP include:

• private sector promotion: (i) tax, tariff and customs reforms; (ii) changes in the Industrial Development Incentives Act (IDIA); (iii) foreign investment, licensing regime and competition policy; (iv) sector policies review in terms of their contribution to private sector investment; (v) public sector enterprise (PSE) reforms.

• rationalization/strengthening of public sector management: (i) strengthening fiscal discipline and transparency; (ii) legislative reform for public sector strengthening and rationalization, including review of the Public Finance Act and the Government Act (including the associated civil service regulations); (iii) rightsizing of, and introducing results-oriented management to, the public service; (iv) capacity building and institutional strengthening; (v) reviewing terms and conditions of employment in particular the incentive system (salary, etc); and (vi) consideration of establishing a Fiscal Reform Stabilization Fund.

• financial sector reform: (i) strengthening the ability of the National Reserve Bank of Tonga (NRBT) to conduct monetary policy using market based instruments; (ii) strengthening prudential supervision of financial institutions; (iii) review of financial sector regulatory and legal frameworks (including Financial Institutional Act of 1996); (iv) Tonga Development Bank (TDB) restructuring.

• establishment of a sustainable social security service: (i) civil service contributory pension scheme; (ii) medical referral scheme.

Back A. Agriculture	Next C. Gender Dimensions of ADB Operations