Dispute over $2m of NZ aid overshadows visit to Niue

A stalemate over a $2 million packet of funding earmarked for tourism development on the tiny island is likely to dominate when PM John Key meets Niue's Premier Toke Talagi today.

In his Budget speech last month, Mr Talagi accused New Zealand of failing Niue by making the money impossible to access because of bureaucracy.

There has been a long impasse over the finding, which was earmarked for tourism development in the Halavaka Fund - and Mr Talagi has hinted the island has could turn to China and Japan for help if New Zealand does not release it. This month, New Zealand is sending a tourism expert to the island to review the sector and the viability of what Niue intends to do with the money.

That visit and Mr Key's visit to the atoll today could also be critical in deciding on future funding once the Halavaka Agreement runs out later this year - and this is an area Mr Talagi is likely to seek some assurances for.

However, he has criticised New Zealand for interfering in its domestic policy and micromanaging Niue from Wellington by determining how the money should be used, after New Zealand demanded some accountability for it. The island, with a population of about 1000 people, is self governing, in free association with New Zealand - which gives New Zealand greater responsibilities than for Pacific countries such as Tonga and Samoa.

Niue's aid package reflects that - it got $21.5 million in NZ aid last year, including $7.6 million in direct budget support for the Government.

A total of $5 million was for the Niue International Trust Fund, set up to provide it with a secure form of revenue in the future, but not expected to be drawn on until 2014.

The chairman of the Niue Tourism Authority Board, Hima Takalesi, said the frustration about accessing the remainder of the tourism money was because of the difficulties in getting bank loans for businesses on the island.

"Some of the tourism sites badly need attention after Cyclone Heta [in 2004].

"So far we have band-aided them, rather than fix them properly."

He said work was needed to make some sites more accessible and improve bush walks.

About $20 million of the fund has been spent on infrastructure - including rebuilding Niue's power station, constructing a new hospital and a new government administration building and upgrading a quarry.

A total of $2 million a year went toward linking up government departments - for example providing a chief of police, help for Inland Revenue to modernise the tax system and support from Counties Manukau District Health Board for health services.

Mr Talagi - who became premier last year - has stated one of his main aims is to attract private investment to the country, especially in tourism.

Tourism numbers have increased slightly - from 1400 in 2003 to 3500 in 2007. However, recent efforts at getting the private sector involved in the economy were ill-fated - a new fish processing plan set up in 2004 in partnership between the Niuean government and New Zealand's Reef Group closed down at the end of 2007 with the fishing company blaming fuel prices, the high dollar, the logistics of getting the fish to and from the plant, and problems with whales.

Mr Talagi has expressed hopes of restarting the initiative - and Mr Key will be shown the plant during his time on the island.

Niue, the Cook Islands, Nauru and Tuvalu have also signed up for a bulk procurement of fuel programme to held reduce the costs of fuel, which are heightened by the transport costs.

The scheme is being developed by the Pacific Islands Forum.