That sinking feeling for Niue

Niue is gearing up for another cyclone season, while still counting the cost of the last. Picture / Kenny Rodger

The confidential report does not make optimistic reading. But then, the residents of Niue are nothing if not experienced at weathering storms, meteorological and fiscal. Headed "Financial Position of the Government of Niue", the report dated September and addressed to the premier, Young Vivian, informs him the nation is stony broke, though the words it uses are these: "very serious financial situation".

The Government ran a deficit of $400,000 for its latest financial year, which may not sound a lot but is for a nation that generates little income from its own activities.

The report spells out the cash crisis under point No3. It has only $778,000 in the bank from donations for Cyclone Heta relief projects when the total should be $1.97 million.

Where has it gone? "In effect the Government has utilised these funds to finance its bank overdraft," the report says, adding that "if we were to do all of the outstanding work on these projects this year then we would have no funds available to run the government." Such is the financial disorder that confronted New Zealand auditors in recent weeks.

There are murmurings of the books being a mess. The auditors are restrained from commenting until their report is tabled in Niue's parliament. Gareth Ellis, spokesman for the Office of the Auditor-General, says the report can be released after it has been tabled unlikely before the New Year. In the meantime he can confirm only that the field work is completed and the auditors have asked Niue for further information.

Vivian confirmed to the Weekend Herald that this included clarifying how his Government could afford to continue a rescue package for the island's one quality resort, Matavai, meaning "the source of the water".

Niue hoped the resort would, with a new Air New Zealand link, be the source of tourism growth but Vivian and resort chairman and cabinet minister Hima Takelesi agree that the Government and resort are caught in a catch-22.

The Government is the resort's biggest shareholder and loaned $2 million of $3 million construction costs. It agreed to continue a rescue package whereby it wouldn't call in the loan for another 24 months but that is up in the air after auditors took the view that the government couldn't afford it. The resort doesn't have the money to pay.

"They [Government] are looking at all their options, what is available and to call in the cards, as it were," says Takelesi. "But unfortunately for Matavai we have been struggling to stay open and I think to the management's credit we have never asked the Government for any injection of money [since opening] to keep the resort going.

"If we were to close it, you may as well close the whole tourism infrastructure for Niue. It's the only facility that is up to scratch when it comes to accommodating 40 or 50 people."

"It's a tricky situation. The Government is still trying to work out how best to accommodate the wishes of the auditors and to see if we can keep Matavai ticking over."

Which puts Matavai's directors in a spot. They have held off filing annual returns until they know the outcome and have been told by the Registrar of Companies that they are in breach of company law. They have been given until January 6 to file.

If the Government rescue package is pulled, options include declaring the resort bankrupt, operating under a receiver, selling or liquidating. But Takelesi said doing so could depress its value, deter investors and may impact on the viability of the weekly Air New Zealand link to the island which began last month.

Giving the resort two years would enable it to reap any benefits that may come from the new service and Air New Zealand's marketing clout. The island lacks the palm-fringed beaches of some Pacific Islands but has good fishing and diving.

Takelesi: "When you look at it strictly under New Zealand conditions it's a ridiculous situation. You can't continue trading in the way that you have been but under Niuean conditions if you don't continue trading, you may as well close down the whole tourism industry." The premier is optimistic a solution can be found to keep the resort operating and says information is being prepared for the auditors. The financial situation was serious every year and yet "we have always been able to satisfy them", Vivian said.

Niue's ability to survive as a nation seems to be raised as often as storms rip through the atoll.

Self-government requires infrastructure and today 45 per cent of Niue's population are Government employees - a marked improvement from the early 1980s, when it tipped 80 per cent, but a significant drain for a country which has struggled to set up profitable export industries.

At 260sq km, Niue is the world's largest raised atoll. Known by locals as the Rock, it is also the smallest independent territory, after deciding in a 1974 referendum to become self-governing in association with New Zealand, a move which has the backing of the United Nations. It has, nonetheless, remained heavily dependent on aid, receiving the highest aid per capita of Pacific nations.

In 2003/04 New Zealand provided $8.25 million, including $2.5 million tagged for economic initiatives.

An average of $6.5 million in aid was paid each year during the previous decade, and 14 months ago, Prime Minister Helen Clark announced $20 million extra assistance to help Niue recover from Cyclone Heta, which devastated the country in January last year.

"To your taxpayers and your media people it is difficult to see [the point] trying to make a little nation out of a population of 1700 people," says Vivian. "I don't blame your people, I suppose it's natural. But the idea of a nation envisaged by all those countries in the UN was a very noble one and we still believe we can get on top of it."

Schemes to develop tourism, copra, passionfruit, limes and cattle had been knocked by "too many natural disasters" in the past 31 years but Vivian draws confidence in the resilience of his people.

Doomsayers predicted Heta would be the calamity that delivered the coup de grace to the little nation whose population has dwindled from a peak of 5000 in 1966 to 1761 when the cyclone hit. Even then people did not desert and the population remains about 1700.