COMMENT: Samoa’s debt, economic growth and financial rewards by NPF and UTOS

Staff Reporters

, Economy, Latest

“SNPF is owned by all the workers in Samoa and UTOS by all the unit holders and are managed by the Government and there is a big difference between owning and managing.”

 

By Afi’a Tuluvao

 

APIA, SAMOA – 20 MAY 2020: Interesting articles in the local newspapers recently on our country’s financial situation and two Government financial institutions pledging help to its owners through dividends as part of their relief packages. Of particular interest is how the two CEOs talk about the amounts their respective institutions have handed out to their owners as if the amounts represent a significantly huge payday and that they deserve a pat on their backs.

First let’s have a look at the debt situation of Samoa.

No Appetite For More Loans
The CEO of Finance stated that the Government has no appetite for more loans and that there is enough money in the public purse to deal with the current needs of our country. I am trying to figure out how this can be true when the Government has been borrowing money to fund budget shortfalls in the past for as long as I can remember when things were normal.

The CBS has predicted a minus economic growth with estimated loss of income of about $400+ million Talā due to loss of jobs in the private sector and yet we don’t have to borrow contrary to the IMF prediction.

View the summary below which puts together information gathered from various public sources so that our readers can have a better understanding of our debt status.

The newspaper articles omitted domestic borrowings which have been factored into the above summary to reflect a more correct status of our national debt.

The Finance Chief may wish to clarify this and would probably quote his version of the domestic debt. Anyway, the IMF predictions is about right with the CBS and for those two to be correct, then our Government will have to borrow to meet the huge shortfalls predicted by the CBS and of course fulfill the prophecy of a turn-around in economic growth after the election year which looks good for the Government. The price will be an additional 600 million and it is about right since the Chief does not mention any reserves so I take it that it is not well for this purpose anyway. Will wait and see how the next budget is financed as I suspect he will rely heavily on our donor friends to come to the rescue.

“One thing that is at least encouraging is that if the annual 100 million Talā repayment is maintained, then perhaps the Chief will be around to see the end of the current balance but I’m not sure whether his PM dad will.”

Back to the NPF and the UTOS. First, the two CEOs are to be sternly reminded that the institutions they head are not Government owned and they know that well. The NPF is owned by all the workers in Samoa and the UTOS is owned by all the unit holders otherwise commonly known as shareholders. Both institutions are managed by the Government and there is a big difference between owning and managing. From the latest information given to the media here is a snap shot of your achievements so that the readers and your owners have a better understanding of how their funds have been managed.

Return on Investment (ROI)
The ROI tells you how much return is received from the money invested in the institution based on the amount of dividends paid out usually on an annual basis. The ROI from the NPF for example has gradually increased over the past three years and that is an indication that the NPF has used your money more prudently and the returns have increased from 4.7% or 4.7 sene per dollar to 7.8% or 7.8 sene for every dollar over the 3 year period.  Likewise the UTOS has also provided a similar result although slightly lower than NPF indicating that your money has been invested in projects with low margins like small retail shops.

In summary there is nothing exciting about this since if their performance is compared to those of other financial institutions managed by the private sector as shown in the summary, then one wonders why take this huge risk of investing in the UTOS for example when you can place your money in the bank which is much safer and earn basically a higher return. You can also use your deposit as security to borrow and set up a shop and earn a similar return so you can have two sets of income from one investment. The economists call it opportunity cost.

Anyway, it’s a lesson not to blow your own trumpet in the media when it exposes incompetency in the eyes of the very people who own the funds. Now $8 million goes to an NPF building at Salelologa, Savaii. Again, what’s the return for the owners? Good perhaps for the government’s politics and the Minister of Finance image with a tough election ahead and hopefully an improvement in services.

We can only wait for the magic number as in the game of dice; and good luck for the next set of dividends.