For the past several months I've been corresponding with some business students at the University of Colorado about Tonga and Peace Corps. They were assigned to me by their professor. The students have just completed the case study which is below.
They have fictionalized some of the details (like my name, former job, etc) but I think they've done a good job of capturing some of the issues in Tonga.
I hope you enjoy reading their work.
The Tongan Paradox
Disclaimer: Sam Battan and Andrew Venclovas prepared this case study under the direction of instructor Francy Milner, as the basis for discussion and training, not to illustrate either effective or ineffective approaches to a problem or project.Introduction
It was five o’clock in the evening when Edward finally got the call from the Peace Corps’ South Pacific placement officer. After a multitude of headaches from the application process had been resolved, it was finally time to tell his boss that he would soon be leaving his long time position at a major consulting firm to go spend time as a Peace Corps volunteer (PCV), assisting with business development in the Kingdom of Tonga. On the long commute over the bridge into New Jersey, Edward couldn’t help but be overwhelmed by all of the uncertainty that he would soon be facing. Once finally home, Edward had to express his excitement, “I can’t wait for the opportunity to help a developing country realize its potential!”
At the very same time, 8,000 miles away in a small village on the island of Vava’u, Tonga, Mele was preparing lunch for her six children in their humble island cottage. Mele’s family didn’t make enough money to save any, but still lived a very happy and well-nourished life. Mele and her husband were educated through the twelfth grade, and their kids attended a respectable public school. They never went hungry because they ate what they produced on their two-acre farm. What material possessions they couldn’t afford were usually given to them by family or neighbors in the village, or sent from Mele’s uncle, who lived and worked in New Zealand. However, Mele’s village had recently been living without some of the main food staples such as bread and milk, because the local general store had not gotten a shipment of supplies from Tongatapu, the Kingdom’s capital, for almost two weeks. For some reason, the boat that usually drops off supplies just didn’t appear. Mele was a rational thinker, and she pondered, “What if I could open up a general store of my own? More stores on this island ought to make the chance of this happening again much less.” Although this was just a thought, months later Mele and a then-unknown PCV named Edward would realize this goal.
Background
The Kingdom of Tonga is an archipelago located in the South Pacific Ocean consisting of 176 islands, 36 of which are inhabited. There are approximately 101,901 people living in Tonga, with about two thirds of that population inhabiting the main island of Tongatapu. Estimates show that the nation has been inhabited for over 3,000 years, with vast cultural shifts attributed to foreign interaction. As part of a subtropical climate, Tonga experiences warm temperatures from December to May, cooler temperatures from May to December and has extremely rich, fertile soil, which accounts for its abundance of crops including coconuts, vanilla beans, and bananas. [8]
The Kingdom of Tonga is a constitutional monarchy and is the only island nation in the region to formally avoid colonization. Tonga is a quiet nation that is relatively isolated, with a political structure divided among the king, the nobles, and the commoners. Recently, there has been increasing pressure on Tonga from Australia and New Zealand to westernize and abandon the deeply entrenched Tongan culture. Some fear that this interference will break-down cultural traditions and deep extended families. [2] [5]
Tonga’s economy depends in large part on the remittances from other nations where Tongan nationals reside. Most of the inflow of foreign aid comes from Australia, New Zealand, and the U.S., which accommodates over half the registered citizens of Tonga. Rural natives primarily rely on agriculture, which makes up 30% of total GDP. The remaining portions of the GDP include various services and industries like telecommunications, most of which are owned by the Tongan government. In fact, the government operates seventeen different State-Owned Enterprises (SOEs), which accounted for 45% of total GDP in 2007. Some critics believe that the “large, underperforming public sector is holding back the growth of the economy both directly and indirectly.”[5] [6]
Tonga’s isolated island culture creates an overwhelming need for sound family structure and values. Most homes have several generations living under the same roof. Reunions are also regular because if a Tongan isn’t familiar with his or her family tree there is a good chance undesirable dating may occur. There are hierarchical ranks within each family, which are not universal, and range from where a member sits at the dinner table to household chores.
The world recognizes Tonga as “The Friendly Islands,” and almost all Tongans are extremely welcoming to foreigners and treat guests as a member of the family. However, gender is a strong determining factor in one’s role as a Tongan, and certain tasks are associated exclusively with males or females. For example, Tongan families are seemingly patriarchal in nature, while the women actually make most important decisions inside the home. Tonga’s government also has a mandatory education system for young people up to the age of 14 years. Thus, literacy rates are the highest in the Pacific and are at about 99% for 15-24 year olds. [3]
The Peace Corps has an extensive presence in Tonga since the first volunteers arrived in October of 1967. Since that time, over 1000 volunteers have served willingly, primarily as teachers. Presently, a new micro-enterprise development team has sprung up to help natives create income-generating businesses for their families domestically, rather than overseas. The volunteers aim to train and motivate communities, and teach basic business skills. [4]
A Whole New World
“Toto, I have a feeling we’re not in Kansas anymore,” Edward chuckled to himself as he lay in bed reflecting on his first day’s experience in this new, unchartered territory of Tongatapu. Since the moment he stepped off the plane, Edward was bombarded by culture shocks. As he was going through the Tongan version of Customs, the friendly man dressed in traditional military garb stopped him for some questions. “How long are you going to be living in the lovely Kingdom of Tonga?” asked the man in scattered but impressive English. “Two years,” Edward said while holding up his middle and index finger. Much to his chagrin, his assigned Peace Corps trainer explained to him that he just told the Customs officer to ‘F’ off. Cultural differences, Edward would find, not only caused such social faux pas, but also resulted in a significant limitation to free enterprise as a means for economic growth.
After his week long training, Edward was boated to the island where he would be spending the next two years. Vava’u was second in population to the main island, Tongatapu. His reaction after the first couple of days was that the island teetered on the “edge of modernity;” it had paved roads and a reasonably sized retail district complete with two banks and a few stores, but most of the population sustained a living off their small acre farms.
Edward was lucky enough to receive a luxurious housing arrangement (compared to other Peace Corps Volunteers). His had running water, a full kitchen, and electricity. It was provided by the bank that Edward partnered with, the Tonga Development Bank. Nonetheless, Edward’s experience was far removed from his life in the States. The power went out in Edward’s house four times in the first week and the cell phone graciously given to him by one of his colleagues had about a 50% success rate for placing or receiving a call – on a good day. The internet connection, when it was working, downloaded data at 32K, just a little more than half of the speed of a dial-up modem in the USA. Although these were just a mild inconvenience to Edward, there were also infrastructure issues that created a problem in Edward’s line of work – developing the skills of the business owners in his local community.
About three months into his stay in Vava’u, Edward was able to go into villages and help business owners on an individual basis. “Here is where I can do the most help; this is what I know best,” Edward thought en route on his first community excursion. On his return from the village, Edward’s ego was long gone; he still had a lot to learn before he could actually help private enterprise prosper in Vava’u.
When Edward first walked into this small general store, he was amazed to find the shelves almost bare and no one was in the shop except the man who owned it.
“Where are all of your goods?” Edward asked with curiosity.
“Still in Tongatapu, waiting to be shipped to me!” the man said with a genuine smile and no concern whatsoever.
“So, you are waiting on supplies to be shipped over from the main island?”
“Yes, my friend Edward. The boats usually come every Monday and Wednesday, but for the past two weeks have not showed up.”
“Why?” was the only thing Edward could think of saying.
“It is a mystery to me. There really is no reason to worry though, it is pineapple season and the kids and wife are eating as heartily as ever.”
Edward concluded later that the infrastructure was definitely not in a place to sustain a competitive market of any sort. He pondered, “How are these business owners supposed to keep a steady supply chain?” and “Why is the government not investing in the proper transportation and commercial channels? These were puzzling questions for Edward, but not as puzzling as the main question in his mind: “Why aren’t Tongans doing anything about it?” It seemed that he still had some things to learn about the Tongan culture.
The Dirty “M” Word
Soon after Edward’s first encounter with a Tongan business owner, he met Mele. Her husband came into the bank where Edward was working and inquired about starting a small grocery store in their village, ten miles away. In these situations, Edward learned, men are the ones who make public appearances and ask the questions, but it is actually the women who keep the books and make the business decisions. Accordingly, Edward asked Mele’s husband to bring Mele in for a group discussion on how to start up this grocery store. Once all three were behind closed doors, Edward dove right into questioning.
“Why do you want to start a grocery store?” Edward asked.
“To provide for our family and friends,” Mele’s husband replied.
“Why not do it to make a profit and save some money?”
“We have been experiencing some food shortages and our only concern is the well being of our family and community.”
“But wouldn’t money make you happy? If you ran your store correctly, you could have extra income to spend on whatever you wanted.”
“Money doesn’t make us happy, Edward. Having food, shelter, and a good family is what makes us happy. For the necessities we cannot produce ourselves we rely on the money sent to us by Mele’s relatives and mine.” Mele’s husband concluded.
It was now apparent to Edward that Tongan’s motivation is what confused him the most. Mele and her husband had no clear idea what ‘profit’ even meant; all they wanted to do was provide for their friends and family and make sure no one goes hungry. Those values are engrained in Tongan culture just as much as self-preservation is engrained in the American culture; remittances and handouts are the only way of life. “Where are the incentives for Tongans to start a business for profit when they get money sent to them for doing nothing?” Edward pondered.
The Argument for Free Enterprise
Edward made a lot of progress with Mele as well as multiple other small business owners. Throughout the course of a year, Edward championed a multitude of small victories, including:
Helped Mele and her husband start their general store
Taught over ten small business owners proper bookkeeping methods
Developed a website for a small Tongan business owner
Trained Tongan bank staff underwriting of loans
Assisted in IT problems throughout the island of Vava’u
Still, he was having trouble finding a large-scale solution to promote free enterprise and ultimately, promote economic growth. Edward believed the government’s regulation of business, as well as the culture and lack of infrastructure, was hindering economic growth. In his opinion, helping small business owners with their business skills was a very small-scale solution; there was still little hope for a nation-wide privatization of the economy. The Tongan SOEs, coupled with strict property laws, decreased demand for foreign direct private investment and greatly increased the barriers of entry to all industries.
Edward found hope when a private company came to Tonga and took the mobile phone market by storm. Prior to this, there were only two cell phone companies in the whole Kingdom. The largest, called UCall, is owned by the public telephone SOE, and in distant second for size and revenues was Tonfon, a company owned by the king and other government officials. Digicel, a global cell phone giant, bought out Tonfon in early 2007. The process took months, and for about a year Digicel operated Tonfon as it had always been run. [6] When Digicel started promoting a free concert by American reggae star Shaggy, everything changed drastically. No one knew who Digicel was, and there was no explanation to why they were sponsoring a concert, only that it was free and everyone was invited. The night of the concert was met with heavy rains, but despite that, over 10% of the whole population ended up attending the concert. After the show, Edward went to bed without seeing a single Digicel sign or advertisement. When he woke up, Digicel banners and billboards were seen almost everywhere in town and, according to Edward, the town had been “painted Digicel Red over night.” Along with all of the new marketing ads, Digicel representatives were traveling door-to-door selling phones and two months of service for $20 USD. Edward had never seen a company do such a masterful job of marketing and launching than what he had witnessed Digicel accomplish. Although this was a rare case of free enterprise thriving, it gave Edward hope that it could happen again in the future.
After witnessing Digicel’s success, Edward returned to Vava’u to work with small business owners, and was still trying to help free enterprise prosper in the great Kingdom of Tonga. He felt good about helping Tongan small business owners, but he was still trying to implement a solution to provide Tonga with sustainable growth. It wasn’t for a lack of ideas; Edward believed the national economy could benefit greatly from its beautiful geography and fertile soil, as well as its educated population. Eco-tourism, Multinational Corporation call support centers, and exporting crops all presented great potential to thrive in Tonga, if the infrastructure and institutions were in place. But what could the Peace Corps do to help make this a reality? As Edward’s stay in Tonga was winding down, he had a perspective changing realization. There will always be use for the 20-something college graduates who enter the Peace Corps, but what countries like Tonga need are older, more experienced PCVs to work on an individual basis with the upper levels of government. In order to modify the current milieu in which the Tongan government operates, Edward believed the Peace Corps must work harder to actively recruit older adults with “real world” experience. Only then will significant progress be made in repairing the gaps of Tonga’s economic infrastructure.
On the 17-hour plane ride back to the US, Edward was optimistic for the future of Peace Corps in Tonga. As long as the right volunteers were working in the right places, there would be significant progress made on the most pressing of issues, including:
Improving infrastructure,
Disaggregating the large and underperforming public sector,
Incentivizing personal entrepreneurs, and
Promoting foreign direct investment
Lingering Questions
What else could Edward do to promote a large-scale solution? Are there any ways to address the lack of infrastructure and unfavorable regulatory environments and promote capitalism without damaging the rich culture? What will it take for Tongans to stop relying so heavily on remittances and take initiative themselves for economic growth?
Appendices
Works Cited
"Low Productivity Cripples Tonga Economy." Economy. 16 Oct. 2008. 18 Nov. 2008 <http://matangitonga.to>.
"Promoting Prosperity in Tonga: Removing Constraints on the Private Sector." Asian Development Bank. Transforming Tonga. 20 Oct. 2008 <http://www.adb.org/documents/reports/psa/ton/psa-ton.pdf>.
"Population, Health, and Human well-being." Earth Trends: Country Profiles. 18 Nov. 2008 <http://earthtrends.wri.org/pdf_library/country_profiles/pop_cou_776.pdf>
"History of the Peace Corps in Tonga." 28 Mar. 2008. 21 Nov. 2008 <http://www.peacecorpswiki.org/history_of_the_peace_corps_in_tonga>
"Reducing the Presence of the State in the Economy." Asian Development Bank. 28 Nov. 2008 http://www.adb.org/documents/reports/psa/ton/chapter3.pdf
Hunsicker, Steve. "Business Changes in Tonga." Weblog post. Steve's Adventures. 15 May 2008. 13 Oct. 2008
Hunsicker, Steve. "More About Tonga." Weblog post. Steve's Adventures. 9 July 2007. 12 Oct. 2008
Tonga Geography. Tonga’s Geography 2008. CIA World Factbook. 14 Nov. 2008 http://www.theodora.com/wfbcurrent/tonga/tonga_geography.html
“Economic Indicators Report 2006.” Department of Statistics, Government of Tonga. 13 Oct. 2008 http://www.spc.int/prism/Country/TO/stats/Economic/eco-index.htm
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