Key laughs off Niue aid swipe

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Prime Minister John Key is playing down a diplomatic swipe by a Pacific leader on the Niuean leg of his island-hopping goodwill tour.

After a long-running standoff over aid to the tiny country, Niue's premier, Toke Talagi, used a speech in front of most of the island's business and public service leaders yesterday to link his own re-election chances to New Zealand writing out more aid cheques.

He told Mr Key that, if he lost the election in 18 months' time, "I will blame you".

Mr Key did not react at the time and the swipe was delivered to a silent audience. But he later laughed it off. "I am treating it as a joke," he said.

There have been tense talks behind the scenes between Niue and New Zealand over how tens of millions of aid dollars are being spent on the island, which has fewer than 1500 inhabitants.

Most Niueans live in New Zealand and, as a self-governing region of New Zealand, its people have full New Zealand citizenship.

New Zealand effectively funds the Niuean Government, writing out a cheque of $7.6million a year to support its 420 public servants and 11 ministries and departments. It provides another $4.6m in direct funding, either for core services or core staff.

But there has been a long-running bone of contention over a $20m aid fund set aside in 2004 to help Niue to rebuild after a devastating cyclone.

The New Zealand Government wants the money put into ventures that will put the Niuean economy on a sounder footing, but there are understood to be concerns at how as much as $15m of the fund has been spent so far. The money has either been used to rebuild hospitals and public buildings, or ventures that have had limited economic spinoffs.

The Government is refusing to make more money available until a special envoy visits the island to assess projects next month.

Mr Talagi was critical yesterday about New Zealand dragging its heels and delivered his ultimatum during Mr Key's visit, warning that, if New Zealand refused to provide the money, his country would seek it elsewhere, probably in China.

The threat was clearly a response to the ripples of concern in New Zealand and Australia about China's emergence as an aid donor in the Pacific region, and its deep pockets.

Mr Key is in the Cook Islands today on the last leg of his whirlwind trip, which has taken in four islands in four days.

- © Fairfax NZ News