Tonga - Economy

Economy

Tonga's economy is characterised by a large non-monetary sector and a heavy dependence on remittances from the half of the country's population who live abroad (chiefly in Australia, New Zealand, and the United States). The royal family and the nobles dominate and largely own the monetary sector of the economy – particularly the telecommunications and satellite services. Tonga was named the sixth most corrupt country in the world by Forbes magazine in 2008.

Tonga was ranked the 165th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.

The manufacturing sector consists of handicrafts and a few other very small scale industries, which contribute only about 3% of GDP. Commercial business activities also are inconspicuous and, to a large extent, are dominated by the same large trading companies found throughout the South Pacific. In September 1974, the country's first commercial trading bank, the Bank of Tonga, opened. There are no patent laws in Tonga.

Rural Tongans rely on plantation and subsistence agriculture. Coconuts, vanilla beans, bananas, coffee beans and root crops such as yams, taro and cassava, are the major cash crops. The processing of coconuts into copra and desiccated (dried) coconut was once the only significant industry but deteriorating prices on the world market has brought this once vibrant industry, as everywhere throughout the island nations of the south Pacific, to a complete standstill. In addition, the feudal land ownership system meant that farmers had no incentive to invest in planting long-term tree crops on land they did not own. Pigs and poultry are the major types of livestock. Horses are kept for draft purposes, primarily by farmers working their 'api 'uta (a plot of bushland). More cattle are being raised, and beef imports are declining. The export of squash to Japan once brought relief to a struggling economy but recently local farmers are increasingly wary of this market due to price fluctuations, not to mention the huge financial risks involved.

Tonga's development plans emphasise a growing private sector, upgrading agricultural productivity, revitalising the squash and vanilla bean industries, developing tourism, and improving the island's communications and transportation systems. Substantial progress has been made, but much work remains to be done. A small but growing construction sector is developing in response to the inflow of aid monies and remittances from Tongans abroad. In recognition of such a crucial contribution the present Tongan government has created a new department within the Prime Minister's Office with the sole purpose of catering for the needs of Tongans living abroad. Furthermore, in 2007 the Tongan Parliament amended citizenship laws to allow Tongans to hold dual citizenship.

The tourist industry is relatively undeveloped; however, the government recognises that tourism can play a major role in economic development, and efforts are being made to increase this source of revenue. Cruise ships often stop in Vavaʻu, a place that has a reputation for its whale watching, game fishing, surfing, beaches and is increasingly becoming a major player in the South Pacific tourism market.

Tonga's postage stamps, which feature colourful and often unusual designs (including heart-shaped and banana-shaped stamps) are popular with philatelists around the world.

In 2005, the country became eligible to become a member of the World Trade Organization. After an initial voluntary delay, Tonga became a full member of the WTO on July 27, 2007.

The Tonga Chamber of Commerce and Industry (TCCI), incorporated in 1996, endeavours to represent the interests of its members, private sector businesses, and to promote economic growth in the Kingdom.

Tonga is home to some 106,000 people, but more than double that number live overseas, mainly in the U.S., New Zealand and Australia. Remittances from the overseas population has been declining since the onset of the 2008 global economic crisis. The tourism industry is improving, but remains modest at under 90,000 tourists per year.