Economy of Tonga
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Tonga's economy is characterized by a large nonmonetary sector and a heavy dependence on remittances from the half of the country's population that lives abroad, chiefly in Australia, New Zealand, and the United States. Much of the monetary sector of the economy is dominated, if not owned, by the royal family and nobles. This is particularly true of the telecommunications and satellite services. Much of small business, particularly retailing on Tongatapu, is now dominated by recent Chinese immigrants who arrived under a cash-for-passports scheme ended in 1998.
The manufacturing sector consists of handicrafts and a few other very smallscale industries, all of 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.
Rural Tongans rely on plantation and subsistence agriculture. Coconuts, vanilla beans, and bananas are the major cash crops. The processing of coconuts into copra and desiccated coconut is the only significant industry. Pigs and poultry are the major types of livestock. Horses are kept for draft purposes, primarily by farmers working their api. More cattle are being raised, and beef imports are declining.
Tonga's development plans emphasize a growing private sector, upgrading agricultural productivity, revitalizing 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. The copra industry is plagued by world prices that have been depressed for years.
Efforts are being made to discover ways to diversify. One hope is seen in fisheries; tests have shown that sufficient skipjack tuna pass through Tongan waters to support a fishing industry. Another potential development activity is exploitation of forests, which cover 35% of the kingdom's land area but are decreasing as land is cleared. Coconut trees past their prime bearing years also provide a potential source of lumber.
The tourist industry is relatively undeveloped; however, the government recognizes 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 Nuku'alofa and Vava'u.
Economy - overview: The Tongan economy's base is agriculture, which contributes 30% to GDP. Squash, coconuts, bananas, and vanilla beans are the main crops, and agricultural exports make up two-thirds of total exports. The country must import a high proportion of its food, mainly from New Zealand. The industrial sector accounts for only 10% of GDP. Tourism is the primary source of hard currency earnings. The country remains dependent on sizable external aid and remittances to offset its trade deficit. The government is emphasizing the development of the private sector, especially the encouragement of investment.
GDP: purchasing power parity - $238 million (1998 est.)
GDP - real growth rate: -0.3% (1998 est.)
GDP - per capita: purchasing power parity - $2,200 (1998 est.)
GDP - composition by sector:
agriculture:
30%
industry:
10%
services:
60% (1997)
Population below poverty line: NA%
Household income or consumption by percentage share:
lowest 10%:
NA%
highest 10%:
NA%
Inflation rate (consumer prices): 3.2% (1998 est.)
Labor force: 36,665 (1994)
Labor force - by occupation: agriculture 65% (1997 est.)
Unemployment rate: 11.8% (FY93/94)
Budget:
revenues:
$49 million
expenditures:
$120 million, including capital expenditures of $75 million (FY96/97 est.)
Industries: tourism, fishing
Industrial production growth rate: 1.9% (FY95/96)
Electricity - production: 35 GWh (1998)
Electricity - production by source:
fossil fuel:
100%
hydro:
0%
nuclear:
0%
other:
0% (1998)
Electricity - consumption: 33 GWh (1998)
Electricity - exports: 0 kWh (1998)
Electricity - imports: 0 kWh (1998)
Agriculture - products: squash, coconuts, copra, bananas, vanilla beans, cocoa, coffee, ginger, black pepper; fish
Exports: $8 million (f.o.b., 1998)
Exports - commodities: squash, fish, vanilla beans
Exports - partners: Japan 53%, United States 18%, New Zealand 6%, Australia 6% (1997 est.)
Imports: $69 million (f.o.b., 1998)
Imports - commodities: foodstuffs, machinery and transport equipment, fuels, chemicals
Imports - partners: New Zealand 30%, Australia 19%, United States 11%, United Kingdom 11%, Japan 3% (1997 est.)
Debt - external: $62 million (1998)
Economic aid - recipient: $38.8 million (1995)
Currency: 1 pa'anga (T$) = 100 seniti
Exchange rates: pa'anga (T$) per US$1 - 1.6250 (November 1999), 1.4921 (1998), 1.2635 (1997), 1.2323 (1996), 1.2709 (1995)