Kiribati economy: The sinking feeling

Kiribati is made up of a group of 33 Islands in the Pacific Ocean that are under threat of being drowned by the Ocean, on account of climate changes. The present International conference on Climate change at Copenhagen has failed to address the concerns of such small Island nations such as Kiribati that has to do with their very survival.

Phosphate deposits that until the late ‘70s were the key contributors of the economy have since depleted, and now fishing and agriculture, mainly copra production, are the major economic activities. Kiribati did one wise thing by establishing a Trust Fund with proceeds from phosphate mining-the Revenue Equalization Reserve Fund (RERF). This fund is used to cover the annual fiscal deficit.

Kiribati has an exclusive economic zone in the pacific covering a vast area of 3.5 million square kilometers, endowed with a variety of fish, especially tuna. Kiribati derives good income by licensing foreign fishing vessels to operate in its EEZ. As a matter of fact, over 80% of the Kiribati population is dependent on the fishing industry for its sustenance.

As for other economic activities, there does not appear to be much scope, primarily on account of the small size of the economy, as well as the Island nation’s remoteness from major markets, apart from lack of a variety of raw materials. All these factors have combined to stunt the growth of the economy, so much so, that it is classified as a least developed country by the United Nations.

Australia is the major market for Kiribati, as well as a source of aid, and there is a Kiribati-Australia Partnership for Development in place. The Kiribati Government has also taken initiatives in addressing these problems and has identified the following areas for special attention in the Kiribati Development Plan 2008-2011: Human Resources Development, Economic growth and Poverty Reduction, Health, Environment, Governance and Infrastructure.

Kiribati is in need of help from the International Community in addressing the most critical problems faced by it, namely the threat of environmental degradation, global warming, etc, that threaten its very existence.

Jersey economy: Anxious times.

Jersey is another overseas British Territory that has made Offshore Banking and finance the engine for its growth and development.

While earlier it was agriculture, fishing and knitwork that sustained its economy, today, it is high finance that contributes nearly 50% of the territory’s GDP, apart from 60% of the Government’s tax accruals. Liberal laws relating to establishment of firms and low tax rates have attracted a host of Banks and financial services companies to establish their offices here. British nationals subject to high taxes at home have found it convenient to base themselves in Jersey to escape the tax rigors at home. Nearly 35000 firms, including Banks and financial services companies are said to be registered in Jersey. The proximity to U.K. and the E.U. markets, as also free access to them have played an important part in boosting the economic prospects of Jersey.

Agriculture continues to be an important economic activity, with vegetables and flowers attracting major buyers in the U.K. And of course, the world famous Jersey cow that has been cross-bred with local varieties in various parts of the world is a native of Jersey. Special mention may also be made of the Jersey Royal Potatoes and dairy products that are exported from Jersey, mainly to the U.K and the E.U. Tourism is another area that continues to grow, and contribute to the economy in increasing measure. The majority of the tourists are from Britain.

The Jersey administration is also encouraging light industry and has succeeded in developing a small but thriving electronics industry. However, Jersey has to import raw materials, foodstuffs, machinery and equipment, chemicals, etc.

Presently, there is a sense of anxiety among the denizens of the Island about their future, especially in terms of the current global economic doom.

Isle of Man economy: Super performer.

Isle of Man is a British Overseas Dependency whose economy is doing much better than its Principal’s! Only the global economic slowdown seems to have slowed down the Isle of Man that otherwise is said to have achieved and maintained impressive growth of 10%+ for over 25 years. A superlative performance, by any standard.

Once dependent on agriculture and fishing, the Isle of Man has diversified its economy that has ensured a steady growth for the Island over a long period of time. The major economic activities that drive the Isle of Man economy include:
Banking and Financial Services: Offshore Banking is said to contribute nearly 20% of the Island’s GDP, with other financial services contributing about 20%. That means 40% of the GDP is generated from this sector.
Services: Among the services that contribute the chunk of the revenues to the Island are ship registration and management. The Isle of Man offers highly professional services in the areas of maritime laws, insurance, finance and management. Film production is another area that the Island has been quite successful at by providing professional services. Surprisingly, the Island enjoys an important position in the area of space exploration and commerce, and hosts the Institute of Space Commerce. Tourism is also on the rise as an industry with great potential.
Manufacturing: The Isle of Man is an important center for the manufacture of sophisticated components used in airliners, spacecraft, submarines, oil rigs, etc. No doubt the Island has enjoyed AAA ratings from rating agencies for long.

The Isle of Man administration has for long adopted a liberal economic environment, making it investor-friendly, with liberal labor laws that allow employment of people from abroad. That apart, it has been the policy of the Island to end every budget with a surplus. The only problem that it faces now is opposition in the U.K. to various benefits extended to it in the form of subsidies, especially as Britain faces economic problems in the wake of the global economic meltdown.

Guyanese economy: Need to consolidate.

The former British colony of Guyana has to contend with two major issues. Political instability and economic downturn. Political instability is a result of the ethnic tensions between the descendents of African slaves, and those of indentured Indian laborers who form two distinct groups in the Guyanese population, and are often at loggerheads. And economic downturn is a result of the dependence of the country on commodities like gold, bauxite, timber, rice, sugar, and shrimp that are prone to price variations on the international markets.

In addition to this, Guyana has border disputes with its neighbors, Suriname and Venezuela that tend to divert the attention of the Government from more pressing issues. The present global downturn has had its effect on the economy of the country dragging it down with a fall in the commodity prices.

The GDP growth rate of Guyana for the year 2008 was around 3.2% and inflation about 8%. External debt is well over 100% of the GDP, and Guyana has had to accept aid from agencies like the Inter-American Development Bank to tide over a crisis like situation. Indebtedness is a constant problem that Guyana has to tackle. The situation began improving once the Government started divesting its share in businesses and brought in private participation. The Economic Recovery Program was fairly successful.

The Guyanese Government has to now take steps to consolidate its economic activities and achievements, and improve its relations with its neighbors to take forward the process of economic consolidation and further progress. The construction of the bride over the River Takutu linking it with Brazil is a step in the right direction.

Improvement in infrastructure, especially energy and power, will help Guyana market its products more competitively, and help it retain its market share. The way forward for Guyana is to first consolidate its present position economically.

Grenada economy: Diversifying to survive.

The Caribbean Island nation of Grenada is making steady progress in diversifying its economy that relies heavily on tourism, apart from educational services to foreign students. The GDP of the country that is growing at more than 3.5% is composed of services to the extent of 77%, industry at 18%, and the rest in agriculture.

Cocoa and nutmeg are the important agricultural products, apart from bananas, citrus, avocados, corn, sugarcane, and vegetables. In fact, Grenada is one of the world’s largest producers of nutmeg. Industrial activity includes textiles, beverages, tourism, and construction that is growing rapidly. Grenada exports nutmeg, cocoa, bananas, and clothing, and imports foodstuffs, chemicals, machinery, fuels, etc. Jamaica, Trinidad and Tobago, the U.S. are the major trading partners of Grenada. The country is also a member of the CARICOM (Caribbean Community and Common Market), and the ECCU (Eastern Caribbean Currency Union).

The economic problems faced by Grenada include declining tourist revenues, destruction of agricultural activities on account of natural disasters periodically, and the effect of the ongoing global crisis, declining FDI, and increasing unemployment. Grenada is certainly feeling the pinch of the economic slowdown, and has accepted aid from the IMF under the special Poverty Reduction and Growth Facility.

The IMF has in fact, praised the Grenadian Government for focusing on the macroeconomic issues, and taking the right steps to mitigate the problems. Some of the areas where Grenada is said to have done well are capital spending, restraining wage growth, increasing efficiency in spending on goods and services, and in addressing the needs of the vulnerable sections of society.

The Banking sector in Grenada came in for special mention from the IMF for its resilience and good performance. Grenada appears to have acted wisely in the face of the ongoing economic problems, and should reap the rewards in the years to come.

Greenland economy: Transition time.

The Greenland economy has been historically supported by the fishing industry with almost 95% of the country’s exports comprised of fish products. A fishy economy indeed!

Greenland is overwhelmingly dependent on the fishing and seafood industry for its survival. Fish processing is the major activity on the industrial front, with a large variety of fish available in waters off Greenland’s coast.

Recently however, discoveries of huge reserves of oil and natural gas have created the possibility of a complete change in the economic scenario of Greenland. The estimates for these mineral resources are truly mind-boggling. According to the U.S. Geological Survey, certain parts of the country may have oil reserves of well over 16 billion barrels, and natural gas reserves of nearly 140 trillion cubic feet. If true, then it will definitely be a game changer for the Greenland economy, with implications for the entire region.

It will also help Greenland re-work its relations and equations with Big Brother Denmark that provides half of the Government revenues. Apart from the oil and gas riches, there are also indications of other precious minerals in large quantities, including gold, diamonds, rubies, platinum, etc. These discoveries provide vast scope for Greenland to break free of its dependence on fish and Denmark, and chart out a new economic agenda and program to develop the mining industry, biotechnology, shipping industry, apart from tourism.

Global warming, otherwise a negative and dangerous phenomenon, is ironically helping out Greenland in realizing its potential in the mining and tourism industry, by opening up hitherto inaccessible areas for exploration and exploitation, and also extending the tourist season.

It remains to be seen how Greenland plays its new economic cards to ensure a orderly economic development, without falling into the trap that several other nations in a similar position have, in the past.

Cook Islands economy: Small and struggling.

The case of the economic development of the Cook Islands is a typical one of small islands isolated from large markets, small domestic markets, lack of resources, and compulsion to import large quantities of essentials. In addition, natural disasters striking at regular intervals set the economy back by a few years. Hence, there is always a tug of war between economic progress and regress.

The economic base of the Cook Islands is made up of agriculture that provides sustenance to one third of the workforce. The major agricultural produce is copra, citrus fruit, bananas, pawpaws, yams, coffee, and pineapples. Among industries may be mentioned tourism, fruit processing, clothing, fishing and handicrafts.

New Zealand is the country’s major trading partner, as well as benefactor. Economic aid from New Zealand offsets the budgetary deficits and stabilizes the economy of Cook Islands.

The services sector contributes 75% to the Island’s GDP, while industry about 10%, and agriculture about 15%. The unemployment rate is said to be about 12% and the inflation rate is rising steadily. The country exports fish, jewelry, handicrafts, and black pearls. In fact, black pearls are the major export item. Imports include foodstuffs, textiles, timber, capital goods and fuels.

Presently, the Cook Islands are being supported by the Asian Development Bank under the Economic Recovery Support Program. The global financial crisis has affected the Cook Islands’ economy, ad this support from the ADB is expected to help the country tide over its short-term problems.

The Government has initiated several measures including provision of support to the vulnerable sections of society. It is also trying to curb the high inflation rate and developing infrastructure by way of airports, roads, water supply, etc., to give proper direction and thrust to the process of economic development.

Central African Republic economy: Many hurdles to cross.

The land-locked African nation, rich in minerals, especially diamonds, but poor in economic management, has enormous problems to overcome, in its march towards economic progress.

Subsistence agriculture provides succor to the majority of the people. With forestry providing a helping hand, 70% of the country’s population finds some form of livelihood that is suitable to a largely unskilled workforce, in the above two activities.

Tobacco, corn, millets, coffee, bananas and tapioca are the major agricultural produce. Timber and lumbering provide another source of employment for the people. Agriculture provides more than 55% inputs to the country’s GDP. The mining sector is gaining in importance. Diamonds, gold, uranium and other minerals are attracting investors. Presently, the diamond industry is the most developed mining activity and contributes to nearly 50% of the country’s export earnings.

Other industries include textiles, breweries, footwear, bicycle assembly, etc. The industrial sector is said to contribute nearly 20% of the GDP. The Central African Republic exports timber, coffee, cotton, and tobacco, and imports foodstuffs, pharmaceuticals, machinery and equipment, etc.

The major problems facing the Central African Republic are poor infrastructure, especially transportation, economic mismanagement, and corruption. The country has been a beneficiary of several programs of the IMF and WB in the development of its agriculture and infrastructure.

The Government has also adopted the Central African Economic and Monetary Community Charter of Investment in order to conform to regional and international standards in investment and finance.

Central African Republic has to do a lot in terms of developing infrastructure, especially transportation and communication, and encouraging entrepreneurship to speed up the development process. Security, unemployment, poverty, and disease are the other major social issues that the Government has to address to create an overall favorable climate for the economic development of the country.

Eritrean economy: Looking to break out of the vicious circle.

Eritrea is a country weighed down by its painful legacy that prevents it from taking a bold and definitive step forward towards economic liberty, and social development, despite its potential.

Eritrea is a relatively young republic, having gained independence from Ethiopia in 1993. But outstanding issues with its former rulers resulted in a bitter and costly war in 1998-2000 that saw large scale destruction of Eritrea’s infrastructure, and revenue generating activities, from which the country could not recover easily or soon.

Added to this, is the concentration of economic and political power in the hands of a single group that has prevented the growth and development of potentially profitable economic activities and entrepreneurship in the country.

Eritrea is one of the poorest countries in Africa, with subsistence agriculture providing a semblance of occupation and livelihood to the majority of the people. Agricultural produce from Eritrea includes corn, sorghum, lentils, tobacco, sisal etc. Livestock breeding and fishing provide an additional source of income to the people engaged in agriculture.

There is also some manufacturing activity related to food processing and beverages, cement, textiles, etc. The country exports cotton, fruit, vegetables, meat and hides, and imports foodstuffs, machinery, equipment, etc.

The recent interest of several international mining companies in exploiting the country’s mineral resources, mainly gold, zinc, and copper have created a buzz about the imminent boost to the economy. But several issues need to be resolved before full fledged mining activity gets underway.

One is the security issue, and the other, the issue of sanctions proposed against the country for its alleged negative role in the internal strife in Somalia. These issues and others will have a bearing on how far the country can go to achieve economic development in the near future.

Eritrea is looking to break out of the vicious circle created by its legacy, but wants to do that on its own terms.

Guernsey economy: Rough seas ahead.

An attractive tax haven, with low taxes, no exchange controls, and no restrictions on inward or outward investment, or on repatriation of profits, dividends, interest income, etc., Guernsey, a British Overseas Territory, is an attractive destination for businesses looking for minimal formalities of incorporation and ease of operations. Other facilities that help the Island attract international firms are good communications, and professional services. Of course, the proximity to the EU markets is a big plus for firms to set up shop.

However, it must be said to the credit of the Islands’ Administration, that it does not allow all and sundry firms to establish themselves there. It is quite selective in this matter, and does not offer any incentives to foreign investors and tight fisted in immigration matters.

Next to financial services, tourism occupies an important place in the country’s development, though it cannot be said to be booming. Guernsey also benefits from its expatriate citizens who remit money home in good amounts every year.

Guernsey does have its share of problems that are related to integration with the EU, taxation issues, and budget deficits. The difference in its earnings and expenditure is said to be uncomfortably low, and may force the Island to take unpopular measures to shore up its economy.

The Islands Administration has taken steps to improve the investment environment and has also built up sizeable reserves to help it in the transition in 2010. Guernsey needs to diversify its economic base by expanding upon the existing but depleting sources of revenues like horticulture, floriculture, etc. The coming years may be a difficult time for the Islands and require some deft handling to escape the worst effects of the economic downturn that has gripped the better part of the world.

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