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Kiribati - Economy (Notes)

ECONOMY Kiribati's per capita GDP of less than U.S. $700 is one of the lowest in the world. Only 20% of the workforce participates in the formal wage economy and over 60% of all formal jobs are in South Tarawa. The monetary economy of Kiribati is dominated by the services sector, representing a GDP share of over 80%, and the public sector which provides 80% of monetary remuneration. The end of phosphate revenue from Banaba in 1979 had a devastating impact on the economy. Receipts from phosphates had accounted for roughly 80% of export earnings and 50% of government revenue. Per capita GDP was more than cut in half between 1979 and 1981. The Revenue Equalization Reserve Fund, a trust fund financed by phosphate earnings over the years, is still an important part of the government?s assets and contained more than U.S. $554 million in 2006. Kiribati has prudently managed the reserve fund, which is vital for the long-term welfare of the country. In one form or another, Kiribati gets a large portion of its income from abroad. Examples include fishing licenses, development assistance, tourism, and worker remittances. External sources of financing are crucial to Kiribati, given the limited domestic production ability and the need to import nearly all essential foodstuffs and manufactured items. Historically, the I-Kiribati were notable seafarers, and today about 1,400 I-Kiribati are trained, certified, and active as seafarers. Remittances from seafarers are a major source of income for families in the country, and there is a steady annual uptake of young I-Kiribati men to the Kiribati Maritime Training Institute. Fishing fleets from South Korea, Japan, China, Taiwan, and the United States pay licensing fees to operate in Kiribati's territorial waters. These licenses produce revenue worth U.S. $20 million to $35 million annually. Kiribati?s exclusive economic zone comprises more than 3.55 million square kilometers (1.37 million square miles) and is very difficult to police given Kiribati?s small land mass and limited means. Kiribati probably loses millions of dollars per year from illegal, unlicensed, and unreported fishing in its exclusive economic zone. Official development assistance amounts to between U.S. $15 million and $20 million per year. The largest donors are Japan, the EC, Australia, New Zealand, and Taiwan. U.S. assistance is provided through multilateral institutions. Remittances from Kiribati workers living abroad provide more than $7 million annually. Tourism is a relatively small, but important domestic sector. Attractions include World War II battle sites, game fishing, ecotourism, and the Millennium Islands, situated just inside the International Date Line and the first place on earth to celebrate New Year. The vast majority of American tourists only visit Christmas Island in the Line Islands on fishing and diving vacations. Most islanders engage in subsistence activities such as fishing and growing of food crops like bananas, breadfruit, and papaya. The leading export is the coconut product, copra, which accounts for about two-thirds of export revenue. Currently, copra is exported to Bangladesh for processing. Other exports include pet fish, shark fins, and seaweed. Kiribati's principal trading partners are Australia and Japan. Transportation and communications are a challenge for Kiribati. Air Pacific, Air Marshall Islands, and the former Air Nauru, now known as Our Airline, provide international air links to the capital of Tarawa. Air Kiribati provides service to most of the populated atolls in the Gilberts using small planes flying from Tarawa. Small ships serve outlying islands, including in the Line Islands, with irregular schedules. A joint venture between Air Pacific and the government of Kiribati operates a flight linking Christmas Island to Fiji and Honolulu. Telecommunications are expensive, and service is mediocre. There is no broadband Internet.