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Marshall Islands - Economy (Notes)

ECONOMY The government is the largest employer, employing 64% of the salaried work force. GDP is derived mainly from payments made by the United States under the terms of the Compact of Free Association. Direct U.S. aid accounted for 60.2% of the Marshall Islands' $124.6 million budget for FY 2007. The economy combines a small subsistence sector and a modern urban sector. In short, fishing and breadfruit, banana, taro, and pandanus cultivation constitute the subsistence sector. On the outer islands, production of copra and handicrafts provides some cash income. The modern service-oriented economy is located in Majuro and Ebeye. It is sustained by government expenditures and the U.S. Army installation at Kwajalein Atoll. The airfield there also serves as a second national hub for international flights. The modern sector consists of wholesale and retail trade; restaurants; banking and insurance; construction, repair, and professional services; and copra processing. Copra cake and oil are by far the nation's largest exports. A tuna loining plant that will employ 500 workers--starting at $1.50 per hour--should reopen in 2007. Copra production, the most important single commercial activity for the past 100 years, now depends on government subsidies. The subsidies, more a social policy than an economic strategy, help reduce migration from outer atolls to densely populated Majuro and Ebeye. Marine resources, including fishing, aquaculture, tourism development, and agriculture, are top government development priorities. The Marshall Islands sells fishing rights to other nations as a source of income. Since 1990, the Marshall Islands has offered ship registrations under the Marshall Islands flag. It now registers about 1,400 vessels, the fourth-largest fleet in the world, and receives an income of approximately a million dollars annually. As a small nation, the Marshall Islands must import a wide variety of goods, including foodstuffs, consumer goods, machinery, and petroleum products.