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World > Oceania > Samoa > Economy (Notes)

Samoa - Economy (Notes)


ECONOMY
The Samoan economy is dependent on agricultural exports, tourism, and capital flows from abroad. The effects of three natural disasters in the early 1990s were overcome by the middle of the decade, but economic growth cooled again with the regional economic downturn. Long-run development depends upon upgrading the tourist infrastructure, attracting foreign investment, and further diversification of the economy.

Two major cyclones hit Samoa at the beginning of the 1990s. Cyclone Ofa left an estimated 10,000 islanders homeless in February 1990; Cyclone Val caused 13 deaths and hundreds of millions of dollars in damage in December 1991. As a result, GDP declined by nearly 50% from 1989 to 1991. These experiences and Samoa's position as a low-lying island state punctuate its concern about global climate change.

Further economic problems occurred in 1994 with an outbreak of taro leaf blight and the near collapse of the national airline Polynesian Airlines. Taro, a root crop, traditionally was Samoa's largest export, generating more than half of all export revenue in 1993. But a fungal blight decimated the plants, and in each year since 1994 taro exports have accounted for less than 1% of export revenue. Polynesian Airlines reached a financial crisis in 1994, which disrupted the tourist industry and eventually required a government bailout. It has since become a profit-making concern.

The government responded to these shocks with a major program of road building and post-cyclone infrastructure repair. Economic reforms were stepped up, including the liberalization of exchange controls. GDP growth rebounded to over 6% in both 1995 and 1996 before slowing again at the end of the decade.

The service sector accounts for more than half of GDP and employs approximately 30% of the labor force. Tourism is the largest-single activity, more than doubling in visitor numbers and revenue over the last decade. More than 101,000 visitors arrived in Samoa in 2005, contributing over $82.95 million to the local economy. One-third were from American Samoa, 28% from New Zealand, and 11% from the United States. Arrivals increased in 2000, as visitors to the South Pacific avoided the political strife in Fiji by traveling to Samoa instead.

The primary sector (agriculture, forestry, and fishing) employs nearly two-thirds of the labor force and produces 13% of GDP. Important products include coconuts and fish.

Industry accounts for almost half of GDP while employing less than 6% of the work force. The largest industrial venture is Yazaki Samoa, a Japanese-owned company processing automotive components for export to Australia under a concessional market-access arrangement. The Yazaki plant employs more than 2,000 workers and makes up over 20% of the manufacturing sector's total output. Net receipts amount to between $1.5 million and $3.03 million annually, although shipments from Yazaki are counted as services (export processing) and therefore do not officially appear as merchandise exports.

New Zealand is Samoa's principal trading partner, typically providing between 35% and 40% of imports and purchasing 45%-50% of exports. The increasing number of Asian-owned businesses in Samoa has led the increasing trade with Hong Kong and Japan. Australia, American Samoa, the U.S., and Fiji also are important trading partners. Samoa's principal exports are coconut products, nonu fruit, and fish. Its main imports are food and beverages, industrial supplies, and fuels.

The collapse of taro exports in 1994 has had the unintended effect of modestly diversifying Samoa's export products and markets. Prior to the taro leaf blight, Samoa's exports consisted of taro ($1.1 million), coconut cream ($540,000), and 'other' ($350,000). Ninety percent of exports went to the Pacific region, and only 1% went to Europe. Forced to look for alternatives to taro, Samoa's exporters have dramatically increased the production of copra, coconut oil, and fish. These three products, which combined to produce export revenue of less than $100,000 in 1993, now account for over $6.7 million. There also has been a relative shift from Pacific markets to European ones, which now receive nearly 15% of Samoa's exports. Samoa's exports are still concentrated in fish ($5.8 million), nonu fruit products ($3.27 million), and coconut products ($0.9 million worth of copra, copra meal, coconut oil, and coconut cream), but are at least somewhat more diverse than before.

Samoa annually receives important financial assistance from abroad. The more than 100,000 Samoans who live overseas provide two sources of revenue. Their direct remittances have amounted to $90 million per year recently (about 23% of GDP), and they account for more than half of all tourist visits. In addition to the expatriate community, Samoa also receives more than $28 million annually in official bilateral development assistance from sources led by China, Japan, Australia, and New Zealand. These three sources of revenue--tourism, private transfers, and official transfers--allow Samoa to cover its persistently large trade deficit.


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