Economic crisis hits Pacific’s best investment destination

2011-01-11T11:00:00Z

<p style="text-align: justify;">Tonga offers one of the best environments for investors in the Pacific Islands region: The World Bank’s business development arm International Finance Corporation ranked the country 58th out of 183 economies worldwide – first of all countries in the Pacific – in ease of doing business.<!--more--></p>
<p style="text-align: justify;">But the country is passing through one of its worst financial crisis. The World Bank has said one of the biggest contributors to Tonga’s growing economic crisis is the decrease in remittances – which for many years has been its main source of revenue to keep its economy going.</p>
<p style="text-align: justify;">Remittances comprised close to one third of the country’s gross domestic product and are estimated to have declined a precipitous 25 per cent since the global financial crisis began unfolding in 2008.</p>
<p style="text-align: justify;">The World Bank late last month approved a US$ 9 million grant to help the Tongan economy get through its financial crisis. The grant is expected to help more than a quarter of the population slipping into poverty.</p>
<p style="text-align: justify;">Until recently, Tonga was one of the top economic performers in the region, scoring consistently high on the human development indices in comparison with other Pacific Island nations. In the past four years high food and fuel prices, and the global economic crisis have delivered a blow to its economy. According to one estimate, one in five Tongans is unable to afford basics like food, electricity and medicines.</p>
<p style="text-align: justify;">Tourism was never big in Tonga when compared to neighbours Samoa and Fiji but the crisis had a negative effect on this small industry as well as a result of reductions in numbers of visitors.</p>
<p style="text-align: justify;">The country’s tourism industry is now calling for measures for boosting its destination status to the region’s fastest growing tourism source market – China. It wants more aviation linkages coming out of China to the region. Tonga acquired a profile in China because of its participation in the World Expo in Shanghai along with other Pacific Islands’ tourism organisations last year.</p>
<p style="text-align: justify;">Tonga is working toward shoring up its airline connectivity. Following the stoppage of the Tonga-Apia-Los Angeles service last year, the number of airline seats to Tonga has plummeted. The country is in discussions with various airlines to fill in the gap.</p>
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