Economy of Samoa

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The economy of Samoa has traditionally been dependent on development aid, private family remittances from overseas, and agricultural exports. The country is vulnerable to devastating storms. Agriculture employs two-thirds of the labor force, and furnishes 90% of exports, featuring coconut cream, coconut oil,natural gas and copra. Outside of a large automotive wire harness factory, the manufacturing sector mainly processes agricultural products. Tourism is an expanding sector; more than 70,000 tourists visited the islands in 1996. The Samoan Government has called for deregulation of the financial sector, encouragement of investment, and continued fiscal discipline. Observers point to the flexibility of the labor market as a basic strength for future economic advances.

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, gross domestic product 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.

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 85,000 visitors came to Samoa in 1999, contributing over $12 million to the local economy. One-third came 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 17% of GDP. Important products include coconuts and fish.

Industry accounts for over one-quarter of GDP while employing less than 6% of the work force. The largest industrial venture is Yazaki Samoa, a Japanese-owned company processing automotive wire harnesses 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. Australia, American Samoa, the United States, and Fiji also are important trading partners. Samoa's principal exports are coconut products 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 $3.8 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 coconut products ($2.36 million worth of copra, copra meal, coconut oil, and coconut cream) and fish ($1.51 million) 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 $12.1 million per year recently, and they account for more than half of all tourist visits. In addition to the expatriate community, Samoa also receives roughly $7.57 million annually in official development assistance from sources led by 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.

In the late 1960s, Potlatch Forests, Inc. (a U.S. company), upgraded the harbour and airport at Asau on the northern coast of Savai'i and established a timber operation, Samoa Forest Products, for harvesting tropical hardwoods. Potlatch invested about US$2,500,000 in a state-of-the-art sawmill and another US$6,000,000 over several years to develop power, water, and haul roads for their facility. Asau, with the Potlatch sawmillers and Samoa Forest Products, was one of the busiest parts of Savai'i in the 1960s and 1970s; however, the departure of Potlatch and the scaling down of the sawmill has left Asau a ghost town in recent years.

Fishing has had some success in Samoan waters, but the biggest fisheries industry (headed by Van Camp and StarKist) has been based in American Samoa. StarKist Management announced that it was going ahead with setting up at Asau a blast-freezer project to be operational by 2002. This announcement dispelled a growing suspicion about the genuine motives of StarKist to move to Samoa. The proposed blast-freezer operations in Asau were expected to bring this village back to life.

GDP: purchasing power parity - $1 milliard (2002 est.)

GDP - real growth rate: 5% (2002 est.)

GDP - per capita: purchasing power parity - $5 600 (2002 est.)

GDP - composition by sector:
agriculture: 14%
industry: 23%
services: 63% (2001 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 4% (2001 est.)

Labor force: 90 000 (2000 est.)

Labor force - by occupation: agriculture 65%, services 30%, industry 5% (1995 est.)

Unemployment rate: NA%

Budget:
revenues: $105 million
expenditures: $119 million (2001-02)

Industries: tourism, food processing, auto parts, building materials

Industrial production growth rate: 2,8% (2000 est.)

Electricity - production: 116 GWh (2003)

Electricity - production by source:
fossil fuel: 61.54%
hydro: 38.46%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 107,9 GWh (2003)

Electricity - exports: 0 kWh (2003)

Electricity - imports: 0 kWh (2003)

Agriculture - products: coconuts, bananas, taro, yams, coffee, cocoa

Exports: $94 million (f.o.b., 2004)

Exports - commodities: coconut oil and cream, copra, fish, beer

Exports - partners: American Samoa, Australia, New Zealand, United States, Germany

Imports: $285 million (f.o.b., 2004)

Imports - commodities: machinery and equipment, foodstuffs

Imports - partners: Australia, New Zealand, Japan, Fiji, United States

Debt - external: $197 million (2000 est.)

Economic aid - recipient: $42.9 million (1995)

Currency: 1 tala (WS$) = 100 sene

Exchange rates: tala (WS$) per US$1 - 3.0460 (January 2000), 3.0120 (1999), 2.9429 (1998), 2.5562 (1997), 2.4618 (1996), 2.4722 (1995)

Fiscal year: calendar year