With 64% of households working in agriculture, Tonga has a predominantly agricultural economy. The GDP of Tonga increased steadily from USD 60M in 1985 to USD 402M in 2016. Squash to Asian markets and tuna to the United States have historically been Tonga’s two primary exports. Tonga continues to rely on international assistance and remittances from abroad for support. Although Tonga is a group of 171 islands in the South Pacific, just 45 of them are inhabited, and two-thirds of the people live there. Fiji, Samoa, and American Samoa are close by, as well as Tonga. For American businesses looking to export to Tonga, the most potential products include raw materials, poultry, consumer goods, and capital goods. Additionally, there has been a steady rise in the number of tourists visiting Tonga, from 29,000 in 1995 to 53,800 in 2015, which may create investment prospects for American businesses in the hospitality industry. U.S. businesses should be aware that there are several barriers to doing business in Tonga, such as the ban on foreign land purchases, the country’s relatively high freight costs, and potentially high import taxes. It should be stated, though, that American goods are valued and recognized for their excellence.
The Tonga economy
The economy of Tonga is distinguished by a sizable nonmonetary sector and a significant reliance on remittances from the nation’s 50% of expatriate citizens, mostly in Australia, New Zealand, and the United States. The royal family and nobles control or at least hold a significant portion of the financial sector of the economy. This is especially true of satellite and telecommunications services. Handicrafts and a few other extremely small-scale enterprises make up the manufacturing sector, which accounts for only around 3% of GDP overall. The South Pacific’s few commercial activities are also mostly controlled by the same sizable trading enterprises that are present there. Subsistence and plantation agriculture is important to rural Tongans. The main cash crops are bananas, vanilla beans, and coconuts. The sole substantial industry is the conversion of coconuts into copra and desiccated coconut. The two most common species of livestock are pigs and poultry. The majority of farmers using their API keep horses for draft reasons. Beef imports are falling as more animals are being farmed. The development plans for Tonga include a strong emphasis on the island’s expanding private sector, increasing agricultural productivity, reviving the squash and vanilla bean sectors, promoting tourism, and enhancing the island’s communications and transportation networks. Although much progress has been made, there is still much to be done. The influx of humanitarian funds and remittances from Tongans living abroad has led to the development of a small but expanding building sector. The copra industry is hampered by persistently low global prices.
Diversification opportunities
There are initiatives to find diversification opportunities. Studies have revealed that there are enough skipjack tuna in Tongan waters to sustain a fishing business. Exploiting the forests, which make up 35% of the kingdom’s land area but are shrinking as more land is removed, is another possible development activity. Coconut trees that are past their peak for generating fruit can also be a source of lumber.
Although the tourism sector is still in its infancy, the government is working to expand it because it understands that it can contribute significantly to economic growth.
The foundation of the Tongan economy is agriculture, which accounts for 30% of the GDP. The principal crops include squash, coconuts, bananas, and vanilla beans, and two-thirds of all exports are in the category of agriculture. The majority of the nation’s food must be imported, mostly from New Zealand. Only 10% of the GDP is accounted for by the industrial sector. The main source of hard cash income is tourism. To make up for its trade deficit, the nation continues to rely heavily on remittances and foreign aid. The government places a strong emphasis on the growth of the private sector, particularly the promotion of investment.
Without resorting to pricey grid additions, Energy Tonga is implementing custom-made strategies to power its outlying islands sustainably.
