International Trade in Tonga

News Related to International Trade in Tonga

Business outline for Tonga

Economic Overview

This Pacific archipelago was strongly affected by the international financial crisis and its effects were, mainly, a price increase in fuels and food products, a drop in money transfers from Tongans living abroad and a decline in tourism.  The tsunami that hit the country aggravated this situation.  The GDP's growth rate had a contraction of -0.5% in 2009 and it increased slightly in 2010 (0.8%).

In response to the economic crisis, the government adopted incentive tax and monetary measures. The National Strategic Planning Framework, which defines the development goals in mid-to long terms, envisages among many issues, to establish structural reforms, to improve the efficiency of government and the quality of the services rendered and to increase the participation of the private sector.  A plan aiming to reduce the energy dependence of the country is also taking place.  

The country is facing a very high unemployment rate (over 10%), one-fifth of the population lives beyond the poverty line and the deterioration of social indicators encourages civil disturbances among those who want more democracy.

FDI in Figures

The islands of Tonga attract very little FDI and the flows were petered out under the effect of the global economic slowdown.  In spite of the measures taken by the government to attract investors, the country presents many discouraging factors.  The archipelago is extremely vulnerable to external shocks and foreign investors cannot buy land in the territory.  Moreover, the lack of an overall development, the unpredictable government policies and the difficult access to certain regions of the country tend to discourage foreign investors.

Agriculture and tourism are the two main sectors which attract foreign investments from countries such as Japan, China and the United States.

Foreign Trade Overview

Tonga is a country open to foreign trade. FDI represented almost two-thirds of the country's GDP during the 2007-2009 period.  As a fact, the trade policy is focusing on creating a positive business environment in the country and increasing the reserves of foreign exchange. 

Customs duties are not very high and there are no major trade barriers.  However, foreign investors are excluded from some sectors such as road infrastructure projects. 

The excellent condition of its basic infrastructures and the good organization of the social services sector create a suitable economic environment in the country.  Nevertheless, an under-developed tourism sector, restrictions in regulations and the absence of transparency in the financial sector are some of the factors that discourage trade. 

The archipelago imports much more than what it exports, as a result there is a colossal chronic trade deficit which should continue during the next following years. 

Its main trading partners are the Pacific Islands, New Zealand and the United States.