Samoa: Economy

Samoans operate in a predominantly informal economy, with only 18% of the population formally employed in a salaried position. The figures given below reflect percentages of the formal economy, not necessarily the informal one, which represents more people but not much of the country’s wealth. The Samoan economy is dependent on tourism, capital flows from abroad (remittances, external borrowing, and aid) as well as some agricultural and manufacturing exports.

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

In the early 1990s, Samoa’s economy suffered blows from two consecutive cyclones (Cyclone Ofa in 1990 and Cyclone Valerie in 1991) and an outbreak of taro leaf blight (a root crop which is the staple food and was the largest export). 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. From 2003 until the onset of the global economic downturn, Samoa enjoyed relative economic success with an average of 5.0% GDP growth yearly. The economic crisis, followed by the devastating September 29, 2009 tsunami, resulted in the contraction of the economy by 3.8% in 2008 and 1.7% in 2009. The economy saw encouraging signs of growth in 2010 with a 1.5% growth rate and a prediction of 2.8% for Samoan fiscal year 2011.

The service sector accounts for about three-quarters of GDP and employs approximately 50% of the formally employed labor force (which is about 18% of the population). Tourism is the largest single activity, more than doubling in visitor numbers and revenue over the last decade. In 2009, Samoa’s tourism industry encountered major obstacles, namely the global financial crisis and the devastation of the September 29 tsunami. The tsunami ravaged 25% of Upolu Island’s south and southeastern coast, which housed some prime resorts and beach “fales” (villas). This, however, did not undermine the booming industry, with tourism arrivals increasing to more than 128,000 in 2009 and contributing over $120.8 million to the local economy. The tourism industry started rebuilding a week after the devastation, making use of subsidies and concessional loan assistance from the Samoan, New Zealand, and Australian Governments. Some hotels have since opened and others are in the process of rebuilding.

Industry accounts for about 13% 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 parts are primarily used in production of Toyota vehicles. The Yazaki plant employed more than 2,000 workers, making up over 20% of the manufacturing sector's total output prior to 2008. The pressures of the global financial crisis led to job cuts of more than 50% for Yazaki, and while numbers went up again as the global economy grew, the devastation from the March 2011 Japanese earthquake and tsunami caused the numbers to once again decline to 800 employees. If the auto industry rebounds, and demand increases, it is presumed employment will return to previous levels.

The primary sector (agriculture, forestry, and fishing) employs less than 2% of the labor force and produces 3.6% of GDP. Important products include coconuts and fish.

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. These 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.

The more than 150,000 Samoans who live overseas provide two sources of important financial assistance from abroad. Their direct remittances have amounted to $128.2 million per year recently (about 24% of GDP), and they account for more than half of all tourist visits. In 2010 remittances dropped for the first time since 1998 after sustaining increases every year, a factor attributed to the increased unemployment rates in traditional source countries--the U.S. (including American Samoa), Australia, and New Zealand. In addition to the expatriate community, Samoa also receives more than $28 million annually in official bilateral development assistance from 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.

In April 1998, Samoa applied for World Trade Organization membership. Samoa's bid for membership has moved forward through the accession process, and as of May 2011 all but U.S. bilateral negotiations were completed on market access agreements.

In March 2006, the United Nations reviewed Samoa's status as a Least Developed Country and recommended graduation into Developing Country status. Samoa sought a review of the decision on grounds of economic and environmental vulnerability, citing the 2009 tsunami and global financial crisis as grounds for extension. The UN agreed to extend Samoa’s transition period to 2014.

Sources:
CIA World Factbook (September 2009)
U.S. Dept. of State Country Background Notes (June 2011)