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Economy
Economy of the Marshall Islands
United States government assistance is the mainstay of the economy. Agricultural
production is concentrated on small farms, and the most important commercial
crops are coconuts, tomatoes, melons, and breadfruit. Small-scale industry is
limited to handicrafts, fish processing, and copra. The tourist industry, now a
small source of foreign exchange employing less than 10% of the labor force,
remains the best hope for future added income. The islands have few natural
resources, and imports far exceed exports. In 1999 a private company constructed
a tuna loining plant, which employed upwards of 400 people, mostly women. The
plant was closed in 2005, following a failed attempt to convert it from
producing tuna loins to tuna steaks, a process that requires only half of the
employee base. The owners noted that the plan would not be economically viable
without government largesse and a reduction below the statutory minimum wage,
neither of which the government cared to provide. As the guarantor of a $2
million loan to the business, the government took control of the plant facility
following its closure, and is seeking to find another operator.
In 2005 Aloha Airlines canceled its flight services to the Marshall Islands as
part of its withdrawal from several markets in the region. Though other
international airlines still serve Majuro, the Aloha decision was a setback in
the country's hopes of increased revenues from tourism.
Under the terms of the Amended Compact of Free Association, the US will provide
millions of dollars per year to the Marshall Islands (RMI) through 2023, at
which time a trust fund made up of US and RMI contributions will begin perpetual
annual payouts. Government downsizing, drought, a drop in construction, the
decline in tourism and foreign investment due to Asian financial difficulties,
and less income from the renewal of fishing vessel licenses have held GDP growth
to an average of 1% over the past decade.
The 2007 edition of "Doing Business," prepared by the World Bank's private
sector development department, has declared the Marshall Islands to be the
world's "Best Performer" for its ease and low expense in hiring and firing
employees. By the same token, the same study gave the Marshall Islands extremely
low ratings for its protection of investors and contract enforcement.
Not being among the 179 member countries of the ILO, the Marshall Islands is
among the handful of countries not obliged to abide by the core labour standards
(elimination of forced labour, child labour and discrimination, and respect for
freedom of association and right to collective bargaining) as required of ILO
members.
The United States maintains the U.S. Army's Ronald Reagan Ballistic Missile
Defense Test Site on Kwajalein Atoll. It is important for the local economy, as
the Marshallese land owners receive rent for the base, and a large number of
Marshallese work at the base. Majuro Atoll also benefited from foreign
assistance. The main airport was built by the Japanese during World War II, and
the only tarmac road of the capital was built partly by the Taiwanese and partly
by the Americans.
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