KINGDOM OF TONGA - SPREP

Strategic Development Plan 8 2006/07-2008/09
subsistence economic activity to meeting basic food and shelter needs. Aid and
remittances have been important sources of fairly stable income, offsetting the
high vulnerability of the economy to natural disasters, crop diseases and
fluctuations in world markets. 4 The 2000/01 Household Income and Expenditure
Survey (HIES) showed that remittances from overseas on average accounted for
20% of households’ cash income and 14% of their cash plus non-cash income
(mostly home-grown crops). A World Bank study showed that 90% of
households received cash remittances in 2004, and that these averaged US$3,067
per household and US$753 per capita, supporting both consumption and
investment in assets and education, as well as improving average incomes of the
poorest households. Total remittances were equivalent to 42.5% of GDP. 5
The HIES also revealed a degree of inequality in income distribution
between households and geographic regions. Nationally, the 10% of households
with the lowest income levels received just 1.6% of total household income,
whereas the 10% of households with the highest income levels received 30.9%. 6
In the Outer Islands where approximately one-third of the population resided,
there was a slightly lower degree of inequality in income distribution than in
Tongatapu, 7 but average household income was notably lower (Figure 1.1).
In addition, the unemployment rate was 13.3% according to the 1996
Census of Population; youth unemployment was on the increase; and associated
problems of rising crime and drug abuse were on the rise (Figure 1.2).
Calculations on the basis of HIES data suggested that in 2001 5% of
families had expenditure levels below a Food Poverty Line of $703 per head per
year, and that 22% of families had expenditure levels below a Basic Needs
Poverty Line of $1,466 per head per year. 8 Inequality, unemployment and
poverty were emerging issues confronting policymakers in 2000/01.
Another matter of increasing concern was environmental pollution from
improper disposal of solid, chemical and medical waste, from pesticide and
4 An index of output volatility calculated by the Commonwealth Secretariat for 111 countries during the
period 1980-92 placed Tonga as the fourth most volatile on the list, attributing this high volatility to
economic exposure through a narrow export base (Atkins, J.P. and Mazzi, S. 1999. Small States: A Composite
Vulnerability Index. Joint Commonwealth Secretariat/World Bank Task Force Conference on the Small States,
St. Lucia, West Indies, 17-19 February 1999). Tonga suffered 16 natural disasters between 1950 and 2004,
with economic losses averaging 14.2% of GDP during the disaster years (World Bank 2006. Not if but when:
Adapting to Natural Hazards in the Pacific Islands Region. Washington, p. 2).
5 World Bank Workshop, “Improving Development Outcomes in the Pacific Through Labor Mobility”, Suva,
November 2005.
6 The national Gini coefficient was 0.42. This coefficient is a measure of inequality where 0 = perfect equality
and 1 = absolute inequality (Asian Development Bank 2003. Hardship and Poverty Status Discussion Paper.
Manila.)
7 The Gini coefficient for the Outer Islands was 0.39, compared with 0.41 for Nuku’alofa and 0.44 for the Rest
of Tongatapu.
8
Asian Development Bank 2003. Hardship and Poverty Status Discussion Paper. Manila, p.19.
Looking to the Future, Building on the Past 2