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Tourism and Economic Dependency on Foreign Nations in The Pacific Islands

Individual Research Report

AP Seminar

March 6th, 2023

Word Count: 1,166

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Introduction

Within the last century, the Pacific Islands have found themselves at a crossroads in an

increasingly interconnected world. Agricultural production, cheap labor, and marketable tourism have all

labeled the Pacific Islands as viable targets for globalization. Globalization, as defined by the

International Monetary Fund (IMF), is the historical process in which global economies are integrated,

through the trading and movement of goods, services, capital, and even labor across international borders.

However, while economic growth in the small island region has skyrocketed (Latzko, D., 2004), the

tradeoff has been decreased local economic stability, region-wide economic dependence on foreign

nations, and the loss of traditional cultural practices within these nations (Mau, M. et al. 2010). In the

case of the Pacific Islands, the rapid shift from traditional values to modern economic practices has

resulted in unequal distribution of wealth and limited opportunities for sustainable economic growth

(Juswanto, W., 2022), perpetuating the cycle of colonial influence and hindering the development of

Pacific Island economies in the future.

Historical foreign influence

According to Sara Mar, a Master of Public Health at Boston University, the Pacific Islands

became the targets of various European powers in the late 19th and early 20th century due to their

location, agricultural capabilities, and untapped trading potential. As a result, land in this region became

highly sought after by many in the north. The colonization process varied among the islands and

territories but typically involved missionary work, military conquest, and political agreements. (Keen, M.

2015) In some cases, such as the colonization of Hawaii and Fiji, Europeans established trade, leading to

partnerships and eventual colonization. However, in Micronesia, countries such as the Solomon Islands

and Papua New Guinea were offered peace treaties and threatened with war (Madrid, C. 2023). These

treaties were designed to give colonial powers control over the islands in exchange for military aid. This

process resulted in the initial stage of modern Pacific Island economics, namely through the agricultural

industry's development. As a result, Micronesia suddenly increased its agricultural production by over
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74% (World Bank, 2020), and most of these goods were typically exported to foreign nations. This

greatly benefited the islands at the time, and favored relationships with international powers, leading to a

long history of trading within the Islands. However, this trading arrangement resulted in a narrow and

fragile economic structure vulnerable to external shocks and fluctuations in these commodities' prices in

the long term.

Economic dependency on foreign nations

The main threat that Pacific Island governments face is economic dependence (Firth, S., 2018).

Many PICs (Pacific Island Countries) heavily rely on exports as a source of income, which fluctuates

between 12% and 93% from country to country (World Bank, 2020; CIA, 2023). While their partner

nations -- such as China and Australia -- mainly export manufactured goods and textiles, the Pacific

Islands specialize in agriculture and natural resource extraction. Countries such as Papua New Guinea and

the Soloman Islands are vital players in the mineral and petroleum industry. In fact, petroleum exports

construct around 5.2% of the Solomon Islands' yearly GDP (CIA, 2023), followed by other exports such

as cooking oil, bananas, coffee, spices, and other crops. Other countries, such as Tonga and Vanuatu, are

large timber ports and have close politico economic connections with China and Myanmar. Over 90% of

all wood exported from within PIC makes its way into mainland China, where it is redistributed (Sora,

M., 2022). Export-oriented agriculture and extractive industries are the main drivers of economic growth

in many Pacific Island countries (Juswanto, W., 2020). However, strict dependence on foreign nations

means Pacific Island economies can also be vulnerable to changes in global demand, commodity prices,

and natural disasters.

While these economic developments have significantly affected the GDPs of many Pacific Island

Countries, this has also been damaging to local economies within PICs. Large chunks of government

spending and policy reform are targeted toward international affairs, making sustainable local businesses

unviable for many who require government aid. Many people work in agriculture on the islands, and it is

reported that around 80% of islanders grow their own food (Georgeou et al., 2022). This is because most
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islanders work on farmland, meaning their crops have little to no value within local communities that

produce their food regardless. This, alongside poor industrial development and inadequate wealth

distribution, has left the working class of PICs at a standstill; they must generate wealth, but the only

practical option to make money is to export crops. Simply put, The Pacific Islands lack a diverse

economy and rely on foreign export and demand to stay afloat (Fairbairn, T., 1994; Juswanto, W., 2020).

However, there are a couple of other industries that the Pacific Islands have thrived off.

The Pacific tourism industry

The Pacific Islands have long struggled with employment, as agriculture has been the only

reliable industry for working-class citizens to get involved in. However, the tourism industry has created

new jobs and employment opportunities in the Pacific Islands, particularly in hotels, restaurants, and

transportation. Tourism is a significant source of foreign exchange and revenue for the Pacific Islands, as

tourists bring money to the local economy through spending on accommodation, food, transportation, and

other services. The tourism industry has led to infrastructure development, such as roads, airports, and

ports, which can also help other sectors of the economy. Despite this, The Pacific Islands' economies

often depend heavily on tourism, making them vulnerable to external shifts in demand (Sora, M. 2022).

A sizable portion of the revenue generated by the Pacific Islands comes from tourism. It is estimated that

around 40% of the contributions to PIC GDPs come from the tourism industry (World Bank., 2020; CIA.,

2023). This means that in times when tourism is not in high demand, PICs are at risk of falling into

economic recession. This is precisely what happened in 2020, as the tourism industry was put on hold due

to Corona Virus (CIA, 2023). The rapid growth of the tourism industry has also led to environmental

degradation and the depletion of natural resources such as coral reefs and beaches, which are critical to

the tourism industry and the local economy. The benefits of the tourism industry are often not equally

distributed among the local population, with a small number of people and businesses benefiting the most.

In fact, tourism is detrimental to Islanders in many ways. Tourism culture and demands have eradicated

traditional practices on the islands, such as shamanism, rituals, etc.

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Overview

The Pacific Islands, though unstable, are facing a period of rapid industrialization and economic

growth. While initially positive, their dependency on foreign nations has led to a degradation in

traditional practices and unstable local economies. Many countries in the Pacific Islands are vulnerable to

fluctuations in demand and have reached a standstill in economic growth. Unlike their western and

eastern trading partners, the governments of PICs did not have time to adapt to new foreign policy, and

the result is a region entirely dependent on foreign benefactors for their manufactured economic success.
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