Tonga, a small island chain in the southern Pacific Ocean, is better known for its burly rugby players and scenic beaches than its politics. Hosting a tiny population of just 103,000 people, the country had been relatively quiet and inward-looking for the past century, presided over by a deeply conservative monarchy.

However, popular discontent over the slow pace of political reforms, which culminated in riots in the country’s capital, Nuku’alofa, in 2006, brought about an appetite for change, leading to Siale'ataongo Tu'ivakanō becoming Tonga's first elected prime minister. Taking office in 2010, along with the country’s first parliament, Mr Tu'ivakanō maintains that although Tonga lacks strategic and mineral resources such as oil and gas, its recent reforms to promote FDI are significant steps forward in ensuring that investors receive the transparency that they require when doing business in the country.


Road to recovery

“We have started by looking at whole sectors and seeing how we can increase things to become more transparent, and we have assessed what we need to put in place, in terms of institutionalised frameworks, [to boost] our competitive industries,” says Mr Tuʻivakanō.

While the Asian Development Bank (ADB) classifies Tonga as a middle-income economy, it maintains that the country's economy has lagged the average performance of the Pacific region due to its structurally constrained economic environment, a lack of sufficient infrastructure and its high exposure to the global economic recession. While the Pacific region as a whole is expected to expand economically by 5% in 2013, according to the ADB, Tonga will grow by just 1.2% in this time period.

While Mr Tuʻivakanō says the Tongan government has put in place a roadmap to achieve economic recovery, he concedes that the country’s economy has been heavily affected by the global economic slowdown due to its reliance on foreign enterprises and remittances from Tongans working abroad. “For small, developing countries such as Tonga, what has happened globally has affected us at home,” says Mr Tuʻivakanō. “Even though we are thousands of miles away [from the eurozone], it is affecting us. However, I am hopeful that what we are trying to do here in reforming our institutions will ease some of the problems that are currently challenging us.”

Tourism hopes

According to the ADB, the agriculture, forestry and fisheries sectors have been the backbone of Tonga’s economy, accounting for 19.3% of GDP, 60.2% of exports and 40% of employment. In a country where 23% of the population lives below the national poverty line, Mr Tu'ivakanō says government strategy will continue to focus on how to expand and support these industries. Additionally, while its pristine and relatively unpopulated islands have been a draw for tourists from neighbouring Australia and New Zealand, Mr Tu'ivakanō admits Tonga’s tourism industry is still relatively unstructured, and the government is keen to attract tourist operators to develop this sector.

“We are now looking at how can we can further promote tourism and bring in private sector actors to influence policy,” says Mr Tuʻivakanō. “We have tried to promote tourism in the past, but nothing has worked and we are hoping that the new approach to promoting this sector to foreign enterprises will work. For funding, we have looked towards New Zealand as there is some interest there. At this point we wish to glean more ideas [from foreign companies] as we want to get more people to come to Tonga. We want to attract investors as I believe that for smaller countries such as ours, they could provide us with a good platform.”

Early successes

Although the government’s initiatives are still relatively new, Tonga has already experienced some success in attracting more international visitors. The ADB estimates that tourism, which accounts for 9% of Tonga's GDP, has experienced a significant rebound after the 2008 crisis. Between 2010 and 2011, visitor arrivals more than doubled and tourism receipts increased from TP61m ($33.28m) in 2011 to TP68m in 2012.

While overall official estimates continue to paint a relatively gloomy picture of the country’s near-term economic prospects, it appears that Tonga’s new government may succeed in kick-starting the country’s lacklustre growth. If Mr Tu'ivakanō's plans can attract the big-ticket players that are key to revamping Tonga's ailing economy, the country may successfully place itself on the map for reasons other than its rugby players.